TRADING WITH
MEXICO
BY
WALLACE THOMPSON
AUTHOR OF “THE PEOPLE OF MEXICO”
[Illustration]
NEW YORK
DODD, MEAD AND COMPANY
1921
COPYRIGHT 1921
BY DODD, MEAD AND COMPANY, INC.
PRINTED IN THE U. S. A. BY
The Quinn & Boden Company
BOOK MANUFACTURERS
RAHWAY NEW JERSEY
TO
ALBERT BACON FALL
A Statesman Whose Insight and Whose
Knowledge of Mexico Have Long
Sustained the Faith of Those
Who Love Her Best.
PREFACE
The book whose pages follow is the result of a conviction, firm-rooted
in observation and experience, that the American business man prefers
to judge for himself. He wishes the facts, and beyond all the
fundamental facts, and when he has them his judgment is sure, quick and
final. It is to men who think in this way that this book is addressed.
It is the story, told as concisely as the facts permit, of conditions
as they truly exist in the great land which, like a cornucopia,
stretches to the south of us. It is written for the business man of the
United States, definitely, with such limitations as exist for such a
book--its value to the European may be the greater because it does not
seek to straddle the national issue.
I have written other books on Mexico. One has seen the light of
publication before this volume was written.[1] I have sought, in
these other volumes, one upon the people of Mexico and one upon the
psychology which governs their actions in social and in business life,
to lay a solid ground for the understanding of the country and its
people. In the book which is offered here I give, freely, openly,
without apology, the facts of a commercial situation which to me is
the most astounding condition in the business world to-day. I picture,
with the simplicity of truth, a country of vast natural mineral
resources, but virtually no agricultural wealth, a country with almost
no consuming population, a country of radical governments which have
sought, frankly, to destroy capital and the machinery of Mexico’s own
wealth. I have told but little of the famous resources of Mexico--those
are described elaborately in many works. I have told little of the
labor of Mexico, for this is yet to be harnessed. I have described none
of the great industrial needs of Mexico, because those are obvious to
all who run.
I have sought, rather, to set down those phases of Mexican life to-day
which are the background of Mexican business. I have dared--what no
man with less faith in the American business man would dare to do--to
set forth honestly the truth about Mexicans of to-day, the secrets of
Mexican government, the facts of Mexican “bolshevism,” the horrors
of Mexico’s degeneration under the rule of her predatory _caciques_.
These to me are the fundamentals of Mexican trade, just as they are the
fundamentals of Mexican politics and of the life of the Mexican people
to-day. I have sought to set them forth in their relation to the grave
issues of world trade, to set them in their relationship with the ways
of men in business and with the ways of business in its relationship
to human life.
I am a friend of Mexico. Few who have written of her life have been
more deeply interested in her welfare. I should like to lay here the
foundations for a solution of the Mexican business problem by setting
forth the unhappy picture, ignoring no detail, seeking no self-deceit,
as is too often the practice of those who write on Mexico. I believe
that more will be gained, more business of a solid sort won, by those
who realize and recognize the truth of conditions in Mexico, than by
those who deliberately close their eyes to those conditions.
Let us have the truth, then! Let us face the Mexican trade problem
as it is, with its vast potentialities balanced, as they actually
are, by the sinister elements of ignorance, bitter poverty and racial
conservatism. Let us see the problem while we see the golden goal. For
this problem is no mere issue of beating the British or the Germans to
a thriving market. It is an issue of bringing into being the purchasing
power of a populous nation, which is bowed down to-day by the horrors
of revolution, of unthinking radicalism, of national degeneracy. He
who shall solve that problem will win the trade of Mexico when she
has trade. That is all which is to be known, and the only issue to be
faced.
This book is not a radical document. It does not seek to explain the
problems of to-day in terms of to-morrow. The author finds in the
radical movements of the present the leaven of the future--little else.
He sees in the upheavals of our day a searching for some essential
truth which will be a clarifying factor in this time of chaos and
distrust. He does not see in them the final solution of any of the
difficulties which hatched them out into a too ready world.
Nor is this book reactionary. The author believes that the day of
Diaz is long past in Mexico, that the day of the dreamer of utopian
visions--Madero--is past in Mexico. He seeks in the present and in
the future the sane, firm grasp of actualities which to the watcher
on the tower is the only hope of true progress. He sees in the orgies
of Carranza and his immediate successors not the upsurgence of mighty
ideals, but of personal ambitions and crass disregard of the bases of
all human progress. He seeks, in the whirling chaos of the present, a
firm footing. He seeks to give the direction of such understanding as
he may have to those who think with him. He believes that if he gives
such a direction to them, it will enable them to go forward to the
winning of some of the vast profits which await them in the Mexican
market.
One word more I would add. There rules to-day in Washington
a government one of whose mighty maxims is the protection and
encouragement of those Americans who to-day go forth, as their fathers
went forth before them, to carve their way in the wilderness. The
Washington government knows, as we all know, that the only wilderness
left to us is the open field of the vast undeveloped lands to the
South. I believe that Washington plans definitely to support the
American pioneer to the fullest in his new conquest of the New World.
That his weapons of conquest are dollars and brains and energy matter
not, and that he battles in lands over which the flag shall never fly
matters less. The fact that he is an American, that he is honest, that
he is patriotic and sincere--these matter much in Washington.
This book, then, goes upon its way, its record clear and envisioned
in deep frankness and in deep faith in the American business man and
in the American government of to-day. I offer it to those who must go
forth, to those who must perforce place the funds at the disposal of
those who go, and to those who, in the councils of our government, are
quietly, without ostentation or political apology, placing firm hands
to the backs of those who dare and who give.
WALLACE THOMPSON.
NEW YORK,
August 5, 1921.
FOOTNOTES:
[1] _The People of Mexico._ Harper & Bros., New York, 1921. The
companion book, _The Mexican Mind_, is in preparation for publication
as this present volume goes to press.
CONTENTS
CHAPTER PAGE
I TRADING WITH MEXICO 1
II NATURE AND THE MEXICAN MARKET 16
III THE PEOPLE WHO BUY 48
IV THE CREDIT OF MEXICO AND OF THE MEXICANS 69
V OUR BILL AGAINST REVOLUTIONARY MEXICO 96
VI MEXICO AND HER “BOLSHEVISM” 128
VII THE RAPE OF YUCATAN 159
VIII THE ROMANCE OF MEXICAN OIL 196
IX THE GOLDEN GEESE 240
X THE HIGHWAY TO SOLUTION 258
TRADING WITH MEXICO
CHAPTER I
TRADING WITH MEXICO
Three fundamentals determine and will determine American participation
in Mexican trade. Excursions, however wet, will not change those
fundamentals. Enthusiasm, however sincere, will not affect them. Above
all, promises should not be taken into consideration in our cool
judgment of them. American business men have never been noted for
sentimentalism in their own country; they should not be sentimental in
other countries. Let us take up the situation and look at it with the
sane judgment we would apply to the question of selling, say, a new
type of water meter in New York City.
The three fundamentals of the Mexican trade question are not unique.
They are, first, the Market; second, the Credit, and third, the
Government and Laws under which trade must be carried on. Truly not
original, and the astonishing thing about American business men who
consider Mexico is that they apparently lose sight of them, and most of
all lose sight of the emphasis which must be given to each.
First, the Mexican market. Three phases again: the people, the
industries and the need. There are 15,000,000 people in Mexico.
Of these, 6,000,000 are Indians, and Indians that are comparable,
literally, to our own reservation Indians in the United States, in
the things they buy and the things they make. There are 8,000,000
mixed-bloods, a cross of Indian and Spanish, but of these 8,000,000
fully 6,000,000 are almost as Indian as their full-blood cousins. In
other words, 12,000,000 out of 15,000,000 take and need nothing from
the outside world excepting food, at those times, like the present,
when they do not produce enough for their own needs. More than that,
the money or goods which would pay for imported food for the 12,000,000
are created by the remaining 3,000,000--in other words, the actual
market in Mexico is not 15,000,000 people but 3,000,000. The rest wear
no shoes--only native tanned sandals. They wear no civilized clothes,
only white cotton woven at home. They wear only home-made hats, the raw
material the fiber of palm trees which grow wild. They have no need for
culture, for houses, for travel. Remember, then, a buying population of
3,000,000.
The industries are limited almost exclusively to the extraction of
the riches of the soil by mining and through deep oil wells. In all
Mexico, with its vast sweep of territory, virtually nothing is produced
for export excepting those riches which come from Mother Earth, and
those overwhelmingly under the enterprising management of the foreign
companies and individuals who alone have ever sought to develop them.
Only one industry in Mexico puts human hands and human brains to the
wheel of progress and creates wealth--that is the industry of growing
sisal hemp in Yucatan. Sisal hemp is indispensable for the making of
binder twine for the world’s wheat crop, and is the basis of what was
once a great national and international industry. Yet to-day even
that commodity has been cut in production almost to the point of
destruction, by the machinations of Mexican government and graft, and
Yucatan is not to-day the great purchasing center that it once was.
Moreover, Yucatan is far from the Mexican mainland, a principality, a
country of its own, and its riches have never been a true part of the
resources of Mexico, for it buys and sells direct with the outside
world.
Gold is the common medium of circulation in Mexico to-day. There is
not a peso of Mexican paper currency in use. All is gold, or foreign
bills, with low-grade silver and copper as subsidiary coins. The use
of gold is reassuring to the business man. It looks like prosperity
and it does assure a firm rate of exchange. But the gold in Mexico
does not mean these things. Its great significance is the absence of
credit. Gold circulates because no man trusts the government, and
every piece of gold that passes through your hands in Mexico tells you
that Mexico is far from being on a stable financial basis, either as a
government or as a business community. Gold is of value, really, only
because it makes credit possible. When you must ship boxes of gold
into distant states at an appalling rate of insurance against bandits
and highwaymen, it is not prosperity, but rather the lack of it. When
gold is in circulation, and there are no bills, the available money
of the country is limited, literally, to the total of the gold and to
not one cent more. When there is paper in circulation it means that
the gold supply has been increased many fold because the credit of the
government has been added to the gold to supplement the supply of money
to be used in trade.
In Mexico there is not only no paper money, but there is practically no
commercial paper. The drafts of great foreign companies travel about
the land for weeks and months before they are cashed and when they
finally reach the bank on which they are drawn, the backs are covered
with endorsements, and on some an extra sheet of paper has been pasted
to carry more signatures. And that is not good business, and should not
be reassuring to the prospective trader.
In Mexico to-day no one trusts the government, and as a result no one
trusts his neighbor. The business men of Mexico who are demanding
long-term credits abroad will not trust their oldest customers, and
cannot themselves get credit in their own country. Recently, when
the Mexican government wanted credit on a large supply of railway
equipment, it was told that if one young American, engaged in running
private trains at heavy cost over the Mexican railway systems, would
guarantee the bills, the Mexican government could have what it
needed. Otherwise, cash with order. The Mexican government is trying
to get railway equipment, and is making promising announcements.
But it is getting very little, and for what it is getting it pays
almost entirely in cash, or, strangely enough in this age, barters
commodities or prepaid freight tickets for it! These are facts, and
extremely significant facts. The railway equipment men want to know
how the government is going to pay--and that is what all Americans who
contemplate trade with Mexico should want to know.
But the need of Mexico, the power we have to help her rehabilitate
herself! Ah, that is a strong bid, even with what we have called the
unsentimental American business man. He wants to give her a lift now,
when she needs it, and then he will not be forgotten when the big
splitting up of profits comes. Perhaps this is true. Let us look at
it. For some years now we have been following the very laudable and
beautiful system of going more than half way with Mexico. We are still
urged to follow this excellent method. The only trouble is that the
“more than half way” is getting longer and longer, and Mexico is asking
more and more and giving less and less. The kindly souls who have
sought to get into Mexico with their surplus stocks are not gaining
anything, except curses and distrust. So far, save for the promises
which have always been forthcoming, there is nothing coming out of
Mexico to help the trade we are hearing about.
Most of the talk about Mexican trade for American manufacturers was
born, moreover, of our own need to get rid of accumulated goods.
Beginning late in 1919, there was considerable inflow of these cheap
goods into Mexico on good terms. Those who were fortunate enough to
unload talked of it, and the gossip went about that Mexico was a
fine place to sell off extra stocks. But after a year, the unloading
system began to glut the Mexican market, and to-day, when the same
manufacturers want to sell again, they find that Mexico will
take--only goods at sacrifice prices. They went half way and more, did
our manufacturers, and Mexico did not “come back.” Instead she sat
tight where we came to her, and insisted on our coming a little further
with concessions to her needs and wants. The result is that to-day
there is nothing like the demand for American goods that there was when
we first did the unloading which we thought would whet the Mexican
appetite. Mexico is like the customer of a “fire sale” store--she will
buy only the most obvious bargains. It is cash trade for a section of
a town where there used to be credit, and where there is no credit
to-day. But the customer is again demanding credit--and cash-trade
bargains at the same time.
This question of credit is of necessity complicated. But perhaps the
answer as far as the American business man is concerned is contained
in the fact that while the Mexican merchant demands credit he himself
does not give credit--no country was ever on so thorough a cash basis
as Mexico is to-day. The merchant who is asking for credit is carrying
on his business from hand to mouth; he has no accounts on his books to
guarantee the goods for which he is promising to pay. He asks credit
on his character standing and on the possibilities of his market--he
offers literally nothing else. Personally, many Mexicans and many
foreigners in Mexico are reliable and honest men, but no sane business
man would take in the United States risks similar to those demanded
by his prospective customers in Mexico. And the possibilities of
the market--those are as yet thin air and enthusiastic hope, which
gain strength only from our national need to get a foreign outlet to
keep our plants going. Let the American manufacturer weigh these two
considerations with the additional realization that there is no reserve
credit in the background.
Reserve credit, such as bills payable, sound real estate values and
prospects of peace and good business years ahead, are comparable to
the unseen sources of energy in the human body, on which that body
lives and thrives during lean periods. Mexico’s lean period has now
lasted for eleven long years, and in that period the country has been
living literally on its reserves alone. Again and again one hears the
expression, “Mexico is living on her fat,” and the continued marvel
is that she has lived so long and survived such lengthened calamities
through so many ghastly years of destruction. As this is written, there
has been some appearance of regeneration, a noisily announced period
of “reconstruction.” But as yet this is only an appearance. Actually
while the wheels of business and life are running more smoothly for the
moment, this is obviously a surface condition--deep down under the
surface of Mexican life the wasted tissue remains. Mexico is not yet
filling the interstices of her flesh with that reserve strength which
is business credit and business promise.
But why not help in the rebuilding, and thus take a risk which will
probably bring great gain in the years of progress to come?
The answer to this question must be based on a thorough understanding
of the third of our three great issues--Mexican Government and Law as
applied to business. The Mexican revolutions which began in 1910 had
for their announced object, “Mexico for the Mexicans.” The idea was to
bring the foreigner under control of Mexican law and government. This
was eminently just--if it were true, as assumed, that under the Diaz
régime the foreigners had been above the Mexican law. The facts were
largely otherwise, however, despite some glaring abuses. In the working
out of the idea of “Mexico for the Mexicans,” the revised as well as
the entirely new legislation and procedure went far beyond the normal
reaction against the alleged irregularities of the Diaz time.
In the new “Constitution of 1917,” which is literally the most radical
written constitution of any country in the world to-day, the chief, if
not the only object was to make difficult the operation of foreigners
in any line of business in the country. The laws against their holding
land are drastic and final in their import; no foreigner may own
property within sixty miles of the border or within thirty miles of the
sea; foreigners may not control a Mexican corporation formed for the
purpose of holding such land unless they waive their citizenship rights
with respect to such companies; great estates are prohibited, so that
true agricultural industry is made virtually impossible; foreign plans
for irrigation projects--the one hope of the Mexican farmer--are nipped
and killed; most serious of all, such lands are virtually confiscated
through nationalization projects which have already been applied to
many great properties, some of them of foreigners, and have been kept
from affecting others only by active diplomatic protest.
But, the casual observer of things Mexican asks, how is it that
business still continues? How is it that the oil companies to whom,
we are told, these nationalization laws especially apply, how is it
that the oil companies are still doing business, are still drilling
wells and taking out oil? Does this not mean that these laws are merely
provisions against a revival of the abuses of the old days? These are
the questions that occur, as the Mexicans planned them to occur, to the
outside observer.
The Mexicans assure us that this is truly the case, but the effect of
the laws is very different. Their effect is to place all business,
Mexican and American, foreign oil wells and native merchants alike, in
the status of receiving the _privilege_ of doing business, in place
of the _right_ of doing business. In effect they make every foreigner
in Mexico, from the missionaries who conduct services contrary to the
law of the land which prohibits foreigners from officiating as priests
before their own altars to the oil men who dig wells under permits
wheedled out of a grasping government department, law-breakers or
receivers of special and “pernicious” privilege. To-day no business
man can defend his rights before the courts of Mexico, for all rights,
even the common rights of corporate business, are in some way or
another contradictory to the laws of the land. They receive privilege,
and privilege in great and generous measure--if they are friendly to
the ruling group or their satellites. They receive privilege by the
grace of government, not rights by the power of government. Government
theoretically exists for the protection of the weak, but government in
Mexico exists actually for the exploitation of the strong by officials
and for the suppression of the weak if the strong want and can pay for
such suppression.
Strangely enough, the strong in Mexico are not altogether contented
with this condition. Somehow business, with its awakening consciousness
to its helplessness, is finding the situation irksome. The greatest
single industry in Mexico to-day is oil, and oil pays about $50,000,000
a year in various taxes to the Mexican government--and for what? Almost
all of it for the privilege of doing business, and the result is that
oil is at the mercy, to-day, of government caprice and the caprice of
Mexican officials. The laws of the present era of Mexico are enacted
literally for the purpose of having a “club” of control over all forms
of business activity, laws to be enforced when it is convenient, or to
be “forgotten” when that is desirable. The oil companies spend time
and vast effort to keep their protests to the Washington and Mexican
governments in good order--so that the price of their privileges may be
kept low. The legitimate portion of their taxes is only about forty per
cent of the total sum they pay, but it is probably literally true that
they would pay all they now pay and more if they could dispense with
the rule of privilege and trade it for decent human rights to do decent
business in a decently governed country.
In this, these companies are fighting the fight of the individual
business man as well as the fight of their own stockholders. It may all
be selfish, and doubtless is, but by a strange turn of affairs, the
laws of Mexico have worked out to the creation of salable privilege
instead of defensible rights, and this has thrown all business into
the same group. The business problem of Mexico is literally the
achievement of this exchange of privileges for rights. And until that
exchange is effected, he is but a gambler who goes into Mexico to seek
or to offer honest business, for even though he should gain much sure
profit in the beginning, those profits will be more than wiped out
later unless the legitimate business of Mexico is given the legitimate
rights of business.
And how is this exchange of privileges for rights to be effected? This
is the problem that confronts American business and American government
to-day. The issue is joined clean and is simple indeed. The provisions
of the Mexican Constitution of 1917 and the laws which give it effect
remain on the Mexican statute books to-day because they are profitable
to the group in control of the government. They mean, literally, graft
and power, for where privilege is necessary for the carrying out of
business, there is a price on privilege, but where rights are provided
for business, the price and the prize are upon industry and activity.
To the members of the American Chambers of Commerce on tour in Mexico,
to the American manufacturers who are invited to ship goods to Mexico
to-day, offers of privilege are made, privilege without graft or
price, now. But the price is there, and is clearly worked out in the
subtle Mexican mind. These American business men, pleased with their
reception, are to become boosters of the Mexican government, demanding
its recognition and scouting the great financial interests who are
their traditional enemies at home. That is price enough to the Mexican
mind. But when recognition is gained, and when those same individuals
seek to do business in Mexico under “normal” conditions, the laws
which ensconce privilege and give it into the hands of petty and high
officials for dispensation, will reap their toll.
One way only remains--the removal of privilege, the establishment
of rights. Insistence on these issues alone will almost solve the
Mexican problems politically and commercially. But the Mexicans are
wise indeed when they seek to divide the counsels of this country, to
place the small American business man and manufacturer in a position of
antagonism to the issues that are set clear in Washington, the issues
of political privilege versus political rights, the issues of the
business privileges which those individual Americans seek to gain for
themselves versus the business rights that will include them and all
their fellows.
The call is again for clear foresight and not for sentimentalism, for
a social conception of business and not for a selfish, individualistic
hope of getting in ahead of the next fellow. The Americans who have
been longest in Mexico are begging to-day for rights in exchange for
privilege. They know, as those who look upon Mexico from outside or as
newcomers do not know, that until Mexico mends her ways with business,
business can never rescue Mexico from the slough of her present
unhappiness. They know that no business in any nation can long prosper
without the prosperity and the good sense of the government of that
nation. They are not pirates, and they know that piracy, in government
or in business, leads but to the destruction of both. What they know we
may have for the listening. If we do not take it, we, too, must learn,
as they learned, in the costly school of experience.