tf)f) COURIER. f Mexico, August 14, 1942. Dear Larry: I know you have been following this railway matter. I wonder whether we are not in complete agreement that it is the most important single item in our program of collaboration with Mexico? All these things on which we are working such as lead, copper, mercury and other metals, fibres, lumber, etc., are all most important in our procurement program, I get increasing evidences every day that even in such item* as flourspar and iron ore we may be vitally interested in the deposits here. There is a wide range of raw materials indispensable in our defense progreji and our war program f»r whloh Mexico, for a number of reasons not necessary to go into here, will be the principal source outside of the United States and Canada. No matter how good a source of these essential materials Mexico may be, and mo matter what we do to develop these materials as we are doing now, she cannot be a supplier unless transportation is available, I think we must accept it as a settled fact that sea transport will not be available except on a most limited scale for the duration #f the war. No matter what we do to eliminate the submarine menace, and no matterto what degree we develop our shipbuilding program, ships will be so urgently needed for offensive purposes in bringing the war to an end that shipping will not be available for this area before the end of the war. Our whole program of economic oooperation, therefore, depends on land transport. So far as the roads are concerned, these can be used to a certain degree, hut only to a limited degree. We therefore hare to depend on rail transport from Mexiee. As our program of political oo* operation rests so largely on an economic basis, it may be said, I believe, without any exaggeration, that our whole program of political, economic and cultural oooperation rests on the maintenance of adequate rail transportation. Laurence Duggam, Esquire, Adviser on Political Relations, Department of State, Washington, D. C. We
- 2 - We are talking a lot about the completion of the Pan American Highway, finishing a part on a temporary basis, I think this is a wisa move. But even if wa finish the Pan Amerioan Highway to the Canal it would not bo adequate for the movement of the goods we have to Hove, The rail* ways, therefore, form the main transportation means for these material* we wish to bring out of Mexico in these great quantities, and which we must havo. There is a further factor which mist ha increasingly taken into account and which we should recognize now. We already have these difficulties with respect to the supplying of the Canal Zone, The problem* of the Oamtral American states due to transport are increasing. Wa have to be sure of a means of transportation by rail as far south as possible. The bridge across the Suchiate River is being built. This will give us the link to Guatemala, Thera is, however, a good part of the route from Mexico City to Veracruz and from Veracruz south that will have to be rehabilitated to carry the traffic we want it to carry. Fortunately wa hat* a broad-guaga system available from Laredo to Mexico City and from Mexico City to Veracruz. The Veracrns railway and from there south is increasingly important in our plans. 1 think wa are in* terested in the rehabilitation of the Tehuantepec Railway and should recognize that now. The competent people in the various war agencies and which are responsible for getting the raw materials to industry I think hava now reached the point where they realize that these materials from Mexico are an essential part of our war effort m that they are materials that we cannot do without. Not all these agencies, however, have reached the point whera they are ready to racogniza that it is equally important to recognize in every ooncrete way that the transportation means are just as important in our war effort as the materials themselves. For this reason I think we should realize now, and act accordingly, that the Mexican railways ara an essential part of a factor in our war effort. Colonel Hill is doing a good job. It is a very big Job, It is getting mora important erary day, I think he can handle the Job, In a daspatoh, No, 3310, of which a copy is appended hereto, I emphasize the importanoa of additional personnel for him. This is being held up pending some decisions by the Army and Navy. This additional personnel should not be made dependent upon this deciaion by them, bat should ba supplied immediately, I know that ha needs thasa man, for I live and sleep with this railway problem because I realize Its importanoa. I am
I 1-3- I am also sending you herewith ft copy of my despatch No* 3303 j of May 13, in which I refer to the last conversation whioh I had with the President yesterday, together with Colonel Hill. It was mot satisfactory. There is no doubt that he is giving this matter his constant attention. We are going to get improvement of the operation here. It will not be a question of today or tomorrow because one cannot change such a situation in a day, and neither could we do It at home. One thing our people can be sure tf and that is that the President is 100% with us in getting the best possible operation and management of the Mexican Railways, and he is a man of force and decision. I think $ou will find, the despatch interesting. There are two major questions which concern me at this moment, She first is the most important* Zt seems that while the various procurement agencies of our government which are responsible for getting the materials for the war effort are in agreement that these Mexican strategic materials are absolutely essential to us and the basic and essential part of our war effort, that Army and Navy are still making up their minds whether the Mexican rail* way system is of this primary importance. How they can be hesitating on this point is beyond me, becayse it is quits certain that the materials in Mexico don't help us unless we can get them home. I understand from Colonel Hill that certain major decisions are held up at home because Army and Navy have net been able to make up their mind on thisnpoint, I feel so strongly about this that if the proper decisions cannot be reached very soon that the Secretary and Mr, Welles will have to take it up with the President, who, like they, will see the point at ones* I realize that the Army and Navy have tremendous problems these days, but these must not delay such a primary decision as this on their part, because it is they who would be most hampered if these materials wannot move from Mexiso* Z think, therefore, the Army and Navy should reach a decision without delay and so inform the BEW and other agencies that the Mexican transportation system, principally the railways, is an essential part of our war effort* This is of primary and immediate importance because our whole program of rehabilitation in its major aspeets is held up until they reach this decision. If thsy do not reaoh it now they will two or three months hence and we will have lost very precious time that we cannot afford to lose, I think adequately big people in the Army will have to give this matter their consideration to get the right decision. The second question is the one of financing* I am unfortunately somewhat hampered, as we have not been able to
4 to follow the Mexican finances as elosely as we should have. Now that Busser is here we are going to work on this and can giro more accurate and detailed information. X know, however, what the answer is, as you do. You know what obligations the Mexican Government has undertaken under the agrarian claims and under the petroleum agreement. You know what a drain it has been to meet these payments* In addition to this there are are constantly these new commitments being made. It is thue that this economic development no are fostering will bring la additional taxes and ineome in the Mexican Government, out it will not aid it In the degree necessary to meet the strains, I think we should be prepared to undertake this rehabilitation of the railways under Lend-Lsase. It is definitely a part of our war effort. It means that we would be paying eventually a part of the cost of this rehabilitation, but it is a sacrifioo on our part which is an important one In our war effort. This rehabilitation of the railways has to be carried through in our interest, completely asido from amy interest which ths Mexican Government may have In It. I think, therefore, War and Mavy, who have the daeisive voice under Lend-Lease, should be prepared to oonslder the rehabilitation of the railways as a LendLsase projest. Increasingly the financing of oertain aspects of the rehabilitation of the railways will become a problam and we cannot permit ihe Inability of the Mexicaan Government to do the financing to interfaro with the re» habilitation going on* It Is too important for us, I think, therefore, 4nyapproaches which the Mexican Government may make to us to bring rehabilitation of the railways under Lend-Leaso should be favorably metf and if they do not make the approaches, wa should. I know these decisions are important, but I can assure you that I am living and sleeping with this problem every day, I have a keen sense of responsibility and I try tosee things, not In their details only, but in the big picture and for the longer as well as the near range, I am convinced that this rehabilitation of the railways is a major factor in our whole problem with Mexico, for everything falls down if wa do not succeed there. I am oonvlnced it Is a major part of our war effort, for wa have to get these materials out. For this reason I hope you will discuss this matter with Mr. Welles and give him the thoughts I have expressed in this letter. I know he does not have time to read these despatches and I hava not written him directly about this becausa Z know that you sen give it to him more effectively on the basis of my letter and despatches. This railway situation is developing satisfactorily up to this point, but we are now at a point where major decisions
-s^ * 5 ** deciaions have to be made or our work will be largely paper work. We have to take this railway problem in a big way and make the big deoiaions and then go ahead # I need not tell you I would not be pressing this so atrongly if it were not ao vital, in my opinion, and I need not tell you that my opinion ia based entirely on what I believe to be our vital interest. With all good wishes, Cordially and faithfully youra, 0. 3. Kessersmlth Enclosures: Copy of despatch No. 3303, of August 13# Copy of despatch No. 3310, of August 13. GSM:EH