Face-Saving Dilemma

Biggest stumbling block to U.S.-Mexican attempts to settle their mutual differences (see p. 20) is Mexico's expropriated oil. Last week the expropriated U.S. oil companies turned down the latest State Department compromise, left the stumbling block still smack on the border.

The deal presented by Good Neighbor

Cordell Hull: Mexico would make a $9,000,000 ''token payment" (made possible by U.S. loans and credits of much more than that) to the oil companies. The money would be placed in escrow pending valuation of the properties by two experts--one from Mexico, one from the U.S.

The companies have never revealed either their cash investments or their own valuation of their ex-properties. Mexican estimates for all the expropriated fields (about 40% U.S.-owned, 60% British) have ranged from $23,000,000 (after expropriation) to $500,000,000 (before). But if by any chance experts could agree, the balance would be paid over a long-term period in oil from the companies' exproperties. Otherwise the $9,000,000 would be returned to Mexico and negotiations would start all over again.

The U.S. companies looked on this deal with cold horror. It is true that much of their cash investment in Mexico has long since been paid off in oil, or written off as a bad debt. But the real value of the properties lies in oil beneath the ground. With Mexico denying their "subsoil rights" (or canceling them with a token payment), they shudder to think what might happen in other countries. In Venezuela, Colombia, elsewhere in & outside the Hemisphere, oil companies have investments that make their Mexican properties look like peanuts.

So last week Jersey Standard's tough president, William S. Parish, spokesman for all of the U.S. companies, answered Cordell Hull's proposal with a flat No. He recalled that Mr. Hull himself had insisted, as recently as last year, that expropriation amounted to outright confiscation unless "adequate, effective and prompt compensation" was paid. Real-politiker finally persuaded Mr. Hull that "international law" was not always compatible with Good Neighbor necessities. But Mr. Parish stood firm on the high ground that Hull had once occupied: he demanded arbitration followed by restitution or full payment.

Actually, Mr. Parish's position is not so toploftical as that. What he really yearns for is a compromise already offered by his company: a long-term operating contract for the companies, after which the properties would revert in tola to Mexico. Failing that, he would rather preserve his principles and his face than accept a token payment.

Mexico, while plumping 1,000% for the State Department deal, also had reason to lean a bit toward the Parish compromise. Since Mexico kicked the gringos back up north, its oil properties have been limping and stalling. Last year's production was 40,300,000 bbl.--compared to 46,500,000 bbl. in the last pre-expropriation year. Exploration has almost stopped. Some of the movable equipment has been shipped to Japan for scrap, in exchange for the kind of ready cash that used to pour in from oil-company taxes. President Avila Camacho might well find U.S. oil know-how and oil capital useful--if only a way could be figured to save the face he must turn to his anti-gringo voters. One such face-saver would be a public admission on U.S. oilmen's part that they could have behaved more simpaticamente toward Mexico in the past, are resolved to do better in the future.

The all-round face-saving solution to this oily dilemma may come from no immediate action at all. The State Department may retire to the sidelines, tell Mr. Parish to take the ball and see how far he can carry it on his own. While he tries, the U.S. can use its Good Neighbor funds for highways and military bases.

This file is automatically generated by a robot program, so reader's discretion is required.