been fruitless, he did not give up. In April, 1922, he went to Paris to confer with bankers from France, Great Britain, Belgium, and Switzerland on terms to be offered to Huerta on the bonds. On his return Senor de la Huerta met him and a number of bankers in New York. After having conferred for two weeks, during which time Felix Diaz and his American supporters, made desperate but unavailing efforts to block the game and start a revolution, they reached an agreement, subject to ratification by President Obregon and the Mexican Congress. This agreement provides for the resumption of payment of the interest on the debt coupons maturing after January 1, 1923, and the continuance of payment for five years out of special funds (all the oil tax, ten per cent of the gross receipts of the railways, and all the net revenue of the railways), after which full service on the debt is to be resumed. New interest bearing scrip

is to be issued to make up the difference between the actual interest due and the amount paid in the five year term. The arrears of interest are to be taken care of by an amortization fund extending over a period of forty years. The “external debt" is specially favored, as cash payments on interest on coupons maturing after January 1, 1923, will be made on a scale ranging from 50 to 140 per cent, while the payments on the internal loans will range from 30 to 60 per cent. The railways are to be turned over to private management, the government agrees to guarantee the railway bonds, and the holders of the mortgages agree not to foreclose, unless the government defaults in its obligations.27 Here again we have the strange-perhaps we should simply call it modern-spectacle of a group of foreign individuals negotiating with a sovereign state and attempting to dictate to that state its financial policy. Prominent in the list of bonds which the government agrees to pay are the Huerta bonds of 1913, amounting to $6,000,000, the validity of which Obregon protested.

27 Summary of the Plan of Readjustment of the Obligations of Mexico, etc. Pamphlet issued by the International Committee of Bankers on Mexico. Released September 5, 1922.

The debt settlement was signed June 16. Six days later the Mexican Petroleum Company, popularly known as "Mexican Pete," which had effected the tax agreement a few months earlier, issued its annual report for 1921. This showed a net profit of $12,540,684 as against $9,783,809 in 1920, this after charging off $6,267,776 for depreciation and development and $3,000,000 to cover income and excess profits taxes, allowing a dividend of $26.82 on the common stock. In consequence the stock of "Mexican Pete" rose from $133 to $186 in a week. The Pan-American Petroleum and Transport Company, an allied concern, showed earnings of $18,162,113 in 1921 against $12,987,702 in 1920 and $6,591,421 in 1919. Its stock also rose. But better days were coming. For the seven months ended July 1, 1922, "Mexican Pete" cleared (the reporter said "earned") $15,854,403, or $3,300,000 more than for the entire year of 1921. This amounted to $35 a share, or about $60 for the year, if the same rate continued. The Pan-American reported profits of $18,162,491, or $13.15 a share. Both companies reported considerable current assets.28 Soon after this Pan-American declared a stock dividend of 25 per cent and took over "Mexican Pete" at two and a half for one. Such was the condition of the men who were shouting "ruin" to the Mexican government and "confiscation" to the State Department at Washington. While the State Department was giving heed to their cry the International Berndall Corporation of America was negotiating, through Messrs. Day and Chadbourn, in a very different way with the Soviet government of Russia for concessions in the Baku oil fields. The terms of the contract were that the company was to install new machinery and turn over to the Soviet government 85 per cent of the oil taken from old wells and 80 per cent of that taken from new wells brought in by them.29

The announcement of the debt agreement and its unanimous endorsement by the Mexican Congress and that Pres

28 New York Times, June 22, 1922, 23:2; Sept. 12, 29:2.

29 New York Times, Sept. 24, 1922, 9:1.

ident Obregon had signed a decree that Article 27 should not be retroactive produced no change in the attitude of the State Department. Indeed, the State Department probably never had mentioned one of the prime difficulties between the Obregon government and the bondholders, the refusal to recognize the bonds issued by Huerta. It would be a strange spectacle indeed to refuse to recognize a man and then insist that the people pay our speculators for the bonds they bought of him.

There is another side to this question of some importance. A good many of these bonds were bought at first hand by Europeans. Many of them were owned by Europeans in 1912 and their governments had recognized Huerta, who issued them. Formerly they would have looked to their governments to force payment, but now they dared not do so. No doubt the "innocent purchasers" wondered whether the United States would follow the principle of caveat emptor. However, it was not necessary to appeal to the government; the bankers were able to take care of the "innocent purchasers."

But the debt problem was only a small part of the difficulty of recognition. While the problem of taxation of oil had been adjusted, temporarily at least, that of the rights of landholders to the subsoil had not. On the contrary. their rights to the surface seemed endangered in some cases for agrarian laws had been passed in the attempt to put into effect Article 27 of the constitution for the recovery of lands held by Americans. Mr. Hughes insisted that the policy of the Obregon administration had been confiscatory and that diplomatic relations could not be resumed until Americans were guaranteed against confiscation.30

Soon after this the text of the Supreme Court decisions in the Tampico cases was received, but Secretary Hughes announced that they gave no protection to Americans who owned land prior to May 1, 1917, but had taken no steps to develop oil or had granted no leases. Besides, the State Department had been informed "by Mexican authorities that the Mexican Congress has sole authority to regulate

80New York Times, Aug. 8, 1922, 31:2.

by appropriate organic law the interpretation of the precepts of the constitution and that no organic law for this purpose has yet been enacted." In view of these facts the decisions did not in themselves warrant recognition.31

The next move was by Obregon. In his message to Congress (September 1) he suggested ratification of the Huerta-Lamont agreement, but made no suggestion for any change in Article 27 or of any law interpreting it to suit Secretary Hughes. As for the treaty asked for by Mr. Hughes, his attitude was unchanged. He had offered a counter proposal whereby Mexico should recognize the validity of claims for damages due to the revolution, the justice and the amount of each to be settled by a mixed commission. This commission was also to try to adjust other differences between the two countries. However, his proposal had been declined and now there was nothing left but to follow a policy of "careful waiting."32

Unfortunately Secretary Hughes and Mr. Summerlin, chargé d'affaires, did not follow the same policy. Although President Obregon had made no recommendations about Article 27, a bill affecting it was soon drawn up. This bill, instead of repealing Carranza's decrees, proposed to carry them out with a few modifications. Concessions secured before May 1, 1917, must be registered within 180 days. Among other things the bill forbids the turning over of a concession to any foreign government, provides for royalties ranging from 15 to 50 per cent, and declares that "Any violation of the provisions of this article or the failure to pay the concession tax ... shall be considered cause for the forfeiture of the contract."33

In some way not yet disclosed Mr. Summerlin secured a copy of this bill. October 18 he discussed the matter with Señor Pani, minister of foreign affairs, and the next day sent the bill to him and asked for an official copy. The reply of Señor Pani manifested no displeasure whatever

31 New York Times, Aug. 11, 1922, 22:3.

321bid., Sept. 2, 1922, 4:4.

33 New York Times, Nov. 20, 1922, 4:2. Nov. 19, 1:3; 14::2.

because Mr. Summerlin had sent the note and promised to send an official copy when ready. Apparently Mr. Summerlin never received an official copy, but he sent a copy of the one he had to Secretary Hughes. The chief objection of the oil men to the bill was that it allowed the government to levy excessive taxes. This might force them to shut down and then their concessions would be declared forfeited for failure to pay the tax. November 15 Mr. Summerlin sent Señor Pani a memorandum written "on the official paper of the American embassy," according to that Señor Pani, stating that, in the opinion of the Washington government, the bill was "entirely inadequate for the protection of legally acquired rights of American citizens." The next day Señor Pani sent a curt reply, stating that neither he nor President Obregon knew anything of whence came the bill under discussion, that no project on the subject had been sent to Congress, and that the "honor and sovereignty of the nation" would not allow it to accept laws "which receive the previous censorship of the governments of other countries." The correspondence was then transmitted to Congress. The result was that a storm burst forth and raged for two or three days. The facts were also communicated to the other Latin-American countries.

Now it was known that Obregon wanted recognition and Secretary Hughes had given him to understand that a treaty or legislation guaranteeing American property rights was necessary to secure this recognition. Here was a bill affecting precisely the thing at issue and Secretary Hughes says that the Department of State had been given to understand that its comment would not be unwelcome. This being the situation, he thought it proper to make known the opinion of the department lest silence at this time might furnish complaint later.

Under the circumstances it must be confessed that the conduct of Secretary Hughes was eminently correct. But either Mr. Summerlin was altogether mistaken in what he mistook for assurance that the comment of the State Department would not be unwelcome, or he was led into a trap by which Obregon hoped to score in popularity with the