The Times TUESDAY, AUGUST 30, 1938. Mexico's Troubles

Manawatu Times, Volume 63, Issue 204, 30 August 1938, Page 6

The Times TUESDAY, AUGUST 30, 1938. Mexico's Troubles

A cable message to-day states that, following the expropriation of all the foreign-owned oil wells and large areas of foreign-owned land, the Mexican Government was contemplating a further seizure of American-owned properties. This was alleged to be the direct result of the too mild protests made by the United States Government against the previous acts of Government brigandage, and, judging by events that have happened on a larger scale in Europe, this may well be the case.

Perhaps, however, the United States Government realises that the Mexican grab may not be as profitable to its perpetrators as President Cardenas imagined, for the latest information to hand seems to show that the oil expropriation at least has not proved to be a very profitable experiment. It certainly has not solved the problem it set out to solve, that of assisting the labourers in the oil industry. .Bather their lot has taken a downhill trend as they find they cannot wrest from Government managers the same rignts they wanted from the foreign companies. In their demands to the latter, they could always turn to the Government for help, but now that the Government itself is managing the petroleum industry, they must abide by its rulings whether they like them or not. Not only have the workers suffered deductions in wages, but also, in most cases, the working staff has been greatly cut down. The difficulty encountered by Mexico in finding buyers for Mexican oil has caused the plants to operate at a minimum because Mexico has inadequate storing facilities.

Then, also, there is the increasingly troublesome relation between imports and exports in Mexico. One of the main points discussed in a Bank of Mexico report deals with the upsetting of the balance of trade. The increase in exports during the first 10 months of the past year was 3.18 per cent, compared with the same 10 months of 1936 while the increase in imports soared to 33.56 per cent. The balance in favour of exports, which in the first 10 months of 1936 was approximately 261,000,000 pesos was reduced to £153,000,000 pesos during the same period of 1937.

It must be understood that the shift, in commercial balance is a sign, not only of the restriction of Mexican manufacture, but also a decline of the possibility of payment of debts. In spite of exports, it was found necessary to draw from the reserve and from there comes the decline in the balance reported by the Bank of Mexico. On December 31, 1936, the statement issued by the Bank of Mexico showed the metallic reserves of the bank to be 193,014,659.10 pesos which, as compared with the sum of bills and deposits and other obligations of the bank, was a reserve of 67 per cent. The statement issued by the bank on March 12, 1938, showed the metallic reserves to be 109,830,222.06 pesos or a reserve of 39.78 per cent.

Observers who have followed the Mexican economic troubles for several years attribute the present condition of the Bank of Mexico to the unwise open-handed methods of the Government in its spending. They feel that, if the Mexican Government had attempted to spread its programme over a period of five or six years instead of two, the situation could have been avoided. Instead, millions of pesos were spent in the Laguna Cotton District, in road building, in irrigation projects and others without regard for the depleted conditions of the Government funds.

In order to fulfil its obligations and meet payments, the Government was forced to fall back upon the Bank of Mexico. 'The bank furnished as much as it could out of its funds, but there finally came a time when it could no longer dole out money in this manner. At that time it became necessary to sell gold from its vaults to other countries, gradually draining the reserves.

To-day, there are practically no dollars coming into the country through the banks, except for those used to pay the mining industry pay rolls. There, is also a thin inflow of dollars from the tourist trade, which has steadily declined since the expropriation and the recent Cedillo revolution. Thus, the banks have been merely re-selling the dollars which come into their possession and daily, according to the demand, the jjrics of dollars rises or falls sinee there is no stabilising agency.