TRADING WITH MEXICO 
 
TRADING WITH 
 MEXICO 
 
 BY 
 
 WALLACE THOMPSON 
 
 AUTHOR OF "THE PEOPLE OF MEXICO" 
 
 NEW YORK 
 
 DODD, MEAD AND COMPANY 
 1921 
 
COPYRIGHT 1921 
 Br DODD, MEAD AND COMPANY, INC. 
 
 PRINTED IN THE U. 8 A. BY 
 
 Cftc guinn & goben Company 
 
 BOOK MANUFACTURERS 
 
7*7 a 
 
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 TO 
 
 ALBERT BACON FALL 
 
 A Statesman Whose Insight and Whose 
 
 Knowledge of Mexico Have Long 
 
 Sustained the Faith of Those 
 
 Who Love Her Best. 
 
PEEFACE 
 
 THE book whose pages follow is the result of 
 a conviction, firm-rooted in observation and ex- 
 perience, 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 vol- 
 umes, one upon the people of Mexico and one upon 
 the psychology which governs their actions in so- 
 cial 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 
 
 i The People of Mexico. Harper & Bros., New York, 1921. The 
 companion book, The Mexican Mind, is in preparation for pub- 
 lication as this present volume goes to press. 
 
 vii 
 
viii PREFACE 
 
 situation which to me is the most astounding con- 
 dition 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 popu- 
 lation, 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 
 
PREFACE ix 
 
 with the ways of business in its relationship to 
 human life. 
 
 I am a friend of Mexico, Few who have writ- 
 ten of her life have been more deeply interested in 
 her welfare. I should like to lay here the foun- 
 dations for a solution of the Mexican business 
 problem by setting forth the unhappy picture, ig- 
 noring 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 recog- 
 nize 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 po- 
 tentialities 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 na- 
 tional degeneracy. He who shall solve that prob- . 
 
 lem 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. 
 
x PREFACE 
 
 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 fu- 
 ture 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 be- 
 lieves 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 pres- 
 ent and in the future the sane, firm grasp of actual- 
 ities 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 am- 
 bitions 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 Mexi- 
 can market. 
 
 One word more I would add. There rules to-day 
 
PREFACE xi 
 
 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 govern- 
 ment knows, as we all know, that the only wilder- 
 ness left to us is the open field of the vast unde- 
 veloped lands to the South. I believe that Wash- 
 ington 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 per- 
 force place the funds at the disposal of those who 
 go, and to those who, in the councils of our gov- 
 ernment, are quietly, without ostentation or polit- 
 ical apology, placing firm hands to the backs of 
 those who dare and who give. 
 
 WALLACE THOMPSON, 
 
 NEW YOEK, 
 
 August 6, 1921. 
 
CONTENTS 
 
 CHAPTER PAGB 
 
 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 
 
TRADING WITH 
 MEXICO 
 
 CHAPTER I 
 
 TRADING WITH MEXICO 
 
 THREE fundamentals determine and will deter- 
 mine 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 Mar- 
 ket ; second, the Credit, and third, the Government 
 and Laws under which trade must be carried on. 
 Truly not original, and the astonishing thing 
 
2 TRADING WITH MEXICO 
 
 about American business men who consider Mex- 
 ico 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 com- 
 parable, 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 
 3,000,000 fully 6,000,000 are almost as Indian as 
 their full-blood cousins. In other words, 12,000,- 
 00 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. 
 
TRADING WITH MEXICO 3 
 
 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 overwhelm- 
 ingly 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 com- 
 modity has been cut in production almost to the 
 point of destruction, by the machinations of Mexi- 
 can government and graft, and Yucatan is not to- 
 day the great purchasing center that it once was. 
 Moreover, Yucatan is far from the Mexican main- 
 land, a principality, a country of its own, and its 
 riches have never been a true part of the re- 
 sources 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 sub- 
 
4 TEADING WITH MEXICO 
 
 sidiary 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 cir- 
 culates 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 gov- 
 ernment or as a business community. Gold is of 
 value, really, only because it makes credit possi- 
 ble. When you must ship boxes of gold into dis- 
 tant states at an appalling rate of insurance 
 against bandits and highwaymen, it is not pros- 
 perity, 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 en- 
 
TRADING WITH MEXICO 5 
 
 dorsements, 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 re- 
 assuring 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 cus- 
 tomers, and cannot themselves get credit in their 
 own country. Recently, when the Mexican gov- 
 ernment wanted credit on a large supply of rail- 
 way equipment, it was told that if one young Amer- 
 ican, 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 announce- 
 ments. 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 
 
6 TRADING WITH MEXICO 
 
 bid, even with what we have called the unsenti- 
 mental 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 gaming 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 Amer- 
 ican manufacturers was born, moreover, of our 
 own need to get rid of accumulated goods. Be- 
 ginning 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 Mex- 
 ican market, and to-day, when the same manufac- 
 turers want to sell again, they find that Mexico 
 
TKADING WITH MEXICO 7 
 
 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 un- 
 loading which we thought would whet the Mexi- 
 can appetite. Mexico is like the customer of a 
 "fire sale" store she will buy only the most ob- 
 vious 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 compli- 
 cated. But perhaps the answer as far as the 
 American business man is concerned is contained 
 in the fact that while the Mexican merchant de- 
 mands 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 
 
8 TRADING WITH MEXICO 
 
 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 de- 
 manded 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 consider- 
 ations 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, ' t Mex- 
 ico 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 sur- 
 
TRADING WITH MEXICO 9 
 
 face 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 ob- 
 ject, "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 re- 
 gime 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 re- 
 vised 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 lit- 
 erally 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 coun- 
 
10 TRADING WITH MEXICO 
 
 try. The laws against their holding land are dras- 
 tic 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 citizen- 
 ship 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 se- 
 rious of all, such lands are virtually confiscated 
 through nationalization projects which have al- 
 ready 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 Mexi- 
 cans 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. 
 
TRADING WITH MEXICO 11 
 
 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 busi- 
 ness. In effect they make every foreigner in Mex- 
 ico, 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 per- 
 mits wheedled out of a grasping government de- 
 partment, 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 corpo- 
 rate business, are in some way or another contra- 
 dictory to the laws of the land. They receive priv- 
 ilege, 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 govern- 
 ment. 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. Some- 
 how business, with its awakening consciousness to 
 its helplessness, is finding the situation irksome. 
 
12 TRADING WITH MEXICO 
 
 The greatest single industry in Mexico to-day is 
 oil, and oil pays about $50,000,000 a year in vari- 
 ous 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 ca- 
 price of Mexican officials. The laws of the present 
 era of Mexico are enacted literally for the pur- 
 pose 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 de- 
 sirable. 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 gov- 
 erned 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 crea- 
 tion of salable privilege instead of defensible 
 rights, and this has thrown all business into the 
 
TRADING WITH MEXICO 13 
 
 same group. The business problem of Mexico is 
 literally the achievement of this exchange of priv- 
 ileges for rights. And until that exchange is ef- 
 fected, 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 in- 
 deed. 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 gov- 
 ernment. 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, priv- 
 ilege without graft or price, now. But the price 
 is there, and is clearly worked out in the subtle 
 Mexican mind. These American business men, 
 
14 TRADING WITH MEXICO 
 
 pleased with their reception, are to become boost- 
 ers of the Mexican government, demanding its 
 recognition and scouting the great financial inter- 
 ests 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 privi- 
 lege, 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 di- 
 vide 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 privi- 
 lege versus political rights, the issues of the busi- 
 ness 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 busi- 
 ness and not for a selfish, individualistic hope of 
 getting in ahead of the next fellow. The Ameri- 
 cans who have been longest in Mexico are begging 
 to-day for rights in exchange for privilege. They 
 
TEADING WITH MEXICO 15 
 
 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 un- 
 happiness. 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 de- 
 struction 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.^ 
 
CHAPTER II 
 
 NATUBE AND THE MEXICAN MARKET 1 
 
 EVEEY land upon this globe owes to nature that 
 predetermination of its products and its needs 
 which are the vital factors of its commerce and its 
 industries. Even the nature of its races, which 
 has so much to do with the standards of living 
 which affect the quality and volume of business, 
 is determined to a certain extent by climate and 
 geography. It is therefore a fundamental need 
 of all \vho have a deep interest in Mexican busi- 
 ness to grasp something of the location, the for- 
 mation, and the climate of that country. For few 
 nations in the world have a more wonderful loca- 
 tion, and few have a more disastrous climate. 
 
 The vast cornucopia-like triangle of land which 
 comprises the territory of Mexico lies south of 
 nearly three-quarters of the southern boundary 
 of the United States. Its western tip touches 
 Southern California at the Pacific and its most 
 easterly point is 500 miles south of the Pensacola, 
 at the western end of Florida. For 1,833 miles 
 
 iThis chapter is based upon the author's article on Mexican 
 Geography contributed to the important Mexican Year Book for 
 1920-21, published in Los Angeles, Calif., concurrently with this 
 volume. 
 
 16 
 
NATURE AND THE MARKET 17 
 
 Mexico's northern border is contiguous to the 
 United States, 693 miles eastward along arbi- 
 trarily marked lines from the Pacific Ocean to El 
 Paso, Texas, and the remainder southeastward 
 along the sinuous course of the Rio Grande to the 
 Gulf of Mexico. Its jagged southern border is 
 hardly 400 miles long, touching Guatemala and 
 British Honduras (Belize). 
 
 This cornucopia, grasping the Gulf of Mexico on 
 the east like a great hand, swings southeastward 
 from the Pacific contact with the United States 
 until the most westerly point of the Guatemalan 
 border is 500 miles east of Mexico's easternmost 
 contact with the United States on the north. 
 
 Set apart, as Mexico is by her boundaries, she 
 seems in form much like a great peninsula, but she 
 has, herself, two important peninsulas as part of 
 her territorial extent and configuration. One is 
 the Peninsula of Yucatan, which forms the eastern 
 end of the cornucopia, the thumb of the curving 
 hand which grasps the Gulf of Mexico, an area of 
 about 50,000 square miles. The other is the long, 
 narrow peninsula of Lower California, with 58,343 
 square miles, extending directly south of the 
 American state of California and connected with 
 the Mexican mainland by only a narrow strip. 
 
 That mainland comprises, with the two penin- 
 sulas, 765,762 square miles, and the 1,561 square 
 miles of coastal islands under Mexican sov- 
 
18 TRADING WITH MEXICO 
 
 ereignty bring the total area of the country up to 
 767,323 square miles. The greatest width of the 
 mainland is 750 miles, and the greatest length is 
 1,942 miles, from the northwestern tip of Lower 
 California, where it joins the United States, to the 
 southermost point in the jagged Guatemalan bor- 
 der in the Mexican state of Chiapas. The narrow- 
 est point in Mexico is 120 miles, at the Isthmus of 
 Tehuantepec, once discussed as the possible site of 
 an interoceanic canal, and in the time of Diaz the 
 route of a great transshipping railway between 
 the Pacific and the Gulf of Mexico. The Atlantic 
 (Gulf of Mexico) coastline of Mexico is 1,727 
 miles long, that of the Pacific (including the long 
 border of Lower California) 4,574 miles. 
 
 Lying between 32 30' and 14 30' North Lati- 
 tude and 86 30' to 117 Longitude west from 
 Greenwich, the triangular form of the Mexican 
 territory places it about equally in the temperate 
 and torrid zones. This is a primary factor in 
 Mexican climate, but far more significant is the 
 contour of the country itself. 
 
 This is largely mountainous, for if we include 
 the high but fertile table-lands, nearly two-thirds 
 of the country is covered with mountain ranges. 
 The Eocky Mountains of the United States, the 
 great backbone of the Western Hemisphere, cross 
 the Mexican border into Sonora, in a low, nar- 
 row range. Almost immediately south of the in- 
 
NATURE AND THE MARKET 19 
 
 ternational line they begin spreading eastward. 
 A long, slowly rising valley a hundred miles wide 
 continues southward from El Paso, narrowing 
 rapidly, while to the eastward of this valley rises 
 an apparently new range of mountains, obviously 
 a part of the great Rocky Mountain range, but 
 unconnected with iti in the United States and 
 south, indeed, of the broad flat plains of Texas. 
 This is the Sierra Madre Oriental, or Eastern 
 Mother Range, the continuation of the Rockies in 
 Sonora and Durango being called the Sierra 
 Madre Occidental, or Western Mother Range. 
 Further south, these two join together, and spread 
 to virtually the whole width of Mexico, excepting 
 for the Gulf coastal plain, some 300 miles wide, 
 to the east. All of Central Mexico is mountain- 
 ous, flattened only by vast plateaus which, ac- 
 cording to the accepted geological theory, were 
 created by alluvial deposits and lava dust from 
 the mountains which rise still above them. At the 
 Isthmus of Tehuantepec, the Sierra Madre flat- 
 tens out till, save for the relatively easy grades 
 which climb from the Gulf and from the Pacific to 
 the summit of the low divide (less than 300 feet 
 above sea level) the mountains might be all but 
 gone. The narrow plane of the Isthmus passed, 
 the mountains rise again until the center of the 
 state of Chiapas is once more a vast plateau ac- 
 cented with towering peaks, a formation which 
 
20 TRADING WITH MEXICO 
 
 continues southward through Central America, 
 lowers again at Panama, but joins directly, at last, 
 with the South American Andes. 
 
 In this sweep of mountainous territory are hun- 
 dreds of deep canons or barrancas, great fertile 
 plateaus, and many wonderful mountains. Of 
 these last those about the Valley of Anahuac, the 
 site of Mexico City and for ages the center of Mex- 
 ican government and population, are the most 
 famous. Here are Popocatepetl (17,520 feet) and 
 Ixtaccihuatl (16,960 feet) the snow-peaked vol- 
 canoes, and to the eastward the still more beauti- 
 ful cone of Orizaba (18,250 feet). Virtually at 
 the same latitude, but far to the west, is Colima, 
 (12,991 feet), a still active volcano. Toluca 
 (14,950 feet), close to the Valley of Mexico, Ma- 
 linche (14,636 feet) in the state Tlaxcala, the 
 Cofre de Perote (13,400 feet) in the state of Vera 
 Cruz, and Tancitaro (12,664 feet) are those of 
 greatest height. Only the already great altitude 
 of the plateaus of Mexico from which most of the 
 striking mountains spring keeps hundreds of 
 others from filling the eye of the traveler. The 
 scenery which results from the mountainous for- 
 mations of Mexico is literally unsurpassed, for 
 Popocatepetl and Ixtaccihuatl can give the climber 
 all the thrills of the Alps, and the crater lakes to 
 be found in one or two sections of Mexico rival in 
 splendor the more famous resorts in Europe. 
 
NATURE AND THE MARKET 21 
 
 The deep and wide barrancas which mark the 
 mountainous formation all through Mexico are 
 magnificent to contemplate, but the day's journey 
 down and up the sides of such a geological spec- 
 tacle as the Barranca of Beltran brings home to 
 even the unscientific observer the terrific handi- 
 caps which these vast cuts put upon the industrial 
 development of the country. Much of the con- 
 quering of these handicaps was achieved under the 
 broad railway policy of President Diaz, and the 
 work done still remains, but many years must now 
 pass before the final conquest is achieved. Such 
 a work as the building of the Colima branch of the 
 Mexican Central, completing the only direct line 
 for the first time from the Capital to the Pacific, 
 will hardly be repeated when revolution threatens, 
 for here, in less than 100 miles, twenty great 
 bridges had to be built, most of them crossing 
 barrancas and cuts of mere geological formation, 
 with virtually no streams filling them even in the 
 rainy season. The Southern Pacific line from the 
 northern border in Sonora lacks but sixty miles of 
 linking up with the Guadalajara branch of the Na- 
 tional Railways, but thirty of those sixty miles are 
 through a mountainous territory cut with deep 
 barrancas which will cost close to a million dol- 
 lars a mile to build. 
 
 Such barrancas and valleys do not, of them- 
 selves, indicate either great natural water power 
 
22 TRADING WITH MEXICO 
 
 or navigable streams. There are wonderful water 
 power possibilities in Mexico, to be sure, which 
 come from two factors, the sheer drops which give 
 ideal power sites with tremendous heads of water, 
 and the heavy torrential rainy season. But the 
 streams themselves do not carry sufficient water 
 the year round to justify any plant, and tremen- 
 dous reservoir development is vital to any power 
 plant design. Such reservoirs have been built in 
 various parts of Mexico, but at appalling expense, 
 such as only great financial interests can swing 
 only foreign capital or the government has been 
 able to handle them. There is an added and un- 
 expected element of difficulty the porousness of 
 much of the soil of Mexico. The mountains, in- 
 deed, are of igneous rocks, but underneath the 
 valleys is often soft limestone, and more often 
 still, under those places where a great impound- 
 ing of water might be made with a relatively low 
 and inexpensive dam, is the soft, porous alluvial 
 and volcanic-ash land with which the valleys have 
 been filled up. 
 
 This porous soil and limestone are factors bear- 
 ing on the absence of navigable streams. Even in 
 the lowlands the streams run underground in 
 Mexico, and while they can be tapped by shallow 
 wells, they deprive Mexico almost entirely of the 
 advantages of river transportation. Even the 
 
NATURE AND THE MARKET 23 
 
 Rio Grande, on the northern border, is useless for 
 navigation most of the year. The Panuco, at 
 whose mouth is located the great oil center of Tam- 
 pico, is navigable only a short distance above that 
 port. The broad, rich coastal plain along the Gulf 
 of Mexico is watered by tiny streams, all of which, 
 excepting the partially navigable Papaloapam, 
 are useless for steamers and even for launches 
 most of the year. Not until we reach the Isthmus 
 of Tehuantepec do we find a river worth consider- 
 ing for transportation. The Coatzacoalcos, at 
 whose mouth on the Gulf of Mexico is Puerto Mex- 
 ico (the eastern terminus of the Tehuantepec Na- 
 tional Railway), furnishes a highway which made 
 possible the relatively great development of Amer- 
 ican tropical plantations during the years of 
 peace under Diaz. Its mouth was then the port 
 of loading for great ships, but only by continual 
 dredging was it kept open, and to-day the port is 
 abandoned except for light-draft coasting ships. 
 Further south, emptying into the Gulf at Fron- 
 tera, is the magnificent system of which the Gri- 
 jalva and the Usumacinta are the chief streams. 
 Here indeed have plied and in the future will ply 
 great river steamers, for upon the banks of the 
 Usumacinta, at least, are rich oil fields and the 
 fairest farming land in all tropical Mexico. Both 
 the Grijalva and the Usumacinta are magnificent 
 
24 TRADING WITH MEXICO 
 
 streams, and the latter is comparable, in its ma- 
 jestic volume, to the Mississippi itself. Only the 
 bar at Frontera keeps them from being navigable 
 to ocean steamers. For a brief period under 
 President Madero this bar was dredged so that 
 fruit boats could enter and go to the docks of ba- 
 nana farms, encouraging a promising industry 
 which was killed by heavy taxation and govern- 
 ment neglect of the dredging, under the revolu- 
 tionary presidents of recent years. But this one 
 system of rivers offers virtually all there is of 
 navigation in Mexico. 
 
 Yucatan, the peninsula which separates the Ca- 
 ribbean sea from the Gulf of Mexico, is virtually 
 without rivers, the water from the abundant rain- 
 fall of its interior finding its way to underground 
 streams in the porous underlying coral limestone. 
 
 On the west coast there are a few rivers. The 
 most important is the Lerma, which waters a 
 large territory on the Pacific side of the conti- 
 nental divide, and allows some local transporta- 
 tion. The Balsas, in the states of Oaxaea and 
 Guerrero, reaches far inland, but rapids and shal- 
 lows make its use for navigation expensive and 
 all but impossible. In Sonora is the Yaqui river, 
 navigable for small boats and of some value for 
 transportation. The Fuerte is also in this class. 
 
 Another phase of the geography of Mexico 
 which affects transportation is the complete ab- 
 
NATURE AND THE MARKET 25 
 
 sence of good natural harbors well located. The 
 chief port of Mexico, Vera Cruz, has a harbor 
 which was built artificially around a partially pro- 
 tected bay. Tampico is a port solely because of 
 the jetties which narrow the mouth of the Panuco 
 and, with the help of dredges, keep the channel 
 clear. Puerto Mexico has a similar problem, but 
 the smaller river makes dredging absolutely vital. 
 Frontera is solely a dredging proposition, as the 
 Usumacinta and the Grijalva, emptying together 
 into the Gulf, have formed a vast delta in the low- 
 lands which can probably never be narrowed to 
 take advantage of the great volume of water which 
 they pour out. Yucatan has literally no sem- 
 blance of a harbor, and its great crops of sisal 
 hemp are loaded from lighters at appalling 
 expense. 
 
 On the Pacific coast, Acapulco has one of the 
 ideal harbors of the world, completely landlocked, 
 and open for medium-draft ships. But it is rela- 
 tively small, and moreover as yet almost inacces- 
 sible to any railway survey, although it was used 
 by the galleons from Manila as a port for trans- 
 shipment of the treasures of the Orient across 
 Mexico to the galleons from Cadiz which came to 
 Vera Cruz. Salina Cruz, the Pacific terminus of 
 the Tehuantepec National Railway, was built from 
 an open roadstead with two lines of jetties and 
 seawalls, a work which inattention has now all 
 
26 TRADING WITH MEXICO 
 
 but ruined. Manzanillo, the terminus of the only 
 direct railway line from Mexico City to the Pacific, 
 was also built with seawalls and opened by 
 dredges. Mazatlan, further up the coast, and the 
 chief port of the Southern Pacific Railway of Mex- 
 ico, is an open roadstead. Guaymas, the port of 
 the state of Sonora, is accessible only to light-draft 
 ships. 
 
 These are all great natural handicaps, and have 
 affected the life of Mexico probably more than it 
 will be possible to estimate. The mighty and 
 costly work of the Diaz regime in building harbors 
 is a monument to that " materialistic" era which 
 will last through many years and has already 
 playeu a tremendous part in furnishing the sinews 
 of revolution to succeeding governments, for with- 
 out that work Mexico would be far from capable of 
 sustaining herself in the period of her agony 
 to-day. 
 
 But beyond all these factors of mountains and 
 rivers and sea looms a yet greater problem, and 
 still more far-reaching the problem of climate. 
 As noted, Mexico lies in about equal parts in the 
 temperate and torrid zones. But the geological 
 zones are far more important, for climate is af- 
 fected not alone by latitude but by altitude as well. 
 These geological zones are three, the hot country 
 or tierra caliente, the temperate country or tierra 
 templada and the (relatively) cold country or 
 
NATURE AND THE MARKET 27 
 
 tierra fria. The hot country is the lowland section 
 along the coasts from sea level to 3,000 feet alti- 
 tude, where the mean annual temperature varies 
 from 76 to 88 Fahrenheit. The Mexican termin- 
 ology includes not only the lowlands of the torrid 
 zone, but the whole coastal plain up to the northern 
 border. The tierra templada lies along the moun- 
 tain slopes and in the lower plateaus, between 
 3,000 and 6,500 feet altitude, where the tempera- 
 ture is between 65 and 76. This zone takes in 
 the higher northern sections which are within the 
 temperate zone proper. The tierra fria takes in 
 the high plateaus and the mountains, between 
 6,500 and 12,500 feet, the yearly average temper- 
 atures varying from 30 to 60, although the im- 
 portant sections record 50 or more. The three 
 geological zones each include about equal portions 
 of the country, but half of the inhabitants live in 
 the cold zone, and only a quarter each in the tem- 
 perate and hot sections. The mean temperatures 
 of the cold zone are approximately those recog- 
 nized as the most favorable for physical exertion, 
 but in the hot country the body struggles against 
 a handicap of almost 20 F. more than the 65 at 
 which it normally functions best. More signifi- 
 cant still are the temperatures of all the zones in 
 their relation to mental activity. The human 
 mind is at its best under the stimulus of a mean 
 temperature of about 40 F,, but even at Mexico 
 
28 TRADING WITH MEXICO 
 
 City, 7,600 feet above sea level, the mean tempera- 
 ture of winter is as high as 53. In the temperate 
 and hot countries the handicaps under which the 
 brain functions run to 20 and up to 45 above the 
 40 at which the human mind works at highest 
 efficiency. No stimulating winters, no clarifying 
 cool spells, even, in the midst of the endlessly 
 beautiful summers of Mexico ! 
 
 Only the cold zone has any advantages in tem- 
 perature, and these advantages are equally im- 
 portant with the fertility of the soil in accounting 
 for the predominance of population there. Yet 
 even where the temperature is favorable to at 
 least physical work, there is the debilitating same- 
 ness or the tropics, the assurance that there will 
 always be more difference between day and night 
 than between the seasons. There, on the heights, 
 too, the nervous drain of altitude and of lack of 
 moisture in the air takes the place with no ad- 
 vantage to the human machine of the humidity 
 and heat of the hot country. At every turn in 
 Mexico climate takes toll of human energy, even 
 if we ignore the undoubtedly debilitating effect 
 of tropical and sub-tropical light upon the white 
 men and upon their mixed-blood descendants as 
 well. 
 
 All these climatic factors, then, have continuous 
 influence on the health of all the Mexican people as 
 well as upon Mexican business. The hot, humid 
 
NATURE AND THE MARKET 29 
 
 weather of the hot country makes those who live 
 there low in resistance of disease, while the ner- 
 vous strain of the altitudes and dryness of air in 
 the better portions achieves a not dissimilar result 
 in lowering resistance. It is axiomatic that the 
 Mexicans as a people are seldom well and, as has 
 been recorded in detail elsewhere, 1 this ill-health 
 has been and is to-day one of the determinants of 
 the relatively low state of progress of the country. 
 No people who are continually sick and upon whose 
 energies their climate is a continuous drain can 
 work well or achieve greatly. 
 
 The relation of this thoroughly recognized fac- 
 tor of ill-health to Mexican trade and commerce 
 must not be overlooked. It is at the root of much 
 of the apathy which keeps the Mexican people at 
 their low ebb of business enterprise. It deter- 
 mines with peculiar insistence their predilection 
 for the easy road, the "manana habit/' even for 
 the dominance of outworn traditional methods in 
 agriculture and in business. It has a great deal 
 to do with the ease with which foreigners develop 
 a land which has for centuries lain virtually fal- 
 low. But it places vast difficulties in the way of 
 that development, for it keeps the labor problem 
 continually in the foreground and vitiates much 
 of the great advantage which the relative cheap- 
 ness of that labor seems to offer. It has and will 
 
 i The People of Mexico, Book I, Chap. V. 
 
30 TRADING WITH MEXICO 
 
 continue to have a powerful effect on trade, for 
 it keeps even the enterprising among Mexican 
 business men at a low standard of efficiency and 
 makes it almost imperative that foreigners, for 
 the present, do most of the jobbing and export 
 and much of the retail trade and export buying of 
 the country. This element is too likely to be lost 
 sight of, because it is not a condition common to 
 other lands. But it explains much that seems at 
 first inexplicable in the difficulties of the American 
 exporter and importer in getting the adequate 
 representation in Mexico which he must have. 
 
 Another vitally important effect of Mexican 
 geography is the uncertainty and untoward dis- 
 tribution of rainfall. This has forced upon the 
 Mexicans their diet of corn and with it their use 
 of fiery condiments which are probable causes of 
 the digestive disorders which ravage all classes. 
 Moreover, the rainfall conditions have been vitally 
 important in the determination of the entire agri- 
 cultural tendency of the country. 
 
 The seasons in Mexico are marked, not by win- 
 ter cold and summer heat so much as by seasons 
 of rain and drought. The winter is the dry sea- 
 son, roughly between October and May, and the 
 summer is the salubrious rainy season, from June 
 to September. The distribution of rain through- 
 out the year and the failure of the rains in the 
 important growing seasons in some of the other- 
 
NATURE AND THE MARKET 31 
 
 wise fertile sections is due primarily to the geog- 
 raphy of the country. Professor Ellsworth Hunt- 
 ington, of Yale, the great American climatologist, 
 finds that Mexico's summer rains are due to the 
 vertical rays of the sun which cause the rapid 
 rising of the heated air, with sudden expansion 
 and condensation, first over the low-lying hot 
 country and later on the rising uplands of the 
 tierra templada, where the function of the moun- 
 tains in bringing about condensation is amply 
 proven by the well- watered eastern slopes and the 
 dry western sides of the ranges. 
 
 This mountain contour and the peculiar shape 
 of the Mexican mainland (very wide at the north 
 in proportion to the south) create another impor- 
 tant climatological effect the broad stretches of 
 desert in the northern sections. The so-called 
 continental type of climate which forms the Amer- 
 ican deserts further north combines with the 
 mountain contour and the distance from the 
 eastern seashore (driving the rain-clouds south- 
 ward) to make immense sections of Mexico desert, 
 capable of supporting, at best, only wandering 
 herds. These deserts lie between the broad arms 
 of the great "Y" of the Mexican mountain 
 ranges, and combined with the mountainsides 
 themselves render nearly three-fourths of the area 
 of Mexico unfit for cultivation, even if irrigation 
 were general. 
 
32 TRADING WITH MEXICO 
 
 The result is that of the 500,000,000 acres of 
 land in Mexico, not more than 25,000,000 acres 
 are arable. Great sections are useless, so that in 
 the state of Chihuahua, 90,000 square miles in ex- 
 tent, only about 125,000 acres, or less than two- 
 tenths of one per cent can be cultivated and most 
 of that arable portion is irrigated. 
 
 The most fertile sections of Mexico are rich 
 indeed, and in the plateau valleys, where alluvial 
 deposits and lava dust have been poured in to- 
 gether to form the soil, great crops can be raised 
 when there is rain. Only in a relatively limited 
 section, however, is rain sure to come at the times 
 needed by the crops. Often when it does come, it 
 is in torrential downpours which are likely to wash 
 cultivated fields away in a single night. It is this 
 condition which makes the so-called tier r a tem- 
 plada, on the slopes of the mountains, in many 
 ways the least desirable of all the farming land 
 of Mexico. 
 
 Uncertainty of rainfall is, then, one of the out- 
 standing results of the Mexican climate as influ- 
 enced by Mexican geography. This uncertainty 
 works forever upon the mind of the Mexican 
 farmer, making him a hopeless fatalist, making it 
 less than worth his while to attempt scientific culti- 
 vation. If there is rain, his crops are good any- 
 way, and if there is not rain, the cost of labor and 
 fertilizer and good seed are lost. The Mexican 
 
NATURE AND THE MARKET 33 
 
 farmer is the worst of gamblers, and his fondest 
 hope is that his average crop over a period of 
 years will be twenty-five per cent of normal ! 
 
 Famine has ravaged Mexico periodically for 
 thousands of years. It is most interesting, in look- 
 ing at the present stage (when the largest items 
 of import are foodstuffs), to realize that it has 
 probably been only the much-abused hacienda sys- 
 tem which has saved Mexico from severe ravages 
 of recent famine. The hacienda system, which 
 is the operation of huge estates under an elaborate 
 overseership, approaches as nearly as the living 
 conditions of the country permit to a business- 
 like administration of the farming of the land. It 
 was the stable factor in Mexican food production 
 in the time of the Spaniards and in the later era 
 of Diaz. 
 
 The small farmer of Mexico has worked, since 
 the beginning of Indian history, without a thought 
 of supplying the market and thus feeding the in- 
 dustrial workers of the towns. He has lived from 
 hand to mouth, and only when he chances to have 
 a surplus does he transport it or sell it on the 
 ground for the needs of the city market. So true 
 is this that in the period of mining and industrial 
 expansion under Diaz, the draining of the labor 
 from the haciendas to the mines and to the few 
 factories had an immediate effect on the food pro- 
 duction, and the imports of foreign corn and wheat 
 
34 TKADING WITH MEXICO 
 
 grew almost in exact proportion to the diversion 
 of this labor to industry. The small farmers, the 
 Indians and peons, who had places of their own 
 or worked in the village commons, did not go to 
 the mines, but continued their relatively easy ex- 
 istence on their own little fincas. They learned 
 only slowly the possibilities of the increased mar- 
 ket for their product, and only to an infinitesimal 
 degree did they rise to meet that market. 
 
 To-day, with the shutting down of hundreds of 
 the haciendas, and the return of the country to its 
 primeval agriculture, the situation has become 
 extremely serious, and the food importations have 
 grown out of all proportion to the industrial 
 growth of the country; in fact, almost in inverse 
 ratio to the industrial depression of the country. 
 
 This presents a serious problem, but it also 
 presents a promise of new opportunity when 
 peace comes to Mexico. For then there must come 
 a revival of large-scale farming, the growth of a 
 new farming system, and with it a tremendously 
 increased market for modern farm implements. 
 There has been much talk, on the part of the revo- 
 lutionary governments, of the needs of the new 
 small farmers for agricultural machinery, but this 
 is almost entirely talk, for the new small farmers 
 are only falling back to the way of their ances- 
 tors, and are not in any sense taking the place of 
 the ruined haciendas in food production for the 
 
NATURE AND THE MARKET 35 
 
 cities and industrial sections. That development 
 will probably come in the form of an entirely new 
 system of agriculture, in which foreign machinery 
 and of necessity foreign capital must have a vital 
 part. 
 
 One of the inevitable developments of Mexican 
 agriculture must be in the direction of irrigation. 
 There is literally not enough good accessible land 
 which will produce without irrigation to feed the 
 country or, what is more important, to make an in- 
 crease of population possible. This land must be 
 created by irrigation, and irrigation, owing to the 
 geographical formation of the country, must of 
 necessity be carried out by great capital. Many 
 of the village communes have irrigation systems, 
 of a crude sort. Water is brought from distant 
 streams, where it flows after the rainy season, and 
 in some places it is brought up from the under- 
 ground streams by means of crude water-wheels 
 operated by man-power. But the total area 
 watered by such irrigation is relatively insignifi- 
 cant, and as dams can be built in Mexico only at 
 large cost, the true development of Mexican irri- 
 gation waits on peace, on foreign capital and gov- 
 ernment investment and encouragement. 
 
 Something of this sort had been begun before 
 the present era of revolutions. In the closing 
 years of the Diaz regime (before 1911) many 
 franchises were granted to large private com- 
 
36 TRADING WITH MEXICO 
 
 panies which planned irrigation projects, and the 
 sum of 90,000,000 pesos was ordered expended on 
 government irrigation over a period of years. A 
 few of the private companies had put their plans 
 into execution, and many others, on the way to ac- 
 complishment, were nipped and destroyed by the 
 subsequent revolutions. For the past ten years, 
 nothing has been done toward solving the problems 
 of irrigating the fertile but unwatered lands of 
 Mexico, and it seems hardly likely that anything 
 will be done under the threats of confiscation 
 which now hang over all great enterprise there. 
 
 Rainfall conditions have had much to do with 
 the overemphasis on the land problem and indeed 
 with fche failure of succeeding governments to 
 solve that problem. As in all arid countries, water 
 rights were originally more important to the na- 
 tives than were land rights. In hundreds of the 
 Indian communes which still persist, the commu- 
 nal rights of the Indians are distributed, not on 
 the basis of land assigned, but of the water al- 
 lowed; each Indian receives a proportion of the 
 water brought by the communal irrigation ditches, 
 and may take three or four times the amount of 
 land which his water will irrigate for crop ro- 
 tation, forage, etc. This inevitable emphasis on 
 water has perhaps had its part in directing the at- 
 tention of the Indians in their demands for land 
 distribution, toward the cultivated haciendas 
 
NATURE AND THE MARKET 37 
 
 where water is available. But it also gives 
 promise for a future which will make possible the 
 rehabilitation of the country through great irriga- 
 tion projects creating thousands of rich small 
 tracts available for distribution to industrious na- 
 tives and foreign small farmers as well. In the 
 government franchises given under Diaz to pri- 
 vate irrigation projects, provision was made that 
 about one-third of the land brought into cultiva- 
 tion should be turned over to the government for 
 distribution to small native farmers. 
 
 Aside from the indirect effect of these rainfall 
 conditions, they have determined, with imperative 
 insistence, the type of agriculture which is fol- 
 lowed in Mexico, and so have affected her trade 
 in foods and raw materials. They have made 
 corn (maize) the staple food of the country, as 
 wheat is the staple of the lands where there is win- 
 ter snow and regular rainfall throughout the year. 
 They have allowed the development of only the 
 tropical products like coffee, sugar and rubber in 
 the rich districts of Vera Cruz and Oaxaca which 
 were partially opened by foreign stock companies 
 under Diaz. They have, more than all, enthroned, 
 as the only important agricultural export of Mex- 
 ico, the sisal hemp of Yucatan. This desert prod- 
 uct, which requires slow growth for the maturing 
 of the long stout fibers which make rope and 
 binder twine, is the greatest export of Mexico 
 
38 TRADING WITH MEXICO 
 
 which is the product of Nature's 'bounty and 
 human enterprise. Coffee and some rubber and 
 tobacco and a little sugar were raised for export 
 in happier days, but only sisal hemp, the product 
 of the desert henequen plant, has become a wealth- 
 producer in any great quantity. Mexico has long 
 been an importer of foodstuffs, for, as I have 
 noted, before the days of modern commerce, 
 famine came with terrible regularity. Under 
 Diaz, food was imported in increasing quantities, 
 and since his fall, Mexico has been utterly depen- 
 dent on the outside world for a large portion of 
 the nutriment of her people. 
 
 It is impossible now to predict when and how 
 Mexico will become an agricultural country in fact 
 as well as in potentialities. Irrigation must come, 
 for only when it does will agriculture and the pros- 
 perity of agriculture fill the land. In one section 
 where irrigation has been carried out on a large 
 scale the Laguna district near Torreon, Coah. 
 cotton is grown in quantity. This product feeds 
 into the native industry of cotton weaving which 
 flourishes near Orizaba and in other sections 
 where local, direct water-power is available. 
 
 It seems inevitable that the increase in irrigated 
 lands will add to the acreage of cotton and also 
 to the number and importance of agricultural 
 products of the class of raw materials. The coun- 
 try which irrigation will water in Mexico is of 
 
NATURE AND THE MARKET 39 
 
 vast extent, and is safely comparable, even at its 
 worst, with what the lands of Utah and California 
 and the Imperial Valley were before water was 
 brought to them. Again, however, we wait on 
 peace and on the great works of modern scientific 
 irrigation. And, however enthusiastic we may 
 be as tradesmen, our capital will not be rushing to 
 seek Mexican investments of this sort until civi- 
 lized government again rules, with a promise of 
 relative permanency. 
 
 The desert character of the country in the north 
 was responsible for the establishment of a great 
 eattle-raising industry, for the land was cheap 
 and the ranges were vast. This has to-day been 
 virtually wiped out, and Mexico imports meat 
 from the United States all the result of revolu- 
 tion, so that when peace comes the cattle industry 
 will surely be revived. But always the cattle of 
 northern Mexico have been of the range, still unfit 
 for profitable slaughter, and sections suitable for 
 their fattening have been badly needed. There 
 was, in other days, much shipment of range cattle 
 into the United States, and to the better watered 
 southern sections of Mexico. But although peace 
 will bring a revival of the ranges, Mexico cannot 
 look forward to becoming a great meat-producing 
 country until the irrigation problem is solved. 
 
 There are rich, well-watered sections of Mexico 
 this must not be overlooked but these have 
 
40 TRADING WITH MEXICO 
 
 resulted in a crowding of population on the pla- 
 teaus and through the rich valleys such as that of 
 the Lerma river in Jalisco state, and have con- 
 tributed but little toward the broad development 
 of the country. In fact, one of the characteristics 
 of Mexico's population distribution has been the 
 tendency to gather into groups, so that a great 
 city like the capital or like Guadalajara or Puebla 
 will have a dozen cities and villages of considera- 
 ble size close about it and then stretches of 
 sparsely populated country for leagues until 
 another group is found. This is essentially cli- 
 matic and geographical. 
 
 The mountain contour of the country and this 
 same grouping of the important centers of popu- 
 lation have been the chief influences in the loca- 
 tion of the railways. Owing to the absence of nav- 
 igable streams, the mere possibility of Mexico's 
 industrial and of even her true national develop- 
 ment had to wait upon the coming of the railways. 
 The first line was that completed in 1872 by Eng- 
 lish capital between Vera Cruz, the chief port of 
 the Gulf of Mexico, and the City of Mexico, some 
 400 miles inland and a mile and a half above the 
 level of the port. This "Mexican Railway" 
 touches the groups of cities along the old Spanish 
 highway, and gave them an industrial primacy 
 which was unchallenged until the very last years 
 of the Diaz peace. 
 
NATURE AND THE MARKET 41 
 
 After the building of this first line railway con- 
 struction turned to follow the great natural ave- 
 nues laid out by the mountain valleys. There 
 were, as we have seen, two main valleys, that be- 
 tween the Eastern and Western Mother ranges, 
 and that to the east of the Eastern chain. Look- 
 ing at a map of Mexico, the most casual observer is 
 struck by the fact mentioned more than once by 
 Mexican revolutionists, that both these valleys 
 lead directly to the heart of the United States. 
 The railroads which were built there might in- 
 deed be taken to have been built to drain Mexico 's 
 resources into the United States. But it was only 
 because these roadbeds had been laid out by Na- 
 ture herself that the lines came to be built there, 
 with the inevitable result of increasing immeas- 
 urably the importance of the United States to 
 Mexican development. One early Mexican presi- 
 dent (Sebastian Lerdo de Tejada, 1872-76), in 
 fact, refused to allow these obvious roads to be 
 built, explaining, in a much-quoted phrase: "Be- 
 tween the weak and the strong, let the desert re- 
 main. ' ' 
 
 The roads were both built by American com- 
 panies under President Diaz, the Mexican Na- 
 tional on the east, the Mexican Central on the 
 west. They had a mighty part to play in the mod- 
 ernizing of Mexico, and in her development 
 through the trade in the minerals and in the 
 
42 TRADING WITH MEXICO 
 
 building of such industries as followed them. 
 Throughout their history to the present, they have 
 been of far greater importance to Mexico than to 
 her allegedly covetous northern neighbor. 
 
 After these lines were built, others came, to fol- 
 low the mountain valleys. One went from Mexico 
 City westward to Guadalajara, tapping the rich 
 Valley of the Lerma, the granary of Mexico. Nar- 
 row gauge lines twisted through the rich states 
 of Mexico and Michoacan, lines which when mod- 
 ernized and extended in some future time will 
 open agricultural and mining territory compara- 
 ble to anything yet known to commerce and Mexi- 
 can industry. Another line found its way to Oax- 
 aca, deep in the mountains to the east and south of 
 Mexico City. Others followed the seacoast to the 
 Isthmus of Tehuantepec, and crossed that narrow, 
 shallow neck of land to the Pacific. 
 
 Along the western slope of the Sierra Madre 
 other lines were built through Sonora, and then 
 the Southern Pacific of Mexico, an American com- 
 pany, pushed these roads still further southward, 
 opening new territory, not to the commerce of 
 Central Mexico, but to that of the United States. 
 And last of all, the line to Guadalajara left its 
 easy grades and smooth roadbed to leap the bar- 
 rancas and climb down the mountains to achieve 
 the contact with the Pacific at Manzanillo. A 
 mighty hand, indeed, has nature had in the locat- 
 
NATURE AND THE MARKET 43 
 
 ing of Mexico J s railway lines, and with their con- 
 nection to the United States and our trade. 
 
 The mountainous character of the Mexican ter- 
 ritory has upturned vast mineral resources, whose 
 effect on the development of the country has been 
 greater perhaps than any other single fact. These 
 minerals gave the wealth of the Aztecs which 
 tempted the Spaniards to take and to develop the 
 country so thoroughly. They were drained for the 
 three centuries that Spain ruled, and their exploi- 
 tation shaped all the policy of the colonial regime. 
 They were the greatest of the attractions to 
 foreign capital at the beginning of the Diaz rule, 
 and they paid most of the revenue of taxes upon 
 which the material civilization of the Mexico of 
 that day was built. It seems safe to promise that 
 when there is lengthened peace again in Mexico, 
 mining will take its place with the greatest indus- 
 tries of the country although oil may still retain 
 its present primacy when it, too, can spread out 
 and develop itself. 
 
 Mining camps and groups of mining camps dot 
 the country, and whole distinct territories are de- 
 voted to the mining, here of silver, there of gold, 
 there of copper, lead, etc. Indeed, the geography 
 of Mexico has had a tremendous effect in the crea- 
 tion there of a country primarily rich in minerals 
 as she is poor in agriculture. Oil is to-day the 
 greatest single wealth of Mexico, but the other 
 
44 TRADING WITH MEXICO 
 
 minerals have had and will again have their im- 
 portant bearing on her development. 
 
 The mineral wealth (oil as well as metals) has 
 as I have noted been the chief attraction which has 
 brought foreign capital to Mexico. The Span- 
 iards and to a lesser extent the Indians before 
 them, mined the mountains of Mexico, but it re- 
 mained to foreign enterprise in the time of Diaz 
 to open up the great bonanza sections to scientific 
 development. In the train of this development, 
 came more foreign capital of every sort, for agri- 
 culture, for industry, for oil, and for public serv- 
 ice investment. This foreign capital, developing 
 Mexico's latent wealth, opened her to the world, 
 and brought forth her great promise of the fu- 
 ture, even though it also gave to the revolution- 
 ists who overthrew Diaz a handy battle cry of anti- 
 foreignism. 
 
 It seems unlikely that without the geographical 
 and geological conditions which offered the wealth 
 of minerals to the development of capital, Mexico 
 would or could have entered upon the modern 
 stage of her development. In that was the hope 
 of the past and in it, too, is the hope of the future 
 regeneration of Mexico. The tempting possibili- 
 ties of such development are the only bait which 
 will bring back to Mexico the stream of foreign 
 capital to which alone she can look for her prompt 
 salvation, when peace comes at last. 
 
NATURE AND THE MARKET 45 
 
 The geography and climate have had their hand, 
 too, in the industrial situation in Mexico. Mining, 
 in the time of Diaz, drained the available labor 
 away from the farms and away from the small 
 factories which then existed. The oil fields have 
 more recently taken a large proportion of the 
 available workers. The supply of labor in Mex- 
 ico is astonishingly small the development of 
 the latent labor supplies in the Indian communes 
 waits on peace and education. Temperamentally 
 (and in this we find the hand of climate) the Mex- 
 ican is not a good factory worker. The raw prod- 
 ucts which the land produces, sisal hemp, cotton, 
 rubber, etc., all demand for their profitable manu- 
 facture large and intricate plants, such as Mexico 
 has not built and for whose operation she has 
 never trained her people. Therefore, save for the 
 cotton factories (which produce only the coarser 
 staples) there is to-day in Mexico almost no in- 
 dustrial development. The lists of industries of 
 which such a manufacturing town as Monterey 
 boasts, include, for instance, candle and match 
 factories employing thirty or forty people, brass 
 bed " factories," where the products of American 
 foundries are put together, soda water factories 
 the industries which no city in any other land 
 would find worth mentioning. Mexican industry, 
 indeed, waits surely upon the development of the 
 crops of raw materials, upon the education of her 
 
46 TRADING WITH MEXICO 
 
 laboring classes, and upon the solution of the 
 problems of irrigation and water power. 
 
 Geography and climate have been cruel to Mex- 
 ico, of this we need not seek to deceive ourselves. 
 But throughout the list of unhappy conditions 
 which has been set down here there runs a prom- 
 ise of advancement and of better things when 
 peace comes and when foreign enterprise shall 
 again be welcomed. All of the advance which 
 Mexico has made in her long fight against an un- 
 kind Nature has been made with the help of for- 
 eign energy. First was Spain, and the 300 years 
 in which she built up the colony to a semblance of 
 a modern state, creating great cities and peace 
 and prosperity. Then, after fifty years of de- 
 structive revolution, Diaz, and his wise invitation 
 to and use of foreign enterprises and foreign 
 money. Only in these two periods has Mexico 
 been prosperous. 
 
 The greatest advance was under Diaz, when in 
 thirty years Mexico rose from the ashes of her 
 revolutions and flew toward the heights of com- 
 mercial advancement. In that time her railways 
 were almost all of them built, all the water power 
 which she now has developed, the one great and 
 productive irrigation section the Laguna cotton 
 district reclaimed from the desert, the sisal hemp 
 industry created, the factories, such as they are, 
 built and set in operation. Virtually all of these 
 
NATURE AND THE MARKET 47 
 
 advances were made with foreign capital and 
 under the control of foreign engineers and mana- 
 gers. Success rewarded the faith and the efforts 
 of all who devoted themselves to these develop- 
 ments and it was their conquering of the great 
 natural handicaps of Mexico which made possible 
 the glowing tales of her " treasure-house." When 
 such times as those come again, and only when 
 they come, will the battle against Nature be re- 
 sumed, and in its resumption, the signs of man's 
 great conquest reappear. 
 
CHAPTER III 
 
 THE PEOPLE WHO BUY 
 
 A BAMBOO hut with a clumsy thatch of grass, a 
 hovel of sundried bricks, made, as the Israelites 
 made them, of straw and clay, a shack of unfin- 
 ished lumber or rotting railway ties topped with a 
 roof of laminated sheet-iron these are the sym- 
 bols of the social level of Mexico. Within them all 
 a dirt Soor, a box filled with earth for a brazier, 
 two or three earthenware pots, a metate over 
 which the woman bends at her endless task of 
 grinding meal for the family cakes of unleavened 
 corn, a few rush mats for beds and a tawdry 
 shrine with a dim light before it the inert mil- 
 lions of Mexico live to-day as they have lived for 
 a thousand years. 
 
 Their minds untutored, their thoughts and de- 
 sires confined literally to the animal plane, their 
 religious instincts almost entirely superstition, 
 their government the support of rulers upon the 
 vast misery of the lowly, Mexico finds her parallels 
 only in China and in Turkey. And Mexico is at 
 our own back door, the cynosure of our most hope- 
 ful tradesmen ! 
 
 48 
 
THE PEOPLE WHO BUY 49 
 
 Up until ten years ago, there was an aristoc- 
 racy in Mexico counting in its make-up many able 
 men, groups of able men, devoted as far as their 
 lights allowed them, to a paternalistic care of the 
 Indians and peons, and to the development of Mex- 
 ico as a great, modern state. Under Diaz there 
 was also a slow building of a material civilization, 
 looking, in the future, to the filling of the peon 
 stomach and the lifting of the peon mind through 
 education to the light of the white man's world, to 
 a place in the white man's commerce. It has been 
 the common usage, in this past decade since Diaz 
 fell, to excoriate that aristocracy, to blame it for 
 all the evils of the country, to point with bitter 
 scorn at its wealth, at its material monuments of 
 churches and palaces and mines and railways. 
 And yet, although these ten years of revolutions 
 have been devoted most effectively to the elimina- 
 tion of the Mexican upper classes and of their 
 materialism and its monuments, the condition of 
 the lower classes has not been alleviated by one 
 tiny burden, nor has it been lifted by one hair's 
 breadth. 
 
 The Mexicans of to-day are worse off than they 
 were in the days of Diaz ; they are worse off than 
 in that wild revolutionary period before Diaz; I 
 am not so sure that they are not in worse condi- 
 tion than they were under the Spaniards, for they 
 seem literally to be sliding back to an era of bar- 
 
50 TRADING WITH MEXICO 
 
 barism like only to that misery which was theirs 
 before the Spaniards came. 
 
 We lose sight of the essential fact of Mexico, 
 commercially as well as socially, if we lose sight 
 for one moment of the lowest of the Mexican peo- 
 ple. They present to us our first and greatest 
 problem, whether we are traders, missionaries, or 
 those who seek to develop Mexico's resources or 
 to sell her our goods. 
 
 It is they who must buy our merchandise or aid 
 our work or operate our factories, mines and oil 
 wells. They were, and are, a vast potential market, 
 a great, slow-moving force for us to re-shape by 
 education into an advanced people, civilized, pro- 
 gressive, using the products of the world and pour- 
 ing their own products back into the stream of 
 commerce. They offer us an immense, a wonder- 
 ful well of labor, perhaps a greater contributant 
 to the nation's future wealth than anything else 
 in all Mexico. Because of these potentialities and 
 because of our inability to understand why such 
 possibilities do not find their development, it is 
 vital that we look, clear-eyed and sympathetically, 
 on the one great and overwhelming factor in that 
 hopeless inertia the ignorance of the mass of the 
 Mexicans. 
 
 Mexico is a land of innumerable children. A 
 land where there are twice as many children under 
 ten years old as there are in the United States (in 
 
THE PEOPLE WHO BUY 51 
 
 proportion to population). And a land where not 
 one child in six has even the chance to go to school, 
 because there are no schools for them. 
 
 The depth of Mexico's ignorance, in childhood 
 and in adulthood, in life and in business, literally 
 passes comprehension. The active, curious minds 
 of the Indian youngsters grow quickly into sodden 
 stupidity; the keen and vivid intelligences of the 
 children of the middle and upper classes expend 
 their growing forces in sensuality and plunge 
 themselves and their country into debilitating ex- 
 cesses because there is no training to give them 
 a life above the animals. 
 
 I have seen, in the seats of government in Mex- 
 ico, men who know less of world history than a boy 
 in an American high school; I have talked with 
 "experts" of government departments who knew 
 less of their special subjects than did I, a layman. 
 I have seen in the presidential chair men who be- 
 lieved, literally, that the shrunken, sick Mexico of 
 to-day was one of the great, advanced countries 
 of the world because they had no conception of 
 the development of world civilization. 
 
 I have seen, in Mexican homes, the slow murder 
 of Mexican babies, because neither I nor any one 
 else could change the round of tradition, unre- 
 lieved by training of any sort, which takes an an- 
 nual toll of child life in Mexico that is perhaps not 
 surpassed even by the toll of the famine in China. 
 
52 TRADING WITH MEXICO 
 
 The chain of tradition links Mexico together, 
 and links her, too, to a past which goes back into 
 tlje furthest reaches of prehistoric legend. 
 
 The ways of modern agriculture are those of 
 the early Aztecs, and modern tools, even, are in- 
 troduced with the greatest difficulty. The round 
 of life is a brief cycle of dull days, unlivened by 
 any thought or knowledge beyond the confines of 
 a village or a township or a few blocks of a city. 
 The schools, such as they are, are patterned after 
 models long abandoned everywhere else in the 
 world, and are stifled by a traditional belief that 
 war and revolution and the erection of imposing 
 buildings are more important to the progress of 
 the country than the education of its youth. 
 
 All this has driven Mexico on through the years 
 handicapped with a load of illiteracy that can well 
 be recognized as the most potent factor in the de- 
 generation that marks her every manifestation 
 to-day. 
 
 Only figures can tell, even in part, the depths of 
 that ignorance. Back in 1895, the Mexican gov- 
 ernment reports (which one must always remem- 
 ber speak as favorably as they dare) showed that 
 only 2,000,000 out of a population of 12,500,000 
 could read and write! This means that 82 per 
 cent of all the people of Mexico were without 
 these rudiments of learning. By 1900 this per- 
 centage had been reduced to 80 and in 1910 the 
 
THE PEOPLE WHO BUY 53 
 
 Diaz government claimed that it had been reduced 
 to 78, in other words that of the 15,000,000 popu- 
 lation of that year, a little over 3,000,000 could 
 read and write, while nearly 12,000,000 remained 
 in the depths of their ignorance. In 1919, the 
 Carranza government issued a report claiming but 
 a slight advance over these figures in the nine 
 years since the fall of Diaz. 
 
 It is literally true that not a tenth of all the peo- 
 ple in Mexico have what we would call a common 
 school education, and three out of four cannot read 
 a street sign or scrawl their own names. Indeed, 
 one great British mining company reported that 
 of its 595 Mexican employees, including scores of 
 what we would call skilled workmen, only six, or 
 about one per cent could sign a receipt for the 
 money they were paid. 
 
 To those of us who look on through foreign eyes, 
 this condition explains much of Mexico's dilemma, 
 and the point is further clarified when we know 
 that the greatest claim ever made for Mexican 
 education showed but 12,000 schools, with 850,000 
 pupils enrolled while the population of children 
 of school age was more than 4,000,000 ! No single 
 issue is greater or more pressing than education. 
 Yet education waits, as everything in Mexico 
 waits, on peace and better times, on food and on 
 health. And these wait and more than all, from 
 our selfish interest, business and commerce wait 
 
54 TEADING WITH MEXICO 
 
 on education! Around and around the problem 
 swings, and each issue is dependent upon another, 
 and that, then, upon the first. 
 
 Of all the complicated, interwoven factors of 
 Mexican life and of the tendencies, this very day, 
 of Mexican business and trade none, however, 
 offers so true an understanding as race. The 
 basis of Mexico's ignorance and the basis of her 
 steel-bound traditions is Indianism. For Mex- 
 ico's 15,000,000 people include 6,000,000 pure- 
 blooded Indians, of some fifty tribal strains, lit- 
 eral aborigines in their life and in their thoughts. 
 There are, as I have noted, 8,000,000 mixed-bloods, 
 three-quarters of whom are virtually Indians in 
 their way of life and in their outlook upon the 
 world. And there are only 1,000,000 of white 
 strain, mostly Spanish, a group which is to-day 
 without voice in the affairs of the country. Two- 
 thirds of Mexico is Indian, and most of the other 
 third a mixture of Indian and white, a mass with 
 the dark Indian sea below it and virtually no light 
 coming to it from above. 
 
 To-day there sifts into the Mexican ruling 
 classes these same mixed-bloods hardly a ray 
 of culture, hardly a gleam of a truly broader out- 
 look, to lift them and their people out of the dull 
 cavern of their circumscribed life, or to lead them 
 to the better things of modern civilization and 
 commerce. We talk of the heathen of China, of 
 
THE PEOPLE WHO BUY 55 
 
 the darkness of ignorance and superstition in 
 Africa, but in Mexico the churches and the foreign 
 industrial concerns seem to me to face a greater 
 need than in any other country in the world. 
 
 For Mexico is at our door, and the cultural tra- 
 ditions of Mexico are those of our own world, the 
 white. For 300 years she was a subject state of 
 Spain, and for all the mistakes of the Spaniards 
 and the Roman Catholic Church, the foundation- 
 stones they laid are as the foundation stones of 
 our own life. 
 
 The Indian mass was the great problem of 
 Spain ; it was the great problem of Diaz ; it is the 
 great problem of all those who would lead her to 
 the ways of the world of to-day. For the past ten 
 years it has been forgotten, lost in the struggles 
 of individual men for personal power. But always 
 those individuals have been swallowed up, without 
 their realizing it, in the mire of Indianism, for In- 
 dianism, the very epitome of ignorance, lies there 
 always beneath the Mexico that the world sees, 
 waiting to engulf its own masters and to destroy 
 all social and business progress. The Spaniards 
 and Diaz built above these shifting sands, ever 
 conscious of them, providing against them always. 
 Diaz fell because after he built his foundations he 
 did not reach down into the Indian mass to up- 
 raise them. He fell in his old age, forgetting, as 
 old men forget, the dangers which have been with 
 
56 TRADING WITH MEXICO 
 
 them through all their life. But before he fell he 
 had laid the foundations, building upon those of 
 the Spaniards and erecting new ones of his own, 
 among them foundations of foreign business, of 
 foreign missions, of foreign schools, business and 
 missions and schools which by their own enter- 
 prise and perhaps as much by the examples which 
 they set for Mexican business, Catholic churches 
 and native school teachers, were beginning the 
 great uplift of that vast, inert Indian mass. 
 
 The brief rule of Madero (1911-1913) was the 
 link between Diaz and the upheaval of radicalism 
 and Indianism which was to begin with Carranza, 
 in 1914. Then commenced the process of casting 
 away, bit by bit, all the slow-built civilization, all 
 the shallow foundations of commercial prosperity, 
 of Diaz. With Carranza began the upsurgence of 
 the Indian, the terrific push upward of the long- 
 hidden forces of destruction which had been held 
 in check, not only for the thirty years of the Diaz 
 peace, but for all the four centuries since the 
 Spaniards had first come to Mexico. 
 
 Primarily, this destruction was marked by the 
 wiping out of the fabric of the promising Mexican 
 educational system for Diaz had made sound be- 
 ginnings toward raising the Indians out of the 
 depths of their ignorance. His rule was building 
 a foundation for business and for progress by 
 creating an intelligence which would demand and 
 
THE PEOPLE WHO BUY 57 
 
 would develop the better things which white civili- 
 zation had to offer. 
 
 Under Carranza the ideal was not of slow uplift 
 by education and the creation of a substantial 
 economic existence which would make life and 
 peace worth striving for. Carranza and those who 
 followed him under the banner of the revolution 
 have thought little of solid progress. Their ideal 
 has been revolution the political remedy for the 
 economic ills of the land. 
 
 So, despite all the sweeping promises of Car- 
 ranza and his immediate successors, education and 
 the progress of business, of trade and of develop- 
 ment have gone into the discard. With the pres- 
 sure of the needs of the revolutionary "generals" 
 for greater and greater appropriations for their 
 armies (and for the graft which ate up most of 
 such appropriations), with the ever- widening cir- 
 cle of vampires who fattened on government pat- 
 ronage in every other conceivable way, the money 
 available for education as well as for industrial ad- 
 vancement shrank steadily. Where under Diaz 
 the total annual budget of the government was 
 $50,000,000 a year, with a total appropriation for 
 schools, federal and state, probably less than $4,- 
 000,000, Carranza had nearer $100,000,000 and 
 spent less than $2,000,000 a year on education. 
 For Carranza, when the demands of his "gener- 
 als" for their "share" increased, shut off the fed- 
 
58 TRADING WITH MEXICO 
 
 eral support of the schools of the City of Mexico 
 and its neighboring villages, and also the sums 
 which in other days had gone to help the poorly 
 provided state governments. He threw the school 
 systems on the hands of absolutely bankrupt cities 
 and towns, with the result that in the City of Mex- 
 ico alone some 120 schools, half the former num- 
 ber, were closed, and 25,000 children, despite 
 crowding into other buildings, were deprived of 
 education. All this is history. And statistics do 
 not show that there has been any recovery since 
 that day. 
 
 The Obregon government, on paper, re-estab- 
 lished tiio federal department of education with a 
 cabinet officer at its head, which was abolished by 
 Carranza as an economy measure. There was 
 some more of the endless Mexican discussion of 
 systems of education, but so far as can be found, 
 no increase in appropriations or in plans for bet- 
 ter support of the public schools. All those wait, 
 perhaps, as I have said, on the improvement of 
 business conditions, as the final solution of the 
 business problem waits, I believe, upon them. 
 
 But they all wait on something else, which I 
 have mentioned above, and that is the improved 
 physical condition of the Mexican people. Com- 
 fort, food and health are as important to mental 
 and moral development as the training of the mind 
 by education. The misery of Mexico is so pro- 
 
THE PEOPLE WHO BUY 59 
 
 found, her crashing inertia so deep-rooted and so 
 self-perpetuating, that it sometimes seems that 
 she can never be cured from within herself. Some 
 outside force must break the circle and this I be- 
 lieve is the great opportunity of the American mis- 
 sions, working in conjunction with the great civi- 
 lizing energies of American business. 
 
 Already something has been done, by great 
 American business concerns, and by American 
 trade unions along the northern border and even 
 within Mexico itself, to improve living conditions. 
 But the terrific chasm of the Mexican mass re- 
 mains utterly unplumbed, and the childhood of 
 Mexico and the manhood and womanhood of Mex- 
 ico wait, hungry because their food does not feed 
 them ; in discomfort because their long traditions 
 do not let them even desire comfort; in sickness 
 because of utter ignorance of the foundations of 
 human health. 
 
 Of this last a word must be written here. I 
 have compiled, elsewhere, 1 the astonishing figures 
 bearing upon this question, and have found, in the 
 mass of Mexican official statistics, that the death 
 rate of Mexican babies under one year is nearly 
 twice that of the United States ; between birth and 
 ten years, three times that of this country, and that 
 clear through the whole range of Mexican life, 
 
 i The People of Mexico. Mexioan health is treated directly In 
 the chapter on "Vitality," pp. 86-109, and indirectly in' the 
 chapter on "Climate," pp. 131-151. 
 
60 TRADING WITH MEXICO 
 
 from two to four times as many Mexicans die in 
 each thousand as die in the United States at the 
 same ages. The average life of every Mexican 
 born is but 15 years, while in the United States it 
 is about 35 years, and half of the Mexicans born 
 this year will be dead before they are 7 years old, 
 while in the United States half of all the babies 
 born will live to be 42 years old. 
 
 High death rate means sickness. Experts esti- 
 mate that for each death in the United States 
 there are 300 days of severe illness and 6,000 days 
 of indisposition or slight illness, spread over the 
 average 35 years of American life. But in Mex- 
 ico the Average age of death is 15 years, so that 
 the days of sickness must be crowded into less than 
 half the space of time they cover in the United 
 States. 
 
 In Mexico, almost no care, as we conceive it, is 
 given to the sick. The government reports show 
 that only one-quarter of all the deaths reported 
 in the country are listed as "classified by the doc- 
 tor " in other words, there is no medical attend- 
 ance at all in three-quarters of all the fatal ill- 
 nesses in Mexico. It is well known to those who 
 know that unhappy land that in the case of illness, 
 the priest and the doctor are sent for at the same 
 time, the priest to administer extreme unction, 
 the doctor to do what he can with a dying patient. 
 
 This factor of ill-health in Mexico is one of tba 
 
THE PEOPLE WHO BUY 61 
 
 most terrible of all the pictures of her misery, 
 perhaps the most potent element in the national 
 ineptitude. No one who is continually ill can be 
 greatly interested in progress, mental, or moral, 
 or industrial, for illness is the greatest force work- 
 ing against the material advancement of the peo- 
 ple and of the country. And upon material ad- 
 vancement, upon the increase of income and the 
 increase of needs physical and cultural (as the 
 money comes to procure them) we must build the 
 solidity of the Mexican people that are to be, as 
 well as the trade which we seek to gain from them. 
 
 Out of this picture of darkness, then, comes op- 
 portunity and with opportunity the dawning of a 
 new day in Mexico. Because ill health is so great 
 a factor as it is, there is something that we can at- 
 tack and can conquer. Because education is at 
 the low ebb that it is, there is something which 
 we can do that is direct and tangible, when the 
 means are put into our hands. 
 
 There is hope in Mexico, and that hope is tied 
 up with the opportunity for foreign help, which is 
 actually, and even more potentially, the most dis- 
 interested and direct force working on conditions 
 in Mexico to-day. The land is so torn by personal 
 politics, so nearly ruined by the exactions of un- 
 thinking government, so much the football of well- 
 deserved calumny, that this single ray of clean, 
 clear light can be recognized by all as one of the 
 
62 TRADING WITH MEXICO 
 
 great hopes in the horizon to-day. That hope 
 must be made to dawn, and it is well for us to con- 
 sider how that dawn may be assured, and how the 
 day which must follow may be firmly grounded on 
 economic permanence, on social stability and on 
 the comfort, health, education and industrial prog- 
 ress of the Mexican people. 
 
 This is the field wherein I believe that the coop- 
 eration of the American companies established in 
 Mexico and the American missions operating there 
 will bring about a solution of the ultimate Mexican 
 problem. For the companies, ready and anxious 
 as they appear to be to serve, would, through the 
 missions, find a means wherein their money and 
 the great force of their prestige would have effi- 
 cient direction. The foreign oil, mining and rail- 
 way corporations will not hesitate, I believe, to 
 place their resources and their opportunities at 
 the disposal of workers whom they are convinced 
 can truly improve the morale and thus the pro- 
 ductive capacity of the workers upon whom their 
 business depends. Heretofore there has been mu- 
 tual misunderstanding. The companies have not 
 always found the mission workers as efficient as 
 they would like, and the missionaries have been 
 quite ready to suspect the companies of repre- 
 senting "predatory capital' ' with the ambition, 
 not merely of making their business profitable, but 
 of putting down the " devoted " leaders of the peo- 
 
THE PEOPLE WHO BUY 63 
 
 pie or of forcing American intervention at once. 
 
 I have faith in both the companies and the mis- 
 sionaries, and I believe that in the new political 
 crisis which Mexico is bringing upon herself as 
 this is written (and which she may have tumbling 
 about her ears before it is printed) these two must 
 reach out, and will reach out, to clasp hands and 
 go on together. 
 
 Both have done wonderful things for Mexican 
 education, the missions through the conscious de- 
 velopment in Mexico of the ideal of education for 
 service, and to the end of raising and training 
 leaders for the Mexican masses, and the companies 
 through isolated examples of truly constructive 
 welfare and educational work. 
 
 Probably the most outstanding example of the 
 educational achievements of American corpora- 
 tions was that of the trade schools which were or- 
 ganized and operated by the National Eailroad 
 between 1890 and 1912, under the direction of 
 E. N. Brown, president of the National Railways 
 one of the "pernicious foreigners" who were 
 exiled under Carranza's "nationalization" of the 
 railway properties in 1914. These railway schools 
 trained between 15,000 and 18,000 Mexican me- 
 chanics and engineers, taking boys of 14 and 15, 
 paying them first 62 cents a day and gradually in- 
 creasing that until, after four years' training, they 
 were receiving three and a half pesos a day. They 
 
64 TRADING WITH MEXICO 
 
 TV ere then ready to take positions as skilled work- 
 ers in the railway shops or on the locomotives or, 
 if they chose, in other industries. The railway 
 placed no limitation on them, holding that the com- 
 pany benefited in the increase of the efficiency of 
 the Mexican worker wherever he might be. 
 
 The whole scheme of this work, including the 
 paying of apprentices while learning, was the 
 broadest kind of educational service, taken up, to 
 be sure, because the railway company needed me- 
 chanics and trainmen, but with an effect on Mexico 
 and on the creation of the so-called Mexican " mid- 
 dle class" (the buying and building as well as 
 the elevating element in any population) which is 
 still felt through the chaos of revolutionary de- 
 struction. 
 
 To-day the greatest industry of Mexico is the 
 production and refining of petroleum, and foreign 
 companies, of course, control it. Much genuinely 
 helpful welfare work is being done by them, in- 
 cluding not only schools for children but training 
 schools for workers as well. In addition the very 
 conscious plan of increasing wages until unskilled 
 labor now receives a minimum of $2 a day is hav- 
 ing a remarkable effect upon the standard of liv- 
 ing and upon the buying capacity (as well as upon 
 the efficiency) of the Mexicans of the Tampico oil 
 section. There is much undigested prosperity, 
 and agitators are creating trouble as far as they 
 
THE PEOPLE WHO BUY 65 
 
 can for the foreigners, but on the whole the effect 
 on the material well-being of the peon has been 
 advantageous. It is inevitable that a continuation 
 of this attitude should bring forth a vastly in- 
 creased civilization at least in this one section of 
 Mexico. 
 
 Education has been pushed forward by the com- 
 panies, and in the model villages such as the town 
 of Terminal (across the river from Tampico on 
 the property of the Doheny companies) really ex- 
 cellent schools are maintained with Mexican teach- 
 ers under American supervision. 
 
 Conditions in the oil country outside the private 
 company towns are, however, deplorable, present- 
 ing a contrast which is not without its mighty les- 
 son for us all. The graft and incompetence of the 
 present ruling classes of Mexico have regarded the 
 prosperous oil towns only as the most luxurious 
 of posts for influential favorites. The educational 
 conditions of Tampico, where in a city of more 
 than 100,000 people there are only twenty govern- 
 ment primary schools with an attendance of 4,500 
 pupils, beggars description. Yet the foreign com- 
 panies have been called on regularly to support the 
 Tampico schools, just as they are called on to pay 
 for pavements, sanitation, etc. And this money 
 has gone, hardly a single dollar into the work for 
 which it was collected, but countless thousands 
 into the bottomless pit of revolutionary graft. 
 
66 TRADING WITH MEXICO 
 
 But for all the unfortunate conditions of the 
 moment, the possibilities of the foreign corpora- 
 tions aiding in the uplift of the Mexican mass 
 throughout the country is one of the encouraging 
 phases of the Mexican trade and business problem. 
 It links up definitely with the solution (on which 
 we shall touch, in later chapters) of the parts of 
 the question which deal with other elements than 
 the human equation. The beginning which has 
 been made in Tampico, chiefly by the great Ameri- 
 can companies, carries with it an import far 
 greater than the mere contrast between their trim 
 little company villages and schools and the ugly 
 squalor of the Mexican towns. Somehow, out of 
 the dark present, American business has learned 
 how closely it is linked with the welfare of the hu- 
 man element in its scheme. They have learned how 
 the simple man, how his happiness and prosperity, 
 are wrapped up with the prosperity and success of 
 every enterprise which remotely touches him. 
 
 Until these recent years, and through these 
 American corporations, there has never been sci- 
 entific welfare work in Mexico, there has never 
 been considerate treatment of the workers, little 
 study of their weaknesses and their needs. If we 
 contemplate that, in its bare truth, we can begin 
 to understand something of the importance of 
 even the relatively little work which has been done 
 of late. Perhaps the greatest potentiality of the 
 
THE PEOPLE WHO BUY 67 
 
 future of the human side of the Mexican market 
 lies in the broad extension of that genuinely Amer- 
 ican attitude toward the masses of the country. 
 
 I have advocated the union of the forces of 
 American missionaries and American corpora- 
 tions in Mexico. I believe that this will bring 
 great good and will eventually, as it has done in 
 this country, bring a higher efficiency of labor and 
 a larger market for the things which this country 
 can export to Mexico. The desertion of the 
 masses by the revolutionary government and the 
 exile of the natural aristocracy, have brought the 
 human problem of the country home with tremen- 
 dous force to the foreigners. It lies to-day almost 
 solely in their hands, and seems likely to wait 
 long for a rescue or aid from any other source 
 whatever. 
 
 For the missionaries, education and improved 
 economic conditions amongst the workers is indis- 
 pensable they are the tools and the signs of their 
 great plan of regeneration. For business, the en- 
 couragement of religion and education which the 
 mission schools give promises that improvement in 
 the laboring population and in the buying capacity 
 of that population which is demanded by the ad- 
 vancement of their business. Somehow that buy- 
 ing population which I have set at 3,000,000 must 
 be increased. Somehow the efficiency of the la- 
 boring group (which numbers little more than the 
 
68 TRADING WITH MEXICO 
 
 buying public) must be increased. Only one way 
 is open to make the masses better men, happier 
 men, more cultured men. The ignorance of Mex- 
 ico, the inefficiency which results from that igno- 
 rance, the low standard of living which keeps the 
 people from those "wants" which make luxuries 
 into necessities and so improve trade by widen- 
 ing the eddies of demand all these affect us all in 
 Mexico. 
 
 Trade follows education. It follows the mis- 
 sionaries of business and of religion. It thrives 
 alone on the prosperity of peoples. To-day these 
 factors of trade in Mexico are only depressants 
 in the future they must and surely will be changed 
 slowly into booming creators of trade. But so 
 long as the chief item of import is food and so long 
 as the productive capacity of the Mexicans is only 
 half developed, so long will the market in Mexico 
 swing at its lowest ebb. 
 
CHAPTER IV 
 
 THE CREDIT OF MEXICO AND OF THE MEXICANS 
 
 THE Mexican government to-day is bankrupt, 
 and Mexican business is bankrupt. The most san- 
 guine propagandists of the revolutionary govern- 
 ments can offer nothing better than promises to 
 offset the obvious facts of Mexican finance. The 
 government to-day owes nearly a billion dollars 
 including unpaid interest on her debts for eleven 
 years. Commercial credit has reflected the 
 ghastly vision of government bankruptcy, because 
 the ingrained principle of Mexican politics has 
 been the subservience of economic progress to po- 
 litical exigencies. 
 
 The history of Mexican revolutionary govern- 
 ment has been marked by the steady suction of 
 business into the maelstrom of political horror. 
 This began in the earliest years of the rule of Car- 
 ranza (1914-1920). For five years Carranza car- 
 ried on a deliberate campaign to destroy the 
 banks, as the representatives of the capitalists. 
 He succeeded, despite all the magnificent resil- 
 iency of business. He swamped the country with 
 paper currency ; he withdrew the metallic reserves 
 of the banks until their bank notes reached almost 
 
 69 
 
70 TRADING WITH MEXICO 
 
 the degradation of his own issues. He made Mex- 
 ico into a land of thieves, and gave their thievery 
 the cloak of government sanction as of one thief 
 underwriting the ventures of another. 
 
 When her banks were gone, Mexico had nothing 
 left but her mines and her oil, for Mexico creates 
 virtually no wealth. She manufactures nothing 
 and exports nothing save the ultimately exhausti- 
 ble resources of her soil. Mining flourished dur- 
 ing the war, with allied governments supporting 
 the lead and silver markets, and oil has flowed on 
 and continues to flow, giving Mexico herself only 
 the curs of incalculable unearned wealth for the 
 personal loot of her government officials. 
 
 Credit wan Mexico's great asset under Diaz 
 he spent years in establishing it and upon it he 
 built the nation. To-day in Mexico there is no 
 credit. There is gold in circulation and the sight 
 of gold is encouraging to the business man. But 
 the gold in Mexico circulates because there is no 
 credit ; no man trusts another and none trusts the 
 promises of the government. Mexico cannot to- 
 day issue paper money, and her heavily alloyed 
 silver coin is on a par with her gold only because 
 an artificial scarcity is maintained in order to 
 increase the value of silver as the change needed 
 in business. 
 
 Mexico is one of the great potential markets of 
 the world. The American manufacturer can justly 
 
THE CREDIT OF THE MEXICANS 71 
 
 look to it for an outlet for his wares. But a 
 market is useless until the buyer can pay for his 
 goods. Mexico is not yet a place to dispose of 
 what we make until she can pay for what she 
 takes. The credit situation is the crux of Mexico, 
 and the crux of the credit situation is the political 
 chauvinism which, eight years ago, set out delib- 
 erately to destroy that credit, because credit was 
 capitalism and capitalism was unfriendly to the 
 self-appointed leaders of the proletariat and, more 
 important still, was said to be the enemy of that 
 world radical movement to which the Mexican 
 revolutionary leaders look so smugly to save them 
 from interference in their orgy of loot and glory. 
 
 When Diaz left the presidency in 1911, there 
 were $35,000,000 in the national treasury, and 
 Mexico's credit was such that she could float at 
 par a national bond issue drawing 4% per cent. 
 To-day the unpaid interest on her public obliga- 
 tions exceeds $150,000,000 and she cannot at any 
 price borrow a cent on any security less than the 
 indorsement of the government of the United 
 States of America. 
 
 This is the way the situation is expressed in 
 cold figures. But Mexico is a land of infinite re- 
 source, both natural and diplomatic, and nations 
 in worse condition than this have been taken in 
 hand by great bankers and placed upon their 
 financial feet. Any Mexican official can explain 
 
72 TRADING WITH MEXICO 
 
 Mexico's condition convincingly the long years 
 of revolution, the paralyzation of industry 
 through destruction and through the prices and 
 want brought to all the world by the Great War. 
 It is therefore of no really deep significance, they 
 say, that Mexico owes millions of dollars, and that 
 she is to-day suing for favor in the world's money 
 markets. But there is a deep and fundamental 
 cause which is back of her financial bankruptcy, 
 back even of its merely economic causes in wrecked 
 mines and abandoned factories, in ranches 
 stripped of millions of head of cattle which bandits 
 have killed for their hides. 
 
 The real bankruptcy of Mexico goes deep down 
 into the minds of men, Mexicans and foreigners, 
 government officials and rabid interventionists 
 alike. The bankruptcy of Mexico is a sickness 
 born of broken faith, a moral bankruptcy that is 
 ugly with human greed and hopeless with nervous 
 fear. 
 
 The trouble with Mexico to-day is that Mexicans 
 as well as foreigners have ceased to believe in 
 Mexico. 
 
 At the time of my several recent visits to 
 Mexico, I did not go as a stranger to the country. 
 I had watched her develop during six years prior 
 to 1910, under the peace and prosperity of the 
 Diaz regime. Understanding something of the na- 
 tive psychology and much of that of the foreigners, 
 
THE CREDIT OF THE MEXICANS 73 
 
 I was prepared to find that a good deal of the 
 seriousness of the situation was due to panicky 
 fear and distrust one of another. What I was not 
 prepared for was a condition where every inci- 
 dent, every situation, every tight-strung nerve of 
 potential strength or weakness led down pell-mell 
 paths to a deep ravine of utterly blasted faith not 
 only in present conditions in Mexico, but in the 
 possibility of the country's ever crawling back to 
 her old serenity and strength in any measurable 
 time. 
 
 Mexico, as most Americans do not realize, con- 
 siders herself to have been at peace for the past 
 five years, for the bandits were in the hills and 
 most " revolutionary " outbreaks were being suc- 
 cessfully nipped. Yet in the important city of 
 Monterey, typical of the interior of Mexico, the 
 damage done "in the revolution " remains un- 
 touched. On the main plaza the stones that are 
 left of the beautiful old Casino, burned by Car- 
 ranza's soldiers six years ago, have barely been 
 moved from the roadway. Smoke-stained shells 
 of buildings rise here and there, and in the suburbs 
 bullet-ridden windows still remain in fine private 
 houses and factories. The once paved streets are 
 full of unexpected bumps, the roads leading to the 
 smelters and out into the country are cut deep 
 with ruts and puddles and railway crossings are 
 all but impassable, even to skipping Fords. The 
 
74 TRADING WITH MEXICO 
 
 street cars limp and bump and leak, and the very 
 civic improvements seem installed with a fatalistic 
 certainty that they will soon be destroyed. 
 
 There is industry and there is business in 
 Monterey, each of a kind. In the old days there 
 were two great smelters, foreign owned, a steel 
 plant and a brewery, besides three railway shops 
 and miscellaneous other factories. Most of the 
 miscellaneous factories closed long ago, but the 
 smelters and the steel plant kept going in good 
 order as long as war prices sustained them. 
 Now, one of the smelters has closed, for London 
 has ceased holding up the lead market, and the 
 other (owned by the American Smelting and Ee- 
 fining Company) continues only because it uses 
 the ore from its own mines. During the war the 
 steel plant was handled by the United States War 
 Trade Board, the great organization which har- 
 nessed our own industries to war needs, and 80 
 per cent of its product was, by agreement, sold 
 in the United States and in Cuba at war prices. 
 When the war ended, the Monterey steel plant 
 was forced to curtail, and to-day the great blast 
 furnace is cold and only a Mexican government 
 order for a few thousand tons of steel rails keeps 
 the rolling mill moving. 
 
 The railway shops are content with the most 
 perfunctory of repairs, and are more remarkable 
 for the appalling array of rusted and rotted en- 
 
THE CREDIT OF THE MEXICANS 75 
 
 gines (I have counted 150 engines out of commis- 
 sion in the Monterey yards) and for the wrecks 
 of burned freight cars which fill their sidings than 
 for any activity which inspires their machinery. 
 
 The few factories which operate are sustained, 
 in their turn, by the high prices which even the 
 staples of existence command in Mexico. Three 
 small cotton goods factories, reopened five years 
 ago, get prices only a few cents below those paid 
 for imported goods, to whose cost in this country 
 is added a heavy import duty. The brewery keeps 
 running, although it pays the government a tax! 
 of 100 per cent on its product estimated to be 
 $1,000 in American gold per day. 
 
 Retail trade goes on, throughout Mexico, but the 
 sales are greatly curtailed and the prices are out 
 of reach of the masses, being twice to five times 
 those of the last normal period, 1912. Stocks are 
 hopelessly depleted, for no merchant will keep a 
 large supply of goods on hand, for fear not alone 
 of the long-promised drop in the world market, but 
 of what will happen in Mexico to-day or to-morrow 
 or next week. 
 
 Moreover, all business is on an absolutely cash 
 basis, and for "hard" money gold and silver- 
 alone, whether the trade be wholesale or retail. 
 In Mexico to-day credit is practically unknown, 
 either amongst Mexicans or between Mexican 
 houses and those with whom they deal abroad. 
 
76 TRADING WITH MEXICO 
 
 There is a stringency of currency, due to the de- 
 struction (for various reasons soon to be noted) 
 of all forms of paper money. Mexico is spending 
 literally her economic life blood, gold and silver, 
 and her great resources are wasting and rotting 
 because there is no money with which to develop 
 them or to move them. 
 
 Those are simple conditions, patent to any ob- 
 server who stays longer than the few hours or a 
 day allowed the busy junketer on his trip through 
 " prosperous Mexico. " Back of these conditions, 
 however, are facts which are as incontrovertible 
 and menacing. The closing of the smelters has 
 back of it the conditions of mining, in a country 
 which for centuries has depended on its mines for 
 its existence as an economic entity. Even through 
 the war, with war prices for metals, the mines 
 which were producing were only those with high 
 grade ores, which could bear the risks of banditry, 
 the cost of ponderous freight rates, or could main- 
 tain their private railway trains to transport ore 
 which the run-down government rolling stock 
 could not handle. Moreover, even war time prices 
 did not make possible the proper development of 
 the properties, and when the bottom dropped out 
 of the lead and copper markets, many of the richest 
 mines closed, because they had not been able or 
 had not dared do enough normal development to 
 keep ahead of the work on the rich veins. 
 
THE CREDIT OF THE MEXICANS 77 
 
 Back of the hand-to-mouth operation of fac- 
 tories and wholesale and retail stores is the situa- 
 tion with regard to currency and banking. Money 
 in Mexico is worth, at legal interest, 1 per cent 
 per month (12 per cent per year) but if you have 
 money, and will take a chance, you can get 5 per 
 cent a month and even more on as good security 
 as the country affords. So few are the men who 
 believe enough in Mexico to take the chance that 
 there is not enough capital even to satisfy the 
 needs of speculators. And can legitimate business 
 expand or even carry its normal load when the 
 money it ought to borrow, the money it has al- 
 ready invested, is worth so much as that? The 
 only form of business which thrives in Mexico is 
 speculation, and I think I am safe in saying that 
 virtually every sign of business activity which 
 any visitor to Mexico sees to-day is speculative at 
 its source or dependent upon speculation. 
 
 This speculation finds its chief manifestation 
 in the marketing of food the distribution of the 
 necessities of life is in Mexico, as elsewhere, the 
 source of sure profit. But in Mexico, so great is 
 the fear of men of what may happen, that the 
 profits of speculation transcend anything known 
 to our busiest food profiteers. The farmers will 
 not take the chances (which include the uncertain- 
 ties of costly graft) incident to getting freight 
 cars or pack animals as well as the fear of bandits. 
 
78 TRADING WITH MEXICO 
 
 This allows the speculators, in quick turnovers, to 
 make as much as 200 per cent on a car of corn in a 
 fortnight, and this condition has lasted for nearly 
 eight years. 
 
 Another phase of speculative activity is in the 
 importation of foreign goods. The Mexican 
 customs laws are complicated with elaborate 
 classifications, and at best it is something 
 of a speculation for a merchant to import 
 goods in the days of sudden changes in classifi- 
 cations and boosts of tariffs without notice. In 
 addition, however, many favored henchmen of 
 government officials have been given concessions 
 to import all goods free, privileges which it is 
 said they sell to any one who will take the risk for 
 a fixed charge of one-half of the customs fee .that 
 would otherwise have been collected. Now and 
 then these favored persons take a flyer of their 
 own and one of them once sent in a carload of 
 shoes, most of which were dumped in Monterey. 
 Having paid no duty, the shoes were sold at prices 
 which demoralized the local market, for the nor- 
 mal duty on a pair of shoes averages $1.50. 
 
 Other things "happen." For instance, a fav- 
 ored group gets a trainload of goods say food- 
 stuffs at an entry port. Then the government 
 suddenly announces that, effective at once, the 
 high duties on these foodstuffs are to be removed. 
 The goods of those "in the know" go across duty 
 
THE CREDIT OF THE MEXICANS 79 
 
 free, and if other merchants telegraph orders to 
 take advantage of the open port, as like as not 
 they find, when the goods reach the border, that 
 the high duties have been put back as suddenly as 
 they were removed. 
 
 Such things as these happened with great fre- 
 quency in the days of Carranza. Perhaps they are 
 not happening now, for Mexico is on her good be- 
 havior. But all this has occurred frequently 
 enough to have shaken the faith of simple men. 
 The fear of what may happen to-morrow things 
 of this sort or something else stifles business, 
 for business is a timid spirit, and does not re- 
 cover its confidence quickly. 
 
 I hold no brief against the present governments 
 of Mexico. They have been and still are revolu- 
 tionary governments. They have a natural faith 
 in their own vital importance to Mexico, and con- 
 sider that whatever it may have cost the country 
 to get such government is money well spent. But 
 for her own sake and for the sake of those of us 
 who are sincerely interested in knowing what 
 troubles Mexico, it seems that we should realize 
 l>y this frank analysis the lack of faith which I 
 describe. 
 
 The situation which I have just outlined is eco- 
 nomic, but back of the economic and basically 
 more important is the financial situation. The 
 cause of the economic bankruptcy is to be found 
 
80 TRADING WITH MEXICO 
 
 in the new conception of the financial organization 
 of Mexico which the Carranza officials have pro- 
 nounced, and upon which Mexico has been acting 
 for the past seven years. 
 
 Let us look for a moment at the financial side of 
 the foreign investments in Mexico, for recent ac- 
 tivities on the part of the government seem to 
 admit that Mexico recognizes that an important 
 factor in the present national bankruptcy is the 
 loss of foreign capital. This damming up of the 
 flow of foreign investments has been the result of 
 two distinct situations. First is the outrages, the 
 wanton destruction of foreign property and 
 foreign lives by bandits and revolutionaries. The 
 other is the enactment and partial enforcement of 
 drastic anti-foreign laws. 
 
 One of the strongest pillars of the material 
 prosperity of the Diaz time was foreign invest- 
 ments. The bonanza mines had to become paying- 
 low-grade business propositions in order to pre- 
 serve mining as a national asset. The barren ag- 
 ricultural lands had to be irrigated, with water 
 that fell in mountains hundreds of miles away. 
 More than that, Mexico had to begin to build an 
 industrial machine of railroads and factories 
 which would create new national wealth the econ- 
 omists of even a generation ago realized that no 
 land, however rich, could prosper from her natural 
 
THE CREDIT OF THE MEXICANS 81 
 
 resources alone. These were the axiomatic bases 
 of the economic need of foreign money. 
 
 The financial need for foreign capital was yet 
 more pressing. At the beginning of the Diaz rule, 
 the trade balance against Mexico was apparently 
 insurmountable, and although year by year it was 
 cut down through the economic development of the 
 country, each year the trade balance has to be 
 evened up. This was the function of foreign in- 
 vestments, and this was the financial reason for its 
 continued encouragement under Diaz. To the last 
 year of his reign, this inflow of foreign money kept 
 coming evenly, in tens and twenties of millions an- 
 nually. As it came in, balancing the outgo of in- 
 terest on the national debt and on private loans, it 
 became itself a producer of Mexican wealth, so 
 that in time it would have eliminated the necessity 
 of further forced-draft encouragement for outside 
 investment. 
 
 That time had not come in 1911, however, when 
 Diaz left Mexico. But the net result of the stop- 
 page of foreign investment in the revolutionary 
 period which followed is to be found to-day in that 
 unpaid interest of nearly $200,000,000 on govern- 
 ment securities alone. 
 
 This is no apology for the mistakes of the Diaz 
 regime. The great men of that day built a vast 
 commercial enterprise, the Business of Being tke 
 
82 TRADING WITH MEXICO 
 
 Bepublic of Mexico, but like many commercial en- 
 terprises of the period before the Great War, it 
 had left out the human equation. It was this 
 failure which wrecked the Diaz government in the 
 end, and made such purely paternalistic regimes 
 virtually impossible in Mexico again. 
 
 To-day the rulers of Mexico, awake at last to the 
 need for the foreign money which their revolution- 
 ary predecessors shut out so stubbornly under 
 the " Mexico for the Mexicans " policy and the 
 socialistic constitution, have been carrying on an 
 active campaign of publicity and official concilia- 
 tion. The junkets of Chambers of Commerce 
 from al 1 over the United States are part of the 
 big plan. Yet in the hearts of the people, of this 
 country and of Europe, who hold the purse strings, 
 be they bankers or enthusiastic investors of little 
 capital, there lingers and will linger many doubts. 
 It seems likely to be a long day before the foreign 
 investor finds any new faith in Mexico. 
 
 But what of Mexico herself? Where lie the 
 financial roots of her lost faith in Mexico's own 
 future? After the economic conditions noted 
 above, they lie in the Mexican currency situation. 
 
 To-day Mexico has no currency but gold, silver, 
 nickel and copper coins. There are no bank bills, 
 there is no bankable paper, there are no promis- 
 sory notes, no checks, no credit. Seven years ago 
 there was no metallic currency whatever, only 
 
; THE CREDIT OF THE MEXICANS 83 
 
 banknotes, depreciated till a peso (normally worth 
 fifty cents) would hardly pay carfare. During 
 that time the banking business was all but wiped 
 out, and bankable paper disappeared. 
 
 Yet back of that period, in turn, was the time of 
 Diaz, when paper money was as good as gold, and 
 the ordinary processes of exchange went on as in 
 any civilized country. Diaz had found, when he 
 came to power, a condition similar to that which 
 exists to-day, with only metallic currency in cir- 
 culation. He brought in a new financial regime, 
 establishing sound banks, which under govern- 
 ment control issued paper money. In 1910, the 
 circulating medium of the country was $150,000,- 
 000, of which $65,000,000 was banknotes, accepted 
 on an absolute parity with the $85,000,000 of gold 
 and silver. This money was, as noted, supple- 
 mented by active bankable paper circulating 
 freely in business. To-day, by contrast, the gov- 
 ernment admits that there is less than $50,000,000 
 (I personally think it is very much less) of gold 
 and silver money in the country to transact the 
 business (on a cash basis) of nearly 15,000,000 
 people ! 
 
 The loss of $100,000,000 of the circulating me- 
 dium of the country (to make no estimate of the 
 loss and inconvenience due to the destruction of 
 credit) is the work of the revolutions of the past 
 eleven years. 
 
84 TRADING WITH MEXICO 
 
 It was Carranza who started the paper money 
 orgy. In the course of three years he issued prob- 
 ably 2,000,000,000 pesos of paper currency the 
 exact records, if kept, have never been made pub- 
 lic. Through this means he destroyed the confi- 
 dence of the public in paper money, and ulti- 
 mately, when he came to full power, wiped out of 
 existence the whole system of Banks of Issue es- 
 tablished by Diaz. 
 
 The first of the Carranza paper money was is- 
 sued in Chihuahua, and was accepted at its face 
 value. Diaz had taught the people, down to the 
 humblest peon, to accept paper money, and the 
 bayonets of the Carranza troops convinced any 
 who doubted the quality of the new issue. It was 
 a good scheme for financing a revolution till 
 Villa drove Carranza out of Chihuahua and de- 
 clared Carranza money worthless and its posses- 
 sion a political crime. Now Villa money was 
 issued, and was forced upon the people at the 
 points of new bayonets, and as the various chief- 
 tains chased each other over the country the 
 money of the towns fluctuated with the identity of 
 the conqueror. Metallic currency disappeared 
 completely and the value of paper money fell by 
 jolts to a few centavos on the peso. 
 
 These were the days when men who were paid 
 in American money lived like kings. House rent 
 was fifty cents a month ; light, gas and water cost 
 
THE CREDIT OF THE MEXICANS 85 
 
 a dime. You could travel hundreds of miles in a 
 Pullman for a dollar, and settle all your old debts 
 for two per cent of the original figure. Food 
 prices went up, of course, and the natives, mostly 
 paid in the depreciated paper, suffered terribly. 
 Starvation followed in waves, and the mortality 
 in the cities was appalling. 
 
 The value of paper money fluctuated over night, 
 and after closing hours each day, there was a 
 scampering of merchants to sell the currency 
 taken in during the day. They bought New York 
 drafts, worn American bills, diamonds, carriages 
 and real estate, at prices whose rise could not pos- 
 sibly keep up with the fall in the value of paper 
 money. 
 
 Early in the excitement Carranza had begun to 
 repudiate his various issues of currency. The 
 reason given was a real one that they were being 
 counterfeited everywhere, a process simple 
 enough, for the original issues were themselves 
 crudely printed on ordinary paper. At first the 
 Carrancistas had attempted to keep up with the 
 avalanche of counterfeits by requiring that all 
 paper money on hand in banks, stores and private 
 tills be submitted regularly for inspection. Not 
 even the government "experts" could tell the bad 
 from the good, however, and they ended by de- 
 claring all of the money submitted by their politi- 
 cal friends to be all right, and confiscating, as 
 
86 TBADING WITH MEXICO 
 
 counterfeit, a large and fixed percentage of that 
 owned by men of doubtful "loyalty." The pro- 
 cess did not tend to increase the public confidence 
 in the administration. 
 
 The final issues of Carranza revolutionary 
 paper money came from Vera Cruz in 1915. This 
 money alone was recognized as a part of the Car- 
 ranza government obligation, and $8,000,000 was 
 set aside in the Carranza financial plans for its 
 redemption. This last paper money, issued after 
 Carranza was recognized by the United States, 
 consisted of engraved notes, known as "infalsifi- 
 cables" or "uncounterfeitables." These were 
 issued at 10 centavos on the peso, and the gov- 
 ernment was pledged to "redeem" them. This is 
 being done, but not by anything so simple as pay- 
 ing honest money for them (which would put 
 them, perhaps, into general circulation). Instead, 
 all who pay direct taxes are required to return a 
 surtax of the face value of their taxes in these 
 "infalsificables." A friend of Carranza wrote 
 that "this was a beautifully simple and ingenious 
 scheme." It is that still, for those favored ones 
 who control the remaining supply of the notes and 
 sell them at advanced prices to the taxpayers who 
 have to have them mostly the big foreign mining 
 and oil companies. 
 
 The story of the paper money days in Mexico, 
 and the fact that of the billions issued but $8,000,- 
 
THE CREDIT OP THE MEXICANS 87 
 
 000 is recognized as a just debt, may stir the indig- 
 nation, and it certainly clarifies our understanding 
 of Mexico 's lost faith in her rulers. But in point 
 of actual fact, the destruction of the banking and 
 credit system of the country, which was a corol- 
 lary of the paper money orgy, was far more terri- 
 ble and cast an even more lasting blight on the 
 standing of the government. 
 
 Early in his revolutionary career Carranza was 
 at odds with the banks. He considered it an un- 
 friendly act, one "taking advantage of the unlet- 
 tered," for the banks to use their knowledge of 
 financial conditions to profit from the fluctuations 
 of his paper currency. He also found the banks 
 " reactionary " in their refusal to use their stand- 
 ing to assist him in making his money popular, 
 and he charged openly that the banks had " com- 
 bined to discredit the government. ' ' On his entry 
 into Mexico City he endeavored to coerce banking 
 officials personally, and jail was sometimes the 
 boarding place of bank managers and bank presi- 
 dents, when they refused to unlock the vaults to 
 government ' l inspection. ' ' 
 
 The wrecking of the banking system extended 
 over more than a year. Huerta, who preceded 
 Carranza in the presidency, took the first forced 
 loans of $5,000,000 from the banks, allowing them 
 to issue new paper currency to cover this coin 
 taken out. Carranza, on gaining control of Mexico 
 
88 TRADING WITH MEXICO 
 
 City, found the forced loan idea convenient, for 
 he was in sore financial straits. As one chronicler 
 has it, " Money had to be found . . . The money 
 in the banks was the only money available, and it 
 was taken as the only way out of a very difficult 
 situation. ' ' x In its statement of debts, however, 
 the Carranza government recognized these forced 
 loans to a total of $20,000,000, none of which has 
 been paid in six years. 
 
 The Carranza "loans" from the banks inevita- 
 bly shook their credit and with it the credit of 
 every business man and business organization, 
 and inevitably the credit of the Mexican govern- 
 ment itself. Banknotes dropped in value and al- 
 though they never reached the low mark touched 
 by government paper, their fall to 75, to 50 and 
 finally 30 per cent of their face value reduced in 
 like manner the value of all bank deposits, and 
 finally brought banking transactions to a stand- 
 still. The process of final destruction of the banks 
 began with the edict of September 26, 1915, abol- 
 ishing out of hand the Huerta concession which 
 had allowed some of the banks to issue additional 
 paper currency to cover the Huerta "loans." The 
 banks were required to bring their reserves up to 
 the old basis in forty-five days, and despite the 
 blow to their credit, this was accomplished. On 
 November 10, however, another Carranza edict 
 
 i E. D. Trowbridge. Mexico Today and Tomorrow, p. 198. 
 
THE CREDIT OF THE MEXICANS 89 
 
 reduced the recognized bank reserves by requiring 
 that silver coins be estimated at their bullion, in- 
 stead of their face value. This storm was weath- 
 ered, in its turn, and nothing further was done for 
 nearly a year, although during that time the 
 breach between Carranza and the banks was con- 
 tinually widening. 
 
 An edict of September 15, 1916, required that 
 the banks should have in their vaults within sixty 
 days enough gold and silver to redeem at par every 
 banknote which they had in circulation, currency 
 which had been issued under concessions allowing 
 a banknote circulation twice the total of the bank 
 reserves in metal and bankable paper. The de- 
 cree also prohibited the banks from doing business 
 with the public until the conditions set down were 
 fulfilled. In other words, liquidation of notes and 
 deposits was stopped, and the life blood of bank- 
 ing, the active turning over of funds in the course 
 of business, was cut off. Finally, on December 14, 
 1916, the coup de grace was given, and the banks 
 were officially closed to all business excepting the 
 collection of bills receivable in the depreciated 
 currency of the banks themselves. 
 
 Thus by a series of cumulative blows the whole 
 Mexican national banking system which had been 
 built up under Diaz was destroyed utterly. At the 
 time the final blow was given, banknotes were ac- 
 cepted at about 30 per cent of their face value, and 
 
90 TRADING WITH MEXICO 
 
 had apparently reached stability. Bankers assure 
 me that had they been allowed to operate, even 
 under the conditions then prevailing, they could 
 eventually have pulled themselves and much of the 
 business of the country out of the hole. It is also 
 interesting to remember that the franchises of the 
 Banks of Issue were to expire in 1922, time suffi- 
 cient, under careful government leadership, for 
 them to wind up their affairs and furnish a solid 
 financial basis for the erection of some new form 
 of national currency. 
 
 The Mexican governments, one after the other, 
 have lent what prestige they had to a proposed and 
 elaborate new banking law, based on a " Sole Bank 
 of Issue." From Carranza's time the men in 
 charge of the government finances apparently be- 
 lieved that this system could be established on the 
 wrecks of the ruined Banks of Issue. Up to the 
 present this has not yet been attempted, for Mex- 
 ico was and is in no mood to receive any form of 
 paper currency or government banking, however 
 it may be guaranteed. 
 
 It was inevitable, after the banks were closed, 
 that the country should go back to a metallic basis. 
 This was made more difficult, however, by the gov- 
 ernment's decree, recently reiterated in the sum- 
 mer of 1921, making illegal the circulation of 
 American silver and banknotes. This plan, al- 
 though it brought out the Mexican gold and silver 
 
THE CREDIT OF THE MEXICANS 91 
 
 which had been hoarded, inevitably cut down the 
 circulating medium of the country to absolutely 
 inadequate proportions, even though American 
 money could easily have been obtained to provide 
 enough currency to tide over the crisis. 
 
 There were many difficulties connected with the 
 establishment of gold and silver again, but most 
 of them had to do with the scarcity of these me- 
 diums. There was a further complication for 
 which no one was responsible. This was the phe- 
 nomenal rise in the price of silver during the 
 Great War. This early became a crisis, for first 
 the silver pesos became more valuable as bullion 
 than the fifty cents (American money) at which 
 they had been fixed in the time of Diaz, and soon 
 even the subsidiary coins, of a lower silver con- 
 tent, became worth more than their legal value in 
 gold. The export of silver coins had to be stopped 
 by government order, and under the guidance of 
 American monetary experts the recoinage of sil- 
 ver in smaller pieces was begun. To-day this 
 money is in general circulation, accepted at face 
 value for the simple and deliberately created rea- 
 son that it is issued only as the crying demands of 
 business for change force it out. The new pesos 
 are about half the bullion value of the old, and the 
 subsidiary coins are even less valuable in propor- 
 tion. 
 
 Needless to say, this change in the size of the 
 
92 TRADING WITH MEXICO 
 
 silver coins had an unfavorable effect on the public 
 mind, already on edge over the various financial 
 coups of the Carranza government. This was ag- 
 gravated by a destructive form of favoritism by 
 which a few men were allowed, under Carranza, 
 to buy up and export the old silver coins, a form 
 of graft which amazes and disgusts the observer 
 and also, be it noted, made the money shortage 
 greater and less easy to endure. 
 
 The ruin of the economic structure of Mexico 
 lies bare for any one to see, and beneath it is the 
 rotted structure of the old financial system. The 
 closing of the banks, the destruction of credit, the 
 shutting off of the relief which might have been 
 given by the use of American currency, seem at 
 the root of most of the ills which then beset Mex- 
 ico, because they are at the root of the lack of 
 faith of the people and their fear of the caprices of 
 the morrow. For instance, to-day in Monterey, 
 the great industrial center of northern Mexico, 
 there are no banks save two private houses where 
 money can be left on deposit, and a few exchange 
 offices. Where, in 1910, the four Banks of Issue 
 had more than $10,000,000 out in industrial, min- 
 ing and farm loans, there is hardly as much as 
 $250,000 loaned to-day, and that is by American 
 banks on the border. The safe commercial paper 
 which circulates in Northern Mexico is checks on 
 American banks. The drafts of strong mining 
 
THE CREDIT OF THE MEXICANS 93 
 
 and oil companies form the chief basis of money 
 transfer, and are shipped from place to place all 
 over Mexico. Optimists call this a peaceful pene- 
 tration of American credit into Mexico, and so it 
 is, but all that can be done from outside of Mexico 
 is but a drop in the bucket compared with her 
 financial needs. Credit within and without must 
 be established, and that is a problem which rests 
 with Mexico alone. 
 
 To understand at all the mountain of distrust 
 which looms before her, it is necessary to set down, 
 briefly, the condition of the Mexican foreign debt. 
 
 The external government debt is $173,000,000, 
 and on this interest has been defaulted for more 
 than eight years, a total of $50,000,000 remaining 
 unpaid. The internal national debt is $67,000,000 
 and the defaulted interest $20,000,000. State and 
 other debts (save railroads), which have been 
 guaranteed by the government are $33,000,000 and 
 $10,000,000 in interest. 
 
 The bonds of the National Railways of Mexico, 
 guaranteed by the Mexican government, total 
 $239,000,000, the interest defaulted being about 
 $75,000,000. 
 
 With other items, and counting alone the debts 
 guaranteed by the credit of the government, these 
 obligations total $603,000,000, and the unpaid in- 
 terest thereon is over $155,000,000. Unguaran- 
 teed state and city bond issues, the $20,000,000 
 
94 TRADING WITH MEXICO 
 
 recognized as due the banks for "loans," and 
 $8,000,000 with which to redeem outstanding fiat 
 currency bring the total up to a principal of $779,- 
 120,915. Nearly eight hundred million dollars, 
 and defaulted interest to nearly two hundred 
 million ! 
 
 From time to time, and government after gov- 
 ernment, treasury officials have come to New York 
 to arrange for the refunding of this debt. The 
 plan is usually for New York bankers to loan Mex- 
 ico $300,000,000, refund the whole debt, eliminat- 
 ing some items (notably by a reduction of the bond 
 issue of the railroads) and take as security the 
 Mexican government's pledge of a portion of the 
 customs duties. 
 
 The answer to this proposition has been aston- 
 ishingly to the point. No Mexican guarantee of 
 customs receipts has interested the bankers unless 
 it was backed by the United States government, 
 presumably with a collection agency of American 
 marines, as in Haiti and Honduras to-day. The 
 most interesting development in answer to the 
 Mexican suggestions of refunding was the ap- 
 pointment of one of the most impressive interna- 
 tional banking committees ever created some three 
 years ago. This was headed by J. Pierpont Mor- 
 gan and announced that its purpose was "the pro- 
 tecting of the holders of securities of the Mexican 
 republic and of the various railway systems of 
 
THE CREDIT OF THE MEXICANS 95 
 
 Mexico and generally of such other enterprises 
 as have their field of action in Mexico." It would 
 seem that the probity of the Mexican government, 
 both as to its debts and as to its willingness to re- 
 pay the losses of foreign investors was slightly 
 under suspicion in the financial circles of the 
 world, a suspicion which is shared by no other 
 Latin- American country save those in actual and 
 admitted bankruptcy. 
 
CHAPTER V 
 
 OUB BILL AGAINST EEVOLUTIONAEY MEXICO 
 
 THE American after-dinner orator roars Ms 
 boast of "two billions of American dollars in 
 Mexico" and moans Ms claim of "a billion of 
 damage " done to those pioneer American dollars. 
 Whereupon the Mexican (of whatever political 
 complexion) wails protest that three-quarters of 
 those American dollars were made out of Mexico 
 herself, and our State Department, which alone 
 might claruy the matter, perforce keeps silence. 
 Up to the present time few have attempted to 
 bridge the gulf between the orator and the Mexi- 
 can and no one that gulf between the orator and 
 the State Department. We live in an age of ' l con- 
 victions " and we choose our figures according to 
 our beliefs. 
 
 Fifteen years ago an American consul in Chi- 
 huahua, Marion Letcher, wrote a report in which 
 he estimated (frankly without figures) that the 
 total foreign investments in Mexico were $1,641,- 
 054,180, distributed as follows: 
 
 American $1,057,770,000 
 
 British 321,302,800 
 
 French 143,446,000 
 
 Various 118,535,380 
 
 Total 11,641,054,180 
 
 96 
 
OUR BILL AGAINST MEXICO 97 
 
 These figures have been assailed, especially as 
 regards the comparatively small sum alloted to 
 the British, but they remain to this day the only 
 official estimate available. I have, however, been, 
 able to find another compilation, worked out also 
 by Americans, but this by the research depart- 
 ments of several large banking groups, with full 
 access to all Mexican government figures and to 
 the stock books of most of the great American 
 companies. The total, which is for 1914, before 
 the vast bulk of the investment in oil, is almost 
 identical, but the distribution is startlingly dif- 
 ferent : 
 
 American $655,000,000 
 
 British 670,000,000 
 
 French 285,000,000 
 
 German 75,000,000 
 
 Spanish, Dutch, etc 190,000,000 
 
 Total $1,875,000,000 
 
 These figures claim to include the foreign invest- 
 ment in the National Debt of Mexico and are said 
 to estimate the actual distribution, as far as can 
 be worked out, of the holdings of the securities 
 of all companies operating in Mexico. Consul 
 Letcher's figures were conceivably based largely 
 on the nationality of the corporations alone. On 
 the other hand, Europe contributed more than half 
 the invested capital of such important groups as 
 
98 TRADING WITH MEXICO 
 
 the National Railways of Mexico, made up of 
 companies which were all incorporated under 
 American laws. 
 
 When this new compilation of investment dis- 
 tribution first came to my hands, I was, I may 
 admit, inclined to * ' split the difference. ' ' As care- 
 ful a study of the American investment field as it 
 is possible to make has, however, convinced me 
 that the new figures are much more nearly correct 
 than those of Consul Letcher with one exception. 
 I do not believe that they include all the American 
 investment in the Mexican government, state and 
 municipal bonds held abroad. 
 
 On the other hand, neither Consul Letcher 's 
 figures nor the other compilation represent the 
 actual full value of American investments in Mex- 
 ico at the fall of Diaz in 1911. It is important that 
 this fact be remembered because by that date the 
 moneys which had gone into Mexico for foreign 
 enterprise had increased many fold through the 1 
 energy which went with them and pushed them 
 forward to success. I believe that the original 
 American investment had grown, by 1911, to fully 
 $2,000,000,000, but in order to be absolutely just 
 from the Mexican viewpoint we can discuss the 
 damages on the basis of the actual cash invested 
 the loss, incidentally, looms even greater. On 
 the other hand, we must not forget that however 
 the Mexicans may claim that the increase in val- 
 
OUR BILL AGAINST MEXICO 99 
 
 ues represents an " exploitation " of their coun- 
 try's resources, the concomitant advance in all 
 values throughout the land in the era of Diaz was 
 almost entirely the direct result of those same 
 foreign enterprises. 
 
 From many sources, including of course the two 
 authorities which have been quoted, I have esti- 
 mated the American investment of actual cash 
 capital and have set against it the losses in actual 
 physical damage and in ruined business, since 
 1910, as follows : 
 
 AMEBICAN CAPITAL IN MEXICO 
 
 Original Physical Actual 
 
 Investment Damage Losses 
 
 Railroads $150,000,000 $30,000,000 $60,000,000 
 
 Oil 200,000,000 5,000,000 100,000,000 
 
 Mines 200,000,000 15,000,000 100,000,000 
 
 Lands and cattle . . . 50,000,000 10,000,000 20,000,000 
 Industries and public 
 
 service 50,000,000 10,000,000 20,000,000 
 
 Total $650,000,000 $70,000,000 $300,000,000 
 
 Damage claims aggregating $500,000,000 are 
 said to have been filed with the American State 
 Department, but no official confirmation of this 
 has ever been forthcoming. However, the claims 
 which Americans have against Mexico, whether 
 filed in the State Department or not, must be di- 
 vided into two categories, the actual and the po- 
 tential damage, and perforce includes also the 
 claims due for loss of life and personal damages. 
 
 The actual harm already done includes : physi- 
 cal damage to property ; unwarranted and illegiti- 
 
100 TRADING WITH MEXICO 
 
 mate taxes which approach confiscation; destruc- 
 tion of property values through such taxation and 
 through the prevalence of banditry; destruction 
 of property values by the driving out of stable 
 government ; destruction of the financial and credit 
 system of the country through government de- 
 crees and repudiations ; losses in legitimate profits 
 which would have been made during the recent 
 eras of high prices ; actual loss in market value of 
 property through the estrangement of the foreign 
 capital which alone, in Mexico, presents a reliable 
 buying element; destruction of property values 
 through the exile of the foreigners who formed the 
 industrious and capable organization which main- 
 tained those values. 
 
 The potential damages are chiefly those which 
 come from the fact that there hangs over all for- 
 eign property in Mexico to-day, and has hung for 
 five years, a sword of Damocles in the threatened 
 confiscation of such property under the radical 
 "nationalization" plans of the revolutionary gov- 
 ernments. These, briefly, provide that: foreign 
 corporations and individuals are incompetent to 
 own property in Mexico unless they renounce 
 their citizenship and appear only as Mexicans be- 
 fore the Mexican law ; the government may appro- 
 priate all large tracts of land, giving in return un- 
 guaranteed state agrarian bonds of virtually no 
 value; the government may "nationalize" the oil 
 
OUR BILL AGAINST MEXICO 101 
 
 in the ground, making it subject to the denounce- 
 ment of any one, whether the property owner or 
 not, when the whole oil-producing organization 
 of Mexico to-day is founded on the principle of the 
 oil belonging to the land itself; no foreigners, 
 under any conditions, may own any land within 
 sixty miles of the frontier or thirty miles of the 
 seacoast. 
 
 Lastly, and in a group by itself, are the damage 
 claims arising from the killing of nearly 600 Amer- 
 ican citizens in Mexico since the Madero revolu- 
 tion began in 1910. The claims for these outrages 
 and for the maiming and raping of many hundreds 
 more occupy a class by themselves, and will, we 
 may confidently believe, be the first which will be 
 paid when Mexico returns to the ways of civiliza- 
 tion. 
 
 Just here we can imagine the official Mexican 
 "press department" preparing to state that 
 "Mexico has always paid her bills, including all 
 damage claims." This, however, is not quite lit- 
 erally true. She has paid foreign damage claims 
 at the muzzles of foreign cannon, to be sure, and 
 President Diaz, in that long rule which many call 
 "the anomaly of Mexican history" paid all the 
 bills presented to him. But the only "conven- 
 tion" which ever sat to adjudicate American dam- 
 age claims was hardly the success that would jus- 
 tify any such sweeping assertion of Mexico's pro- 
 
102 TKADING WITH MEXICO 
 
 bity. In 1840, after years of turmoil, and after a 
 show of force, President Jackson called a conven- 
 tion of Americans and Mexicans together to con- 
 sider American damage claims. They sat from 
 1840 to 1842, allowed $2,000,000 in damage claims, 
 rejected $1,000,000 and when they adjourned left 
 $3,000,000 still to be considered. Under an ar- 
 rangement of twenty installments, Mexico paid 
 three and defaulted the rest. The cash was paid 
 by the United States, and the slate was wiped 
 clean after the Mexican war of 1847-48. Finally, 
 this war, which as schoolboys we were taught to 
 regard as a sort of "blot on the national escut- 
 cheon" was the result of continued outrages to 
 Americans and continued diplomatic jockeyings 
 with an Uncle Sam who even then was much the 
 same model of patience which he is to-day. 
 
 In the public discussion of the damage which has 
 been done to American properties in Mexico, there 
 has been much emphasis on the potential harm 
 from the so-called " socialistic " or "bolsheviki" 
 tenets of the new Mexican constitution. There 
 have been vast, crippling losses, yet it seems as if 
 most of what we have heard has been the things 
 which will happen if Mexico is allowed to proceed 
 along her present road. There is reason enough 
 for this fear and for this emphasis, and one of the 
 great battles being fought in the world to-day is 
 that which these Americans are putting up not 
 
OUR BILL AGAINST MEXICO 103 
 
 alone for themselves but for the very principles 
 of property rights. But so far Mexico and 
 particularly the wily gentlemen who have occu- 
 pied the Mexican presidential chair have always 
 tried to get all they could and have often carried 
 the mis-named " American" bluff to astonishing 
 lengths but have almost as often retired when the 
 game turned against them. They have used the 
 potential damage as a means of extracting an 
 increasing toll of taxes and of loot, and for little 
 else, as yet. 
 
 In this chapter I am, as already mentioned, in- 
 tentionally avoiding taking these "potential dam- 
 ages" into consideration. I feel that we must 
 have, as a starting point, a comprehensible picture 
 of what has already actually happened to Ameri- 
 can investments in Mexico. 
 
 Most of the American money in Mexico went to 
 that country during the thirty-four years of Diaz 
 rule. This period was marked not by blind adora- 
 tion of the foreigner, as the revolutionists now 
 state, but by a sane and far-seeing realization that 
 foreign capital must come to Mexico if her na- 
 tional and economic potentialities were to be de- 
 veloped. Foreigners were encouraged generously 
 by laws recognizing the privileges of pioneers in 
 protection and in assistance in the form of ex- 
 emption from taxes during their development 
 period (the term was usually for ten years). The 
 
104 TRADING WITH MEXICO 
 
 idea was to allow them to import machinery with- 
 out duties and get on their feet as quickly as pos- 
 sible. Practically none of these companies was 
 given land, for there is no vacant Mexican govern- 
 ment land worth having. 
 
 The first and the greatest American corpora- 
 tions to enter Mexico were the railroads. These 
 held concessions, made according to law, but Mex- 
 ico had profited by the American government's 
 experience with its trans-continental lines, and the 
 subsidies and grants were small indeed compared 
 with those given to our Union Pacific, for instance. 
 It is worth noting also that there have never been 
 such scandals as our great railroads reveled in, 
 and that virtually every cent was invested in the 
 lines themselves. The Mexican railway companies 
 which were consolidated in 1907 into the National 
 Railways of Mexico were never paying ventures 
 for the builders, and until the merger few divi- 
 dends had ever been paid by any of the lines. For 
 about four years following the merger conditions 
 improved greatly, but in 1912 troubles began, and 
 by 1913 all was chaos and destruction. 
 
 From then on to to-day, the story of the rail- 
 ways of Mexico has been a tragic romance. It 
 can be reduced to figures, necessarily cold in the 
 telling, but every figure the result of dramatic and 
 crushingly realistic incident. The National Rail- 
 ways of Mexico, a property worth over $250,000,- 
 
OUR BILL AGAINST MEXICO 105 
 
 000 as a physical plant alone, was taken over by 
 the Carranza government on December 4, 1914, 
 and since that time the bondholders have received 
 no cent of interest and the physical property has 
 been crushed and battered and all but destroyed. 
 On January 1 of 1921 over $75,000,000 of back in- 
 terest was unpaid and the defaulted payments on 
 fixed charges is still piling up at the rate of $1,- 
 000,000 a month, while the Mexican government is 
 collecting from the operating commission $1,500,- 
 000 a month a sum set by Garranza for the com- 
 mission to turn in by any means available, as 
 higher rates, scrimping on repairs, deterioration 
 in upkeep. 
 
 The confiscation of the railway properties by 
 the Mexican government under Carranza is one 
 of the most astonishing and illuminating pages in 
 the whole story of Carranza 's campaign against 
 capital and the foreigners. But although it be- 
 gan with him, it apparently has continued into 
 the rule of his successors for they seem a part 
 of the revolution of which he was and still is the 
 dominating, sinister genius. Under the terms of 
 the merger of 1907, the Mexican government was 
 given the voting power but not the title to 50 
 per cent of the stock of the company, under cer- 
 tain definite conditions laid down by the bond- 
 holders. This 50 per cent interest represented 
 no capital invested, nor was it a recognition of any 
 
106 TRADING WITH MEXICO 
 
 debt which the railways might have imagined they 
 owed the government. It was given outright in 
 consideration of one thing, the guaranteeing by 
 the Mexican government of a return of 4 per cent 
 interest on the bonds of the merged lines. To the 
 merger the government contributed nothing of 
 tangible value save one short line of railway 
 worth about $5,000. Its permission was needed, 
 perhaps, for the transfer of the railway conces- 
 sions to the merger, but this would probably have 
 been given without question had it been asked 
 alone. The interests back of the merger believed 
 that the Mexican government guarantee of the in- 
 terest on the bonds was worth the gift of the vot- 
 ing right of half the common stock and on this 
 understanding alone it was given. 
 
 The taking over of the physical property by the 
 Mexican government followed the American occu- 
 pation of Vera Cruz in 1914, and shortly after- 
 wards Carranza made his claim official, on the 
 ground of the 50 per cent voting right! On the 
 basis of this right alone the Mexican government 
 to-day holds control of the National Railways of 
 Mexico, a right once given on the solemn guaran- 
 tee of the interest on the bonds which has not 
 been paid for eight years and with the recog- 
 nized provision that the bondholders should name 
 the president of the lines, and various officials and 
 members of the board and to-day there is not 
 
OUR BILL AGAINST MEXICO 107 
 
 one official who is not a creature of the govern- 
 ment which happens to be in power in Mexico ! 
 
 Upon such a basis rests the title of the Mexican 
 government to the National Railways. The sub- 
 sidies paid by the Diaz government in years gone 
 by for construction were given as the subsidies 
 were given to the American railways which 
 crossed the prairies to the Pacific coast to make 
 such construction possible in recognition of their 
 benefit to the country. The Mexican subsidies 
 were less than those given to the Union Pacific 
 by the United States government and not one 
 touch of scandal (such as marked our own railway 
 development) was ever breathed against that of 
 Mexico. The subsidies give no tangible claim to 
 the lines and as far as I know have never been 
 advanced as a claim. The only hold of Mexico 
 over those properties is the shadowy title con- 
 veyed by the voting right of a block of stock given 
 voluntarily by the bondholders in return for 
 guarantees which have been thrown to the winds 
 for these eight years. 
 
 In the period since the government has had 
 control of the lines, the physical property has de- 
 teriorated to a point where only the magnificently 
 solid work done by the American builders to-day 
 holds them together. Operated by the Mexicans, 
 with former firemen as general superintendents 
 and minor native clerks as high officials, the prop- 
 
108 TRADING WITH MEXICO 
 
 erties went their way of slow destruction in the 
 days of Carranza. Since that time, the turnover 
 of railway officials has eliminated many of the 
 employees who were trained under the American 
 executives of the Diaz and Madero time, and to-day 
 the roads are in the hands of men who learned all 
 they know of the railway business from those who 
 in their turn had gleaned their little knowledge 
 from their American chiefs now gone from Mex- 
 ico eight years. The result is a ruin comparable 
 to nothing, probably, but the ruin of railway prop- 
 erties in Russia to-day. 
 
 Of the more than 800 locomotives owned in 1914, 
 only 333 (by tlib notoriously inaccurate Mexican 
 government figures) are said to be running. The 
 rest lie at the bottoms of canons or are rusting in 
 banks of hundreds in shop yards, as I have this 
 year seen and counted over 100 in the one yard of 
 Monterey. The freight cars have decreased from 
 18,000 to 7,000, and usable passenger cars are 
 virtually unknown off the main lines to-day all 
 were wantonly destroyed in the early revolution 
 or stolen and converted into dwelling-places for 
 "deserving revolutionaries." Three-quarters of 
 all the bridges on the 8,000 miles of line are dam- 
 aged, dozens of them beyond repair, thanks to the 
 diabolical perfection of the methods of destruc- 
 tion used by various Mexican patriots. The tie 
 replacements are seven years behind; nearly 20,- 
 
OUR BILL AGAINST MEXICO 109 
 
 000,000 are needed, worth over $17,000,000. Other 
 items in the $80,000,000 replacement bill are $30,- 
 000,000 for cars, $12,000,000 for locomotives and 
 $4,000,000 for rails. 
 
 This loss has been the result of two forms of 
 destruction the depredations of the fighting fac- 
 tions and the cumulative destruction of neglect 
 and failure in upkeep. Instances multiply. Dur- 
 ing one month (March, 1914) seventy trains were 
 blown up while running at 30 to 40 miles an hour ; 
 the patriots used to connect up their dynamite 
 with electric batteries and then sight along two 
 sticks from their safe retreat in the bushes and 
 so set off the charge under whatever section of 
 the train caught their fancy. At one time in 
 Monterey in 1915, revolutionary troops burned 
 800 loaded freight cars; their skeletons line the 
 Monterey sidings for all the world to see, to-day. 
 One of the long bridges on the road to Eagle Pass, 
 on the American border, was wrecked by running 
 a train of loaded coke cars with two locomotives 
 on each end out on the bridge, firing the train and 
 blowing up the bridge when the burning coke had 
 heated the steel. A similar trick on the Tampico 
 line was to take out a rail, then set fire to a train 
 of oil cars and run it full speed on the bridge, 
 where it was derailed and the same process was 
 followed as with the coke train. 
 
 The rotting of the ties on the road has left most 
 
110 TRADING WITH MEXICO 
 
 of the branch lines all but impassable, save to the 
 Mexican enginemen who know each bump and are 
 quite willing to "take another chance." The 
 wrecked bridges, jacked up on timbers, have un- 
 comfortable and terrifying "dips." The list can 
 be multiplied indefinitely. Yet perhaps the most 
 expressive sight to be seen in Mexico to-day is 
 those banks of rusting engines, 100 in Monterey, 
 100 at Aguascalientes, others at San Luis Potosi, 
 Mexico City and Guadalajara. These engines 
 were only slightly damaged when they were side- 
 tracked, but through the failure of the government 
 to furnish repair materials, they have been gradu- 
 ally stripped of parts to repair other engines, the 
 brasses have been carried off and sold for junk 
 and the whole field of ruin left like a desert waste. 
 There is in the Mexican railway law a provision 
 for compensation in case the railways are taken 
 over "for military purposes." It is estimated 
 that under this law the damages collectable are 
 only $10,000,000 a year less by $2,000,000 than 
 the default in the fixed charges alone. The esti- 
 mated $80,000,000 of physical damage (a mere 
 estimate until an actual valuation can be made) 
 is presumably collectable. The bill of the rail- 
 roads is, however, as follows: Physical losses, 
 $80,000,000; defaulted interest to June, 1921, $75,- 
 000,000; total, $155,000,000. It is believed that 
 about one-third of the bonds are held by Ameri- 
 
OUE BILL AGAINST MEXICO 111 
 
 cans, so that their loss is over $50,000,000. In ad- 
 dition, there has been an individual loss in the dis- 
 posal of the bonds by small holders, at sacrifices as 
 great as 80 per cent. It is even said that the Car- 
 ranza government had hopes of being able to buy 
 up the railway bond issue when its administra- 
 tive policies had reduced the quotations to less 
 than 30 per cent of par. Only the lack of money 
 prevented this coup for real government owner- 
 ship, it is said. 
 
 In the above, I have treated only with the Na- 
 tional Railways of Mexico. Outside of this sys- 
 tem the only important lines in Mexico are the 
 Mexican Eailway (British owned) which has now 
 been returned to the stockholders but without com- 
 pensation for damages and the Southern Pacific 
 in Mexico (American owned). The former suf- 
 fered severe physical destructions, but the latter *s 
 bill for damages, while heavy, sinks into relative 
 insignificance. 
 
 In the confines of a general study, space can not 
 be given to the sidelights on the Mexican railway 
 situation a situation almost Teutonic in its co- 
 lossal blunders, splendidly American in the ele- 
 ments which have gone to save it from utter wreck. 
 The long years of patient railway building, the 
 hundreds of miles of rock-ballasted lines across 
 unproductive wastes, all done under American 
 management, gave Mexico a system which has held 
 
112 TRADING WITH MEXICO 
 
 together despite the wreckage of bandits and the 
 ravages of time and neglect. The traffic of the 
 nation moves to-day, not in the wheezy trains 
 which the Mexicans maintain, but overwhelmingly 
 in a system of privately owned locomotives and 
 cars operated by the American mining and 
 trading companies at staggering expense. Their 
 100 locomotives, in perfect repair (kept so in 
 their own shops) and their nearly 3,000 freight 
 cars probably represent half of the railway equip- 
 ment running on the National Railways to-day, 
 and they probably carry far more than half the 
 freight. They pay full freight rates in addition 
 to furnishing tlie trains, and although much of 
 this equipment has been taken over by the govern- 
 ment as this is written, it is no exaggeration 
 to say that but for these American companies and 
 their magnificent efforts to save what is to be 
 saved of their Mexican properties Mexico would 
 to-day be stagnant, a land of chaos comparable 
 only to the period of fifty years ago, before Diaz 
 ruled. 
 
 The great oil business of Mexico owes its ex- 
 istence primarily to American enterprise. Of the 
 $300,000,000 of cash invested in the oil fields, 
 $200,000,000 is American. To-day, even after the 
 colossal production during the war, only a small 
 portion of this investment has been recovered, for 
 only two purely Mexican companies, the Mexican 
 
OUE BILL AGAINST MEXICO 113 
 
 Petroleum (American) and the Eagle (British) 
 are paying dividends. The oil business in all lands 
 is so speculative that its returns are quoted not 
 as " dividends " or " interest, " but as "recovery," 
 for until the great investment in drilling, tanks, 
 pipe lines, refineries and ships is got back, there 
 is no surety that the venture itself will prove prof- 
 itable. For this reason the losses of the oil com- 
 panies through the Mexican revolutions can be 
 only an estimate. From sources which I have been 
 able to reach, I place the actual physical losses 
 at about $5,000,000 for the American companies. 
 This seems like a very small item, but it does not 
 count the failures of most of the 300 companies 
 which have put money into Mexican oil or the 
 vast sums paid in taxes or lost through oppres- 
 sion. Nor does it take into consideration the po- 
 tential losses if Mexico enforces her "nationaliza- 
 tion" plan. These last would be legitimately in- 
 cluded here, for as I say, they jeopardize the "re- 
 covery" of the investment still remaining unpaid 
 for, and Mexican oil stock quotations have suf- 
 fered as a result. Mexico still threatens to en- 
 force the provisions of the new constitution which 
 make oil the property of the nation and its ex- 
 ploitation a matter of concession, like gold and 
 silver. The oil companies are fighting this plan, 
 for they entered Mexico and invested millions in 
 oil lands and leases from individuals (no land 
 
114 TRADING WITH MEXICO 
 
 was ever given them) under a mining law which 
 left coal and oil the property of the owner of the 
 land, unlike gold and all other minerals. 
 
 The actual bill of our oil companies includes, as 
 the chief single item, a $2,000,000 loss due to the 
 Battle of Ebano, fought over American property 
 in the spring of 1915. Oil, tanks, pipe lines and 
 refinery buildings were destroyed, a single cannon 
 ball igniting a tank containing 850,000 barrels of 
 oil, all of which was burned. The item of direct 
 thievery (largely by federal troops) is only about 
 $300,000, but petty destruction, murderous as- 
 saults, the killing of a score of valuable employees 
 and the tribute to bandits and federal " generals" 
 pile the total up. Tribute has been levied, first 
 by the federal Carrancistas, and from January, 
 1915, to March, 1920, by Manuel Pelaez, the former 
 rebel leader, to a total of about $2,000,000, Pe- 
 laez 's figure being a regular $30,000 a month up 
 to his joining the successful Obregon revolution 
 in 1920 and so becoming a "federal." 
 
 The ravaging of the oil wells is full of pictur- 
 esque and terrible incident, like the railways. The 
 most striking and costly was the outrage perpe- 
 tated by General Candido Aguilar, son-in-law of 
 Carranza. On December 13, 1913, Aguilar de- 
 manded, from the Eagle Oil Company (British) 
 tribute to the sum of $10,000. This was not forth- 
 coming so Aguilar proceeded to carry out his 
 
OUK BILL AGAINST MEXICO 115 
 
 threat of "shutting in" the great "El Portrero" 
 well, one of the most famous in Mexican oil his- 
 tory, which had been a steady producer, for two 
 and a half years, of 30,000 barrels per day. He 
 succeeded in capping it, and before the casing was 
 finally blown out, the oil had broken through 
 the ground in dozens of places, including 
 the bed of a neighboring river. The whole 
 countryside was in imminent danger of a 
 terrible holocaust if the oil on the river flowed 
 away and ignited, as it surely would, but by super- 
 human efforts this danger was averted. But all 
 other attempts to save the oil and repair the dam- 
 age were almost fruitless, and for months the see- 
 page went on, until at last the well was reduced to 
 salt water and $20,000,000 worth of oil had been 
 lost. This loss is technically British, although it 
 is probable that the bill for damages will fall upon 
 the United States, for it was undoubtedly through 
 the instrumentality of our State Department and 
 its emphasis of the Monroe Doctrine that Great 
 Britain was restrained from taking action. 
 
 Another item to be noted is the great Carranza 
 tax system which continued in full force into the 
 era of Obregon and costs the oil companies some 
 $4,000,000 per month. Part of this may be recog- 
 nized in time as legitimate, but it violates the 
 letter of the franchises of most of the companies. 
 To this bill of claims will also be added the losses 
 
116 TRADING WITH MEXICO 
 
 incident to carrying out the orders of our Depart- 
 ment of State for all Americans to withdraw from 
 Mexico on two occasions. Each time about one 
 month's production was lost. 
 
 I have noted above the far-reaching possibilities 
 of destruction to oil properties entailed in the 
 "nationalization" plans. While these are in 
 abeyance pending "investigation and legislation" 
 the oil companies have other drains on their re- 
 sources, such as government levies for dredging 
 the river at Tampico (while the companies' own 
 dredges do the work), the requirement of special 
 licenses to drill each well, and the virtual curtail- 
 ment of all development work outside the Tam- 
 pico-Tuxpam district. All add to the total loot 
 of the revolutionists, and continue the threat 
 against foreign business development throughout 
 all Mexico. 
 
 About $200,000,000 of American money has gone 
 into mining in Mexico. Practically all of it has 
 been legitimate business investment, in low grade 
 or old abandoned bonanza properties, in mills and 
 in smelters the speculative period of bonanza 
 mining such as we have had in our own West was 
 passed in Mexico a century before American 
 money began to flow across the Rio Grande. Our 
 American investment could therefore by no means 
 be regarded as a speculative venture, and the 
 margin of return was relatively small so small 
 
OUR BILL AGAINST MEXICO 117 
 
 in fact that Mexicans did not and would not now 
 consider such mining as profitable investment. 
 We are, therefore, justified in taking a serious 
 and calculating view of the damage done to Amer- 
 ican mining properties under revolutionary rule. 
 
 From sources available, I would estimate the 
 damage done American mining properties in Mex- 
 ico at $15,000,000 this is very conservative. 
 There has, however, been little of the wanton de- 
 struction of mines such as the Germans practiced 
 in Northern France. One instance, however, 
 stands out, and this was to a coal mining property 
 in northern Mexico, the Agujita, less than 100 
 miles south of Eagle Pass, Texas. In May, 1913, 
 General Jesus Carranza, brother of the president, 
 demanded $50,000 from the manager of this prop- 
 erty, owned by American and other foreign capi- 
 tal. The money was not on the ground and there 
 was no telegraphic communication with Mexico 
 City, so it could not be paid. The property was 
 then wrecked by Carranza soldiers, several hun- 
 dred coke ovens blown up, the mines fired and 
 flooded, buildings burned, etc., damage estimated 
 at $1,000,000. 
 
 Some other incidents of this sort are recorded, 
 but the largest physical damage is indirect, due 
 to the driving off of workers and the murder of the 
 American engineers, so that great mining proper- 
 ties were abandoned temporarily with the result 
 
118 TBADING WITH MEXICO 
 
 that the water came in and tremendous values in 
 timbering and stoping have been destroyed. In 
 some instances the damage caused by water has 
 mounted up to vast sums; one great mine, the 
 Tiro General, an American property, will for in- 
 stance require $300,000 before it can be operated 
 again. Other properties abandoned from time to 
 time during the years when railway traffic was in- 
 terrupted, have similar bills for repairs, and hun- 
 dreds of other mines, great and small, have been 
 kept closed through the most profitable period 
 mining has ever known (that during the Great 
 War), with vast losses, although the ore is of 
 course still in the ground and will some day be 
 taken out. 
 
 The decrees and laws put into effect by the Mex- 
 ican government in its effort to raise money have 
 had a serious effect on mining. There have been 
 new export taxes on metals, for instance, 5 per 
 cent on lead, copper and zinc, where before noth- 
 ing was assessed, and in some cases, as in that of 
 copper, definite sums per pound have been as- 
 sessed, with the result that the falling copper 
 prices caused the closing of great properties like 
 that of Cananea ^American) and El Boleo 
 (largely French). Silver and gold were taxed 10 
 per cent as against 2% per cent in the old days; 
 during the war the export of gold was prohibited 
 and half of the value of the silver exported had 
 
OUR BILL AGAINST MEXICO 119 
 
 to be returned to Mexico in gold. Taxes on min- 
 ing claims also have been increased tremendously, 
 so that in 1916 a group of forty-five American 
 companies estimated for the American-Mexican 
 commission sitting in Atlantic City that where in 
 1912 they paid $96,000 in taxes on a group of 
 claims the new laws would have collected $569,- 
 000 and where in 1912 the export taxes were $1,- 
 726,000, the export taxes on the same quantity of 
 metal (if it had been taken out, which it was not) 
 would have been $7,000,000. 
 
 During the war, only high metal prices kept any 
 mining business going in Mexico. After the ar- 
 mistice, hundreds of mines and all but a few 
 smelters were closed down, and only the high price 
 of silver, as long as it continued, allowed those 
 that were left to keep running. Even during the 
 era of high prices it was impossible for the mines 
 which were operating to do the development work 
 which alone makes possible the continued opera- 
 tion of mines under modern conditions. 
 
 Due to taxation, heavy freight costs, scarcity of 
 materials and of labor, bandit raids and uncertain 
 supplies, the science of mining in Mexico thus 
 slipped back thirty years. This, in a phrase, sums 
 up the reason for the losses and the conditions 
 which make it impossible for mines to operate to- 
 day where in times of ordered, intelligent govern- 
 ment, they were running and supporting hundreds 
 
120 TEADING WITH MEXICO 
 
 of thousands of Mexicans in comfort and peace. 
 
 Figures presenting the case of the land and cat- 
 tle companies are almost impossible to obtain, for 
 these interests have never organized as the oil and 
 mining men have, and the only possible sources of 
 such information have not been able to collect 
 figures enough to cover the situation. Roughly, 
 however, it is estimated that $50,000,000 of actual 
 American money has been invested in land in Mex- 
 ico, and although the titles to the properties still 
 remain (always subject to the proposed confisca- 
 tion of foreign property), the loss in capital in- 
 vested, of live stock and crops, can probably be 
 placed at over $30,000,000. The land companies 
 and individual American holders of lands have, 
 however, been the greatest sufferers, perhaps, of 
 all the interests, for the actual worth of the land 
 they occupied was infinitesimal compared with the 
 value which their very presence and industry crea- 
 ted for it. 
 
 The Mormon colonies of northern Chihuahua, 
 near Casas Grandes, were amongst the most pros- 
 perous, in a comparatively large way, of all the 
 agricultural sections of Mexico. Here the ' l desert 
 blossomed as the rose" and the American colo- 
 nists, industrious and prosperous, were becoming 
 valuable contributors to the Mexican national 
 wealth. All this has been swept away, houses 
 
OUR BILL AGAINST MEXICO 121 
 
 burned, cattle run off, men, women and even the 
 children murdered and maltreated, and the whole 
 enterprise all but destroyed. The case is paral- 
 leled all over the country. 
 
 Millions of dollars have been invested by Amer- 
 icans in tropical plantations, and some at least of 
 the properties were of great potential value. The 
 story of the wrecking, raiding, pillaging and mur- 
 dering on these properties would cover pages and 
 the sums actually lost and the values destroyed 
 by the interruption of development run up into 
 great totals. 
 
 At the other end of the country, in Sonora, the 
 records show the ' systematic ruin of the Yaqui 
 Delta Land and Water Co., which, beginning under 
 President Madero, had invested $3,000,000 in land, 
 surveys and experiment stations and was turning 
 a great property worthless for anything but graz- 
 ing, into a paradise of irrigated farms. Begin- 
 ning with Carranza and continuing steadily since 
 this company's property has been despoiled, and 
 by means of confiscatory legislation, new inter- 
 pretations of franchises and overwhelming taxa- 
 tion has been reduced to ruin and even the govern- 
 ment franchise itself finally annulled. The Mex- 
 icans have no plans and no money to do such vast 
 development themselves, so the destruction of this 
 property, pushing it back to the mere value of the 
 
122 TRADING WITH MEXICO 
 
 grazing land, was utterly wanton and deprives 
 Mexico of a great agricultural development of the 
 type which she sorely needs. 
 
 In industrial, public service, banks and other 
 classes of investment American money has been 
 put into Mexico to a total of about $50,000,000. 
 Most of the industrial and public service corpor- 
 ations are owned by foreigners in Mexico, the only 
 exceptions being a few manufacturing plants and 
 undeveloped tramway and city water plants. The 
 majority of this capital is, however, British, 
 French and German, American money having gone 
 into the other interests described. Much of this 
 industrial property has been destroyed, and the 
 public service corporations have been taken over 
 by the government on various pretexts and with- 
 out payment, for the money they have earned has 
 gone into the Mexican national war chest. There 
 remains, however, the possibility of damage 
 claims, which in these cases can be easily estab- 
 lished. 
 
 Of the American corporations engaged in in- 
 dustries a typical case is that of the Continental 
 Eubber Company, which has invested $5,000,000 
 in the guayule rubber business in north central 
 Mexico. In 1910 the guayule exports of Mexico 
 were 28,000,000 pounds, worth in the market ap- 
 proximately $20,000,000, and of this the Conti- 
 nental exported the largest share. To-day the 
 
OTJE BILL AGAINST MEXICO 123 
 
 guayule exports are practically nothing on the 
 part of the companies, while the guayule shrubs on 
 their lands are being cut and shipped by roving 
 bands of bandits and peons. The vast Hacienda 
 de Cedros, covering 2,000,000 acres, was bought 
 by the company nearly fifteen years ago, when its 
 value was around $1,000,000. At the height of the 
 guayule business its worth was many times this 
 sum, but to-day, even with the chances of a future 
 recognition of the title of the American company, 
 it could not be sold for its original cost. Like all 
 foreign properties in Mexico which have been suc- 
 cessful, the value of this hacienda was in the in- 
 dustry of the Americans who owned and managed 
 it a value which cannot be estimated or set down 
 in figures in a damage claim. 
 
 The Mexican Banks of Issue, the backbone of the 
 credit system of Mexico, were owned only in small 
 part by American interests. Their destruction 
 and the wiping out of the entire Mexican financial 
 system which was built up by Diaz, must not be 
 forgotten in trying to get a picture of the de- 
 struction wrought by the Mexican revolutionary 
 bandits and their governments. The paper money 
 systems which scourged the country from 1913 to 
 1916 cost foreigners millions of dollars which can 
 never be shown in figures, owing to the fluctua- 
 tions of the paper pesos. The upsetting of credit, 
 which those who study the situation soon find was 
 
124 TRADING WITH MEXICO 
 
 due largely to Carranza decrees (whether justified 
 by circumstances or not) has set Mexico back 
 nearly fifty years and has depressed values of 
 property and investment beyond any calculation 
 but the most careful studies by experts in finance 
 as well as industry. 
 
 It is such phases of the Mexican credit system of 
 to-day which constitute the real damage claims 
 against Mexico claims which can hardly be esti- 
 mated. I place the figure at $1,000,000,000, and 
 yet its potentialities are far more than that. At 
 the present moment the greatest actual loss even 
 though it can be partially repaired if the future 
 develops sane government in Mexico is in the 
 virtual destruction of the market for property in 
 Mexico. The new constitution and the decrees and 
 laws under it virtually prohibit foreigners from 
 owning anything in a vast restricted zone along the 
 border and seacoast, a zone including the richest 
 foreign holdings in Mexico. They prohibit for- 
 eigners from owning real estate anywhere unless 
 they agree never to appeal to their home govern- 
 ments in case of trouble. The effect of this is to 
 eliminate the only possible market for valuable 
 property. The Mexicans, and particularly the 
 Mexicans who are in control to-day, will not, need 
 not, can not buy such properties foreigners and 
 the opportunities which were open to foreigners in 
 
OUR BILL AGAINST MEXICO 125 
 
 Mexico before the revolution actually created the 
 market value of such property, because they and 
 they alone were the possible purchasers. 
 
 Even well-developed small farming tracts can- 
 not be sold to small Mexican farmers such small 
 farmers hardly exist as a class and where they do 
 exist, their experience and their financial capacity 
 do not lead them to consider the purchase of im- 
 proved farms. And above all is the promise and 
 the performance, in some cases, of the much- 
 heralded land distribution of the revolutionary 
 governments. Where men can get something for 
 nothing, or on their own worthless credit, they do 
 not buy in the open market. 
 
 Aside from this destruction of the values of 
 foreign property holdings in Mexico by making 
 transfer virtually impossible, there is, once more, 
 that omnipresent menace of confiscation which 
 makes men seek privileges instead of their as yet 
 uncertain legal rights, for the protection of what 
 they have. No longer do men buy to develop 
 they take, as in the oil fields, only what is sure to 
 return large profits in a very brief time, for they 
 know that even if they have privilege, and think 
 they know how to keep on having privilege for 
 themselves, they cannot transfer their capacity; 
 for getting privilege when they seek to sell their 
 property. There are no longer relative values of 
 
126 TRADING WITH MEXICO 
 
 property, in Mexico property is worth only what 
 can be got out of it, and got quickly. 
 
 This all makes up an uninspiring picture. But 
 we must look on such pictures, must weigh and 
 judge them ere we can see the way through and 
 beyond them. That there is such a way must not 
 be forgotten. It lies beyond the realm of mere 
 political reform, for to-day, as all through the 
 revolutionary history of Mexico the curse of the 
 country is the application of political remedies to 
 economic ills that phrase should be burned into 
 the brain of all who seek knowledge of the real 
 Mexico. 
 
 That the relief is to come from the womb of 
 revolution has been the hope of all who have 
 watched the struggles in Mexico without under- 
 standing them. The failure of their hopes has 
 been continuous. Madero, Huerta, Carranza, de 
 la Huerta, Obregon, to each in turn have such 
 watchers transferred their allegiance and their 
 faith. Each has failed, in so far as each has ap- 
 plied only the political remedy. The result has 
 been the utter debasement of Mexican credit, the 
 utter outraging of Mexican and foreign faith in 
 Mexico herself. To-day, as I have said, Mexicans 
 do not believe in Mexico, and each new failure of 
 the political remedy sends them further away 
 from her altars. What, then, is the answer? 
 
 The answer is but the following of the inexora- 
 
OUE BILL AGAINST MEXICO 127 
 
 ble logic of life and of business. We shall find 
 it, not in the application of new politics, of new 
 (or of old) constitutions and laws and decrees, 
 not in the ravings of dreamers or of petty states- 
 men. We shall find it, and shall know it when we 
 find it, in a solution of the practical problems of 
 Mexican commerce, labor and business by the 
 practical men of affairs of Mexico and of the 
 world. Our part shall be a very great part, for 
 the business men of the United States, above all 
 others, must show the way. Mexico must in the 
 end bow to practical ideas of practical men, and 
 in bowing to that yoke she will see her future un- 
 fold. Of the ways of finding the road and of turn- 
 ing Mexico upon it, we shall deal later. Only here, 
 at the end of this dismal chapter of failure to solve 
 the economic problems by political nostrums, I 
 wish to indicate that there is, and will be, a way 
 of hope and of salvation from within Mexico 
 herself. 
 
CHAPTER VI 
 
 MEXICO AND HER " BOLSHEVISM " 
 
 years ago Mexico was one of the great, pro- 
 gressive nations of the world; to-day she is just 
 "another Latin American Republic." Then she 
 showed literally the achievement and the promise 
 of Japan; to-day she is as backward and as hope- 
 less as Turkey. Ten years ago her diplomats 
 were honored in the councils of kings, her credit 
 ranked with that of the best of Europe, her cities 
 were miniatures of Taris, her mines operated with 
 the perfection of those in England, her railways 
 and budding industries bore comparison with 
 those of the United States, her people lived in 
 arcadian peace, wakening slowly and surely, if 
 sometimes painfully, to a civilization which was 
 meeting their needs. \ x To-day, Mexico is a little 
 worse than Turkey, a little better than Hayti, her 
 diplomats are as inconsequential as those of 
 Thibet, her credit is as low as that of Austria, 
 her cities and ports are mud puddles and pest 
 holes, her mines are back to the rat-hole workings 
 of the colonial Spaniards and Indians, her rail- 
 roads are rattling skeletons, her industries virtu- 
 ally non-existent. ^Lif e is again arcadian, with all 
 
 128 
 
MEXICO'S "BOLSHEVISM" 129 
 
 those discomforts of Arcadia which the poets of 
 old arid the propagandists of to-day neglect, so 
 carefully, to mention. 
 
 The world has learned, in these past years, to 
 take colossal destructions calmly, so that few of 
 us wonder and none of us really questions the fact 
 or the why of Mexico's sudden and astounding 
 degeneration. And yet that failure is in miniature 
 the threat and the promise of the failure of our 
 civilization, in epitome the boast of bolshevism 
 and the nightmare of capitalism. Mexico is like 
 the Chamber of Horrors at the old Eden Musee 
 or Mme. Tussaud's, a row of illuminated pictures 
 which tell in ghastly realism what is sure to hap- 
 pen to careless people if they play too recklessly 
 with the world which is given them to use. 
 
 This seems indeed a cycle of bolshevism, but it 
 is a cycle in which radicalism, like capitalism, is 
 a sorry victim. As a picture the events in Mexico 
 approximate the drama in Eussia, carried to the 
 logical conclusions which such a drama would 
 reach on any national stage where personal ag- 
 grandizement is a mightier lodestone than public 
 devotion. The historical facts of the past decade 
 in Mexico are unrelated to the facts and back- 
 ground of Russia, yet in Mexico there have been 
 heard the same shibboleths, the same promises, 
 the same cries of the downtrodden. There have 
 been seen the same red flags, the same uprisings 
 
130 TRADING WITH MEXICO 
 
 and assassinations, and the same "redistribution" 
 of property as in Russia. And more than all has 
 unrolled the drama of the rising of obscure chief- 
 tains and politicians to colossal and wicked power* 
 But in Mexico the cycle has gone far beyond 
 Russia, perhaps because here there has, indeed, 
 been no touch of even such idealism as there may 
 be in Moscow. 
 
 In Mexico the crimson day of bolshevism has 
 been followed quickly by the purple twilight of the 
 aftermath of graft and privilege. To-day there 
 Is to be seen there a power of wealth mightier 
 than any which is conceivable in the now almost 
 forgotten dawn of bolshevism 's red day in Mex- 
 ico. Privilege and not the proletariat, capitalism 
 and not socialism, are the gods of that stricken 
 land, a land which ten years ago was mistress 
 of her life and of her destiny, and to-day is a 
 beggar in the marts of the world, ready to sell 
 her body and her soul for gold. 
 
 I have no desire to force a parallel between the 
 early events in Mexico and those in Russia. The 
 parallel is there, and could fill the eye and mind 
 with the aid of a modicum of imagination. But 
 the facts alone are eloquent, and the primary fact 
 is not whether the revolution against the czar was 
 day for day and hour for hour a repetition of the 
 Madero revolution against Diaz, or whether 
 Huerta was an Indian Denekin, or Carranza a 
 
MEXICO'S "BOLSHEVISM" 131 
 
 weak Lenin or Obregon the realization of what 
 Trotzky might be to-morrow or next year. The 
 first fact and the last is that in one great section 
 of Mexico we have seen and in the whole of Mex- 
 ico we are to-day watching the rolling on of an 
 ugly spiral from plutocracy to revolution, from 
 revolution to socialism, from socialism to bolshe- 
 vism and then from bolshevism to demagogy, to a 
 later and darker dictatorship, with a more misera- 
 ble proletariat, and on into the vast sweep of an 
 age of privilege which holds and wields power 
 greater than government, greater and more direct 
 than capital or labor has ever wielded. For privi- 
 lege stands alone in the midst of the smoking ruins 
 of what was once the Mexican nation. 
 
 He braves much in this day who dares define or 
 limit bolshevism, but in Mexico its manifestations 
 have been carried to a point where they have lim- 
 ited and defined themselves. First, Mexican bol- 
 shevism was and is the application of political 
 remedies to economic ills ; second, it is the raising 
 up of the proletariat by promises and agitation to 
 the overturning of established government and the 
 setting up, not of the promised millennium, but 
 of new dictatorships and new oppressions. Both 
 sought, and claim, the improvement of the work- 
 ers, but both have failed and faded to shadowy 
 appearance and raucous boast. 
 
 In Mexico to-day there are spots where peace 
 
132 TRADING WITH MEXICO 
 
 and progress reign but they are literally those 
 spots where " capitalism, " entrenched behind a 
 wall of gold and foreign protection, has been able 
 to give its workers the value of the profits which 
 they gain. The rest of Mexico is worse off, po- 
 litically and economically, than in the days of 
 Diaz, and increasingly the only hope of the coun- 
 try seems, by some means, to achieve the extension 
 of sane business to the replacement of the eco- 
 nomic ruin of native demagogues masquerading 
 behind the fair words of socialism. 
 
 The essence of the beneficent effects of this for- 
 eign business has been the education of the Mex- 
 icans whom it touches toward broader horizons of 
 living and personal efficiency. For actually the 
 history of Mexico's downfall is a history of the 
 failure of her education, of the failure of the past 
 governments of Mexico to utilize the forces which 
 were at their hand for the uplift and the develop- 
 ment of the unhappy masses of the people. That 
 failure of the past has become a colossal catas- 
 trophe in the days of present and past revolution. 
 
 For their day and time, Spain and the Roman 
 Catholic church did much for Mexico. We do not 
 know what the Church might have done if it had 
 had different, more educational ideals, but we do 
 know that, save for the work of the Protestant 
 missions in the past thirty years, hardly any other 
 force but Rome has done anything for social im- 
 
MEXICO 'S "BOLSHEVISM" 133 
 
 provement in Mexico. We do not know what 
 Anglo-Saxon educational and economic leadership 
 would have done in the place of that of the Span- 
 iards and mixed-bloods such comparisons are 
 necessarily academic. But we do know that under 
 the Spanish viceroys and under Diaz more was 
 done toward improving the material welfare and 
 toward building the foundations of material and 
 moral prosperity for the unfortunate peons than 
 has been done or even sincerely attempted in the 
 ten years of revolutionary rule since the fall of 
 Diaz. 
 
 Mexico has been, and indeed is, what we some- 
 times call in our brusque Americanism, a "white 
 man's country. " It is essentially one of the spots 
 in this world where the burden of uplift is the 
 white man's burden. For 300 years white Span- 
 iards sought to lift it, and in that long effort, with 
 all its failures, they placed Mexico, even with her 
 six millions of unlettered, superstitious Indians, 
 in the category of the white lands. The duty of 
 the white man, imperialist or socialist as he may 
 be, has ever been two-fold, and its duality has 
 been its power ; we have lifted the material plane 
 of our wards and we have upraised those wards 
 themselves to a higher and yet higher mental and 
 spiritual plane. 
 
 It is this dual duty that the revolutionists of 
 Mexico have shirked and have scouted. The eco- 
 
134 TRADING WITH MEXICO 
 
 nomic rain of the country is to-day almost com- 
 plete, and its spiritual uplift has been halted as 
 by a wall of flame. From those material ruins, 
 Mexico might conceivably rise in a spiritual re- 
 birth, but the fact has been otherwise, for the 
 material ruin has been accomplished by the pros- 
 titution of all the ideals, all the sacred faiths of 
 men, concentrated by self-seeking bandit govern- 
 ments to the aggrandizement and the enrichment 
 of a few sodden favorites. 
 
 I would, if I could, paint a different picture, but 
 the half lights of such a panorama can be added 
 only after the dull background has been set in. 
 And that background is dark indeed. The pano- 
 rama of misery begins when one crosses the north- 
 ern border to-day. There the scattered but once 
 almost happy villages of other times have been 
 replaced by ruined, roofless railway stations lined 
 with starving vendors of food who fight with the 
 bony dogs for the refuse of the very food they 
 sell. All the long trip to Mexico City is marked 
 by the same voiceless suffering, and the capital 
 itself has a dismal dinginess that cries of hopeless 
 misery, in appalling contrast to the gallant days 
 of the Diaz " materialism." 
 
 The unhappy toll of war and revolution, one 
 says? Yes, in part, for such "war" as Mexico 
 has known always takes that toll and always, too, 
 from the weaklings, putting starvation and sick- 
 
MEXICO'S " BOLSHEVISM" 135 
 
 ness and filth and dismay where once were comfort 
 and health and some cleanliness and happiness. 
 
 But, again the question, was it not worth the 
 price, will it not be worth the price, in the victories 
 won for human freedom? And here the answer is 
 unequivocably "No." 
 
 Many hoped, with the fine faith of their own 
 sincerity, that the upheaval which followed Diaz 
 was the dawning of a new era. But in that hope 
 even those who knew Mexico forgot the Mexicans 
 and their history. Political independence from 
 Spain had been won, freedom from the domination 
 of religious bigotry had been won, before Diaz 
 came. The struggle of his day was one of uplift, 
 carried on with faulty tools, perhaps, but slowly 
 reaching toward the light. Living was improving, 
 slowly ; religion was improving, slowly ; education 
 was advancing, slowly. Then came a period of 
 crystallization; the Diaz oligarchy grew old. 
 Many sincere men, inside and outside Mexico, 
 thought that the advance could and should move 
 more rapidly. Diaz repressed those hastening re- 
 formers, and the spiritual force which finally 
 broke forth into the Madero revolution of 1910-11 
 was undoubtedly the result of that repression of 
 progressive thought. 
 
 Like all the revolutions of Mexico's stormy his- 
 tory, this one began with a beautiful stating of 
 ideals and of the unrealized needs of the common 
 
136 TRADING WITH MEXICO 
 
 man; but as with all those other revolutions, the 
 power passed quickly to the hands of men whose 
 sole " ideal 77 was personal aggrandizement, per- 
 sonal wealth, and ruin to all whose needs might 
 incommode these exalted " leaders. " 
 
 The so-called "social revolution 77 of Mexico 
 borrowed the battle cries of European socialism, 
 but in the land in which it worked it stirred up 
 only a tempest in a teapot, with the miserable 
 masses of the country serving as tinder and fuel 
 beneath the vessel. The teapot is the diminutive 
 organized labor world of Mexico, and that is boil- 
 ing more violently, perhaps, than elsewhere. But 
 to-day the "advanced 77 ideas of Mexico serve, in 
 the name of socialism, only to put sweeping power 
 into the hands of unscrupulous men, men who 
 know and care nothing of the responsibilities of 
 power, and are using it only to the destruction of 
 the very bases of Mexican society. 
 
 Thus, while there seems to be a light dawning 
 in the labor world of Mexico, I am not sure that 
 the light does not come from the burning of some- 
 thing which Mexico cannot afford to lose. In that 
 organized labor world there are fewer than 
 50,000 workers out of a population of 15,000,000, 
 while there are more than 3,000,000 peons, heads 
 of families, who work, when there is work, in the 
 fields, or as common laborers. It is upon the con- 
 tinued, unbroken suffering of these 3,000,000 that 
 
MEXICO'S "BOLSHEVISM" 137 
 
 the 50,000 profit to-day the peons have but 
 changed masters once again and in the name of 
 freedom, now, serve a vaster company. The 
 Mexican leaders, drawing their power in turn 
 from the coherent, organized industrial workers, 
 are to-day destroying the civilization of Diaz, and 
 with it the civilization of American business men, 
 American teachers and American missionaries, 
 which was and is the hope of the downtrodden ma- 
 jority. The "modern" laws which labor has pro- 
 mulgated might, we may conceive, fit the advanced 
 industrial life of Germany or the United States, 
 but they are utterly suicidal to Mexico. The new 
 Constitution of 1917 has written into its fabric 
 an idealistic set of labor laws, beautiful in termi- 
 nology but under present conditions of industry 
 and psychology and government in Mexico, about 
 as impractical for the development of industry 
 and the true welfare of labor as they are efficient 
 as a means of graft and extortion against labor 
 as well as against employers. These laws are 
 worked out for the sole benefit of the industrial 
 workers of Mexico, that total of less than 50,000 
 as against the 3,000,000 farm and day laborers. 
 They are thus far more important as a propa- 
 ganda document with the foreign radicals who 
 caused the inclusion of those administrative laws 
 in the new national constitution than they are 
 helpful to Mexico's own social advancement. 
 
138 TRADING WITH MEXICO 
 
 The eight-hour day provided in the constitution, 
 the welfare projects such as the stern proviso 
 that nursing mothers shall have two half-hour 
 periods per day in which to care for their chil- 
 dren, the constitutional support of the right to 
 strike even in public utilities, and the virtual 
 provision against the employment of strikebreak- 
 ers, or the closing of a shop in a lock-out, are 
 typical of the privileges for labor they cover 
 everything which the most radical would make the 
 laws of every land. In Mexico, and under the 
 peculiar conditions of Mexican psychology and 
 inter-class relationships, they become little more 
 than tools of the demagogues. The rulers do as 
 they choose in any cap-j, as when, not long ago, a 
 railway strike was successful to the last detail 
 of the demands made in the name of "the social 
 revolution" and two months later a similar strike 
 for similar ends was opposed by the general use 
 of strikebreakers. The labor courts, theoretically 
 a great advance, are used almost without excep- 
 tion as a palladium of radical propaganda and 
 as a toll-gate on the road of privilege. 
 
 Such are the reforms of the new era. They 
 provide six or eight hour days, for men who can- 
 not read and whose children are not taught to read 
 or to think. They provide minimum wages, to be 
 determined by factory committees, with the most 
 ignorant workmen in the world on a par with 
 
MEXICO'S "BOLSHEVISM" 139 
 
 employers and industrial engineers. They pro- 
 vide against discharge for any cause except proven 
 drunkenness, in a land where, to say the least, 
 drunkenness is relative. 
 
 Their own people have begun, a little, to wonder 
 at the wisdom of these sweeping changes, and one, 
 Ing. Carlos Arroyo, not long ago wrote in the of- 
 ficial but very radical "Bulletin of Industry, Com- 
 merce and Labor" that there were four main dif- 
 ficulties which would have to be corrected before 
 factory efficiency could be arranged in Mexico on 
 a cooperative basis : first, scientific method would 
 have to replace the empirical system now in use; 
 second, there would have to be special training for 
 apprentices; third, there would have to be study 
 of employees to have them properly placed; 
 fourth, the responsibility for the tasks assigned 
 would have to be "equally" divided (not given 
 entirely to the workers) between the management 
 and the workers, "because the former continues to 
 be charged with the responsibility for the compe- 
 tence of the latter." 
 
 And as to that competence, this same bulletin 
 regularly publishes the records of accidents. 
 There one will find that in 1918, for instance, there 
 were, in 278 industrial establishments having 
 292,364 employees, 6,424 accidents, in which 184 
 were killed, and 42 maimed and 6,198 wounded. 
 And, most illuminating of all, 5,165 of the acci- 
 
140 TRADING WITH MEXICO 
 
 dents were admittedly due to the "carelessness of 
 workmen, ' ' only 195 were the fault of the manage- 
 ment and 1,064 were due to unavoidable causes. 
 
 As to the value of the achieved reforms, I have 
 but this to tell: In all the cities, in the centers of 
 industry like the Tampico oil fields and the busy 
 port of Vera Cruz (busier to-day than it has ever 
 been because all Mexico must live on imported 
 goods) I found a sullen hatred of the foreigner, an 
 ugly self-assertion that bodes but ill for those mis- 
 sionaries of religion and of business to whom we 
 look for so much of the future regeneration of the 
 country. I saw none of the contented, happy calm 
 of prosperous laborers, but only the unrest of the 
 great cities of other lands, ugly with resentment, 
 fertile field for revolution but not for progress. 
 And yet those very resentful workers, convinced 
 of an unappreciated importance which they knew 
 but by rote, are all that there is of the "fruits" of 
 the "social revolution" in Mexico. 
 
 No, Mexico has not changed, even amongst her 
 petted laboring classes, and I fear that the old 
 rule of our ancient civilization will have to persist 
 a little longer, and the long, dim road be trod 
 again through failure and reform, and failure 
 again and yet again. I fear that we shall still 
 have to lift by reaching down and, by training the 
 dull forces of those dull minds, teach them to help 
 themselves and to climb by themselves. 
 
MEXICO'S "BOLSHEVISM" 141 
 
 Out on the plantations the workers are going 
 the rounds which they have covere'd since Mexico 
 began, and in the fairs I saw the only evidence of 
 happiness which smile on one in the length and 
 breadth of the country. The market places and 
 the fairs of Mexico, sunny, crowded, colorful, rich 
 because the Indians in the booths are close to 
 Nature and Nature's bounty! That simple hap- 
 piness has been the source of all Mexico's joy 
 and of all her misfortune. That simplicity has 
 made her people the dupes of predatory chieftains, 
 and hideous priests of pre-Spanish times, of Span- 
 iard and priest through the long centuries of the 
 viceroys, of master and of some priests, too, 
 through the years since the Independence. Yet in 
 those periods those who have duped the Indians 
 have, most of them, protected the Indians in an 
 easy, medieval way, and slowly there has grown 
 a civilization, and in that civilization have been 
 nurtured the seeds of better things. 
 
 The time was coming for those seeds to bear 
 fruit, when, hastening the ripening, came the 
 revolutions of 1910 and after. It was like the 
 child who pulled up the stalks to see how the seeds 
 were growing they were growing much faster 
 than appeared on the surface, but they did not 
 grow after they were pulled up. 
 
 Looking back to the Diaz day we can find, for 
 instance, the slow, constructive work toward the 
 
142 TRADING WITH MEXICO 
 
 creation of arable land for small farms. It was 
 being hampered somewhat by grasping officehold- 
 ers, but it was advancing, a great national plan 
 of irrigation to make possible the use of small 
 tracts in a country where rain conditions have for- 
 ever made small farming all but impossible. Then 
 the revolution and the resounding cry for "land." 
 The alleged land hunger of the Mexican Indians 
 and peons has been at once the rallying cry for 
 each succeeding revolution and the one appeal of 
 all of them for foreign sympathy. 
 
 But whatever authorities may conceive as to the 
 facts of the existence of this land hunger or of the 
 forms which it takes a desire for little farms, 
 for prehistoric communal ownership, or for prop- 
 ety only because it is wealth and can be con- 
 verted into cash it is also true that the schemes 
 of the revolutionists for land distribution have 
 been impossible except by the confiscation of rich 
 properties and the destruction of vested rights. 
 Obviously, no land which is not tillable is satis- 
 factory for distribution, and the tillable land of 
 Mexico is, as I have pointed out, actually only 
 about 25,000,000 acres, or one-twentieth of the 
 area of the country. Land distribution must long 
 remain largely a beautiful theory, good only for 
 raising up the natives by direct appeal to their 
 bitter poverty or to their human greed, and for 
 
MEXICO'S "BOLSHEVISM" 143 
 
 the raising up of foreign sympathy by the flaunt- 
 ing of the misfortunes of the soil under more ap- 
 pealing names. 
 
 In Mexico to-day all these dreams of land dis- 
 tribution have gone the way of other "reforms" 
 for the benefit of the peons. Nothing, virtually, 
 has been done. Some great properties have been 
 confiscated, or "paid for" in unguaranteed bonds 
 of bankrupt state governments, but most of such 
 properties are to-day in the hands of former revo- 
 lutionary "generals." Some few have been dis- 
 tributed to Indians, but even these tracts are taken 
 with but scant enthusiasm. One great "land dis- 
 tribution" in Yucatan called forth a crowd of 
 6,000 to the festival (all Mexico goes to any fiesta) 
 but only thirty Indians took up any of the hun- 
 dreds of small tracts offered. 
 
 The essential facts of the Mexican situation are 
 patent to all who go to Mexico to-day, and they 
 are inescapable to those who have a background of 
 knowledge of Mexico by which to judge of what 
 they see. And yet- it is true that in the councils 
 of Carranza, in the entourages of de la Huerta and 
 of Obregon there have been men representing 1 
 forces which we in our time have felt could not 
 be used to evil purpose. These were men who 
 had been stirred by the fine frenzy of the first 
 revolution, and whose ideas, caught as mere 
 
144 TRADING WITH MEXICO 
 
 phrases by the leaders of revolts, were handed 
 back to their originators again, as the 1 1 ideals ' ' of 
 the revolution. Strange indeed it is, and yet not 
 only newcomers, but foreigners of long residence 
 and sincere and devoted Mexicans as well, fell 
 victims to that subtle flattery. In business, in edu- 
 cation, in the churches, there were such men, 
 their very hopes too great to protect them from 
 the petty deceits of those who climbed to power 
 upon them. 
 
 I think I can understand why travelers in Mex- 
 ico, sincere students as well as moistily enter- 
 tained excursions of American " Chambers of 
 Commerce" can be deceived as to conditions there. 
 I have been inclined to be impatient with those 
 who let themselves be led this way and that, and 
 flattered by the apparent sincerity of self-deluding 
 Mexican officials, but Mexico is, after all, an eter- 
 nal enigma. It is an enigma because its colossal 
 depths of ignorance and the smalmess of its de- 
 ceits are literally incomprehensible to simpler and 
 less subtle minds. 
 
 It is that enigma which I have sought through 
 all my writing on Mexico to resolve. On my last 
 trip through the country, I saw just the eternal 
 Mexico, the Mexico of ignorance and misery, 
 whose only change was that it was a little sadder, 
 a little more resentful of those whom it once re- 
 garded as its helpers and its friends, a little more 
 
MEXICO >S "BOLSHEVISM" 145 
 
 pompous in parading its borrowed intellectual 
 plumage. 
 
 A most perfect example of this ability of the 
 Mexican of the "modern" type to absorb one's 
 ideas and deceive one by the redishing of those 
 ideas, happened to me on my last trip to Mexico 
 City. In the course of the preparation of an arti- 
 cle on a great business for a popular magazine, I 
 met a Mexican licenciado (a title of vast elegance, 
 meaning much more than its dictionary equiva- 
 lent of "lawyer") who was extremely anxious to 
 be quoted as an expert on the subject which I was 
 studying. He evidently thought that jny quoting 
 him would help him to a government post to which 
 he aspired, so he expounded his ideas at great 
 length. When he was finished, I answered his ar- 
 guments in kind, and with considerable interest 
 in his response to my counter-play. He was pleas- 
 antly combative, and we parted in thorough 
 friendship, 
 
 It was only a few hours later that I had an ur- 
 gent call from this same gentleman, who had, he 
 told me, been going into new material on the sub- 
 ject, and wished to express his views, stated in 
 the morning, more definitely to me. Whereupon 
 he returned me, recooked and eloquently served, 
 my own friendly contentions of the previous in- 
 terview. It was a bit thick for me, but it is worth 
 the telling that an American business man of long 
 
146 TRADING WITH MEXICO 
 
 experience in Mexico who had introduced this gen- 
 tleman to me remarked when the subject came up 
 again, a day or two later : 
 
 "By the way, Licenciado Blank is getting much 
 broader. He has figured out a pretty decent atti- 
 tude on this problem . . . ' ' and he redished me my 
 own views again ! 
 
 This is Mexico to-day. On the top a group of 
 men who have absorbed in just this way the 
 phrases of the intelligent radicals of the world but 
 who still remain, as always, sycophants without 
 background of education, or even genuine radical 
 convictions. Below them the vast misery of the 
 unthinking serfs of the country, duller, certainly 
 sadder and even less vfell nourished than in the 
 days of the viceroys and of Diaz. 
 
 We are all responsible for the Mexico which is 
 before us. We Americans of every type in that 
 old Mexico were too willing to let the misery of 
 Mexico be what it was, were too willing to take our 
 helpers and our support from the middle classes 
 which were emerging so slowly. We made a fetish 
 of that middle class, built our hope of Mexico upon 
 it, called it the crowning achievement of the age 
 of Diaz, and from it came the beginnings of that 
 group of Mexican leaders of which we all had 
 dreamed. We saw Diaz clear all of us, I think-^ 
 and knew that his day could not be forever. But 
 
MEXICO'S "BOLSHEVISM" 147 
 
 we had faith in that middle class, forgetting, as it 
 was easy to forget, the instability of that founda- 
 tion of Indian poverty and misery. We were go- 
 ing to transmute those shifting sands by making 
 more striking the examples of its brothers 
 artisans and clerks and students and teachers. 
 We trusted so blindly, then, in the leaven of ex- 
 ample we knew so little of the sodden flour which 
 made our loaves. 
 
 And then came the day of revolution, Madero 
 the deliverer. There were few of us who regretted 
 the passing of Diaz, save sentimentally, that it 
 should have to be in just that way we had hoped 
 he would die gloriously, beloved by the people for 
 whom he had given so much. And then the dis- 
 appointment and the horror of that wild cabal of 
 graft and loot under Madero, when the dreamers, 
 the repressed brains of a generation, stood wait- 
 ing, wringing their hands in helpless impotence 
 those who could, truly, have done so much! It 
 was pitiful, as was the aftermath of Huerta, the 
 reaction, the impossible reaction with its ugly 
 tinge of a coming uprush of Indian barbarism. 
 
 Then Carranza, riding upon the winged horse of 
 Madero it seems that not all of us understood, 
 quite, for we heard the fair words, as we have 
 heard them echoing through empty halls and 
 across dead and tortured bodies these five years 
 
148 TRADING WITH MEXICO 
 
 since. Many sincere men were caught by those 
 fair, echoing words, and many followed the phan- 
 tom to the end. And many continue to this day. 
 
 I have no need to talk of the recent past, nor of 
 the present. The story is written in the starving 
 babies of the Mexican towns, in the dismal rail- 
 way stations where wretched food can be bought 
 (if one dares) from the very mouths of hungry, 
 filthy vendors. Misery and grief and pain stalk in 
 Mexico to-day. Somewhere those who have used 
 these wretched bodies, as infinite in number, as 
 minute in importance, as the skeletons of a coral 
 reef, for climbing to wealth and power some- 
 where these must make answer. 
 
 In another chapter I Lhall tell something of the 
 story of Yucatan, where the ideas of radical so- 
 cialism were accepted and then used to destroy 
 even itself. It is a story of horror and of wreck- 
 age, the clearest picture of Mexican conditions at 
 their ultimate which has passed in the gory pano- 
 rama of the recent years. 
 
 What has happened in Yucatan is in essence 
 what has been going on all over Mexico. In the 
 larger field of the whole country, the revolution- 
 ists have been more coherent, and at the same time 
 in their utterances somewhat more considerate of 
 the prejudices of the world at large. Yucatan, 
 isolated from the rest of Mexico, and free from 
 the prying eyes of most of the world as well, has 
 
MEXICO'S " BOLSHEVISM" 149 
 
 gone on with the round of despotism and oppres- 
 sion, rape and murder in the name of socialism, 
 but on the mainland, the " rights of labor " have 
 been more elaborately defended (in words) and 
 the legal systems of confiscation and anti-for- 
 eignism have been more logically developed, under 
 the standard of progressive socialism! 
 
 The years have written records of Mexican 
 political and social revolution which are identi- 
 cal with those of the present in all save their 
 battlecries. The first outbreak against Spain 
 in 1810 and the dozens of revolutions which 
 followed it were a reductio ad absurdum of 
 the political ideals of Thomas Paine and the 
 American and French revolutionaries. The Con- 
 stitution of 1857, under which Diaz ruled, was 
 little more than a copy of the Constitution of the 
 United States, and few of its provisions were 
 really adapted to Mexico's peculiar conditions. 
 'So it is not strange, perhaps, that the Constitution 
 of 1917 is as far from being Mexican and far more 
 false an effort to solve the nation's problems than 
 was its predecessor, for it was dictated by foreign 
 radicals and merely adapted by the Mexican poli- 
 ticians who knew best what would arouse enthu- 
 siasm in the Mexican crowd. 
 
 Despite its beauties of theory and its direct ap- 
 peal to the serious radical thought of the world, 
 its most useful function is becoming obvious even 
 
150 TRADING WITH MEXICO 
 
 to the most credulous, for it gives the governing 
 groups that control of Mexican life by which it is 
 possible for them to sell the privilege of doing 
 business, because the ancient rights of business 
 are utterly done away with. The ills of Mexico 
 are essentially economic, and the new constitution 
 and its revolutions, even more than their prede- 
 cessors, have sought to apply only the political 
 remedy, a remedy which has so far served only 
 to destroy the efficiency of the economic machinery 
 of the country and place it upon the auction-block 
 of graft. 
 
 To-day all over Mexico, labor is paid higher 
 wages than it ever received, but it is paying more 
 for its food and shelter 3aan it ever spent before. 
 The misery of Mexico is just as obvious and as 
 unescapable as ever to him who sees truly. Save 
 for those sections where foreign business still sur- 
 vives the Mexican lives as he has always lived, on 
 the verge of pauperism. And upon the summit of 
 the heap, lounging in easy magnificence, is the 
 mixed-blood agitator, the general, the governor, 
 the cabinet official who have battened on Mexico's 
 misery before this day and will doubtless do so 
 long after this day is passed. 
 
 The raising of the Indian masses of Mexico by 
 promises and by high-sounding battlecries is a 
 game as old as Mexican history; it is played with 
 unvarying success year after year and generation 
 
MEXICO'S "BOLSHEVISM" 151 
 
 after generation. The more extravagant the 
 promises, the more complete the enthusiasm of the 
 "proletariat," both for the political movement of 
 the moment, and for the one which follows it im- 
 mediately upon the discovery by the unfortunate 
 "people" that the previous promises are not going 
 to be kept. 
 
 But in to-day's orgy of revolution, Mexico has 
 gone further toward destruction than she has ever 
 gone before. Values throughout native Mexico 
 are almost non-existent, and the wheels of Mexi- 
 can civilization like the wheels of the wheezy loco- 
 motives of her railways, creak and groan on their 
 rounds. The nation's economic life is tied to- 
 gether by strings, and what remains is only what 
 has been salvaged from her junk-heaps, and like 
 the lawn-mower borrowed from a neighbor, is kept 
 running only to serve the purposes of the bor- 
 rower. 
 
 The seventy years of warfare before Diaz left 
 intact the civilization of the Spaniards for Diaz 
 to revive, but the ten years from Diaz to Obregon 
 have torn that civilization to shreds. Nearly all 
 that Diaz built has disappeared, and to-day the 
 business of Mexico is swapping jack-knives and 
 selling food and shelter at the highest prices the 
 traffic will bear. 
 
 No man who would face truth in Mexico can 
 ignore these potent facts. And the reason is not 
 
152 TRADING WITH MEXICO 
 
 revolution, nor even mere radicalism, but the cyni- 
 cal application of political control to economic 
 needs for the aggrandizement of individual leaders 
 whose power is in the market for all who will buy 
 the privileges which they have to offer. 
 
 It is in this condition that the importance and 
 the menace of radical Mexican government are 
 found. What it has seemed well to call bolshe- 
 vism in Mexico has its greatest power in its mere 
 threat against capital and business. That threat, 
 the mere presence of the anti-capitalistic consti- 
 tution and laws, has probably far greater power 
 than their actual application would have. Once 
 the blow of confiscation fell, the answer from the 
 world of business and ci filized government would 
 be quick and sure Mexico cannot be ignored as 
 Russia can be, for Mexico lies in the center of the 
 trade-routes of the globe, and we in the United 
 States would feel the menace of her anarchy too 
 strongly to remain passive. 
 
 But the static power, the threat of laws which 
 are never enforced there is the menace and there 
 the great influence which creates the graft and 
 cynicism of Mexican officials. So long as those 
 laws remain, business, if it would survive in 
 Mexico, must buy immunity. And it does buy it, 
 for business is ever timid, and no single business 
 organization and seldom a group of business or- 
 ganizations, will ever go to the stake for a prin- 
 
MEXICO'S "BOLSHEVISM" 153 
 
 ciple. Its duty to its stockholders and to its em- 
 ployees makes it buy its way, not always by direct 
 graft, but in submission to vast taxes, to unwar- 
 ranted extortions, to the riding of official annoy- 
 ances rather than accept the shut-down and fight 
 with its own great power, its inertia of movement 
 or of the silence which ruins empires. 
 
 In recent months the great business groups in 
 Mexico have opposed a certain amount of strength 
 to the growing power of the auction-block of Mex- 
 ican graft and privilege. The oil companies have 
 from time to time offered a solid front to the en- 
 croachments of this marketing of the privilege of 
 doing business in contraversion of the temporary 
 laws of Mexico. They have held back, apparently, 
 the crushing fall of actual enforcement of the con- 
 fiscatory provisions of the Constitution of 1917, 
 and they have, here and there, stopped the market- 
 ing of privilege for brief periods. But looking 
 at the whole picture, it seems as if the Mexican 
 officials of the present era are in no greater hurry 
 to enforce the confiscation than are the foreigners 
 to have it enforced. The static power of those 
 provisions, waiting to fall, is far more profitable 
 to Mexican pockets than would be the sudden and 
 final crash of their genuine application. Their en- 
 forcement would be of little value to the seller of 
 privilege, for then he would have to invent another 
 method of extortion. No, privilege will long re- 
 
154 TRADING WITH MEXICO 
 
 main upon the market counters of Mexico. It will 
 remain there, in fact, until some means is found, 
 within or without Mexico, for destroying the sys- 
 tem which is so profitable. That need of change 
 is the crisis of the business world of Mexico, the 
 crisis of all who would do business with Mexico 
 in the present or in the future. 
 
 What, then, can save Mexico in this crisis ? The 
 panacea of the Obregon idea was certainly not a 
 solution. Here indeed was a probably genuine 
 desire to solve the problem in a final and glorious 
 way. But the tools were but the tools of the old 
 days of Carranza and the rest. That was a politi-: 
 cal remedy for an economic condition, and its 
 promise was a sordid thing, an unworthy 
 thing for Mexico or for the United States to 
 expect. For the promise of Obregon was at 
 first for reaction, a belief that Obregon was 
 comfortably wealthy already or that his ambi- 
 tion was for power alone. Therefore he was 
 to be the great conservative, who would save 
 Mexico by slipping back to the days of Diaz. But 
 reaction must always fail in the end. In this case 
 it passed quickly, for this was a "reaction" which 
 was part and parcel of the "radicalism" of Car- 
 ranza, its power but a manifestation in another 
 form of the same personalism, the same sale of 
 privilege, which made Carranza impossible and in 
 ithe end, brought him to his ruin. 
 
MEXICO'S "BOLSHEVISM" 155 
 
 The later 1 developments of the Obregon idea 
 were marked by an obvious anxiety to reach a 
 permanent solution of the immediate and press- 
 ing difficulties of Mexico, and most of all to secure 
 recognition by the United States and financial aid 
 from American bankers, as the sine qua non of 
 such a solution. The efforts put forth were power- 
 ful, but the driving force back of them was pri- 
 marily personal ambition and the realization that 
 only such a solution could save the happy hunting 
 grounds of revolutionary leaders from some sort 
 of foreign intendancy. And above and beyond 
 and behind all, were the factors of government 
 whose origins and whose immediate past seem in- 
 deed to be as firmly stamped upon their natures 
 as the spots upon the leopard or his skin upon 
 the Ethiopian. 
 
 The completed cycle of the bolshevist experi- 
 ment and the arrival back at the sale of privilege 
 links up with the failure of Obregon to offer any- 
 thing but, first, a promise of reversion to reaction- 
 ary czarism and, second, that unconcealed offering 
 of privileges and promises of power to all who 
 could or who might aid in the campaign for recog- 
 nition and for foreign loans. The condition 
 seems to me to sound a call as of Elijah for a new 
 understanding of the Mexican problem. Carran- 
 cism might have been but an isolated interlude, 
 might have been a mere question of observation 
 
156 TRADING WITH MEXICO 
 
 and interpretation, if the end had not come and if 
 business in Mexico were not continuing to pay for 
 its sorry privileges in the same sorry way. Obre- 
 gon might perhaps have been the hope for peace 
 and happiness in Mexico if we had not had Car- 
 ranza and de la Huerta and if their followers, with 
 their cynical mouthings of all the most sacred 
 faiths of man, were not to-day still the rulers of 
 Mexico, still the sellers of privilege in the name of 
 human progress. 
 
 We must, I believe, cast away the too long nur- 
 tured idea that the battle in Mexico is between the 
 progressive thought of the day and the reactionary 
 conservatism of great interests. I have sought 
 here to show why this is so. A revolution which 
 can evolve the idea of the socialization of great in- 
 dustry and can, in the very conception of that idea, 
 turn it to the looting of that industry for private 
 graft and gain, as in Yucatan ; a revolution which 
 can produce the uncontrolled radicalism of Car- 
 ranza and evolve through the cynical play-acting 
 of de la Huerta into the promise of reactionism in 
 Obregon with all the unholy forces which sup- 
 ported Carranza rallying to uphold his suc- 
 cessors such a revolution will not, unredeemed, 
 carry Mexico into her next era of progress and 
 peace. Capital and socialism must alike beware. 
 Neither should, in honesty with itself, accept a 
 cause in Mexico until the issue is joined clear. 
 
MEXICO'S "BOLSHEVISM" 157 
 
 In the past ten years we have seen in turn the 
 appeal of political Mexico, to-day to the bolshe- 
 vist, to-morrow to the Christian missionary, to- 
 day to the thinking radical of the universities, to- 
 morrow to the deep-dyed conservative of the 
 counting room. Confusion has piled upon con- 
 fusion until we have each seen in Mexico what we 
 hoped or what we feared. 
 
 We can only begin to see the truth, and in the 
 truth the solution of the complicated Mexican 
 problem, when we clear our minds of these old 
 ideas that he who is against the revolutionary 
 government in Mexico is a hopeless reactionary, 
 and that he who is for it is a raving bolshevist. 
 For the Mexican revolution is part of the " world 
 revolution" only as the shibboleths of that vast 
 upheaval have been turned to the aggrandizement 
 of Mexican leaders who know neither what the 
 phrases mean nor where they lead. 
 
 If this is grasped, and if we will look at Mexico 
 as a problem for us all, then the beginning of the 
 road away from foreign intervention and the peril 
 to our peace and Mexico 's will begin to open. In- 
 tervention can be avoided, even though it may be 
 grievously close to-day. But it cannot be avoided 
 until we see clearly that the issue of intervention, 
 like the whole issue of the Mexican revolution, is 
 not one of capitalistic interests against the un- 
 happy Mexican peon, but a struggle of all the con- 
 
158 TRADING WITH MEXICO 
 
 structive thinkers and workers of the world be 
 they radical, socialistic, religious, philosophical, 
 laborite, capitalistic, industrial or social, be they 
 American, English, French, Russian or Mexican 
 against forces of greed and ignorance which 
 turn every ideal of honest men to the prostitution 
 of their country and the exploitation of their fel- 
 lows within and without its borders.: 
 
CHAPTER VII 
 
 THE EAPE OF YUCATAN 
 
 FROM the golden wheat fields of Kansas to the 
 barren sands of Yucatan, from the loaf of bread 
 on your table to the loot of Mexican revolutions 
 these seem mighty leaps of imagination or of fic- 
 tion. Yet the link is closer than imagination could 
 ever forge, the analogy a stranger tale than the 
 yarns of Captain Kidd. 
 
 The modern industry of wheat farming depends, 
 by one of the romantic balances of world com- 
 merce, upon the supply of binder twine for the 
 mechanical harvester, a supply which comes alone, 
 to-day, from the cultivation of a humble cactus 
 plant in far-off Yucatan. The great Mexican in- 
 dustry of raising this henequen or sisal hemp was 
 prostituted by Mexican revolutionists to the ma- 
 nipulation of the binder twine market so that in 
 four years more than a hundred million dollars in 
 artificially inflated prices were dragged from 
 American farmers. Thus it was that through the 
 helpless years of the Great War, all who ate the 
 bread of the wheat, from you and me in America 
 to the starving children of Belgium, paid bitter 
 tribute to the greed of Mexican agitators. 
 
 159 
 
160 TRADING WITH MEXICO 
 
 The story of Yucatan is no mere tale of the by- 
 play of revolution, the "fortunes of war" or the 
 "necessary accompaniments of a great social up- 
 heaval. ' ' It is the history of the deliberate looting 
 of a commonwealth and of an indispensable in- 
 ternational industry. In the name of socialism, 
 shouting the battle-cries of the age-long struggle 
 for human freedom, Mexican revolutionary lead- 
 ers turned the richest agricultural state of Mexico 
 into a desert waste, prostituted the only creative 
 industry in the whole country to the looting of the 
 world's farmlands and the taxing of every loaf of 
 bread consumed in the world. The vast tribute 
 which thus poured into the coffers of revolutionary 
 government was utterly losi; to public vision al- 
 most before it had left the market-places, and not 
 one cent of it was ever turned to the easing of the 
 sorry human burden of the Mexican peon or de- 
 voted to the education and upbuilding of the Mex- 
 ican people. 
 
 The story of Yucatan is the story of as grue- 
 some a rape of Mother Earth as man has known. 
 Beginning with the familiar picture of the down- 
 trodden peon of the Diaz time, it runs the gamut 
 through the marching armies of conquerors, 
 through a cycle of high-sounding socialism to 
 bloody oppressions, and on to a newer despotism 
 and finally to utter economic collapse. In the end 
 it flattens down into the present, an era of capi- 
 
THE EAPE OF YUCATAN 161 
 
 talistic struggle in which the state, by the laws of 
 economics which its despots perverted so vigor- 
 ously, is being ground between the millstones of 
 opposing forces of the very business which was 
 once the source of all its wealth and all its 
 progress. 
 
 Upon the wheat crop of the world depends the 
 life of the world, and upon the mechanical har- 
 vester depends, literally, the life of the modern 
 wheat industry. In its turn, the operation of the 
 harvester is dependent upon the millions of miles 
 of binder twine which alone make possible the 
 handling of the wheat on its way from the stand- 
 ing fields to the thresher which converts it to gol- 
 den grain. Since Cyrus McCormick first offered 
 his " reaper " to the American farmer, more than 
 fifty years ago, invention has sought far and wide 
 for freedom from the need of twine for the bind- 
 ing of the sheaves, but neither " header " nor me-' 
 chanical flail has been able to achieve it; to-day 
 the wheat farmer must have twine, and that by 
 the hundreds and millions of pounds, to harvest 
 his crop. 
 
 Thus, because the sisal hemp or henequen of 
 Yucatan is the only fiber which can be produced 
 in sufficient quantities at a low price to meet the 
 farmer's need for binder twine, the wheat for the 
 world's food supply depends vitally on the prod- 
 uct of this one distant state of Mexico. Without 
 
162 TRADING WITH MEXICO 
 
 its humble aid, the American farmer might, con- 
 ceivably, hark back to the binding of wheat 
 sheaves by hand it is certain that we could antici- 
 pate the scrapping of billions of dollars ' worth of 
 mechanical harvesters in the substitution of some 
 other method than theirs. The only other fiber 
 that will serve for the making of binder twine is 
 true Manila hemp, whose total crop would not fill 
 a tenth of the needs of the world's annual harvest, 
 and whose finer quality and greater cost have 
 caused it to be devoted almost exclusively to the 
 making of high-class cordage. Cotton and jute and 
 silk and all other known or promised vegetable or 
 animal fibers from which binder twine might con- 
 ceivably be made have proven useless for the pur- 
 pose. One of them is too stout, one too soft, one 
 too short of fiber, one not brittle enough, another 
 too brittle. Sisal, the Yucatan henequen, is to-day 
 the only hemp which meets all demands of the 
 world's annual wheat harvest, a demand which has 
 reached the colossal total of 400,000,000 pounds a 
 year. 
 
 Upon this need has been built the one great crea- 
 tive industry of Mexico, the one business, agricul- 
 tural or manufacturing, which in Mexico produces 
 wealth through human energy. Its source is the 
 long-leaved henequen plant, to whose necessarily 
 slow growth for fiber the sandy, desert soil of the 
 Yucatan coastland is peculiarly adapted. The 
 
THE EAPE OF YUCATAN 163 
 
 henequen is a species of the great agave, that 
 strange, cactus-like "Century plant, " which is 
 found in one form or another in almost all desert 
 countries. As the maguey, it grows in the great 
 Central Mexican plateau, furnishing the heavy 
 drink called pulque, and giving up a hand-ex- 
 tracted fiber which has been woven into the rai- 
 ment of the Indians of the Valley of Mexico for 
 centuries. Still other varieties, in the warmer 
 sections of Mexico, furnish food for cattle and, 
 distilled, the fiery mescal or tequila which is an 
 even more terrible curse of Mexico than the much- 
 berated pulque. 
 
 It is the henequen, however, which is the most 
 commercially useful of all the agaves, for its nar- 
 row leaves, three to four feet long, are peculiarly 
 adapted to the mechanical extraction of their fiber 
 (which most of the agaves are not). The coarse, 
 rasping, yellow strands have the thickness and the 
 strength of horsehair, so that they survive the 
 vigorous de-pulping process of the great gin-like 
 machines. After drying, they furnish a stout fiber 
 which, when woven into thick cord, ties the wheat 
 sheaves in the harvester, and breaks easily as each 
 sheaf is thrown back into the thresher in the gor- 
 geous pageant of the harvest. 
 
 This henequen, the sisal hemp of commerce, was 
 first exported in 1864, and by 1880 was one of the 
 well-known but minor fibers in the American 
 
164 TRADING WITH MEXICO 
 
 market. In 1898, when the Spanish- American war 
 cut off the exports of Manila hemp, henequen 
 sprang into immediate and great importance, its 
 price rose from 2~y 2 cents to 10 cents a pound in 
 New York, and an immediate increase in the indus- 
 try and in the economic importance of the state of 
 Yucatan took place. There was a lively boom in 
 henequen lands, and incidentally an improvement 
 in social and political conditions in Yucatan, fol- 
 lowed by something of a slump with a few mild 
 panics around 1907. 
 
 But henequen fiber had been definitely estab- 
 lished in the market and selling as it did at an 
 average price of 5% cents a pound, became the 
 great staple for the manufacture of binder twine. 
 This new and virtually inexhaustible supply of 
 cheap fiber for twine-making played its part in 
 the broadening use of the mechanical harvester, 
 until by 1915 Yucatan henequen binder twine was 
 being shipped to every wheat producing area in 
 the world, from the Siberian steppes to the pam- 
 pas of the Argentine. 
 
 In 1914 the exports from Mexico were more than 
 a million bales or approximately 400,000,000 
 pounds, which was a doubling of production in 
 fourteen years. The current price of about 6 
 cents a pound had enabled the Yucatan growers to 
 build up immense fortunes and made it possible 
 
THE RAPE OF YUCATAN 165 
 
 for the manufacturers of the thousands of tons of 
 binder twine to furnish it to the American farmer 
 at less than 10 cents a pound. 
 
 The chief manufacturers of binder twine and, 
 therefore, the chief buyers of Yucatan henequen, 
 are the International Harvester Company, which 
 makes about half the binder twine used in the 
 world, the Plymouth Cordage Company, which 
 makes about a quarter of the entire supply, and 
 various state penitentiaries in the wheat belt of 
 the United States. All of these manufacturers 
 work on close margins for the Harvester Com- 
 pany's business is selling harvester machines and 
 it seems interested materially in keeping the price 
 of such accessories as twine as low as possible. 
 The effect of this, combined with Yankee shrewd- 
 ness, has been a continuous effort to keep the 
 price of Yucatan henequen down to rock bottom, 
 and to this end its buyers have been cheerful ar- 
 biters of the price of the sisal in the Mexican 
 market. 
 
 They were never, however, quite the grasping, 
 grinding capitalistic despots they were described 
 as being by the Yucatecans, for those of us who 
 can remember back into the philosophic days be- 
 fore 1914 will recollect that it was not customary 
 for even American capital to kill the geese that 
 laid the golden eggs. The Yucatan hacendados 
 
166 TRADING WITH MEXICO 
 
 were encouraged to demand, and get, comfortable 
 prices for their product, and incidentally to plant 
 large new acreages of the henequen plants. 
 
 It was this large planting, which went on from 
 1900 to 1914, which caused the first glimmering of 
 the idea of "direct action" on the part of the 
 hacendados, the growers of the sisal. It takes 
 seven years for henequen plants to come into bear- 
 ing, and the prospect of immensely increased pro- 
 duction and probably lowered prices inspired the 
 first idea of a pool which would maintain the old 
 price levels. In 1912 a scheme for regulating the 
 price of henequen was first presented to his fellows 
 by a Yucatan hacendado. His idea was not so 
 much to create an artificial shortage by storing the 
 hemp, as to form some sort of organization which 
 would have first chance to buy the henequen crop 
 and thus make the hacendados participants in the 
 profits made by the jobbers or middlemen. 
 
 The organization which resulted, in 1914, was 
 called the "Comision Eeguladora del Mercado de 
 Henequen" (Commission for Eegulating the 
 Henequen Market), or, for short, the "Eegula- 
 dora." It was not, however, a great success, for 
 the Eeguladora was only an organization buying 
 in competition with the old established agents, and 
 the growers still pursued their own immediate in- 
 terests in seeking their markets. Cooperation 
 has never been one of the outstanding virtues of 
 
THE EAPE OF YUCATAN 167 
 
 the Mexicans, and in the selling of their crops the 
 Yucatecan hacendados have never shown any 
 sign of a break away from the national individual- 
 ism. The hacendados have always done their busi- 
 ness in Merida, the capital and business center of 
 Yucatan. They pass from one sunlit office to an- 
 other, wailing dismally over the terrible prices the 
 comfortably ensconced buyers offered them and 
 their unfortunate fellows, but seeking and ready 
 at a momentary hint to drive a bargain which 
 would cut their neighbors' throats on the possible 
 chance of a temporary personal profit. The gen- 
 tlemanly agreement of the Reguladora was not, 
 under these circumstances, a controlling factor in 
 the henequen market. 
 
 This was the situation when, in March, 1915, 
 General Salvador Alvarado, a doughty retainer of 
 President Carranza, "captured" the state of 
 Yucatan with an army of 8,000 men which he had 
 brought from Vera Cruz. Although Mexico has 
 been in revolution since 1911, Yucatan had, till 
 this time, taken little part, accepting new gov- 
 ernors with mild surprise but no opposition as one 
 administration succeeded another in Mexico City. 
 Yucatan is a great peninsula far to the east of the 
 Mexican mainland, unconnected by railways, and 
 thirty-six hours' journey by fast steamer across 
 the Gulf of Mexico from Vera Cruz. The Yuca- 
 tecans have always considered themselves as a 
 
168 TRADING WITH MEXICO 
 
 people somewhat apart from other Mexicans, and 
 during many of the revolutions previous to Diaz, 
 the peninsula remained aloof and politically inde- 
 pendent, re-entering the Mexican confederation 
 only toward the close of the pre-Diaz era. 
 
 General Alvarado is a product of northern 
 Mexico. He belongs with the true Carran- 
 cista group in Mexican politics, has been a candi- 
 date for president of Mexico and has made many 
 trips to the United States as a financier, most re- 
 cently as an envoy of the de la Huerta government 
 in search of a rehabilitating loan. All this, how- 
 ever, has come since his spectacular experience in 
 Yucatan. In that state he gained the experience, 
 and political record, which maJe him aspire to 
 the presidency of Mexico, and earned his diploma 
 as revolutionary financier. There, also, he prob- 
 ably first acquired those radical ideas which en- 
 abled him to assert, as he did in the Mexican 
 {Chamber of Deputies in November of 1920 : 
 
 "I am a bolshevist, I have always been a bolshe- 
 yist, and I shall always be a bolshevist. ' ' 
 
 General Alvarado 's first government work was 
 as a custom-house employee, but he joined the 
 Carranza movement early and early rose to the 
 rank of general through the manifestation of a 
 [thoroughly forceful personality and a ruthless 
 preoccupation with his own advancement. 
 
 Yucatan, in its isolation, in its great wealth, and 
 
THE RAPE OF YUCATAN 169 
 
 its easy-going manners, presented General Alva- 
 rado with the opportunity of his career. Here 
 were ungathered riches for revolutionary spoils, 
 here was noble opportunity for the uplift of the 
 "submerged 85 per cent," here was waiting easy 
 military glory of conquest with no one to oppose. 
 In going to Yucatan, General Alvarado was, more- 
 over, encumbered by none of the political and 
 business experience which delays the prompt exe- 
 cution of inspired ideas. Nor was he inhibited by 
 any preconception of the needs of the common- 
 wealth or its chief industry, for this was his first 
 visit to his future principality. All he knew or 
 heard was that Yucatan was rich and that its pro- 
 letariat was "oppressed," largely by wicked for- 
 eigners of shocking and predatory manners. 
 
 When he arrived in Yucatan, General Alvarado 
 noted with interest the beauty of that gem of 
 Mexican state capitals, Merida, with its sun-clear 
 streets and its beautiful parks and public build- 
 ings. He saw the luxurious equipages and homes 
 and visited the great haciendas of henequen. In 
 the meantime, he looked over the documents in the 
 governor's office and the stock of gold in the state 
 treasury. He scowled his disapproval, as was 
 the Carrancista habit, at the foreigners engaged in 
 the henequen business. Then his attention was 
 called to the charter of the Eeguladora, the harm- 
 less agreement of the hacendados to keep the price 
 
170 TRADING WITH MEXICO 
 
 of the fiber as high as they could and still not soil 
 their hands with trade. 
 
 This charter had courteously made the gover- 
 nor of the state ex-officio head of the Reguladora. 
 Promptly, and without more authority, General 
 Alvarado took charge of the organization. His 
 first act was to force upon the unhappy hacen- 
 dados, through the authority of their own instru- 
 ment, a corporation which took their own business 
 [utterly out of their own hands and forced them to 
 the acceptance of official dictation without dissent 
 or question. 
 
 To the end of organizing his Reguladora in 
 line with modern thought and to thorough effi- 
 ciency for his own ends, he invitti in from Mexico 
 City the one set of brains in the Carranza admin- 
 istration, those of Luis Cabrera, and called in the 
 motley company of self-styled "socialists" who 
 had been drawn to Yucatan by the lurid tales of 
 revolutionary propagandists who had predicted 
 the inevitable uprising of the oppressed prole- 
 tariat when opportunity should be given them. 
 
 This cabinet laid out the Eeguladora plan, and 
 two American bankers of New Orleans, Saul 
 Wechsler and Lynn H. Dinkins, organized a syn- 
 dicate which agreed to finance the cornering of the 
 henequen market up to $10,000,000. There was no 
 socialism in this phase of the plan, for the bankers 
 ;were to receive a commission of $4 per bale on all 
 
THE RAPE OF YUCATAN 171 
 
 henequen marketed, plus the current banking rate 
 of interest for all moneys needed, the loans to be 
 fully secured by mortgages against hemp in stor- 
 age or in transit. 
 
 So far all was well, but here Alvarado met his 
 first difficulty. The henequen growers were not 
 socialistically inclined, nor were they as trusting 
 of his good faith, or so well secured as the Ameri- 
 can bankers, nor had they so much to gain or so 
 little to lose as the " socialist " advisers of the 
 governor. Many of them refused to be bound by 
 the new rules of the Reguladora, which included, 
 amongst others, a provision that no hemp should 
 be sold to any agent or interest save the Regula- 
 dora. 
 
 But Alvarado 's government called on the hacen- 
 dados to subscribe to his rules for the Reguladora, 
 and to those who refused it threatened (and gave 
 evidence of the fullness of its intentions to carry 
 out its threats) to fire the fields and throw the 
 offending hacendados and their families into the 
 flames. It organized the Red Guard of Yucatan 
 (called the " Leagues of Resistance "), and spread 
 terrorism throughout the peninsula. It drove 
 out the tiny group of foreigners who for twenty- 
 five years had been engaged in " exploiting" the 
 unfortunate Yucatan proletariat by keeping the 
 capitalistic hacendados from getting too much 
 money out of American farmers. Along with them 
 
172 TRADING WITH MEXICO 
 
 went hundreds of the hacendados and their fami- 
 lies, and also priests and nuns, while the simple 
 Indians who could not take steamers for foreign 
 ports emigrated quietly back into the forests of 
 interior Yucatan. 
 
 For Alvarado's henchmen closed the churches, 
 burned their priceless historical records, and out- 
 raged nuns and priests. They turned the church 
 buildings into " labor temples " and barracks and 
 storehouses from which later was sold, over the 
 counter, the liquor which had been confiscated in 
 enforcement of "prohibition" in Yucatan. They 
 turned the schools of towns and plantations into 
 centers of propaganda and espionage under im- 
 ported " teachers " who knew none of the Indian 
 language, and many of whom could not write their 
 own names. They confiscated great haciendas 
 under the elaborately "socialistic" agrarian law, 
 and for those upon whom the iron hand did not fall 
 directly, established a reign of terror in the raids 
 of the "Leagues of Resistance," whose crimes, 
 from night-riding and burglary to rape and mur- 
 der, the Legislature declared to be "political of- 
 fenses" in the name of "socialism," and thus out- 
 side the jurisdiction of the common courts. 
 
 His henchmen, foreigners, Mexicans and Yuca- 
 tecans, raised up the previously contented "in- 
 dustrial workers," railway men, porters and 
 longshoremen (numbering in all less than 9,000 
 
THE RAPE OF YUCATAN 173 
 
 out of a state population of 300,000), forming them 
 into unions whose increasing wages were over- 
 lapped more rapidly than they were raised by the 
 rising costs of the handling of the imported com- 
 modities upon which they, like every one else, must 
 live in desert Yucatan. Their wages, and the cost 
 of living, multiplied eight times in the four years, 
 while the wages of the farm workers little more 
 than doubled, and a grievously added burden was 
 placed upon the hacendados who from time imme- 
 morial have taken up the loss in increased food 
 prices so that their farm workers may live. 
 
 By such means, and with such control, General 
 Alvarado acquired the domination of the indus- 
 trial life of Yucatan and of henequen production 
 upon which he built up his market corner. In the 
 selling of the product so controlled, he raised the 
 price of raw henequen from 7 cents a pound in 
 New York to more than 19 cents a pound in the 
 same market. So firm was his grip on production 
 and on distribution that he could, and did, with- 
 hold stock which was sorely needed in the harvest 
 fields, bringing about, in 1916 (through this means 
 and through the soaring prices which had to be 
 asked for the binder twine which was sold), an 
 investigation by a committee of the United States 
 Senate. This committee, after months of investi- 
 gation, completely exonerated the American manu- 
 facturers from the charge of profiteering, and 
 
174 TRADING WITH MEXICO 
 
 perhaps for the first time in the history of that 
 august body, placed itself on record as asserting 
 that a foreign government had acted the role of 
 an iniquitous trust in creating an artificial short- 
 age and artificially inflated prices for a product 
 vital to the business of America's farms. 
 
 In the four years that the Reguladora corner 
 lasted, more than $200,000,000 in advanced prices 
 were taken from American buyers, an average ad- 
 vance of more than 200 per cent. Thus, granting 
 a legitimate doubling of the price of the fiber in 
 keeping with the doubling of the costs of other 
 commodities in this period (1915-1919), the ac- 
 cepted figure of $112,000,000 of direct loot through 
 the Alvarado henequen corner may be taken as 
 literally true. And this was loot that never 
 reached either the cruel hacendados who owned 
 the farms or the workers who furnished the labor 
 for the creation of the product. All this and more 
 went into the bottomless pit of Mexican revolu- 
 tionary graft. 
 
 This henequen corner was, it must be remem- 
 bered, created in the name of socialism and the 
 salvation of the downtrodden peon. Along with it 
 went a mass of other activities, wherein the funds 
 derived from the sale of henequen at the advanc- 
 ing prices were turned to schemes of ostensible 
 government ownership, socialization and coopera- 
 tion. Before even the hacendados were given the 
 
THE EAPE OF YUCATAN 175 
 
 4 cents a pound guaranteed them as first payment 
 against the great profits to come from the " cor- 
 ner, " the Reguladora funds were invested in the 
 purchase of the state railways, at prices to this 
 day unknown. These funds also financed the or- 
 ganization of the Compania de Fomento del Sur- 
 Est (Development Company of the South-East) 
 and bought nine old Mexican coasting steamers at 
 a cost of $4,000,000 so that the socialists of Yuca- 
 tan might not be dependent on capitalistic steam- 
 ship lines. The Reguladora also financed the drill- 
 ing of oil wells, and built a flock of tanks to contain 
 the oil which never came out of the ground. It 
 also built a railway, confiscating therefor, "for 
 the common good," one-tenth of all the rails and 
 equipment of the private plantation railways on 
 the henequen farms ; in a few months it sold this 
 railway to a favorite for $150,000, a. tenth of its 
 cash cost, payable in ten years. 
 
 The Cia. de Fomento del Sur-Est entered upon 
 the business of relieving the oppressed proletariat 
 from the wicked prices for the necessities of life 
 fixed by capitalistic grocerymen. It bought its 
 own supplies in the United States, transported 
 them in its own steamers, and sold them for more 
 than the current retail rates ! The proletariat did 
 not benefit from any of these schemes, but the 
 government henchmen who bought in the United 
 States, and those who sold in Yucatan, waxed fat 
 
176 TRADING WITH MEXICO 
 
 and comfortable, although remaining firm and 
 loyal socialists to the end. 
 
 All these things were done in the name of so- 
 cialism, and in that name, also, the power of Regu- 
 ladora gold was felt even in the heart of the 
 United States, in a heart made sensitive to such 
 machinations by the nervous strain of the war 
 which was already at our throats. Not a little of 
 the money derived from the sale of henequen at 
 prices four and five times normal was used in the 
 conducting of a campaign of propaganda. Mexi- 
 can and foreign "socialists" were kept in the 
 United States lecturing and writing and publish- 
 ing magazines and books. These activities were 
 radical and, in part at least, I. W. W., in general 
 character but they were devoted also to spreading 
 the fame of the Alvarado brand of socialization 
 of industry in Yucatan and to the dissemination of 
 anti- American ideas under the guise of socialism. 
 
 It was glory and it was madness to strike thus 
 at the heart of the " Colossus of the North" as the 
 anti-foreign Mexican orators like to call the 
 United States, and at the very same time at the 
 "Colossus of Mammon," as the wilder socialists 
 referred to us in Yucatan. Carranza had tried the 
 former form of baiting, but the combination of 
 the two was an orgy of glory reserved for the 
 satellites of Alvarado. Never was anything quite 
 so daring and quite so magnificent ever done by a 
 
THE RAPE OF YUCATAN 177 
 
 Mexican revolutionist before, and not even Car- 
 ranza dared do more. 
 
 So glory and madness traveled together, but 
 meanwhile, out in the henequen fields and in the 
 Indian villages, Yucatan toiled on. The simple 
 natives could not quite appreciate the " socialists" 
 and literally fled in terror before some of their 
 manifestations, so that in that day, and in this as 
 well, they tell you with eager friendship to "be- 
 ware of these terrible socialists." To them, "so- 
 cialist" is a name associated with things that are, 
 to their simple minds, quite unsocial. 
 
 Alvarado, in his "conquest" of Yucatan, had 
 frankly spread terror throughout the peninsula. 
 Opposed, on his triumphal march to Merida, by a 
 small "home guard" of upper and middle class 
 youths, he had captured and shot scores of them 
 in cold blood, as "traitors," and pursued his way. 
 He had, as I have noted, closed and sacked the 
 churches, remarking that "As the revolution ad- 
 vances, God recedes." Then, on one of the main 
 boulevards of Merida, he had allowed the dead 
 bodies of two who had offended him to swing from 
 sunrise to sunset from a limb of an oak tree, so 
 that thereafter the simple words, "Remember the 
 oak tree," were sufficient to bring the stoutest- 
 hearted conservative to terms. 
 
 But for all that, General Alvarado protested 
 unfailing friendship for the peons and the Indians, 
 
178 TRADING WITH MEXICO 
 
 grieved somewhat by their distrust of him, but 
 pronouncing his devotion to their welfare in no 
 measured terms. In his carrying out of his " so- 
 cialistic " policies, he did not, however, consult 
 their wishes or even their possibilities of develop- 
 ment. His one panacea for the ills of the Indians 
 was "land," and land he and his imported ad- 
 visers were determined to give them, no matter 
 whether they wanted it or not. Never did the 
 ideals of socialism, beautiful in themselves, have 
 an uglier distortion. 
 
 "Land distribution" is, as I have said, the crux 
 of the protestations of all Mexican revolutionists. 
 Upon the alleged land hunger of the Indians the 
 revolutionists have based most of their appeals 
 for foreign sympathy. The actual facts of the 
 labor situation, in Mexico and especially in Yuca- 
 tan, are therefore worth brief description in this 
 connection. The so-called "peonage system" of 
 Mexico goes back historically to pre-Spanish 
 times. It is based on the psychological difficulty 
 of obtaining continuous labor. Continuous labor 
 being vital to such an industry as henequen grow- 
 ing, there flourished in Yucatan, previous to 1914, 
 a system of indebtedness which was practically 
 slavery. Laborers on the plantations were al- 
 lowed to get into debt in order that they might be 
 held on the plantations on the pretext of working 
 out the advances which were made from time to 
 
THE RAPE OF YUCATAN 179 
 
 time by the hacendados. These debts averaged 
 about 200 pesos ($100) a man, and it is undoubt- 
 edly true that the system was the origin of wicked 
 abuses, a plantation store credit system being de- 
 vised to keep the peons always in debt, and work- 
 ers being sold by the head for their debts. Con- 
 finement in barbed wire enclosures was common in 
 some sections, and altogether the picture of the 
 Yucatan situation especially was a very unlovely 
 one. 
 
 But the system of debt advances was really 
 effectively abolished under Madero, two full years 
 before Carranza and Alvarado entered upon the 
 scene, and it is worth noting that the hacendados, 
 many of whom had fortunes tied up in peon debts, 
 found themselves far happier to be free from the 
 system than were the peons. It is indeed ques- 
 tionable whether the peonage system, as such 
 (and where it was not abused), was entirely dis- 
 tasteful to the Indians who were its victims. Lack- 
 ing any ability to save, the abolition of the system 
 of debt advances wrenched from their grasp the 
 only possible form of enjoying the fruits of their 
 labor outside their usual hand-to-mouth existence. 
 Under the old systems they were able to have 
 some of the good things of life by getting an ad- 
 vance in money, which they spent gayly, careless of 
 the future, and then proceeded to work out the 
 debt in the months or years which followed. Basi- 
 
180 TRADING WITH MEXICO 
 
 cally, the system had its redeeming features, when 
 considered from the viewpoint of Indian psychol- 
 ogy, even though the abuses were such that its 
 abolition was inevitable. 
 
 Linked up with the peonage system was the 
 land distribution question, far too complicated for 
 its origins to be gone into here. 1 In Yucatan, the 
 most heavily populated section is not the most fer- 
 tile. Henequen is not grown in the forests back 
 from the sandy seacoast where prehistoric civili- 
 zation left the great ruins of a rich and glorious 
 empire, but on the seacoast itself. This virtual 
 desert, extending in some places twenty-five miles 
 back from the coast, is the land which is adapted 
 to the growing of henequen, for a slow maturing 
 of the plant is vital to the creation of those long, 
 strong fibers which constitute the valuable portion 
 of the leaves. 
 
 This so-called desert land is sometimes capable, 
 when first cleared of brush, of one or even two 
 croppings of corn. Then it must lie fallow for 
 many years before another food crop can be raised. 
 The native Indian, therefore, has little or no -use 
 for a small plot, or indeed for the ownership of 
 any plot of ground, unless he can crop it once or 
 twice and then sell it to a henequen planter, while 
 the Indian seeks other corn-lands elsewhere. If 
 the government hampers him in moving about, he 
 
 i Both peonage and the Mexican systems of land distribution 
 are discussed at some length in The People of Mexico. 
 
THE KAPE OF YUCATAN 181 
 
 prefers not to try to live as an independent 
 farmer, but to work on a plantation where he can 
 get regular pay for cutting henequen leaves, and 
 also can cultivate a little corn-plot lent him by the 
 hacendado and renewed each year. 
 
 Now the Indian, despite the fortunes which have 
 been made by the hacendados in the henequen busi- 
 ness, has no interest at all in becoming a henequen 
 grower. He knows from experience that the value 
 of the leaves he himself produces are little more 
 than what he would be paid on an hacienda for 
 cutting the hacendado 's own leaves, and he knows 
 that he has not the capital or the initiative to go 
 into hemp production himself. The result was that 
 some years ago, when the communal land was 
 first distributed to the Indians, it was cropped 
 once or twice and then sold to the nearest hacen- 
 dado to become henequen plots. 
 
 Sometimes indeed, the communal land was so 
 worthless for corn that the hacendados were al- 
 lowed to take it over without payment or protest 
 and to plant it to henequen. This loss, from the 
 Indian viewpoint, was far from an unmixed evil, 
 for the natives of the commune profited in the 
 gaining of an opportunity for assured livelihood 
 close by their homes difficult enough except on 
 the henequen farms, in the desert sections of 
 Yucatan. 
 
 Henequen production is far more of an indus- 
 
182 TRADING WITH MEXICO 
 
 try than it is a farming project. Primarily, it re- 
 quires from the planting of the shoots until the 
 first leaves are ready for cutting, eight years of 
 continual and expensive care, for the fields must 
 be kept clear of brush and weeds, the plants tended 
 and those which die replaced with regularity. 
 After eight years of continuous outlay, the leaves 
 are cut, brought into a great industrial plant where 
 machinery and many workers are required to re- 
 move the pulp, to dry the hemp fiber on racks 
 under the sun, to pack it into 400-pound bales in 
 hydraulic presses, and to ship it to the distant 
 American market. The agricultural end of the 
 henequen business is but a small item in its proc- 
 ess, and no individual farmer, even if he has 
 moderate capital, can prosper on it. 
 
 The land distribution planned by Alvarado was 
 to be made from the great henequen haciendas, 
 and some of the oratory defending the confiscation 
 of those haciendas pointed out the fact that this 
 very land had been stolen from the Indian com- 
 munes in years gone by and was now being re- 
 turned to the original Indian owners. That was 
 interesting to the pitying audiences of the Alva- 
 rado propagandists in the United States, but it 
 was of not the slightest interest to the Indians of 
 Yucatan. They had once owned that land, and 
 had or had not cropped it in corn once or twice. 
 They knew quite well it was hardly worth the 
 
THE EAPE OF YUCATAN 183 
 
 trouble and the expense in taxes it would be for 
 them to own it again, especially as they saw the 
 hacendados being skillfully put out of business and 
 knew that with their disappearance went the only 
 market in which Indians could sell the land after 
 they got it, or the henequen leaves if they raised 
 them. 
 
 Thus it came about that despite the apparent in- 
 congruity of the fact, the Indians of Yucatan paid 
 almost no attention to Alvarado's land distribu- 
 tion plans, listening to the alluring official an- 
 nouncements with stolid indifference. They at- 
 tended the festivals which accompanied the distri- 
 bution, but they took up no land grants. 
 
 There were indeed, many Indians who actually 
 took flight into the interior of the state as a result 
 of the efforts to force land upon them. The Mex- 
 ican Indian, of whatever tribe, in reality desires 
 deeply but one thing to be left alone to pursue 
 his half-savage life in his own way, an aboriginal 
 ambition which should not be difficult to under- 
 stand by those who know anything of the North 
 American Indian of the United States. Socialism, 
 like the responsibilities of land ownership, is be- 
 yond his ken and he literally ran away from the 
 offers of either in Yucatan. 
 
 Some Indians, of course, remained, along with 
 a great number of the mixed-blood "slaves" who 
 had been imported from the Mexican mainland 
 
184 TRADING WITH MEXICO 
 
 into the state during the boom period of the hene- 
 quen business. These were thoroughly "union- 
 ized" in the Mexican sense. That is, they were 
 forced to pay their poor little three pesos for a 
 big red card which proclaimed their membership 
 in some union or other, were promised all that the 
 human heart could desire and were allowed to 
 subsist as long as possible upon the promises. 
 The unions were used to the double end of ruining 
 the capitalistic landlords and reducing the output 
 of henequen so that the price would go higher. 
 
 On the plantations where these "unionized" 
 workmen remained, the old task system, by which 
 each man cut from 2,500 to 3,000 leaves a day, was 
 abandoned for a regular "eight-hour day" in 
 which the workmen did as little as they cared to 
 do, and worked, not under instructions, but wher- 
 ever they chose to work. As a result the cutting 
 of leaves was reduced fully one-half, and the 
 plants near the roads were overcut while those 
 deep in the fields were allowed to blossom and go 
 to seed. Both processes killed the henequen, 
 which has to be cut regularly and skillfully in 
 order to prolong its life of usefulness. For miles 
 the great pole-like blossoms marked the henequen 
 fields like a forest, and thousands of productive 
 acres went to ruin. Thus Nature's inevitable proc- 
 ess of flowering and decay marked, itself, man's 
 crass flinging back of her riches into the dust from 
 
THE KAPE OF YUCATAN 185 
 
 which those riches had come in the long slow 
 years of his care of her* 
 
 Meanwhile, other forces had been at work, some 
 building the pyramid of mad ideas and madder 
 methods, others undermining the pyramid's foun- 
 dations upon the rocks of the conservative past 
 or disintegrating its mortar of imitation socialis- 
 tic idealism. Of these forces, the greatest was the 
 financial cycle of paper money, " short " drafts 
 and towering mortgages against increasing stocks 
 of unsold henequen. 
 
 By 1915, when Alvarado arrived in Yucatan, the 
 system of paper money which Carranza used to 
 finance his revolution had already engulfed Mex- 
 ico. Carranza had recently issued his famous dic- 
 tum that if Gresham's law (one of the fundamen- 
 tal laws of economics, which holds that bad money, 
 in any quantity, inevitably drives out good money) 
 was interfering with the circulation of the Car- 
 ranza paper, Gresham's law should forthwith be 
 repealed by executive decree. Billions of Car- 
 ranza paper had been printed, and it was already 
 the circulating medium in Yucatan ; gold and bank 
 bills were in hiding. Alvarado decided that the 
 time was ripe for a currency of his own, and 
 issued, before he had been long in the state, the 
 Beguladora paper money, ostensibly guaranteed 
 by hemp in storage in Yucatan and in the United 
 v States. By decree, this money had to be received 
 
186 TRADING "WITH MEXICO 
 
 at the old value of the silver peso, two for one 
 American dollar. 
 
 It was a beautiful idea, except for economic 
 law. The bayonets of Alvarado 's soldiers helped 
 keep up values for a while, but slowly the theory 
 that power can achieve anything the " proletariat " 
 wants was blasted by fact. Alvarado had prom- 
 ised to redeem his Eeguladora paper in gold or in 
 New York exchange, but he did not bother to back 
 up his promises by a limitation of the currency to 
 the amount he could redeem, so that at one time 
 he had $34,000,000 in paper in circulation, against 
 henequen stores of half the value, stores which he 
 could not liquidate. The currency's value 
 dropped, cent by cent, then by groups of cents, 
 and finally it was almost waste paper, like that of 
 Carranza. There was not enough henequen in 
 New York, nor enough gold in Yucatan, to redeem 
 the paper, and the political nostrum for the eco- 
 nomic ill of bad paper currency failed. 
 
 The failure was colossal enough, in any case, 
 without the financial complication of the currency. 
 Alvarado had closed the ports to all hemp from 
 the interior that was not consigned to the Eegula- 
 dora. That beneficent monopoly allowed no ship- 
 ments by rail, and before he got through Alvarado 
 had to close the roads with soldiers, so that no 
 carts could reach the port. Meanwhile, he had 
 been boosting the price, deliberately and virtually 
 
THE EAPE OF YUCATAN 187 
 
 by decree, until, as I have said, it reached more 
 than 19 cents, as against less than 7 cents a pound 
 which had been its price before the Eeguladora 
 took charge of the market. 
 
 This raising of the price cut off a large portion 
 of the market, and that had not been anticipated. 
 Virtually all consumption of henequen except for 
 binder twine ceased. At 19 cents Manila hemp 
 could compete and it is far better hemp. At 19 
 cents jute cord can compete, and jute cord is soft 
 and pleasant to handle, and where previously hen- 
 equen cord had been used for big bundles of news- 
 papers and magazines and mail, jute was substi- 
 tuted and now the men who handle the bundles 
 of newspapers and magazines and mail refuse to 
 go back to the rasping henequen cord which cuts 
 their hands so uncomfortably. 
 
 The consumption of henequen was actually re- 
 duced to half by this deliberate destruction of its 
 market. In spite of the new low prices to-day, 
 this condition in the general fiber market combines 
 with the cutting off of the Eussian and some of the 
 other European demand to reduce the world con- 
 sumption of the Yucatan fiber to about 70 per cent 
 of what it was prior to 1914. All this loss the 
 Eeguladora had to take np, in addition to the 
 stores which it laid aside to push up the price. 
 Economic law was at work, and all the contentious 
 statements that the price was going up only in 
 
188 TRADING WITH MEXICO 
 
 proportion to the rising costs the world over was 
 answered by the fact that henequen was driven 
 out of the general fiber market by other hemps 
 which had increased in price, to be sure, but had 
 never approached the geometrical progression 
 which henequen assumed under the lordly sway of 
 Alvarado's corner. 
 
 When all is said and done, however, it was 
 Mother Nature and Gresham's law which finally 
 broke the corner. Corners in the products of Na- 
 ture have a way of piling up unexpected responsi- 
 bilities and finally loosing unexpected forces which 
 swamp the unwary juggler. So it was in Yucatan. 
 With about a year's supply of fiber in storage in 
 the United States and Mexico, more than half of 
 it mortgaged to American bankers, and with about 
 $10,000,000 in Eeguladora currency in circulation 
 with nothing but photographs of gold stores to 
 guarantee it, Alvarado's henequen corner went 
 the way of all the corners of history. That was 
 in the spring of 1920 when, after a year of price 
 fluctuation, Nature and the eternal laws of eco- 
 nomics began gently wafting the prices downward 
 until they reached the lowest level in fifteen years. 
 Then it was that the banking syndicate, which had 
 loaned money against henequen shipments, fore- 
 closed on 250,000 bales in storage in New York, 
 marking the final chapter in the story of Alva- 
 rado's Reguladora experiment. 
 
THE EAPE OF YUCATAN 189 
 
 When the smash came, there was an Association 
 of Henequen Growers which had been begging in 
 Yucatan and in the Supreme Court of Mexico for 
 a chance to take back their business. As the finan- 
 cial difficulties and the financial needs of Alva- 
 rado 's henchmen increased, the Beguladora had all 
 but given up paying any money to the haciendas 
 where the henequen was produced. The mule that 
 lived on sawdust up to the day he died is a fable 
 of ancient times, but even under such loudly ac- 
 claimed "socialism" as that of Yucatan something 
 has to be paid for a product which is produced 
 and exported. The growers had all but reached 
 the end of their resources, and Alvarado offered 
 them only paper money, which he would or could 
 not change into gold drafts. So just before the 
 crash, to satisfy the clamor, Alvarado took his 
 way to Mexico City and royally presented the 
 Eeguladora to the Association of the Producers of 
 Henequen. 
 
 The hacendados had hardly had time to look 
 over the ruins when those financial interests which 
 had loaned money on hemp that was to sell around 
 20 cents a pound foreclosed on those 250,000 bales 
 in New York and New Orleans, placing thereon a 
 value of 5 cents a pound. Alvarado was safe in 
 Mexico City preparing to visit New York in an 
 effort to get a loan of a few hundred millions for 
 the government of Carranza. The hacendados 
 
190 TRADING WITH MEXICO 
 
 held the sack, and watching the sack was a group 
 of financiers, including the Equitable Trust Com- 
 pany of New York, the Royal Bank of Canada and 
 the Interstate Trust Company of New Orleans, 
 the latter the Dinkins concern through which most 
 of the loans on the henequen had been placed. 
 
 Down in Yucatan the hacendados had their 
 farms back, the Indians were returning at night 
 to look things over and see whether the " socia- 
 lists " had retired far enough for them to return 
 in safety to their comfortable " slavery " but no- 
 body had any money. When Alvarado left, the 
 hacendados had inherited the Reguladora offices, 
 and had opened its money vaults. These vaults, 
 photographs of whose gold stocks had been circu- 
 lated by Alvarado to sustain his paper currency, 
 were quite empty. The haciendas were in terrible 
 condition, and there was no way of getting funds 
 with which to rebuild and replant them. The only 
 hope was for capital from outside Alvarado 's 
 "socialism" had passed on its way. Of the possi- 
 ble sources of rescue, the chief was in the group 
 of unhappy banks in New York, New Orleans and 
 'Montreal, which were already in the henequen 
 business with their 250,000 bales of foreclosed 
 stock. The second hope was the International 
 Harvester Company, which needs henequen in its 
 business. The hacendados chose the banks, and 
 the Equitable Trust Company, the Royal Bank of 
 
THE EAPE OF YUCATAN 191 
 
 Canada, the Interstate Trust Co., and the Com- 
 ision Begnladora (which still existed in name 
 if not in spirit) formed a company, and taking 
 the four initials, called themselves the Eric Cor- 
 poration. 
 
 There was much rejoicing in Yucatan, for the 
 Eric was going to lend a few more paltry Ameri- 
 can and Canadian millions and reestablish the 
 great state industry. The Eeguladora (now con- 
 sisting of the hacendados) turned in some 300,000 
 more bales of hemp that were stored at Progreso, 
 the Yucatan port, as their part of the capital stock 
 of the Eric, and the hacendados went back to work. 
 ' Now one of the peculiar things about " eco- 
 nomic ruin" is that it seldom ruins a business 
 individuals are the only victims. Yucatan was 
 devastated, many thousands of acres put on the 
 non-productive list. There was no money to pay 
 labor or to finance the crops, but the henequen 
 business went on. To all intents and purposes 
 about all that had happened was the elimination 
 of most of the surplus planting which there would 
 have been if all had gone along properly and there 
 had been no Alvarado to corner and destroy the 
 market. Henequen kept on growing on the hacien- 
 das and, despite increased costs of handling, it 
 continued to move to market. 
 
 Don Avelino Montes, a Spaniard who had been 
 the chief buyer of the International Harvester 
 
192 TRADING WITH MEXICO 
 
 Company, returned from his exile in Cuba and re- 
 sumed buying. Don Arturo Pierce, the honorary 
 British vice-consul who did the buying for the 
 Plymouth Cordage Company, abandoned consul- 
 ing and returned to the henequen trade. The price 
 of Yucatan hemp kept slumping, but to the sur- 
 prise of the Eric people, the demand was supplied 
 with new hemp, and the Eric's stocks of old hemp 
 diminished but slightly. The money to rehabili- 
 tate the Yucatan haciendas was not forthcoming. 
 The old hemp stock had to be sold first, and the 
 wretched hacendados refused to cooperate and let 
 the Eric unload. 
 
 Henequen deteriorates, and also it requires in- 
 surance, as the many fires in Progreso and New 
 Orleans at the time testified. The cost of holding 
 the half million bales of henequen of the Eric is 
 about $2,500,000 a year, and the price at which it 
 was bought in, plus insurance, represents a cost 
 of about 8 cents a pound. The price of hemp had 
 been stabilized at that very figure by Senores 
 Montes and Pierce, with some outside assistance 
 from New York brokers, but the sales were made 
 in Yucatan, of new hemp. So the Eric, in right- 
 eous anger, cut the price from 8 cents to 7, and 
 then to 6. The price of new hemp also fell, and 
 the hacendados, partners in the Eric, wailed at 
 the evil which was being done them. However, 
 they continued to sell the new crop at the new 
 
THE KAPE OF YUCATAN 193 
 
 price, to the Harvester and the Plymouth and 
 Henry Peabody & Co., and Hanson and Orth, 
 while the gradually deteriorating stocks of the 
 Eric went begging. The price was finally cut tc* 
 5 cents, by the Eric. Yucatan has met this price,, 
 too, with new hemp, and because it is still possible 
 to make money out of henequen with the price at 
 4 cents in New York, it seems likely that Yucatan 
 will continue to grow henequen, and to sell it. 
 Meanwhile, however, the business doctors of the 
 Obregon administration in Mexico City at one 
 time succumbed to the pressure of the unhappy 
 hacendados and even agreed to try the "Regula- 
 dora" experiment all over again, with the central 
 government buying 60 per cent of the henequen 
 crop at 6 cents a pound, and again " controlling'' 
 the market, a step in the spiral of destruction 
 which had but a brief life and little significance. 
 For the story of Yucatan is written and the state 
 and its great industry are to-day being ground 
 between the wheels of the " capitalism " which the 
 beautiful theories of Yucatan 's " socialistic " au- 
 tocrats sought to destroy. 
 
 This is the outcome of Yucatan's experiments; 
 in Alvarado's brand of so-called socialism. The 
 price of the fiber is back to less than it was before 
 the inflation began, the production has been cut 
 from 1,000,000 bales in 1914 to less than 700,000 in 
 ,1919, a decline of 30 per cent, while, taking the 
 
194 TRADING WITH MEXICO 
 
 potential production from the plantings up to 1914, 
 the present production is about half of what it 
 would have been if Alvarado had never come to 
 Yucatan. The haciendas are back in the hands of 
 their original owners, the market is in the hands 
 of foreign capital, and foreign capital is fighting 
 over the spoils with what seems to the Yucatecans 
 utter and cruel disregard of the amenities of gen- 
 tlemen. The $112,000,000 squeezed from Ameri- 
 can farmers and the other untold millions taken 
 from Yucatan by loot, by false prices in ' ' coopera- 
 tive stores, " by freight rates on the graft-owned 
 railways, and all the other means used by Alvara- 
 do 7 s retainers, have gone to the enrichment of his 
 group and to the upkeeping of the Carranza gov- 
 ernment. No noticeable part of it has remained in 
 Yucatan, and save for increased wages all around 
 (and the world has surely learned that this is not 
 prosperity) no possible profit has remained. The 
 spiral cycle is complete, and none has gained, 
 not even the predatory capitalists, who are unhap- 
 pily cutting each other's throats in an effort to 
 solve the problems into which they were swept by 
 the machinations of Alvarado and his henchmen. 
 To-day Yucatan is not free from the domination 
 of the " socialists," but that domination is politi- 
 cal, marked by those outrages which have come to 
 be merely a part of politics in Mexico. Elections 
 are held from time to time, elections wherein two 
 
THE EAPE OF YUCATAN 195 
 
 parties of socialists alone confronted each other. 
 The battle is bitter, as battles are when brothers 
 are the contestants. There is still killing and loot, 
 and women and children suffer death and worse in 
 the solution of such glowing political questions as 
 whether, we might say, the flag of Yucatan should 
 be all red or merely red with a black bar across it 
 its problems are daily forgotten, for the real 
 issue is only to find out who should have the next 
 hand at the graft. Socialistic, to be sure, because 
 all Mexican manifestations to-day are masque- 
 rading under the name of socialism, but quite as 
 little in tune with true socialistic ideals as a battle 
 between two factions in Tammany Hall over the 
 control of New York politics would be socialism. 
 
CHAPTER VIII 
 
 THE BOMANCE OF MEXICAN OH. 
 
 WHEN you cross the Mexican border at Laredo, 
 oil enters your consciousness and your clothes. 
 It is everywhere, the thick, odorous chapapote 
 which furnishes the fuel for Mexico's locomo- 
 tives, the energy for every Mexican industry 
 which has no water power, the pavements for 
 her streets, and, I am still convinced, the heavy 
 lubricant with which the sandal-clad brakeman of 
 our train eased an incidental hot-box. In Tam- 
 pico, whence comes all the oil of Mexico, the heavy, 
 black " crude" is even more ubiquitous. It 
 1 ' tars" your shoes when you walk abroad; it deco- 
 rates your clothes when you ride in anybody's 
 motor car or motor boat; it oozes between your 
 toes and sticks in your hair when you bathe at the 
 beach. 
 
 But the physical presence of oil is as a whiff 
 from the dead well at Dos Bocas compared to its 
 spiritual domination in all Mexican affairs. Oil 
 is the greatest I had almost said the only 
 wealth of Mexico to-day, its possession the issue 
 of one of the mighty diplomatic battles of recent 
 times, while the taxes and graft of it have fed the 
 
 196 
 
ROMANCE OF MEXICAN OIL 197 
 
 wellsprings of ten years of devastating revolu- 
 tions. 
 
 Far and away and by many fold, oil is the 
 largest single item of export of Mexico, and the 
 yaried needs of the oil industry and of the bene- 
 ficiaries of that industry dominate the imports 
 as well. To Tampico go shiploads of steel, ma- 
 chinery and supplies, and trainloads of soap and 
 shoes; the factors which build civilization go 
 chiefly and all but alone, in Mexico, to the oil 
 fields. 
 
 Oil dominates the political life of the country 
 not because oil companies or oil millionaires seek 
 to control the Mexican government but because the 
 vast unbelievable wealth which is pouring into the 
 coffers of that government in taxes and in tribute 
 makes revolution a game the stakes of which 
 eclipse any sum or any potentiality of wealth or 
 power which has ever been known in Mexico. 
 
 Oil is the inspiration for the "nationalization" 
 policies which, forged by foreign radicals and 
 given edge by Mexican cupidity, the Carrancistas 
 wrote into their Constitution of 1917. This policy 
 of nationalization, the decrees, the laws, the taxa- 
 tion and the graft which have come in its train, 
 have brought into the field of diplomatic contro- 
 versy the whole problem of the right of a govern- 
 ment to enforce radical, socialistic or, if you will, 
 bolshevik policies against foreign interests which 
 
198 TRADING WITH MEXICO 
 
 may have entered a country and developed it 
 under older, more conservative ideals and systems 
 of government. 
 
 For the oil industry of Mexico is overwhelm- 
 ingly a foreign enterprise. American and British 
 and Dutch are the flags which should fly from the 
 oil derricks, for neither Mexico nor Mexicans have 
 had a hand worth the naming in the opening of the 
 nation's richest treasure-house. The search for 
 oil in Mexico has taken on the nature of a race, a 
 battle, between British and American oil interests, 
 a battle not without its tremendous significance in 
 the world oil situation. But behind this struggle, 
 which is still and, we may hope, will remain a 
 friendly one, loom controversies which are vaster 
 than Mexico or England or America, problems on 
 whose solution the very future of our civilization 
 depends. 
 
 For the real battle in Mexico is not between the 
 two great Anglo-Saxon powers, but between the 
 powers of light and the powers of darkness. In 
 Mexico's oil fields to-day is being settled the ques- 
 tion of whether enterprise shall have the right to 
 bring the riches of the earth to the aid of hu- 
 manity, of whether industrial power belongs to the 
 backward people who by accident find that power 
 in their inept hands, or to those who can develop 
 and raise it up to the service of mankind. Upon 
 the issue in Mexico depends not only the usefulness 
 
ROMANCE OF MEXICAN OIL 199 
 
 of all the petroleum resources of that country, but 
 the future development of oil in Colombia, Vene- 
 zuela, all South America, all Asia, all Africa. And 
 the future of oil development in those lands is 
 the future of the world's oil supply, for there, 
 alone, remain stores sufficient to meet the multi- 
 plying needs of the world. 
 
 The solution of this question is vastly compli- 
 cated. Within the oil situation itself are many 
 problems such as those just noted. Bearing upon 
 it is the tangle of cross-purposes, indirections and 
 varying psychologies. That solution is made all 
 but impossible by the conditions of Mexico to-day, 
 by the flabby weakness of the rulers of the Mexi- 
 can people, by their blindness and selfishness. It 
 has been jammed, time and again, by the failure 
 of the oil companies and their representatives to 
 assert their rights with a skill equal to that of the 
 Mexicans in casting up mountains of controversy 
 out of mole hills of technicality. 
 
 But the story of Mexican oil is not all ugly call- 
 ing of names, not all mere hopeless tangle. The 
 history of its discovery and development is rich 
 with color. The romance of an oil field, like the 
 romance of a gold camp, is always a thrilling tale. 
 But the story of Tampico has this other element, 
 for it is indeed the great romance of our race, the 
 tale of the white man round the world, the build- 
 ing of gigantic enterprises, the harnessing of un- 
 
200 TRADING WITH MEXICO 
 
 known forces, neglected for centuries by apathetic 
 natives, unlocked by the vision and the enterprise 
 of the Anglo-Saxon. 
 
 Oil began with Tampico, but the story of Tam- 
 pico antedates oil. It goes back to the late 80 's, 
 when one of the great railway builders of Ameri- 
 ca 's youth left Kansas for Mexico. A. A. Robinson, 
 who surveyed and built the Sante Fe Railroad 
 from the Kansas prairies to the Pacific Ocean, 
 who swung the track of the Denver and Rio 
 Grande Railroad above the rapids of the Royal 
 Gorge, was also one of the great builders of 
 modern Mexico. Leaving the Santa Fe in 1889, he 
 became president of the Mexican Central and built 
 almost the whole of this first standard gauge line 
 in the country, its branches and tributaries toward 
 the rich granary of Mexico about Guadalajara in 
 the west, to the mines of Pachuca in the mountains 
 and to Tampico on the Gulf of Mexico. 
 
 Tampico, a wretched, fever-ridden village be- 
 side a beautiful river, was no port in those days. 
 The railroad which brought Mr. Robinson to Tam- 
 pico brought also the engineers who built the great 
 jetties which cleared the bar and opened Tampico 
 to the world, carried the ores of Pachuca to their 
 markets and began the conscious development' of 
 what is now the busiest seaport of Mexico. The 
 railroad company built and paid for the jetties, 
 and under Mr. Robinson a short-line to Mexico 
 
ROMANCE OF MEXICAN OIL 201 
 
 City was surveyed and construction was begun, to 
 be halted, in 1908, by the government merger of 
 the lines. 
 
 All this seems to lead far away from oil, but it 
 was in 1900, two years before the jetties were com- 
 pleted, that Mr. Robinson invited Edward L. Do- 
 heny and his partner, the late Charles A. Canfield, 
 to Tampico to develop oil wells. Doheny, who had 
 made himself famous and unpopular by discover- 
 ing petroleum in the middle of Los Angeles, came 
 to examine the seepages of which Robinson had 
 told him in the hope that he might find an oil 
 to help the Mexican Central solve its fuel problems, 
 for the coal of Mexico is scarce and poor, and all 
 the fuel for the railways had to be imported. 
 
 Mr. Robinson agreed to buy the oil for fuel if 
 Mr. Doheny developed it, and it was this encour- 
 agement, this faith of two great believers in Mex- 
 ico, which brought about the discovery and the 
 later development of Mexican oil. The board of 
 directors for the Mexican Central later repudiated 
 the Robinson contract, but the development of the 
 Mexican oil fields had been begun, and it has never 
 stopped from that day to this. 
 
 It was in 1905 that I first visited Tampico. I 
 was the guest of Mr. Robinson, and as we looked 
 out, one day, over the marshes along the river 
 which runs past Tampico to the sea, six miles 
 away, he told me of his dreams for his port, of the 
 
202 TRADING WITH MEXICO 
 
 day when not only the Tampico side of the river, 
 but the barren jungle on the other bank would be 
 lined with wharves and great steamers, greater 
 than any of the coasters and tramps that to the 
 number of half a dozen a month were then carry- 
 ing coal and ore and, amusingly enough as we 
 look back on it now, crude oil from Pennsylvania 
 for use in Tampico 's one industrial establishment, 
 the Waters-Pierce Refinery. 
 
 I visited Tampico twice again, the last time in 
 1908. And then this year ! It was as if the dream 
 of the builder of the port had come true since the 
 setting of yesterday's sun. To-day the river is 
 lined, from its mouth all the six miles to Tampico 
 and above, with wharves and warehouses and hun- 
 dreds of great tanks of oil, and throughout all this 
 length are ships, tankers and cargo boats, while 
 on the hills above are refineries and modern towns, 
 and at night the lights are like those of great 
 cities. The dream, indeed, of a builder of civiliza- 
 tion, of civilized Mexico, has apparently come true. 
 
 A. A. Robinson is gone, laid away with his 
 honors and his vision these four years. But still 
 there is that other American, who twenty years 
 ago rode off into the jungles of the coastal plain, 
 saw with his own eyes the thick, slimy puddles of 
 asphalt at Ebano, and there drilled his first wells. 
 Years later, after his railway contracts were abro- 
 gated, seeking lighter, better oils, Mr. Doheny 
 
ROMANCE OF MEXICAN OIL 203 
 
 went, with the frontiersman's unquenchable opti- 
 mism, nearly a hundred miles farther into the 
 jungle till he heard the unforgettable baby mur- 
 mur and saw the unforgettable bubbling spring of 
 viscous black oil of the great seepages of Cerro 
 Azul, and there located what was to become the 
 greatest oil well in the history of the world, the 
 Cerro Azul No. 4. 
 
 Oil is the most fascinating of all the treasures 
 of earth. No geologist has ever approached the 
 solution of either its source or the contours or 
 formations within which it lies. An oil spring 
 such as that wonderful bubbling pool at Cerro 
 Azul may mean the presence of a great reservoir 
 of oil directly beneath or it may mean that the oil 
 has come a dozen or fifty or a hundred miles along 
 a crack in the mother-rock. Experience, faith, in- 
 tuition, these determine the location of a well. It 
 was these factors that Doheny brought with him 
 to Mexico, for the fields which he finally drilled 
 and proved had been rejected by many geologists 
 before he came and after. 
 
 At Ebano, a way-station on the Mexican Cen- 
 tral a few miles inland from Tampico this pioneer 
 of the Mexican oil fields found his oil and de- 
 veloped it, and his success brought hundreds of 
 other prospectors to Ebano in 1900-1902. But 
 Ebano oil is heavy with asphalt, and it was dan- 
 gerous to handle in the crude burners of the time 
 
204 TRADING WITH MEXICO 
 
 because its fumes ignite at low temperatures. 
 Thus, although it is rich in lubricating oils, it was 
 not the petroleum which the world wanted in that 
 day. With his contract with the Mexican Central 
 abrogated, virtually without a market excepting 
 for asphalt paving in Mexican cities, Doheny 
 turned southward in search of lighter oils. 
 
 His trips into the swamps and forests of the 
 huasteca or coastal plain led him to the great see- 
 pages at Cerro Azul, sixty miles below Ebano. It 
 also took him to Juan Casiano where he located 
 his first wells and in 1908 opened the first of the 
 great producing pools of the Tuxpam district. 
 Drilling and exploration went han^ in hand and 
 not only Doheny but the British interests of Sir 
 Weetman Pearson (now Lord Cowdray) and other 
 American companies began to make this field 
 famous. 
 
 Since that time the story of the Tampico oil 
 fields has been the story of the Americans and 
 other foreigners who followed them. No Mexican 
 name and no Mexican interest are connected with 
 the vast development which has come. Yet so vast 
 is the busy zone of production, so tremendous and 
 so varied the forces and elements working there, 
 that one feels something false in this appearance 
 of preponderance of individuals and of foreigners 
 in the epochal industry of Mexico. When, how- 
 ever, one glimpses the long diplomatic struggle, 
 
ROMANCE OF MEXICAN OIL 205 
 
 the legal tangle, the endless problems which make 
 the Mexican oil question so complicated, one finds 
 that in every phase there are always only these 
 foreigners on the one side and the predatory, 
 scheming Mexican revolutionary leaders on the 
 other. Never is there a Mexican on the produc- 
 tion side, never a foreigner on the side of the ele- 
 ments which retard production. 
 
 It was Mr. Robinson who opened up Mexican oil, 
 and it was Doheny and other early foreigners who 
 first dared drill, and the foreigners alone who in 
 the years past have dared to put millions into pipe 
 lines, storage tanks and wonderful fleets of oil- 
 carrying ships. Only they dared or would dare to 
 go into the sleepy villages of the Vera Cruz plains 
 and pay fifty cents a day to peons who had lived 
 for generations on less than a quarter as much. 
 Only the foreigners dared give their labor a de- 
 cent wage, dared teach their men to be worth more 
 and more until to-day they pay the commonest 
 peon the equivalent of two American dollars a 
 day. Only these foreigners dared believe in Mex- 
 ico, dared insist on the good faith of all her faith- 
 less governments, dared to go on with their work 
 when all else in Mexico stagnates and cringes be- 
 fore the continuing revolutions. 
 
 And on the other hand are the Mexicans who 
 govern thejland, making it their chief business to 
 bait and loudly curse these same foreigners. The 
 
206 TRADING WITH MEXICO 
 
 name of the foreign oil men is anathema in Mexico 
 to-day, and the busiest game of any Mexican offi- 
 cial is the oratorical denouncing of the sponsors 
 of the industry. But, we cannot forget, these 
 Mexicans have not and do not turn a finger to the 
 replacing of great foreign activity by any con- 
 structive form of Mexican enterprise. 
 
 At basis the difficulties of the oil companies and 
 the Mexican governments are psychological and 
 an understanding of those psychological bases is 
 the rarest flower in the intellectual nosegay of 
 most of those who discuss either Mexico or oil. 
 First of all is the companies ' belligerent insistence 
 on the principles of vested rights as the first and 
 only basis for the oil discussion naturally dis- 
 tasteful to those whose single idea is to upset 
 those rights. Another psychological element is 
 that the foreigners' very respect for law and the 
 continuity of government and their insistence that 
 Mexico live up to their own ideals is in the first 
 place quite beyond the conception of the Mexicans 
 in power to-day and in the second place such 
 an attitude is inevitably maddening to the weaker 
 brother whom it seeks to benefit. Because the 
 foreigners believe in Mexico, the Mexicans will 
 not believe in the foreigners. 
 
 Another disturbing factor is the very success 
 of the oil companies and of the foreigners whom 
 they employ. I have told, above, something of the 
 
ROMANCE OF MEXICAN OIL 207 
 
 picture of the Tampico that was and of the Tam- 
 pico that is. It has changed in yet other ways, and 
 most of all in the makeup of her population. 
 
 In 1908 there were perhaps two score Americans 
 and English in the town, and the chief industry of 
 the place was tarpon fishing! To-day there are 
 8,000 Americans and a thousand British and 
 Dutch, and the swaggering, free-money, noisy, 
 busy atmosphere of the frontier, of the oil fields, 
 of the white man on his bully-ragging, destructive, 
 inconsequential "education" of the dark brother 
 round the world, permeates the place. Its influ- 
 ence is not academic, but somehow one feels that 
 Tampico is a monument to the genius and faith 
 of the Americans who made it great. The restless 
 power is there, the restless making over of the 
 world that it may be a better place for the white 
 youth of the future to stamp about in, for the dark 
 brothers to build their new homes in. 
 
 Yet strangely enough, if you will, it is to my 
 mind largely because of this same energy, the 
 achievement which this spirit indicates and predi- 
 cates, that the difficulties of the foreign oil com- 
 panies in Mexico have been the sort they are. 
 Their persecution has sprung from the realization 
 of the Mexicans that these Americans, these En- 
 glish, these Dutch, are doing in Mexico and for 
 Mexico what Mexicans can not, dare not, do. The 
 Mexicans from generals to peons, are frantic, 
 
208 TRADING WITH MEXICO 
 
 baffled, rabid, at the wretched Gringoes who dare 
 to pour their millions out to drill wells, to build 
 pipe lines and terminals and ships, to take and to 
 convert this black and liquid gold from the soil of 
 Mexico. 
 
 Of the hundreds of wells drilled in the Tampico- 
 Tuxpam fields, some of them the veriest "wild- 
 cats ' ' on the flimsiest of chances, hundreds of them 
 as sure as opening a bank vault, only a half dozen, 
 and none a "wildcat," have been drilled by Mexi- 
 cans as individuals or in corporations, and not a 
 single ship, not a single storage tank, not a mile of 
 pipe line, is Mexican. Were the Mexican govern- 
 ment to take over the administration of the oil 
 fields to-day, drilling would cease utterly, to-mor- 
 row development would stop and when, a year 
 hence, it became vital to open more wells, the event 
 would be marked by government ceremonies and 
 stifling graft. 
 
 Every one who knows Mexico knows that this is 
 the truth. The Mexicans themselves know it, and 
 from the Tampico policeman who howls in out- 
 raged anger when an American motorist refuses 
 to be disturbed by official anathemas, up to the 
 presidential secretaries who devise complicated 
 and childish schemes to force the oil companies 
 into recognizing the dignity of Mexican sover- 
 eignty, the whole attitude toward the oil business 
 has been fraught with effort to maintain that hazy 
 
ROMANCE OF MEXICAN OIL 209 
 
 halo of the weakling, delicate " sensitiveness, " na- 
 tional pride, amour propre. 
 
 When I left New York to study Mexican prob- 
 lems for the present writing, I was convinced that 
 the full facts of the case, on both sides, were to be 
 found in the United States ; Washington was in- 
 deed the battle ground of lawyers and diplomats. 
 Not until I reached Tampico, however, not until I 
 went out to the oil fields, did I realize that the real 
 problem is not the question of diplomatic contro- 
 versy or commercial adjustment. There, on the 
 long roads, where but one peon of all the thou- 
 sands whom we passed, took off his hat to the 
 white patrones, as every one would have done 
 twelve years ago, I found the touchstone. I knew 
 then why reason will not prevail, why justice is 
 non-existent, why no white man has yet been able 
 to feel firm ground beneath his feet in the discus- 
 sion of the oil problems. These problems have had 
 their rights and wrongs, as we shall see, but I 
 think that the great difficulty we at home have had 
 in believing that our own people could be right 
 has been our inability to conceive how, being right, 
 the Mexicans could be so hostile to them. 
 
 This, I think, is the point of departure in our 
 misunderstanding of the Mexican situation, espe- 
 cially as it applies to oil. Mexican jealousy and 
 Mexican realization of the weakness of the na- 
 tional psychology in great enterprise have set 
 
210 TRADING WITH MEXICO 
 
 Mexico frantic with the success, the triumph, the 
 apparent imperturbability of the great foreign 
 oil companies. This alone has made their hos- 
 tility to the American drillers, linemen and en- 
 gineers who night and day, month after month 
 through the years of the war, kept the lines open, 
 the oil flowing. Unarmed, and slaughtered by the 
 score from ambush, grim, unkempt, often happily 
 drunk in town, these frontiersmen added their bit 
 to the fire, to be sure. But note this it was not 
 the white man's rough assertion of superiority 
 or the companies' "tactless insistence," but the 
 Mexican's conception of his own inferiority, per- 
 sonal, commercial, political, which lit the flame and 
 kept it burning. 
 
 The world has entered upon a new industrial 
 era, the age of petroleum. The commercial strug- 
 gle is to-day not the war for markets, but the race 
 for oil lands. And of all the petroleum fields 
 known to exist, those in Mexico are the greatest 
 in actual production, the greatest in potential ex- 
 tent, and the most favorably situated for distri- 
 bution all vivified by the greatest individual oil 
 wells in the records of the world. 
 
 The story of the development of that oil field is 
 linked with the history of Mexico, inexorably, in- 
 evitably a part of it, influencing it, all but domi- 
 nating it. 
 
 The first oil well in Mexico was brought in in 
 
ROMANCE OF MEXICAN OIL 211 
 
 1900; production began on a commercial scale in 
 1903; about 1904 a British company secured its 
 first " concession " for oil drilling; in 1905 the 
 status of petroleum as belonging to the owner of 
 the surface land was definitely settled, and de- 
 velopment began on a large scale; in 1912 the 
 Madero government established, over the mild pro- 
 tests of the producing companies, the principle of 
 special taxation on the oil business ; in 1914 Presi- 
 dent Huerta extracted 200,000 Mexican pesos from 
 an American oil representative in Mexico City, 
 and the oil company, under advice of the Depart- 
 ment of State, repudiated his draft and paid the 
 money to Carranza; in 1914 the principle of 
 "shaking down" the oil companies was originated 
 by Candido Aguilar (later son-in-law of Car- 
 ranza), who made a mild $10,000 collection; in 
 1915 Manuel Pelaez made his first call for tribute, 
 some $1,500, under the exchange conditions of the 
 day, which the companies paid with the advice of 
 the American State Department and the American 
 Ambassador, a precedent which later netted Pelaez 
 a regular $30,000 a month; in 1915 Carranza be- 
 gan to devote the brains of his finance minister, 
 Luis Cabrera, to devising oil taxes, with the result 
 that to-day the foreign oil companies pay a total 
 of nearly $4,000,000 a month, derived from export 
 taxes on the product, stamp taxes on their busi- 
 ness, occupation taxes on their offices, harbor taxes 
 
212 TRADING WITH MEXICO 
 
 on their ships, customs duties on their supplies, 
 etc. ; in 1916 Carranza issued the decree requiring 
 foreigners who did business in Mexico to renounce 
 their rights of recourse to their home government ; 
 in 1917 came the new Mexican constitution declar- 
 ing all petroleum in the subsoil the property of the 
 nation; in 1919 the drilling of new wells was 
 stopped unless the companies agreed to accept this 
 principle of nationalization ; in 1919 the second of 
 the big oil pools went to salt water and the need 
 of new drilling to keep up the supply of oil (and 
 the Mexican taxes) became imperative; in Janu- 
 ary, 1920, temporary drilling permits were issued 
 by Carranza; in May, 1920, Carranza was over- 
 thrown and murdered in the revolution of Obre- 
 gon, said to have been financed by certain oil in- 
 terests; in 1921 Obregon doubled the oil taxes, 
 bringing about a shutdown, temporary but salu- 
 tary; in 1921 drilling is going on, however, and 
 the shipment of oil continues. 
 
 While drilling is going on in small sections in 
 spite of obstacles, the full development of the pe- 
 troleum fields of Mexico waits on the final decision 
 of the confiscatory provisions of Carranza, whose 
 dead hand still guides the policies of his succes- 
 sors along the road of anti-foreignism. In 1921, 
 then, the oil companies are still uncertain of their 
 status, still the objects of astonishing taxation, 
 still subject to government annoyance and graft, 
 
ROMANCE OF MEXICAN OIL 213 
 
 still buying, in taxes and annoyances, the " privi- 
 lege " of working their properties. 
 
 The plants of the foreign companies are proba- 
 bly the greatest installation in any single oil field 
 in the world. The investment in pipe lines, pump- 
 ing stations, storage tanks, refineries, terminals 
 and ships represents close on $750,000,000; the 
 length of the 161 pipe lines (practically all of them 
 eight or ten inches in diameter) totals nearly 1,000 
 miles, while nearly 1,500 steel tanks, with a capac- 
 ity of 60,000,000 barrels, furnish enough storage 
 to fill a thousand ships. Through the pipe lines 
 can pass, under high pressure, 750,000 barrels a 
 day, although the average production for 1920 was 
 about half of this amount. 
 
 In the Mexican fields in April, 1920, the latest 
 date for which figures are available, there were 
 304 wells in production, 148 located and 123 drill- 
 ing. The total of commercially unproductive wells 
 to that date was 464, including only 35 which 
 showed oil in too small quantities. Three-fifths 
 of all the wells drilled in Mexico have been dry 
 holes, and to-day of 1,113 wells drilled and pro- 
 jected, only 75 which have actually flowed oil have 
 run out of production. These last, however, in- 
 clude some of the greatest in the history of the 
 petroleum industry. 
 
 The vast investment and plant in the Tampico- 
 Tuxpam fields produced in 1920 over 140,000,000 
 
214 TRADING WITH MEXICO 
 
 barrels of oil, one-fourth of all that was produced 
 in the entire world, equaling some 40 per cent of 
 the production of all the fields in the United 
 States. The 1920 production was nearly five 
 times that of 1913, when less than 26,000,000 bar- 
 rels were extracted from the Mexican wells, and 
 when Mexico 's total oil output was only one-ninth 
 that of the United States and contributed less 
 than one-twelfth to the production of the world. 
 The growth has been steady and by tremendous 
 strides, for when the pressure of war was on, the 
 men who were taking out Mexican oil built up a 
 production which between 1916 and 1917 brought 
 an increase of 40 per cent and began a develop- 
 ment that despite superhuman difficulties gained 
 such momentum that between 1919 and 1920 the 
 increase was 60 per cent. 
 
 On your map you will easily find, on the eastern 
 shore of Mexico, the city of Tampico, located in 
 the center of the palm of the hand with which 
 Mexico grasps the great Gulf. A little to the 
 south you will find, with difficulty, the town of 
 Tuxpam, midway between Tampico and Vera 
 Cruz. From Tampico directly south to a few 
 miles west of Tuxpam runs the "line" along 
 which lies virtually all the oil yet developed in 
 commercial quantities in Mexico. The "line" is 
 thirty-five miles long; the great producing terri- 
 tory never extended over twenty miles; momen- 
 
ROMANCE OF MEXICAN OIL 215 
 
 tarily the section which is giving the oil of the 
 Tuxpam district is along ten miles in the middle 
 of the "line" and the territory is hardly a half 
 mile broad at its greatest width. This section pro- 
 duced in the past ten years 500,000,000 barrels of 
 oil. In 1920 it produced about 140,000,000 barrels, 
 close to one-quarter of all the oil taken from all 
 the wells in the world. 
 
 Now trace the "line" north to Texas and Okla- 
 homa it is an extension of the great mid-con- 
 tinent field of the United States. Now go south, 
 through the old Furbero field, swing a little in to- 
 ward the Gulf, and south of Vera Cruz, on the 
 Isthmus of Tehuantepec, you will find Mlnatitlan, 
 the site of early drillings, and of the refinery of 
 the Mexican Eagle Oil Company. Still south, on 
 the "line," and you will find, if your map is large 
 enough, the village of Macuspana, in the state of 
 Tabasco. Here oil of a grade so fine that the na- 
 tives burn the crude seepage in their lamps has 
 been oozing through the soil for centuries, and 
 here, long ago, the British drilled many test holes. 
 The "line" runs true, skirting the Gulf of Mexico. 
 
 Still more. There are oil seepages on the West 
 Coast, an extension, perhaps, of our California 
 fields. Other indications have been found, even 
 far inland, and indeed on the Gulf side, the "line" 
 does not by any means cover the seepages, even 
 of the coastal plain. All this section, off into the 
 
216 TRADING WITH MEXICO 
 
 interior toward the states of Puebla and Hidalgo, 
 has been leased for oil. But production sticks to 
 the " line. " 
 
 The Tuxpam field, the heart of the "line," will 
 ultimately go to salt water. Of this there is no 
 question. Every pool of oil that has been drained 
 now three in number has given its 100,000,000 
 barrels, and the steaming, brackish water, still 
 under terrific pressure, has wiped out the prop- 
 erty, often between sunset and sunrise a few 
 hours between 50,000 barrels a day and nothing. 
 Dos Bocas at the northernmost end of the "line," 
 came in on July 4, 1906, hailed as the greatest well 
 of history, blew out her casing, caught fire and 
 burned for months, a torch of gas and flame 850 
 feet high, till (if it was oil and not gas she burned) 
 she had easily spent her 100,000,000 barrels. An- 
 other great British well, Portrero del Llano No. 
 4, flowed eight years, giving nearly her 100,000,000 
 to industry, and went to salt water over night. 
 The Casiano field, of the Doheny interests, paid a 
 similar toll. Cerro Azul No. 4 of the same com- 
 pany came in at a full rate of 162,000 barrels a 
 day. She has never been allowed to flow full, for 
 the whole field is owned by the company, and the 
 pool is considered safe from drainage. Further 
 south, the Doheny companies have, in 1921, opened 
 another vast field, the Chapapote Nunez but that, 
 still, is "on the line." 
 
ROMANCE OF MEXICAN OIL 217 
 
 During the past year the Naranjos field has been 
 showing salt water; the Chinampa, with a hun- 
 dred wells located on a relatively few acres, is 
 being drained at top speed, and salt water has 
 been cutting closer in at its edges. To-day the 
 Zacamixtle camp, the last of the "line," which 
 was drilled like mad by scores of crews putting 
 down wells that cost in Mexico $100,000 each, has 
 been narrowed to a strip of an oil river only a 
 few hundred yards wide. 
 
 With Chinampa and Zacamixtle gone, only the 
 Cerro Azul, the sixty square miles of the Chapa- 
 pote field, and the adjacent Toteco pool will re- 
 main on the "line" with no reserves save to the 
 south, in a territory recently proved by the 
 "Toteco" and "Chapapote" districts, or to the 
 north, in the Tampico or Panuco field proper. 
 This last is a heavy oil section, and here, too, the 
 largest portion of the territory is owned by the 
 Doheny companies. 
 
 Why, with this dwindling field, this steady re- 
 duction in reserves, has there not been more de- 
 velopment in Mexico? You know the basic an- 
 swer revolution. But through revolution and 
 graft and theft and murder the American opera- 
 tors in the oil fields, working for British and 
 American companies, have kept on the job. Revo- 
 lution is not the only answer. 
 
 Carranza, when he became president of Mexico, 
 
218 TRADING WITH MEXICO 
 
 cast envious eyes toward the oil fields, and sought 
 to make them his own, for loot and for graft, and 
 not for conservation, be it noted here. He " na- 
 tionalized " petroleum, by his new constitution, 
 and tried to force the companies to give up their 
 properties. They did not surrender, in fact or 
 in principle, and for five years have fought for 
 their rights, and for what they believe is the hope 
 of oil development in all the backward lands of the 
 globe. 
 
 In 1919 Carranza stopped the drilling of new 
 wells, in an effort to force the companies to submit 
 to his decrees, and not until Tepetate and Juan 
 Casiano went to salt water and the tax returns of 
 nearly $30,000,000 a year (at that time) were 
 direly threatened, did he give temporary permits 
 for drilling. He might fight for the nationaliza- 
 tion of the oil, but he was routed by the danger 
 to the vast sum upon which he ran his government 
 and upon which his generals and favorites fat- 
 tened and grew rich. 
 
 Thus in the oil fields drilling has been resumed. 
 But off the "line" there is virtually no drilling, 
 none of the "wild-catting" which is the life of the 
 oil industry. Until the new government, if it ever 
 does of its own free will, loosens the death-grip 
 of Carranza, the oil industry will remain para- 
 lyzed and confined to its narrow, shrinking bed be- 
 tween Tampico and Tuxpam. 
 
ROMANCE OF MEXICAN OIL 219 
 
 But why does Mexico go on? Why does she see 
 so little of the way before her? The situation is 
 complicated by many factors, two of which stand 
 out in relief. These are the support given the 
 Carranza ideas first by the British companies and 
 second by some new American companies. The 
 British needs in Mexico have from time to time 
 been identical with the American, and then the 
 two have worked together, but the British occupy 
 a peculiar position, going back to the Madero revo- 
 lution of 1910-11. At that time the Mexican Eagle 
 company (which is a Mexican corporation) was 
 caught with a number of the old Diaz " reaction- 
 aries" as its company officials, and it was also the 
 holder of the hated Diaz "concessions." As a 
 result it had to walk the chalk line very carefully 
 under both Madero and Carranza, a condition 
 which has always made its position weaker than 
 the American. The large local business of the 
 Eagle Company, in refined gasoline and oils, as 
 well as in fuel oil, has also complicated the matter. 
 It was due to these and similar factors that the 
 Eagle Company placed itself under the "protec- 
 tion" of the Carranza decrees when they were 
 first issued, although with protests, both legal and 
 diplomatic. With a single American exception, 
 the English interests were the only ones which 
 gave any conjfort to those early Carranza plans. 
 Upon their support the former president built 
 
220 TRADING WITH MEXICO 
 
 many of his subsequent activities, including the 
 ruling on drilling permits. He gave these permits 
 to the Eagle Company without conditions, at the 
 very time withholding them from the "un- 
 friendly" Americans under a demand for a writ- 
 ten waiver of all protest against future petroleum 
 legislation. 
 
 The second form of support which the Mexican 
 governments obtained is more recent, and more 
 complicated. Under the Carranza decrees oil 
 lands were open to "denouncement" (or filing of 
 claims) and the taking out of a "denouncement" 
 even to protect one's own property was taken as 
 an unqualified recognition of the right of Mexico 
 in confiscating the oil rights of that property. 
 The American and British companies united in 
 an agreement not to denounce their own lands and 
 not to buy or lease denouncements upon any other 
 lands. 
 
 In 1919, some new American interests, which 
 had had other experience in oil, entered the Mex- 
 ican field. They spent some $500,000 in looking 
 up titles to the properties and leases held by the 
 old companies. They found many defects, for the 
 inheritance laws, the poor records and the negli- 
 gible value of the properties as farm lands make 
 questionable titles the commonplace of the oil 
 game in Mexico. Where there was an apparently 
 defective title, these interests acquired the out- 
 
KOMANCE OF MEXICAN OIL 221 
 
 standing lien, and so laid claim to some of the 
 finest producing lots. 
 
 So far the plan was a not unexpected move to- 
 ward getting a hand in the oil game, a chance to 
 sit in with big stakes alongside the big companies. 
 The new elements, however, next "denounced" 
 their new claims before the Carranza government, 
 thus placing themselves quite outside the old- 
 crowd oil camp. This "denouncing" of their 
 properties brought them many favors from Car- 
 ranza officials, but it made negotiation with the 
 old companies difficult. 
 
 The Mexican oil problem, in its simplest, is 
 three-fold. It has to do, first, with the nationaliza- 
 tion of the petroleum in the subsoil, which threat- 
 ens to wipe out vested property ; second, with the 
 question of taxation, which may at any time, and 
 indeed actually threatens to become confiscatory; 
 third, with the problem of concessions which are 
 to-day the most obvious form of political graft and 
 to-morrow may precipitate a Mexican war over 
 petroleum rights. 
 
 First, the nationalization of petroleum. The 
 Constitution of 1917, adopted by Carranza, and 
 continued by de la Huerta and Obregon, definitely 
 declares petroleum the property of the nation. In 
 the grants of land made by the Spanish crown, 
 (the basis of all land titles in Mexico to-day), gold, 
 silver and other metals were especially reserved 
 
222 TRADING WITH MEXICO 
 
 as the property of the king, and in colonial times 
 and since have been worked only by special per- 
 mission or grant under " denouncement," quite 
 independently of the owner of the land. Neither 
 coal nor oil was known to commerce in Spanish 
 times, but in 1884, when the mining laws were re- 
 vised, the Mexican government as inheritor of the 
 rights of the Crown of Spain and retaining, as it 
 did and does, the royal control over gold and 
 silver, specifically stated that coal and oil be- 
 longed to the owner of the surface. This was con- 
 firmed later in the mining laws of 1892. In 1905, 
 after oil was discovered and certain concessions 
 for drilling had been issued to Sir Weetman Pear- 
 son (now Lord Cowdray), head of the Mexican 
 Eagle Oil Company, an effort was made to have 
 oil declared the property of the nation, like gold 
 and silver, and thus subject to concession and de- 
 nouncement. This was opposed by the American 
 interests, which held no concessions. The issue 
 was decided virtually unanimously by the Acad- 
 emy of Jurisprudence, and in the mining laws of 
 1909 the title to oil was definitely and unequivoca- 
 bly vested in the title to the surface soil. 
 
 Until 1917, the vast development of Mexican 
 oil fields went on apace, based on the old property 
 rights and apparently safe from molestation. 
 Carranza switched the matter completely around 
 by the simple expedient of adding oil to the list 
 
ROMANCE OF MEXICAN OIL 223 
 
 of minerals which are national property and plac- 
 ing the new ruling in that famous Article 27 
 which contains most of the anti-foreign provisions 
 of the new constitution. 
 
 The Mexican defenses of this action are two. 
 The primary thesis is that the subsoil has always 
 belonged to the government, whether king or re- 
 public, and that it was beyond the power of min- 
 isters or courts or legislatures to alienate those 
 rights. In other words, Mexico is only " taking 
 back her own." The opposition to this is on the 
 basis of vested rights, on the long periods during 
 which the owners of the lands had actually en- 
 joyed possession of the subsoil, paying taxes on 
 full valuations, and on the virtual obligation of 
 contract of all Mexican governments to support 
 developments under the laws of their prede- 
 cessors. 
 
 The other contention, more general and yet with 
 a stronger appeal to modern radicals, was that 
 such nationalization was in line with the trend of 
 the times, a trend later manifested in the Russian 
 revolution. Candido Aguilar, then Carranza's 
 foreign minister, gave voice to this phase in his 
 note of August 12, 1918, to the British Foreign 
 Office, where he stated that "the modern concep- 
 tion of property is that it is a social function 
 bound closely to the prosperity of the State." 
 
 Both these contentions might in fact be worthy 
 
224 TRADING WITH MEXICO 
 
 of consideration if the government of Mexico were 
 of a character to be trusted, if it were indeed gen- 
 uinely devoted to any sincere ideals of social re- 
 form, if it were truly interested in the conserva- 
 tion of the nation's resources for the benefit of the 
 people. But the Mexican governments have been 
 none of these things, truly believe none of these 
 things. The radicalism of Mexico, the socialism 
 of Mexico, are means to an end, not ends in them- 
 selves, means to power and position, for loot and 
 for the pelf which goes into private pockets and 
 not even into national coffers. 
 
 Certainly if government could be depended on, 
 the idea of paying fixed royalties to a national 
 treasury is financially preferable to dickering 
 with individuals, and obviously more businesslike. 
 But since oil has been known, the great organiza- 
 tions which handle the product have been accus- 
 tomed to dealing with private owners ; it is a game 
 they know, a business they understand. In Mex- 
 ico there is the other factor which one can never 
 lose sight of, and that is that government control 
 means graft, favoritism, chicanery, the meddling 
 of foreigners and big business in the very heart of 
 the councils of government. And those things, 
 until now avoided, must never come into being. 
 
 In the final analysis, the proposed nationaliza- 
 tion of petroleum has never been a conservation 
 measure, the only excuse (to radical or to con- 
 
ROMANCE OF MEXICAN OIL 225 
 
 servative) for its promulgation. The Mexican 
 governments, from Carranza to Obregon, ac- 
 cepted " denouncements " upon petroleum lands 
 already developed, granted vast concessions for 
 drilling, on a royalty arrangement with the gov- 
 ernment, in so-called navigable streams and other 
 "federal zones," and in every way in their power 
 carried on a redistribution of petroleum titles. 
 This single fact of the government acceptance of 
 such denouncements and concessions indicates that 
 the intention is not to conserve, but to get a new 
 deal with somebody besides the Gringoes and the 
 Indians who own the oil lands sitting around the 
 table. 
 
 The whole interpretation of the oil features of 
 Article 27 seems at variance with the ideas of 
 genuine radicals as completely as it is at variance 
 with the ideas of dyed-in-the-wool conservatives 
 who still dare talk of "vested rights. " The effect 
 of the enforcement of the nationalization plan 
 would be first to change royalty payments from 
 the land owners to the government and second to 
 move the dealings for oil leases from the open field 
 and the negotiations of plain buying and selling 
 to the conferences of government officials where 
 honor is to-day a -more commercial commodity 
 than land, and where the proportions of lease 
 money to graft would be as one to ten. It would 
 indeed, bring on the era of concessions and fa- 
 
226 TRADING WITH MEXICO 
 
 voritism with a vengeance, and the dismal pictures 
 of the foreigners' corruption and exploitation of 
 Mexico would become a bitter reality. 
 
 At present, the chief hope of avoidance of such 
 a condition lies in Article 14 of the same Consti- 
 tution of 1917, which declares that none of the 
 provisions of that instrument shall be construed as 
 being retroactive. The interpretation of non- 
 retroactivity has been the subject of much discus- 
 sion. At one time Carranza's foreign minister 
 told the oil companies that it should be understood 
 to mean that the government would not collect 
 for the oil already extracted. At other times it 
 has been held that the expropriation of petroleum 
 rights would not affect the properties where wells 
 were opened prior to May 1st, 1917; then not to 
 land acquired for drilling purposes before that 
 date. It was this detail which was taken up by the 
 Mexican Supreme Court in August, 1921. But 
 after years of fighting single incidents, an<? 
 working along the theory that American com- 
 panies could demand only their own rights, the 
 issue has actually broadened to the whole ques- 
 tion of property rights of Mexicans as well as for- 
 eigners. There are millions of acres of potential 
 petroleum land in Mexico, not one per cent of 
 which is owned or leased by foreigners, and all this 
 would be wiped out, along with foreign properties, 
 if the oil were declared definitely confiscated to 
 
ROMANCE OF MEXICAN OIL 227 
 
 the nation, or even if merely the "oil" lands 
 were exempted. 
 
 Were non-retroactivity interpreted to national- 
 ize only the oil and coal in federal lands to which 
 no title had ever been given to private individuals, 
 the vested rights of land owners would be pro- 
 tected whether petroleum had been discovered on 
 the property or not. Such an idea of nationaliza- 
 tion would approximate the control of oil in na- 
 tional lands in the United States under the new 
 leasing laws. It is this interpretation which the 
 oil companies and the Mexican land owners are 
 seeking, and which has not been touched by the 
 Mexican Supreme Court decisions noted above. 
 
 The second issue in the oil controversy is taxa- 
 tion. Until the 1921 temporary increase, export 
 duties on oil were collected at a theoretical rate 
 of 15 per cent of its value. This valuation is sup- 
 posedly on the basis of sales of oil in Mexico. 
 There are hundreds of such sales, but their prices 
 are not taken, and arbitrary estimates ostensibly 
 based on the prices for which oil is sold abroad, 
 less another arbitrary allowance for transporta- 
 tion, are the criteria. The results of this system 
 have been confusing to the exporters, to say the 
 least. Some of the lower grades of oil, for in- 
 stance, were actually paying, not 15 per cent of 
 their value, but 40 or 50 per cent. The valuations 
 fluctuate also according to government caprice and 
 
228 TRADING WITH MEXICO 
 
 the need of tax money; the result is another dif- 
 ficulty in making close prices to consumers, which 
 in the end all must feel in the price of gasoline. 
 A peculiar tax difficulty of the oil companies was 
 over an exact doubling of the valuations and thus 
 of the taxes, made by the Carranza government 
 a few days before it fell an increased tax which 
 the de la Huerta and Obregon governments have 
 sought to collect. Still more recent is the virtual 
 doubling of oil taxes which shut in many of the 
 wells during July, 1921. 
 
 The direct oil taxes are now about $2,000,000 a 
 month, so that the doubling is an item of no small 
 moment. At present no immediate solution of the 
 tax difficulties is in sight, and the companies have 
 been split by favoritism into two camps. One is 
 largely British, which finds it profitable to accept 
 the decrees. The other is largely American and 
 finds the enforcement of the new regulations op- 
 pressive. Some plans for relief have been dis- 
 cussed. One of the proposed oil bills based on 
 Article 27 interprets it not as nationalizing pe- 
 troleum, but as nationalizing the right of taxation, 
 taking all tax privileges from the states and vest- 
 ing them in the federal power. The idea would 
 be to provide a single direct tax on petroleum ex- 
 tracted from the soil instead of upon that exported. 
 Apparently this tends toward a solution of the tax 
 question. But here again enters the difficulty of 
 
ROMANCE OF MEXICAN OIL 229 
 
 dealing with Mexicans, for such a direct tax would 
 be without recourse, until its provisions became 
 confiscatory, while at present the companies have 
 at least a chance of defense in protests against 
 arbitrary valuations. 
 
 The outstanding fact in the tax situation, as in 
 the nationalization question, is the bad faith of 
 Mexican government. The much discussed re- 
 forms are non-existent, and government in Mexico 
 is for the benefit, not of the governed, but of those 
 who rule, and taxes fill not the treasury but the 
 pockets of officials, and appropriations are not for 
 schools and civic welfare, but for the army and 
 "public works," where graft is so colossal that it 
 passes the conception of citizens of simpler lands. 
 
 The third element of the Mexican oil problem 
 has to do with concessions. This is a phase of 
 nationalization, but to-day it has taken on an im- 
 portance which recently obscured other issues. 
 The government had issued a number of what are 
 called " federal zone concessions," giving to indi- 
 viduals and companies the right to explore and 
 extract oil from the rivers, lakes, etc. The federal 
 zones are narrow strips along the seashore and 
 navigable rivers on which an easement has been 
 reserved for the public use. The American oil 
 companies contend that this mere easement can- 
 not be converted into absolute ownership, which 
 is the effect when the government grants to third 
 
230 TRADING WITH MEXICO 
 
 parties the right to drill wells there and thus to 
 tap the pools of oil which the companies have dis- 
 covered and developed and on which they are 
 paying rentals to land owners. 
 
 There were a few oil concessions under Diaz, 
 practically all to English companies. One of the 
 great shibboleths of the Madero revolution was the 
 wiping out of the system of concessions, so no 
 more were given until toward the end of the Car- 
 ranza regime. Beginning then, becoming almost 
 an orgy in the brief rule of de la Huerta, and con- 
 tinuing into the days of Obregon, concessions 
 have become common, some going indirectly to 
 a few American companies, many to the British 
 corporations and more to Mexican favorites of the 
 ruling group. The concessions issued cover prac- 
 tically every river and semi-arid gully (regarded 
 as a "navigable stream " for the purposes of the 
 concession) in the whole Tampico-Tuxpam field, a 
 stretching of the "federal zone" idea in order to 
 make possible the penetration of the producing 
 fields by concessionaires. 
 
 Other concessions are of different sort. Under 
 de la Huerta one was issued giving the right to 
 explore rivers, lakes and government lands over 
 the entire republic, with preferential drilling 
 rights up to a production of 400,000,000 barrels 
 per year, the chief consideration being a return to 
 the Mexican government of 40 per cent of the 
 
ROMANCE OF MEXICAN OIL 231 
 
 gross value of the oil found. Another, to a com- 
 pany, also American, gives rights to explore 
 Lower California and other West Coast states, 
 with the privilege of denouncing not only govern- 
 ment lands, but private properties as well the 
 return to the government in this case is 10 per 
 cent of the gross. 
 
 The concession feature of the oil question, like 
 the others which I have described, has its rights 
 and its wrongs, but the fact of giving concessions, 
 and in such blanket form, to take oil from the 
 lands of private property holders, is in itself proof 
 of but one thing the intention of the Mexican 
 government, not to conserve its resources of oil 
 for the benefit of its people and the generations 
 yet unborn, but to get out of the oil business as 
 much as possible as quickly as possible and 
 solely for itself and its favorites. 
 
 The final phase of the oil problem in particular 
 and of the entire Mexican question in general is 
 anti-foreignism. Article 27 of the new constitu- 
 tion contains a number of anti-foreign provisions 
 other than petroleum nationalization. One is that 
 only Mexican citizens may develop oil (and other 
 properties) in the republic. Another section of 
 the Constitution, as I have mentioned, gives this 
 provision force by requiring that foreigners who 
 sought to work such properties should appear be- 
 fore a government department and waive all 
 
232 TRADING WITH MEXICO 
 
 rights of appeal to their home government for 
 protection. This and other anti-foreign pro- 
 visions are summed up in the so-called * ' Carranza 
 Doctrine, " one of the interesting developments of 
 his picturesque reign. This has been stated as 
 follows : 
 
 "No individual should aspire to a better situation than 
 that of the citizens of the country to which he goes; 
 legislation should be general and abstain from distinc- 
 tions on account of nationality. Neither the power of 
 nations nor their diplomacy should serve for the protec- 
 tion of particular interests or to exert pressure upon 
 the governments of weak peoples with the end of obtain- 
 ing modifications of laws which are disagreeable to the 
 subjects of a powerful country." 
 
 The world outside largely persists in taking 
 Mexican professions at their face value, and in 
 solemnly accepting the beautiful Mexican laws 
 and the beautiful Mexican arguments as literally 
 true. On this point I have quoted elsewhere the 
 words of a great Mexican publicist, who has writ- 
 ten: "The carpet baggers of Mexico have tradi- 
 tions rooted as far back as colonial times. They 
 combine the shrewd and subtle wit of the Indian 
 with the grandiose words of modern civilization, 
 with which they have gained the sympathy of un- 
 informed outsiders." Our own State Department 
 has answered the "Carranza Doctrine" in no un- 
 certain terms and once wrote that "the Depart- 
 
EOMANCE OF MEXICAN OIL 233 
 
 ment is of the opinion that ... an attempt is be- 
 ing made to coerce American companies ... to 
 admit in advance ... the correctness of the 
 contention of the Mexican government in the 
 matter of ownership of oil deposits, against which 
 the American government has made solemn pro- 
 test as threatening confiscation of rights legally 
 acquired by American citizens." 
 
 In fact, there is no reason to doubt that vir- 
 tually all of the oil decrees of Carranza, all the 
 rulings of his ministers, all the regulations which 
 have been enforced with such insistence on petty 
 details have been, first, appeals to sentimentalism 
 abroad and, second, childish expedients to force 
 recognition by the foreigners of some sort any 
 sort of superiority in the Mexicans. In the last, 
 so well set forth in the State Department message 
 quoted just above, lies the basic cause of the fail- 
 ure of the companies to reach an agreement with 
 the Mexican government. Every willingness to 
 discuss a point, every slackening of their demands, 
 has been accepted, not as an approach to a solu- 
 tion, but as a weak concession to Mexican "na- 
 tional pride" and personal dignity. 
 
 There are two remaining reasons why the oil 
 question remains unsettled. They are extremely 
 practical, loot and incompetence. Of the former, 
 George Agnew Chamberlain, the novelist, recently 
 American Consul General in Mexico City, has 
 
234 TRADING WITH MEXICO 
 
 written in his book, "Is Mexico Worth Saving?" 
 that: 
 
 "Today it is taken as a matter of course that ninety 
 per cent of all Mexican officials in positions of trust are 
 openly corrupt and will inevitably continue so until 
 controlled by some greater power than any single faction 
 of their peers. . . . The graft of Mexico is outright loot ; 
 its effect is to open simultaneously all the arteries of the 
 body politic and to pour the entire life blood of the 
 nation into the gullets of the group in power." 
 
 The oil companies are the ripest prey for loot in 
 all Mexico. Their individual employees pay graft 
 of certain kinds of that I have no doubt, although 
 there is vigorous and official denial. The com- 
 panies themselves, however, pay a tribute, through 
 the channels of astonishing taxation and contribu- 
 tions to public works, which is no less than the buy- 
 ing of the privilege of doing business. Another 
 phase appears in the gossip which is general that 
 one of the English companies materially aided the 
 Obregon revolution certainly every moneyed in- 
 terest in Mexico had ample opportunity to do so. 
 The American companies were, after Obregon 's 
 occupation of Mexico City, " shaken down" for 
 about $1,000,000 which was credited against taxes 
 and the taxes afterwards proportionately in- 
 creased ! 
 
 As a whole, the companies have resisted the 
 temptation to ease their way along the broader 
 
ROMANCE OF MEXICAN OIL 235 
 
 paths of high government by the voluntary use of 
 money they have generally confined their ex- 
 penses to the ample totals of taxes and assess- 
 ments. It is for this reason that one of the most 
 serious phases of the Mexican congressional dis- 
 cussion of petroleum legislation is that practically 
 every member of the Mexican congress expects 
 "his," and when it is not forthcoming, will see to 
 it that nothing favorable to the foreign companies 
 finds its way to the statute books. 
 
 Lastly, incompetence. Perhaps the most appal- 
 ling factor of the whole Mexican situation is the 
 utter and profound ignorance of the men in con- 
 trol of the national affairs, men to whom the cul- 
 ture, the very procedure, of modern civilization 
 are as a closed book. I believe that the oil problem 
 is made serious chiefly because the Mexicans who 
 might otherwise be willing to solve it are so un- 
 educated, so limited in viewpoint and understand- 
 ing, that they cannot conceive of the vast sums of 
 money which must be invested in pipe lines, stor- 
 age tanks, pumping stations, wharves and ships 
 and refineries before the oil taken from their coun- 
 try's soil becomes the fabulous treasure of which 
 they hear so much. They seem utterly incapable 
 of grasping the fundamentals of their national 
 problems; the pity of the condition almost ob- 
 scures the significance of the fact. It has not been 
 easy for me to explain the oil problem in its sim- 
 
236 TRADING WITH MEXICO 
 
 plest phases to Americans, yet in this chapter you 
 who have read it have learned more than the floor 
 leaders of the Mexican congress will ever know. 
 
 It is through this forest of ignorance, this slime 
 of graft, that the foreign oil companies are making 
 their way. They have committed many mistakes 
 in their handling of the situation, selfish mistakes, 
 mistakes of ignorance, but the struggle has been 
 against forces whose depravity has been literally 
 unbelievable. Personally, I am no fire-eater, but 
 I have seen much of Mexico and I have seen some- 
 thing of the pyschology of depravity, and I be- 
 lieve that the last lingering hope of Mexican 
 adaptability to world conditions lies in Mexican 
 recognition of the need of grasping truth rather 
 than theory, of facing facts with manly faith in 
 Mexico and in Mexican ability to solve her prob- 
 lems as other nations solve theirs, by honesty and 
 patriotism and not by graft and personalism. 
 This attitude the oil companies have nurtured, 
 and in this their policy has been a policy of weak- 
 ness. Seeking here an outlet for the day, there a 
 hope for the morrow, they have put a premium 
 on Mexican dishonesty, given a prize for Mexican 
 argumentative skill. I know some of the prob- 
 lems the companies have faced, I know the need 
 for oil during the war, I have written here some- 
 thing of the magnificence of their achievement, 
 but for all that, I hold that they have had much to 
 
ROMANCE OF MEXICAN OIL 237 
 
 do with the vacillation, the inefficiency, the watery, 
 grafting policy of the Mexican governments from 
 Carranza to Obregon. They have had a large part 
 in making such a policy successful by not refusing 
 unjust demands firmly and directly, by not chal- 
 lenging Carranza to close the oil fields, by not 
 taking a mighty loss to save the endless leak of 
 graft and taxes and cynical legislation which is 
 their heritage to-day. Even yet their policy is 
 one of conciliation to Obregon, the newest presi- 
 dent ; still they are offering compromise, still giv- 
 ing the subtle Mexican mind to understand that 
 perhaps they might agree to Article 27, perhaps 
 they might accept a little higher taxation, perhaps 
 they would like a few concessions, perhaps they 
 might be counted on to get the hopefully predicted 
 Mexican loan. 
 
 All this is the last phase of the complicated 
 problem. We have said, in days gone by, that this 
 is the problem of the oil companies, that theirs is 
 the gain and theirs should be the cost. But if I 
 have succeeded here I have conveyed an idea of 
 the breadth of the oil problem. It is no longer a 
 question of whether the American State Depart- 
 ment is making the proper moves to support hon- 
 est and industrious American investors and work- 
 ers abroad. It is no longer the academic problem 
 of whether the oil companies are handling their 
 business in an intelligent and efficient manner. 
 
238 TRADING WITH MEXICO 
 
 The problem is ours, yours and mine, of you in 
 Kansas, of me in New York, of our cousins in 
 England and China. It is the problem of the chap 
 who runs a Ford and of the man who is cutting 
 our freight bills by renting us a truck, of the 
 steamship company which is carrying our goods, 
 of the captain of the battleship which keeps us 
 safe from near and distant enemies. 
 
 The problem is not merely whether the white 
 peoples of the world are to have the right to de- 
 velop the riches of the backward nations for the 
 benefit of the world, but of how they are to do it. 
 So far, even in forward-looking lands, it has been 
 impossible to eliminate private ownership and 
 colossal private fortunes from the wheel of oil 
 production ; in Mexico, to-day, it would be disaster 
 beyond understanding to turn the right of con- 
 cession and oil privileges over to corrupt and 
 inept government. The battle of the oil companies 
 in Mexico is to save, first themselves from such a 
 fate, and second to save all the unopened oil 
 resources in the world from the strangling hold of 
 such governments and such peoples everywhere. 
 The oil industry can no longer carry the burden 
 of such conditions, for the prices of your gasoline 
 and your ship's fuel oil are reflections not of a 
 world scarcity, but of the uncertainty, the colossal 
 artificial difficulties of oil production in the back- 
 ward lands. 
 
EOMANCE OF MEXICAN OIL 239 
 
 Commerce has fashioned the world into one 
 brotherhood, and the Great War, for all its ap- 
 pearances, has welded us all into a mightier ma- 
 chine of civilization than history has ever known. 
 Oil is the fuel of that machine, and oil must come 
 to its engine, though all the power of politicians 
 and bandits combine to keep it in the soil. The 
 backward countries are swept into the forefront 
 of commercial importance when oil begins to flow 
 from their soil. The process is going on all over 
 the world. In Mexico it is at its zenith. The oil 
 must come, and from Mexico before all others, for 
 Mexico lies in the heart of the world, her shores 
 touched by more waters in proportion to her 
 area than any other continental nation. And her 
 stores of oil are the greatest man has yet found 
 or dreamed of. 
 
 To-day the world's need of oil threatens the life 
 of Mexico. It is eating out her body by revolu- 
 tions, by bandit governments, by colossal graft 
 which feeds on the ever growing river of gold from 
 the oil fields. The world's need for Mexico's oil 
 threatens her with intervention, not because of 
 capitalistic machinations, but because of the crass 
 and wicked injustices which the wealth has 
 tempted her to wreak upon her foreign residents, 
 because wealth has undermined her government 
 and given her over to demagogues. 
 
CHAPTER IX 
 
 THE GOLDEN GEESE 
 
 IN all these devious ways Mexico has tried to 
 kill the goose which lays her golden eggs. Not the 
 least onerous of her efforts in this direction has 
 been the seeking she has always done to make the 
 United States government and American business 
 men take the responsibility for this precious goose 
 of commerce. And sad to tell to the Mexican 
 mind at least we have not always awakened quite 
 promptly enough to our sudden new responsibili- 
 ties, and the goose has more than once dropped 
 near to dying in our arms. 
 
 That golden goose was the product of the na- 
 ture of Mexico and of the regime of Porfirio Diaz. 
 Long before Mexico became independent, long be- 
 fore the social problems which assail her now had 
 been allowed to gain impetus, Nature had given 
 up vast riches from the Mexican soil. Spain gar- 
 nered them in, and gave Mexico such care as she 
 knew bow to give, and the golden era of the three 
 centuries of Colonial life rolled out. Then came 
 the first revolution, and the destruction of such 
 wealth as Spain had left, until Diaz organized 
 what remained and with it began his thirty years 
 of peace. 
 
 240 
 
THE GOLDEN GEESE 241 
 
 In those thirty years. Mexico was changed from 
 a land whose wealth poured out in bonanzas re- 
 turning only caprice for industry and wealth for 
 caprice, into one where industry, solidly invested 
 capital, and wise foresight gained the golden 
 fruit. In other words, the goose became domesti- 
 cated, and produced golden eggs when she was 
 appropriately fed with golden capital and golden 
 brains. 
 
 It was literally the wealth imported and created 
 by those years of peace and domestication which 
 made possible the outbreak of revolutionary ac- 
 tivity in 1910 and drove Diaz from Mexico in 1911. 
 Prosperity was too much for poor Mexico. 
 
 The revolution, indeed, came at a moment of 
 Mexico's saturation with prosperity. And it has 
 continued by the continuation of that prosperity, 
 which has furnished and still furnishes the fuel of 
 banditry and revolution. It was not until after 
 Diaz fell that the great wealth of Mexican oil be- 
 came patent. And not until Carranza began im- 
 posing his taxes on the oil industry do we find the 
 upsurgence of the ideas of socialism, bolshevism 
 and nationalization which have been the battle- 
 cries of all the governments which have followed 
 him. Oil, as we have seen, has furnished the 
 sinews of war, and continues to furnish them, 
 despite all that can be done to turn the tide. 
 
 In the days of the revolutions previous to 
 
242 TRADING WITH MEXICO 
 
 the rewards of success were governorships, some- 
 times presidencies, and always some brief spell of 
 peace. But to-day the reward is too vast, the 
 graft quite too colossal, to slow down the round of 
 struggle. Wealth pours into the national capital 
 in amounts which would be quite hopeless of com- 
 prehension to the revolutionists of the older day. 
 More tax money reaches Mexico City to-day from 
 oil alone than Diaz had from every source at his 
 command while, save for the oil fields, Mexico 
 is to-day a desert waste. 
 
 It is no wonder, then, that the nation can and 
 does buy herself honors and praise in the world 
 outside, that she considers it criminal that she can- 
 not buy recognition, cannot force aid and trade 
 and gold to flow to her. Is she not wealthy and 
 can she not buy pages of advertising and the serv- 
 ices of hundreds of propagandists of every type 
 known to the trade? Gold is here and more gold 
 she expects to bring to her through other channels 
 than her own genuine advancement. She is back 
 again in the days of the bonanza mines, when 
 wealth went to caprice and labor and industry 
 meant nothing. 
 
 And so she is killing the golden goose, just as 
 she killed it long ago under the Spaniards, by 
 forcing it to lay and lay and lay, till at the height 
 of its productivity it is trembling to its death. De- 
 structive legislation, the bitter threat of its con- 
 
THE GOLDEN GEESE 243 
 
 fiscation, the continuing theft of vast sums in ex- 
 change for the privilege of struggling against 
 these laws and threats these are striking down 
 the golden bird. To-day that goose is dying, and 
 all Mexico seeks is to bring in, somehow, another 
 goose to feed her hungry office-holders. She is 
 willing that it shall be a relatively tame domestic 
 goose, if only it will lay the golden eggs of foreign 
 investment, trade, commerce she would gladly go 
 back to the relatively mild, but sure, wealth of the 
 time of Diaz. 
 
 And what does she offer to induce that timid, 
 wabbling goose across the national fence? I can 
 see behind her promises of privilege nothing more 
 substantial than outraged rights, and beside them, 
 the panting, half-dead corpses of two golden 
 geese of bonanza days the almost dead mining 
 industry, the sadly ill oil industry. For Mexico 
 has limited mining by confiscatory taxation and 
 by revolutionary outrages which left the mines in 
 such a state that to-day the cost of operation is 
 too great for them to continue under present 
 prices. And she has set about the starvation of the 
 oil industry, as we have seen, by limiting it to the 
 narrow field of the Tampico-Tuxpam district, 
 when the opportunities for oil development 
 throughout the whole of Mexico are probably un- 
 equaled in any similar area in the world ! 
 
 It is with such pictures as these that she would 
 
244 TRADING WITH MEXICO 
 
 tempt trade and commerce and investment to 
 Mexico. No, the "centennial expositions, " the 
 trade excursions, the special trips for special 
 friends of the government, even the official tele- 
 grams of thanks to American officials who breathe 
 a misplaced idealism with regard to Mexico 
 none of these, nor all of them, can quite make a 
 screen before the unhappy corpses of the once 
 lively golden geese of Mexican prosperity. 
 
 Let us resume, briefly, the list of the events 
 which have marked the process of the years in the 
 Mexican revolutions which began with the upris- 
 ing of Madero and which have been the means of 
 killing foreign enterprise and native faith in Mex- 
 ico 's succeeding governments. The list is long, 
 but it cannot be forgotten. 
 
 The revolution in 1917-1918 virtually wiped out 
 religion in Mexico, profaned, sacked and burned 
 churches, killed and outraged priests, violated 
 nuns and girls in the convents, and drove into 
 exile thousands of priests. The Constitution of 
 1917 virtually abolished religion, and yet the Prot- 
 estant churches have been allowed to continue 
 their work (with the result that many Protestant 
 missionaries of Mexico were active Carranza and 
 Obregon propagandists in this country). While 
 most of the exiled Catholic clergy have now been 
 allowed to return, they still work under conditions 
 which make religion a virtual monopoly of the 
 
THE GOLDEN GEESE 245 
 
 state, and practically eliminate religious freedom 
 in Mexico. 
 
 Ten years of revolution have all but wiped out 
 education in Mexico : first, by destroying the Cath- 
 olic schools, which were almost the only educa- 
 tional system in the country outside the great 
 cities, and, second, by so curtailing the appropria- 
 tions for public school expenses as to make edu- 
 cational organization impossible. 
 
 The revolutionary hordes, when Mexico City 
 was taken in 1915 by General (now President) 
 Obregon, sacked the city almost as thoroughly as 
 Attila sacked Kome, the public being invited by 
 proclamation to join in the looting. Beautiful 
 houses were made barracks for the soldiers ; auto- 
 mobiles and horses, including those of foreign 
 diplomats, were taken; stores and homes were 
 broken open and robbed, and trainloads of rich 
 furniture, including carloads of pianos, were 
 shipped out, much of the loot coming to the United 
 States to be sold. While the population, rich and 
 poor, starved, no food was allowed to enter the 
 city, and trainloads of beans and corn, the staples 
 of Mexican food, were shipped out. 
 
 The revolution virtually suspended the political 
 rights of the Mexican people. Under Carranza's 
 decrees, which to this day form the chief basis of 
 government in Mexico, no one may hold office who 
 ever served under Diaz or Huerta, or who was not 
 
246 TRADING WITH MEXICO 
 
 known to be a Carranzista before the Huerta up- 
 rising save by special permission, granted only 
 on personal appeal to the president himself. The 
 revolutionists continuously refused to allow any 
 Mexicans but those of known sympathies with 
 themselves to participate in elections, so that only 
 a fraction of the eligible voters have ever taken 
 part in any election. 
 
 The revolution exiled from Mexico, on one pre- 
 text or another, virtually all the higher type of 
 Mexicans, the men who throughout all Mexican 
 history have been the stable and stabilizing ele- 
 ment in the government, leaving Mexico in the 
 hands of demagogues of the worst type, from the 
 highest offices to the lowest. There has been talk 
 of political amnesty, but none has yet been forth- 
 coming, and the few Mexican exiles who return 
 do so under personal assurance of their personal 
 safety. 
 
 Mexico is to-day taxing her people, both natives 
 and foreign corporations, to an extent and with a 
 recklessness unknown even in war-ridden Europe. 
 Taxes on imports and exports have been doubled 
 and sextupled. The stamp tax has been quadru- 
 pled and broadened to cover almost every possible 
 human activity; direct taxation on every form of 
 industry and export taxes on the country's prod- 
 ucts have become the normal, where, before, these 
 
THE GOLDEN GEESE 247 
 
 forms of taxation were distinctly avoided in order 
 to encourage enterprise. Mexico is still spending 
 more on her army, mostly in graft, than Diaz 
 spent on his whole government, including interest 
 on foreign indebtedness (which the revolution has 
 never paid). 
 
 The present taxation system has been coupled 
 with favoritism and graft to an extent that pun- 
 ishes with ruin any enterprise (save those fed 
 from the natural resources of the soil, such as oil) 
 which is engaged in a business where profiteering 
 is not possible. 
 
 Carranza, as we have seen, financed his revolu- 
 tion by issuing 2,000,000,000 pesos of paper money, 
 forced into circulation at the points of bayonets. 
 None of this has ever been honestly redeemed. 
 The paper money orgy covered three years, and 
 absolutely wiped out all semblance of credit and 
 all use of paper in business. In its course, the 
 revolution took from the banks in "loans" approx- 
 imately $28,000,000, completing the ruin of the 
 banking system, as I have described above. 
 
 Carranza took over the railways of the republic 
 in 1914, and since that date the revolutionary 
 group has operated them for the profit of the gov- 
 ernment and themselves. They have increased 
 passenger, freight and express rates to figures 
 many times the normal, forcing the properties to 
 
248 TRADING WITH MEXICO 
 
 yield the national treasury $1,500,000 a month, 
 meanwhile paying nothing of rental to their 
 owners, whose fixed charges are being defaulted at 
 the rate of $1,000,000 a month a total theft of 
 nearly $400,000,000, growing at the rate of $1,- 
 000,000 a month. 
 
 The revolutionaries gained the support of the 
 sincere Mexican progressives and of American 
 students on the ground of a defense of the Mex- 
 ican Constitution of 1857, but after they came to 
 power they promulgated the Constitution of 1917, 
 a new instrument, although the old Constitution 
 was amply provided with means for its amend- 
 ment. The new document is the most radical writ- 
 ten Constitution in effect in the world to-day, but 
 its provisions have been used so far only for the 
 aggrandizement and enrichment of those who can 
 abuse its privileges. The provisions for the con- 
 fiscation and distribution of all pieces of land of 
 large area have been used only to take properties 
 of foreigners and Mexicans of the old regime to 
 hand them over to revolutionary leaders. The 
 provisions against the operating of mines, etc., 
 by foreign companies have so far been used only 
 to transfer such properties to friendly Mexicans 
 and Germans. The provisions " nationalizing" 
 oil deposits have been used only to exact tower- 
 ing taxes and millions of dollars of loot from 
 the foreign companies and to drive the properties 
 
THE GOLDEN GEESE 249 
 
 more and more into the hands of the British, Dutch 
 and Germans, and away from the Americans. 
 
 The revolution has allowed and abetted the 
 looting and ravaging of Mexico by every method 
 known to brigandage. Hundreds of thousands of 
 cattle have been killed for their hides; thousands 
 of acres of standing crops have been wantonly 
 ruined ; seed grains have been stolen or destroyed ; 
 the vast sugar industry, left stagnant by Zapata's 
 depredations has, since the government regained 
 possession, been wiped out by the shipping away 
 for "junk" of the machinery of the sugar mills; 
 graft has been levied against relief trains sent by 
 the American Red Cross to feed starving Mexi- 
 cans and the contents of such trains even stolen 
 and sold for personal profit of generals. 
 
 Carranza encouraged and abetted a military 
 oligarchy which supported brigandage as a means 
 for its own profit. Campaigns against the bandits 
 and rebels were not pressed, arms and ammuni- 
 tion were sold by the federals to the bandits and 
 rebels, in order that the military might continue 
 to have work to do. The officers, acting as their 
 own paymasters, padded the army rolls to many 
 times their actual size, and the balance between 
 the expenses and pay of the actual army and the 
 phantom army was pocketed by the officers. The 
 Obregon process, a variation of the Carranza 
 plan, paid millions of pesos in cash and land to 
 
250 TRADING WITH MEXICO 
 
 ex-bandits and revolutionaries, setting up Villa 
 on a rich hacienda, and paying out the resources of 
 the nation to buy the appearance of a peace. 
 
 Revolutionary favorites, as we have seen, were 
 given the rich state of Yucatan for loot. They 
 foisted upon that community (the only spot in 
 Mexico where any wealth has ever been created 
 through manufacturing and industry as opposed 
 to the sacking of the riches of the soil), a so-called 
 " socialistic " regime. A "modern state " was set 
 up, and the experiment of taking from the rich for 
 the benefit of the poor was set in full swing. By 
 means of a great national monopoly of the hemp 
 industry, prices were so inflated that in the course 
 of five years the American farmer paid, in artifi- 
 cially-increased prices for twine for his wheat- 
 binding machinery, $112,000,000 to the Mexican 
 revolution. The state-controlled hemp trust has 
 been forced to relinquish its control, and the 
 costly experiment seems passed. Here is the first 
 collapse of the Mexican fetish of socialistic dema- 
 gogy, but it seems safe to believe that it will not 
 be the last. 
 
 So stands the record, incomplete, shorn of de- 
 tail, but each item taken from the history of shame 
 which has been written in Mexico in the years just 
 passed. Hidden behind a curtain of fair words 
 and lofty idealism, the shame has been committed, 
 but behind that same curtain to-day disintegration 
 
THE GOLDEN GEESE 251 
 
 is hurrying on, coming as it came to Yucatan in 
 the grist of inevitable retribution. That we may 
 understand the end, it behooves us not to close our 
 eyes to the beginnings. 
 
 The killing of the golden geese of recent years 
 in Mexico carries a responsibility from which the 
 United States cannot be entirely free. The eight 
 years of the Wilson regime, when American for- 
 eign policy, as enunciated by Secretary of State 
 Bryan, held that Americans who ventured abroad 
 did so at their own risk and had no right to ask 
 the protection of their government, was a mighty 
 factor in the despoliation which followed in Mex- 
 ico. Carranza, seeking the excuse for the policies 
 to which the great wealth of the oil fields tempted 
 him, found in this, our official attitude, his oppor- 
 tunity for baiting the Americans and with them 
 most other foreigners in Mexico. His virtual es- 
 pousal of the German cause in the Great War gave 
 him still further opportunities, and the result has 
 been written in the outrages which he committed 
 against the Americans. This is a list only less 
 appalling than the list of the outrages which were 
 perpetrated against Mexico and the Mexicans in 
 the name of the revolution. Here, briefly, is the 
 record. Although many of its outrages were com- 
 mitted only during the Carranza regime, it must 
 be remembered that that regime is the direct an- 
 cestor of those which have followed it, for the per- 
 
252 TRADING WITH MEXICO 
 
 sonalities seem the same, the shift in their places 
 being the only change. 
 
 The revolution has killed over 3,000 foreigners, 
 most of them in cold blood, probably not one per 
 cent in fair and open battle. 
 
 The revolution has murdered over 600 Ameri- 
 cans since 1910, and the revolutionaries have vio- 
 lated scores of American women. 
 
 The revolution has ruined over $1,000,000,000 
 worth of American property in Mexico through 
 wanton destruction, cynical recklessness and sav- 
 age bravado. 
 
 The revolution has driven from their homes in 
 Mexico more than 30,000 Americans, men, women 
 and children, who, in carrying to Mexico the high 
 standards of American living, American business 
 and American ethics, were pioneers of our trade 
 and influence, and potential civilizers of Mexico. 
 
 The revolution has, as we know full well, pro- 
 mulgated that Constitution of 1917 which has been 
 the bane of American, even more than it has of 
 Mexican, business. 
 
 The Mexican revolution, by its baiting of the 
 American government through nearly a decade, 
 has nurtured in Mexico and sought to spread 
 throughout Latin- America a hatred and fear of 
 Americans and hostility to the Monroe Doctrine. 
 This is threatening not only our own prestige on 
 this continent, but the peace of the established 
 
THE GOLDEN GEESE 253 
 
 governments of our Latin-American sisters, 
 through the fomenting of hostility and unrest 
 within their frontiers. 
 
 More than all, the revolution has made of Mex- 
 ico a refuge for the enemies of the United States, 
 first by allowing to be set up in its capital the cen- 
 tral organization of the German spy and sabotage 
 system in the Western world, and since the war 
 by welcoming and aiding the bolshevists and radi- 
 cals who are working openly for the overthrow of 
 American institutions in this country and the de- 
 struction of American industry and trade in 
 Mexico. 
 
 This is a bitter record, but without it, as I have 
 had to say of many things in this book, the picture 
 cannot come clear to our eyes. "We cannot, in 
 justice to our own understanding, forget that since 
 the death of Madero, and even before, the Mexican 
 revolution has been but one movement. The rulers 
 who have succeeded each other have all been of 
 the same group, and those in power in 1921 are 
 those who were scrambling for place within the 
 same ruling group in 1913. "The revolution/' as 
 one of them has said, "is the revolution. " And 
 so it is in more senses than one. We but deceive 
 ourselves if in our very genuine desire to give 
 each new Mexican president a chance, we close our 
 eyes to the obvious facts of his political heritage 
 and the human tools he must use. 
 
254 TEADING WITH MEXICO 
 
 Only one word more, and the tale of the golden 
 geese is done. The protection which the Ameri- 
 can government has failed to give its traders and 
 investors who have gone abroad has had an effect 
 which those traders and investors must obviate 
 before they step forth, at least into Mexico, again. 
 Through the years of the Great War, our govern- 
 ment, along with those of the Allies, put into effect 
 in neutral countries, a " Black List" which was 
 designed to keep German, Austrian and Turkish 
 firms and their sympathizers from dealing and 
 trading with the neutrals or with the peoples of 
 the allied countries. 
 
 Mexico was of course our chief field for activity, 
 and there our Black List had its severest test. In 
 those months of struggle, we committed many 
 faults ; we shut off friendly firms from trade with 
 this country ; we encouraged, by many stupidities, 
 the activities of smugglers and "cloaks" who 
 bought for the Germans in Texas jobbing towns; 
 we created for ourselves a phalanx of enemies of 
 American trade who will not soon forget. Worse 
 than this, even, when the war was over the tre- 
 mendous machinery of the enforcement of the pro- 
 visions of the Enemy Trading Act, with its lit- 
 erally priceless information regarding the busi- 
 ness of Mexico, the capital and trade of the Ger- 
 mans, the Mexicans, and the Americans in the 
 whole country all this was thrown away. Lit- 
 
THE GOLDEN GEESE 255 
 
 erally it was cast into the waste-basket, and the 
 information which if followed tip and kept even 
 partially up to date would to-day be the richest 
 mine of information for American importers and 
 exporters was scrapped like worn-out machinery. 
 I do not know how many millions of dollars were 
 spent in gathering this data for the War Trade 
 Board, but I do know the nature of that data. It 
 is gone, and the advantage which might have come 
 from it is lost forever. 
 
 But the unfriendliness which was engendered 
 by our mistakes, which was only slowly being 
 wiped out by the correction of those mistakes 
 when peace came that unfriendliness remains. 
 That is our only heritage of our Mexican activity 
 in the war; it couples up with our own mistakes 
 of ignorance or of carelessness during the same 
 period. 
 
 From 1915 to 1919, literally all the foreign trade 
 of Mexico passed through the United States. Im- 
 ports and exports, the goods from and for Eng- 
 land and Japan and China and Africa no less than 
 our own domestic trade with Mexico went through 
 the border ports by rail. Of necessity, the advan- 
 tages of ship traffic were lost, and our manufac- 
 turers and our buyers of Mexico's raw materials 
 had the greatest opportunity of all time to capture 
 the vast bulk of the Mexican trade. The tremen- 
 dous apparent increases in our Mexican trade dur- 
 
256 TRADING WITH MEXICO 
 
 ing the war years were only the record of the 
 world's commerce passing through our border 
 towns. But to-day we have retained only a little 
 of the gains recorded then, and we shall lose still 
 more of what we have kept. And why? Because 
 we have never truly sought Mexican trade and do 
 not seek it to-day. 
 
 Ah, yes. We want to trade with Mexico, but, I 
 repeat, we have never sought Mexican trade. We 
 have wanted to sell Mexico our surplus, to have 
 her take our extra runs and use the goods we have 
 made in quantities for other countries. But we 
 have never sought to meet the exigencies of the 
 Mexican market. We have never done (as a na- 
 tion, I mean, of course) what England and Ger- 
 many have done; we do not follow specifications 
 literally and send cloth, for instance, with exactly 
 the number of threads per inch which the Mexican 
 must have to get his best customs classification. 
 We do not rearrange our patterns to meet a spe- 
 cial demand of the Mexican market, carefully de- 
 scribed to us by our customers. It is the old story 
 of American trade everywhere in the world our 
 manufacturers have heard it in a dozen ways, and 
 they are justly tired of the sound of it. My only 
 point is that during the period of the war, when 
 Mexican trade had of necessity to come to us in 
 great volume, we did not link the Mexican buyer 
 
THE GOLDEN GEESE 257 
 
 to us, either by meeting his demands or by helping 
 him to understand our difficulties. 
 
 So it was that when the golden goose of Mexi- 
 can business was surreptitiously put into our arms 
 when we were busy with a lively war in Europe, 
 we did not take the care of it that its parents 
 might have expected of us. 
 
 The result is that to-day we have little hold on 
 the trade of Mexico, despite the astonishing fig- 
 ures of our preponderance in it. For what we 
 ship to Mexico is largely food and what we take 
 from Mexico is largely oil an exchange which is 
 more significant than columns of figures in show- 
 ing the economic condition of the land we trade 
 with. Again we swing back to the one great, sig- 
 nificant fact, the need of an activity which trans- 
 cends mere barter, which has little to do with 
 whether we are deceived by Mexican conditions or 
 whether we are willing to risk them now for the 
 sake of the great possible gains of the future. 
 This is the issue of our duty to learn how we can 
 serve in the solution of the problem and to de- 
 vote something of our energy to that solution. 
 
CHAPTER X 
 
 THE HIGHWAY TO SOLUTION" 
 
 THE solution of the problems of Mexico's com- 
 merce and business seems to rest in hands alien 
 to Mexico. The destructions of the past ten years 
 are bringing her steadily nearer to annihilation, 
 and Mexico herself seems helpless to save herself. 
 These make the appearance, and it is vivid indeed. 
 But it may still be only an appearance, if the 
 forces which are acting and must act can be 
 brought to see that they can and must work in 
 Mexico herself. 
 
 The cycle of destructions insists upon showing 
 itself as the round from the materialism of Diaz 
 on to the destructions of an era of profaned uto- 
 pian idealism and now to an era of materialism 
 again. But this time it is an era of materialism 
 which differs from the Diaz time, and is more 
 potent, at the moment, for good and for ill. For 
 to-day, in the high places of government, control- 
 ling through their greed the very minions of gov- 
 ernment, is an animating power which is not the 
 idealism nor the self-sacrifice of devoted rulers, 
 but the worship of wealth alone. That power is 
 mighty for destruction, but at the very moment 
 that it functions thus, another form of wealth, 
 
 258 
 
THE HIGHWAY TO SOLUTION 259 
 
 "capitalism" if you will, is working slowly for the 
 saving of such of Mexico as is being saved. For 
 "capitalism," in foreign guise, in such enterprises 
 as even the mad radicals of the day point to as the 
 signs of their "progress" here capitalism is giv- 
 ing Mexico her only surcease from the destruc- 
 tions of her rulers. 
 
 Wealth is the one power which men recognize 
 in Mexico. It is to-day above government, for it 
 dominates government and destroys government 
 by the very temptation which it holds out to suc- 
 cessful revolution. It rules to-day in Yucatan, 
 even as it ruins the individuals of Yucatan. Yet, 
 too, it rules in the oil fields, for it makes the vast 
 production of oil possible, because it alone has the 
 power and the foresight to develop oil's poten- 
 tialities. And there, in the oil fields, it is being 
 turned, ever so slightly, to the beginnings of its 
 ultimate destiny, which must be, I believe, the sav- 
 ing of Mexico. 
 
 Strange tales I have told of the oil fields, and 
 yet it is a far stranger tale which I have now to 
 tell. For I would point out the vast opportunity 
 which awaits that wealth of oil for the saving of 
 Mexico. In the light of that possibility, the 
 mighty stream of oil which in a thousand ships 
 pours from Mexico into the industries of the 
 globe, is a helpless Niagara, childishly uncon- 
 scious of its own power. 
 
260 TRADING WITH MEXICO 
 
 The constitutions and laws and decrees of the 
 Mexican revolutionaries still hold the wealth of 
 oil in their grip. There has been, in the summer 
 months of 1921, a mild effort to break that grip, 
 to stay the hand of strangulation which is at the 
 throat of the oil industry, but this is still self-de- 
 fense. There is a yet more persistent force than 
 mere taxation or even than mere confiscation at 
 work in the oil fields of Mexico. This force savors 
 of elements mightier than mere industry ; it seems 
 to be taking the form of a sinister elaboration of 
 the vital principles of bolshevism the bolshevism 
 which rules in Russia and is a battle cry in Mexico. 
 
 Among these principles of bolshevism, enun- 
 ciated by Lenin himself a year ago, was the setting 
 of the capitalistic powers at each other's throats, 
 such powers as Japan and America, that they 
 might destroy one another. 
 
 In Mexico we see that threat from Russia de- 
 veloped with the thoroughness of a too-eager pu- 
 pil. In Yucatan the cycle has brought two vast 
 financial interests to battle the millions of the 
 Equitable and the Royal Bank of Canada, against 
 the International Harvester with other unlimited 
 resources. In mightier and more daring terms, 
 and even more deliberately, in Tampico and in the 
 false issues of concessions, Mexico and the gov- 
 ernments, radical, bolshevist indeed, of the revo- 
 lutionary era, have been setting not merely 
 
THE HIGHWAY TO SOLUTION 261 
 
 groups of financiers but the interests of nations at 
 each other's throats. The issues of concessions 
 on the one side and open oil fields on the other 
 seem to have been planned and fomented and dis- 
 tributed with a deliberation which is not Mexican 
 to bring the United States and England to grips 
 in Mexico. So the spoken threat of Lenin finds 
 elaborate action in distant Mexico. 
 
 Oil has been the victim, the tool, then, of those 
 who would destroy our civilization? We do not 
 know. But this we do know that to save itself, 
 to save great nations from war, to save the world's 
 oil for the uses of civilization, oil must come to its 
 own rescue. It may be saved temporarily in other 
 ways than by itself, but itself it must save sooner 
 or later. If sooner, the power will be for good; 
 if later, it will be for destruction, even as the 
 powers in Yucatan are being expended for de- 
 struction. The comparison is inadequate, per- 
 haps unfair, but the vision is crystal clear. It 
 shows the last great power of the world wealth 
 diverted from its proper channels to battle within 
 itself. The dragon's teeth of capitalism have 
 raised up armies and the stone cast by bolshevism 
 has thrown them at each other's throats. 
 
 And this cannot be, and must not be. Our civi- 
 lization rocks. Were it to pass on to the mil- 
 lennium, the rocking would be worth the price. 
 But we see, not the millennium, but, as in Yucatan, 
 
262 TRADING WITH MEXICO 
 
 the coming of new destructions, with capital, and 
 labor, in roles of ignominy. 
 
 For to-day oil, and the capitalism it represents, 
 as yet does little good for Mexico. It pours its 
 wealth nearly $50,000,000 a year into the cof- 
 fers of government and there, like the golden ap- 
 ple, it creates discord and wars and bloodshed. 
 It feeds and fattens the group in power and makes 
 it worth the while for other groups as fast as their 
 petty agitations will allow, to rise up and over- 
 throw their predecessors, to the end of getting 
 their share of the loot, and a new distribution of 
 favors. The gold which pours into the national 
 treasury inspires, as we have seen, all manner of 
 radical legislation and constitutional provisions 
 and oppressions to make the capitalism which de- 
 velops the oil disgorge more and more of oil's 
 wealth, and bow more deeply beneath the yoke of 
 political personalism. 
 
 Thus is the gold which flows from the oil wells 
 dynamically active as a poison and a weapon 
 against those who create it. The oil companies of 
 themselves take no part in Mexican politics. This, 
 I admit, is almost unbelievable, but I am convinced 
 that except where government our government 
 or that of England has directed them, the oil 
 companies have not used their power politically. 
 The United States and England have both taken 
 
THE HIGHWAY TO SOLUTION 263 
 
 hands in Mexican politics, and particularly was 
 Washington active in arbitrating the destinies of 
 Mexico in the eight years just closed. But that 
 does not concern us just now. The liquid gold 
 from the oil fields has never used its power alone. 
 
 It has not yet used its power for its great possi- 
 ble good, either. Not even for so much good as 
 the International Harvester and the Eric corpora- 
 tion have used theirs in Yucatan to the discomfi- 
 ture of Alvarado and the chastening of the hene- 
 quen industry. Never, for the sake of a principle 
 alone, has an oily hand been lifted to say "thus 
 far and no farther. ' ' Never has an oil official done 
 more than cry aloud over the pressure of the 
 thumb-screws cries which do no more than ex- 
 tract more wealth to fatten the generals who, with 
 added strength, only gave the screw another turn. 
 
 For seven years the oil companies paid the rebel 
 general, Manuel Pelaez, a comfortable tribute. In 
 that time they also paid Carranza all he asked in 
 ' ' taxes. ' ' They were helpless, and the war was the 
 excuse, not for strength on their part, but for sub- 
 mission to unwarranted and unjust oppression, 
 oppression which had no object save personal ag- 
 grandizement and enrichment. 
 
 Here is the one power in Mexico which is potent, 
 accepting the rule of corrupt government, passing 
 on its power of gold to those who use it for noth- 
 
264 TRADING WITH MEXICO 
 
 ing but their own ends, and for the destruction 
 of all that our civilization holds dear. 
 
 They buy privilege in Mexico, the privilege to 
 do the business which they must do, while the sin- 
 ister powers to whom they pay tribute cut them 
 from the development of new fields upon which 
 their ultimate future and Mexico's immediate fu- 
 ture depend. The whole power of Mexican revo- 
 lution and of the groups which control the revo- 
 lution lies in that one principle which I have re- 
 iterated : they give no rights, they sell no rights ; 
 only privilege is on the auction-block. Those who 
 buy it to-day and those who contemplate the buy- 
 ing of it as a way to enter a promising foreign 
 trade and investment field are the upholders of 
 the shameful exploitation under which Mexico 
 herself bows. And of these, the greater sinner, 
 to my mind, is he who plans to enter Mexico now. 
 After all, we must in fairness admit that the old 
 companies have the potent excuse of their vast 
 holdings and of their duty to their stockholders. 
 
 The plan which I hold as the solution of the eco- 
 nomic and political chaos of Mexico would com- 
 prise a shifting of the center of control from poli- 
 tics to economics, where the motive force, at least, 
 has ever rested. I would no longer tolerate the 
 application of political remedies for economic ills, 
 but would go so far as to suggest an economic 
 remedy for both economic and political afflictions. 
 
THE HIGHWAY TO SOLUTION 265 
 
 Apparently this is what our government plans, 
 and what Mexico's government will not bring her- 
 self to accept. 
 
 Years of observation of the Mexican problem 
 has led to the conviction that the international 
 difficulties of Mexico are between the Mexican 
 politicians and the American government their 
 interests decidedly conflict. But there is no divi- 
 sion of interest between Mexican business men and 
 American business men; the former are just as 
 disturbed over the confiscatory policies of the Con- 
 stitution of 1917 as are the latter. So recently as 
 April 7, 1921, a petition was sent to President 
 Obregon by a group of landowners in the Mexican 
 state of Jalisco, protesting against the enforce- 
 ment of the rulings of the "National Agrarian 
 Commission" which confiscated their properties in 
 the name of the "social revolution " under the 
 same Article 27 which attacks foreign property 
 rights. Its words are worth recording as an in- 
 dication that it is not alone the American business 
 man who feels the pinch of the rule of privilege 
 in Mexico. 
 
 "Such commissions," the petition reads, "are noth- 
 ing more than partisan centers where laws, reason and 
 justice are mocked. 
 
 "This atrocious work will be judged by public opinion 
 as soon as the deep and serious damage which has been 
 done is known, and history will in time establish the 
 
266 TRADING WITH MEXICO 
 
 responsibility. Suffice it to say that in every case it has 
 been a work of destruction and never of construc- 
 tion. . . . 
 
 "The local agrarian commission is inventing fantastic 
 plans of taxation, confiscating large and small properties, 
 and sugar, mezcal and orange plantations, which have 
 cost their legitimate owners years of toil and the invest- 
 ment of considerable capital. The federal tribunals, deaf 
 to all appeals, follow an invariable line of conduct in 
 every case against the landowners. Should the land- 
 owner invoke in his behalf the same doctrines which have 
 been applied to the benefit of others, he finds out that 
 these same doctrines are never interpreted in his favor. 
 The authorities only favor those they wish to favor and 
 to accomplish this end they do not hesitate to override 
 justice and reason." 
 
 It is to this Mexican business man, still a stable 
 factor in Mexico, that we must look for the change 
 in government attitude toward business which is 
 indispensable to the solution of the social, eco- 
 nomic and political chaos of Mexico to-day. In 
 numbers these Mexican business men are few; in 
 grasp of world affairs they lag behind men in sim- 
 ilar positions in this country. Nevertheless, their 
 interests, those of the American companies now 
 operating in Mexico and those of the AmericanSs 
 and other foreigners who hope to share in Mexican 
 trade, are and will be one. It is in the way of 
 supporting such Mexicans in their efforts to influ- 
 ence the government of their own country that I 
 speak of an economic remedy for all the afflictions 
 
THE HIGHWAY TO SOLUTION 267 
 
 of Mexico. I would, if I could, put them in con- 
 trol, would bring back to their aid the brains and 
 the energy of the exiles who belong, in one way or 
 another, to their class of producers. 
 
 It is to such an end that the foreign business 
 man who hopes, in the immediate or in the dis- 
 tant future, to share in Mexican trade should turn 
 his hand. He should demand, in the councils of 
 his government, in the congress of the country, in 
 the powerful conventions of chambers of com- 
 merce, that Washington insist definitely on a re- 
 turn to civilized and economic rule in Mexico. 
 This Washington seems to seek but they and 
 they alone have the power to compel the deci- 
 sion by the powers of this world that the day 
 of privilege in Mexico must be put aside, and 
 the era of equal rights shall dawn. In the 
 hands of American business interests the tool 
 of pressure is very powerful. This is a moment, 
 not to rush in to get easy markets on the "ground 
 floor," but to demand conditions which will give 
 the opportunities and the profits to those who can 
 best use them the truly Golden Rule of business 
 the world around. 
 
 When that day comes, all will profit. Until that 
 day comes, none can have aught but risk and 
 chance, the chance of the gambler. For who can 
 say how the wheel of politics will turn? And only 
 he who knows Mexico and the Mexicans of old can 
 
268 TRADING WITH MEXICO 
 
 assume that lie can buy his way to privilege with 
 the next pirate crew. The solution is in the hands 
 of American business men because it is in the 
 hands of the Mexican business men whom they can 
 support and aid. And in the group of such Mexi- 
 can business men we must include not only the true 
 Mexicans, but the foreign companies which have 
 worked long in Mexico and so have made them- 
 selves a true part of Mexico, vitally concerned in 
 her progress and prosperity. 
 
 Those foreign companies of Mexico are the 
 business world of Mexico. And they know Mexico 
 and her needs better, in many ways, than Mexico 
 knows herself. They know, as every one who is 
 honest with himself knows, that the hope of Mex- 
 ico is in truly devoted, native government. Yet 
 we still see them pass the power which could to- 
 morrow restore Mexico to the family of nations 
 over to those who use it for their own ends and 
 for the utter destruction of all Mexico that is out- 
 side the influence of the oil fields and of their civi- 
 lization. 
 
 The great companies are Mexican, in essence. 
 They have rights as Americans and as English- 
 men, to be sure, but their greater right is in Mex- 
 ico. And they have the right to use their power as 
 they will. They seek to be good and to be honest 
 and just, but the ends of justice are defeated by 
 their very honesty. I do not advocate activity in 
 
THE HIGHWAY TO SOLUTION 269 
 
 politics, nor even the tangible aid of oil companies 
 to revolutionists of any stamp. I hold only that if 
 the oil companies would give over their profits 
 (as they did temporarily in the summer of 1921) 
 long enough to shut off the stream of gold from 
 corrupt government, if they would thus render 
 revolution and loot unprofitable, the solution of 
 the problem of Mexico would soon come, in a re- 
 turn to an age of honest work and honest govern- 
 ment, free from the temptation of vast unearned 
 wealth. We need not a/sk how or by whom the 
 change shall be made, whether by a sincere Mex- 
 ican government ready to cast out its evil elements, 
 or by a government yet to be born. That is not 
 our concern, for our concern is to search for our 
 part and having found that part, to play it well, 
 
 Is not this a solution of the Mexican problem? 
 Should we not say to the foreign companies : 
 
 "You are in Mexico, you are of Mexico. You 
 represent all that is stable in Mexico. You know 
 those Mexicans who can solve the country's prob- 
 lems, and make Mexico again a land where white 
 men can keep the altar fires burning bright, where 
 honest Mexicans, and foreigners if they wjll, may 
 help to make it all that it should and must be." 
 
 Revolutionary radicalism has run its course in 
 Mexico, and we are back again at a rule of capi* 
 talism, a rule which capitalism, for right or wrong, 
 cannot longer avoid. The eyes of the world are on 
 
270 TRADING WITH MEXICO 
 
 the moneyed powers of the world. It is childish 
 to try to deceive radicals or conservatives with 
 saying anything else. To-day, in Yucatan, capi- 
 talism (because circumstances have forced it to 
 do so) is exacting the toll of penalty from the hen- 
 equen industry and its native spokesmen. To-day 
 in Tampico, capitalism hesitates to move on, and 
 waits for the ruin which will tumble about it, 
 forcing it, in its turn, to grind Mexico beneath its 
 heel. Somehow, dimly, seems to emerge the lesson 
 which Mexico has for us and for the world. Cap- 
 italism must in the end save the world from the 
 ruin of revolution. To-day in Mexico it can move 
 quickly and freely. To-morrow it may be clutched 
 in the very destruction which is upon it, and be 
 forced, itself, to the destruction not alone of the 
 enemies of our civilization, but of the fabric of 
 progress of that civilization. The story of Yuca- 
 tan is written. Is the story of Tampico and all 
 Mexico to follow the same plot, and is the world 
 to go blindly on, believing that in compromise it 
 shall gain strength? 
 
 Truly the crimson feast is preparing for the vul- 
 tures, and vultures will our eagles of business be- 
 come if they wait longer on their distant heights 
 for revolution to finish its bloody orgy. To-day 
 there is yet time. In Mexico there is yet time. 
 Why wait for the chaos, from which there seems 
 but one emergence, the emergence to intervention 
 
THE HIGHWAY TO SOLUTION 271 
 
 and blood and long foreign rule? The one stable 
 force, the wealth of Mexico, must choose a 
 nobler course than that waiting, than that cyni- 
 cal hoping. It can choose and it must choose. Old 
 worlds are indeed passed away and the paths of 
 new stars are to-day being plotted. In the courses 
 of those new stars power will be used without apol- 
 ogy, as the revolutionary radicalism which our old 
 civilization created moves without apology. Our 
 duty is to the future, not to the dead past of com- 
 promise and convention and self-righteousness. 
 Is capitalism honest and sincere and bound up 
 with the welfare of the human race? Or is it in- 
 deed the vulture which waits to feast only upon 
 dead bodies amid ruins? To-day in Mexico it 
 waits vulture-like. Its sincerity and its true right- 
 eousness are to be determined not by slavish wait- 
 ing for the ruin which will force it to use its 
 power, as it is using it in Yucatan, but by its mov- 
 ing, to-day, to the solving of the great problems 
 of a great nation as it alone can solve them. Cap- 
 italism and not revolution, the corporations and 
 people of Mexico, and not foreign pressure, must 
 in the end give answer before the last Tribunal.