Even before the promulgation of the 1917 Constitution, the United States made it clear that it would not accept Mexico’s desire to restructure its society as justification for overriding the rights the United States claimed under international law. In 1916, Secretary of State Robert Lansing warned that Carranza’s refusal to guarantee U. S. investment would lead to “the gravest consequences.” Such statements indicated a contradiction in U. S. foreign policy. President Wilson publicly urged redistribution of wealth in Mexico but would not countenance any change involving wealth belonging to Americans.1
The Americans viewed Article 27, which governed subsoil rights, as the first of many such challenges U. S. interests would face in Latin America, and, as such, they viewed it as a test case for U. S. policy. Policy makers felt that if Mexicans changed the rules governing foreign investment after the investment had been made, other nations might do likewise. In 1916, the president of the Maritime Oil Company warned, “If our government shall permit the Mexican government arbitrarily to repudiate these contracts, it will cast a cloud upon the title to all American investments, not only in Mexico, but in Central and South America.”2
Mexican leaders never foresaw their country developing in isolation from the United States. Rather, they wanted to redefine Mexico’s relations with the Colossus of the North. Mexican policy makers sought to: 1) protect and regulate the exploitation of Mexican natural resources, 2) regulate the activities of foreign businesses and investors, and 3) increase the government’s economic role. Carranza did not oppose U. S. investment as long as investors did not demand special privileges. In 1917, he pledged “all the security and guarantees granted by Mexico’s laws” to U. S. investors.3
State Department goals during the First World War were to maintain stability in Mexico, keep oil shipments flowing to allied fleets, and postpone conflict about property rights until after the war, when the United States would be in a much stronger position. Henry Fletcher, who served as U. S. ambassador to Mexico between 1917 and 1920, stated, “During the war my job was to keep Mexico quiet, and it was done.”4
During the war, President Wilson attempted to safeguard U. S. investments in Mexico without driving Mexico into the hands of Germany. At the same time, Carranza remained neutral in the First World War, demonstrating his independence from the United States.5
The seriousness of the German threat to the United States was emphasized by the Zimmermann telegram, sent to Mexico in February 1917 by German Foreign Minister Arthur Zimmermann. This coded message proposed that Mexico join the war on the German side and fight the United States. In exchange, Mexico would be allowed to regain Texas, New Mexico, and Arizona Irom the United States. Carranza, realizing that Germany was distant and thus unable to provide effective support, did not accept the proposal.
The Zimmermann telegram backfired after the German code was cracked by British intelligence, which passed the contents of the telegram to the U. S. government. When the message was published in the United States, it turned public opinion strongly against Germany and influenced Wilson’s decision to declare war.6
It was U. S. investment in Mexico, not German-Mexican relations, that produced conflict with the United States during Carranza’s 1917—1920 term. U. S. investors controlled 78 percent of the mining industry, 72 percent of smelting, 68 percent of rubber production, and 58 percent of the oil industry. Their investments were worth more than the combined total of all other foreign investments.7
In April 1917, Carranza increased the tax on oil to 10 percent of the value of oil exported. U. S. companies denounced the tax as illegal, since their concessions acquired before 1910 specifically granted them relief from such taxes. Furthermore, they claimed that the tax was “excessive beyond the point of being confiscatory.”8
After the end of the First World War, U. S. ownership of land increased, as did investment in oil, mining, and banking. Mexican wartime neutrality as well as new taxes on these investments soured relations with the Wilson administration. A vociferous minority in the United States demanded armed intervention in Mexico and attacked President Wilson for not more vigorously defending U. S. lives and property there. Oilmen enjoyed the full support of powerful political figures such as New Mexico Senator Albert B. Fall.
In 1920, as a result of intense U. S. and British pressure, Carranza agreed not to enforce a decree requiring drilling permits until the matter was settled by Mexican courts—a face-saving way to avoid conflict. He took a moderate stance since: 1) the end of his term was approaching and he did not want to provide his opposition with a pretext to seek foreign support to oust him; 2) without new oil wells being drilled, production would decline; and 3) he needed the revenue the oil wells provided. The issue still had not been resolved when Carranza was overthrown.9
In his dealings with foreign oilmen, Carranza clearly came out a winner concerning taxation. Between 1914 and January 1, 1920, he vastly increased the share of oil wealth remaining in Mexico by raising the oil tax from an almost trivial 60 centavos per ton to 10 percent of the value of the oil.10
Carranza’s ability to make such increases resulted from the U. S. preoccupation with the First World War. President Wilson also contributed to Carranza’s success in that, even though Wilson ordered the landing at Veracruz and the Pershing expedition, he was not as pro-intervention as many of his U. S. contemporaries. While the First World War gave Carranza some latitude vis-avis U. S. interests, the presence of a powerful, foreign entrepreneurial sector did form one of the real limits on the alternatives open to the Mexican Revolution.11
World History
