18 AUGUST 1939, Page 2

A Warning to Mexico

The dispute between the Mexican Government and the oil companies whose property was expropriated two years ago has now entered a stage which, in the words of Mr. Sumner Welles, Acting Secretary of State, " seriously threatens the relations between Mexico and the United States." Negotiations between the Mexican Government and the oil companies reached a complete deadlock last week, and both parties refused to discuss a proposal for a com- promise which emanated from the State Department. Mr. Welles has warned the oil companies to restrict their demands within reasonable limits ; but the real interest of the State Department is indicated by its insistence on the principle of " prompt, adequate, and effective compensa- tion." The United States GoVernment cannot avoid taking such a stand, owing to the necessity of affirming its position as the protector of American, and in this case European, interests in Latin America ; and the issue of the oil dispute will form a precedent for the policy of other Latin American States. But the deadlock is irritating for President Roose- velt, as it must damage his " good neighbour " policy ; while Germany is only too ready to take the United States' place as a " good neighbour " to Mexico. Fortunately the Mexican Government, which is completely supported by public opinion, still declares its readiness for further negotia- tions. The oil companies, however, have their own weapons; the reduction in the price of Texas petroleum is taken as a declaration of a price-war against the Mexican Government, which has been selling its oil well below market-rate.