By Fortune Editors
August 1, 1943

MEXICO declared war against the Axis in May, 1942, but for nearly a year thereafter she enjoyed a glorious boom. Possibly the last bright flare-up of the binge could be dated March 6, 1943, when a new race track, Hipódromo de las Américas, opened in Mexico City. Celebrities from Hollywood flew in, Carol of Rumania and Magda Lupescu were there and, of course, President Manuel Avila Camacho, whose own horses ran. Because his predecessor, Lázaro Cárdenas, had outlawed all gambling except the national lottery, special legislation had to be passed to permit betting. The bright blue eyes of “Sell ‘Em” Ben Smith of New York, who owns most of the stock in the “two million dollar race track” beamed at the turnout of over 40,000 people. The Mexican Government had obligingly given his Hipódromo, as a “new industry,” freedom from taxes of all kinds for five years, and had permitted it to be built on government soil. A few people tartly commented that the steel in the still-exposed girders supporting the grandstands might better have been used for rail on the decaying National Railways.

The half-dozen best hotels in Mexico City were crowded not merely with race-track followers, movie stars, horse trainers and owners but with well-heeled Americans who had come down to put their spare cash in some profitable business in Mexico. Many of them were intent on evading income taxes or hedging against inflation.

Beneath Mexico City‘s apparent prosperity, however, there had been increasing signs that the boom could not last much longer. Real-estate values had risen to absurd heights. One rich European exile, in March, offered 250,000 pesos* to a Mexico City resident for a house built at a cost of 40,000 pesos a few years before. Although subdivisions were still sprouting on the fringes of Mexico City, building costs were fantastic. What plumbing fixtures, copper wire, refrigerators, and elevators remained in stock had multiplied in price. There were rumors that some of the new tall buildings would be useless for lack of elevators. Mining stocks, local bankers advised, were too high to interest any sane investor. Many of the speculators who flew in to look for a place for their money flew out again, finding nothing more tempting than a bank.

Everyone, except American visitors, complained about rising prices. The weekly shrinkage of the baker’s bolillo (wheat roll) was first a joke, then a grim signal of the price rise. Clearly the Mexican economy was ailing, and everyone knew it. The press and the labor unions grumbled with increasing bitterness throughout March and April. The government must “do something” to enforce its price regulations. At the end of April, Mexico made its first tentative move toward rationing: automobile owners could use their cars only six days a week.

It would be captious and unjust for Americans to criticize too severely Mexico‘s first year at war. Our own first year was not earnest enough. Conspicuous gringo speculators and the rich, ostentatious tourists who descended upon Mexico during that year did little to convince Mexicans that the U.S. knew the meaning of total war. Americans should also recall that in the last war Mexico remained strictly neutral, even pro-German. The scars of Veracruz were then too recent for her to do otherwise. This time Mexico played an important role in swinging Latin America toward the democracies. At the Rio de Janeiro Conference, a few weeks after December 7, 1941, the most stirring speeches in the cause of the United Nations, and, indeed, in favor of Pan-American solidarity, were delivered by Ezequiel Padilla, Mexico‘s Foreign Minister. More than any other single person, Padilla swayed the delegates toward severance of diplomatic relations with the Axis. By May, 1942, three months before our traditional South American ally Brazil, Mexico had gone to war against the Axis.

It is both naive and incorrect to attribute Mexico‘s presence on our team to the good-neighbor policy. As President Avila Camacho points out: “Mexico has not been obliged to alter in the slightest degree her basic policy to find herself at the side of the United Nations.” Under Cárdenas she had clearly and materially shown her sympathy for republican Spain in the first stage of the anti-fascist war in Europe, several years before England and the U.S. committed themselves. And Mexico has never recognized either Franco Spain or Vichy France. The good-neighbor policy obviously had nothing to do with this performance, although it has done much to smooth relations between Mexico and the U.S.

STILL THE OLD COLOSSUS

In spite of the words and deeds of Wallace and Roosevelt, the Mexicans have not yet forgotten the past, Manuel Avila Camacho spoke this charitable sentence in Monterrey on April 20, when he met President Roosevelt: “Neither you nor I believe in negative memories because we both place our hope in the soundness of principles, in the perfectability of men …” By no means are all Mexicans, however, as willing to forget or forgive the fact that in 1848 over half the acreage of Mexico passed irrevocably to the U.S., or that the marines landed as recently as 1914 in Veracruz.

Nor may it be said that Padilla, so highly regarded in the U.S. and in Brazil, is equally admired at home. He is widely distrusted as a “public-address system” for Washington. Even many Mexicans who fervently believe in the ideas for which Padilla stood in Rio, and who are anti-fascist in every fiber, accuse him of acting essentially for the gringo. Distrust of their Foreign Minister is merely evidence of the suspicion of the U.S. that is harbored by nearly every Mexican, no matter how much he tries to believe in the “perfectability of men.”

It is perhaps harder to convince Mexicans than any other Latin-American people that the U.S. will never return to its old big-stick pattern of behavior. With every U.S. success on the battlefield and every awesome announcement of gigantic plane and ship production, apprehension of the nearby Colossus grows in Mexico. Unfortunately Nelson Rockefeller’s propaganda does too little to combat this fear. The sheer might of the U.S. is overstressed; more sympathy and less fear could be bred by emphasis on U.S. bleeding and dying—which every Mexican understands well.

In April, about a week before President Roosevelt set foot in Mexico, a Mexican Government official openly expressed the mounting fear of the U.S. In a speech on Pan-American Day, D. Rubén Romero, Mexican Ambassador to Cuba, said to all Latin America: “We see the U.S. advance like a heroic giant that rises up from America and fights resolutely for our own ideals, but as the giant grows his shadow comes over us and fills us with fears … Let us say to the U.S. as to an elder brother that … we are prepared for every sacrifice for the liberty of tomorrow, but we fear that by rationing everything, we may end up with a rationed liberty.”

The impact of war and threatened rationing are only beginning to strike Mexico. As economic problems deepen and multiply and touch the lives of every citizen, the people want to place the blame somewhere. To blame the war is not enough. There is always the gringo who was so often accused in the past, and who is today bigger and stronger than ever. And there is the Avila Camacho government that brought Mexicointo the war as an ally of the traditional enemy—the gringo. To escape mounting popular criticism, men within the Mexican Government have already yielded to the temptation to shift blame for the nation’s current woes on the U.S. and thereby to rekindle old fears of the Colossus.

MR. VILLASENOR ACCUSES

While the newspapers and labor were criticizing the Mexican Government for its failure to enforce price controls, the Director of the Bank of Mexico, Eduardo Villaseñor, made a startling speech (two weeks before President Roosevelt’s visit). Outlining in detail some of Mexico‘s problems, especially inflation, Mr. Villaseñor placed the blame squarely on the U.S. Although his past record is free of any gringo-baiting, anti-American speech or act, Mr. Villaseñor could not have been harsher in his accusations had he been a leader of Mexico‘s strongest antidemocratic group, the Sinarquistas.

He clearly implied that had Mexico remained neutral she would have fared better economically. Complaining that the U.S. arbitrarily refused to send the small quantities of machines and equipment necessary to keep the Mexican economy from collapsing, he bitterly attacked the BEW—State Department machinery in Mexico City that controls priorities and Mexican imports. This large bureaucracy he charged with ineffectiveness, and suggested that much money could be saved if it shut up shop. He then sarcastically recommended the substitution of a single, small office to be called “The Office for the Refusal of All Requests.” Insisting on more supplies, Villaseñor, in an “or else” tone, threatened to call a halt to further entry of American capital, and hinted that Mexico might revalue the peso. To put the peso at four to a dollar instead of the present 4.85 would almost certainly result in a revision upward of the prices the U.S. now pays for strategic minerals.

In a final warning to Mexico itself, he said, “We should exercise the utmost care that the influence of a practical civilization like the American, an influence at once powerful and irresistible, shall not … bring about the obliteration of our own national culture without at the same time achieving something to raise the level of our own civilization.” Villaseñor has argued on subsequent occasions, as do other Mexicans, that his country’s economy is so feeble that the U.S. cannot now permit it to be further weakened—war or no war—if the good-neighbor policy means what it says.

True, it is as illogical and unjust for Mr. Villaseñor to blame the U.S. for all Mexico‘s economic problems today as to blame Americans for the war itself. And it is extremely difficult for the U.S., with its responsibilities on all the battlefields of the world, to remedy Mexico‘s war-caused troubles. Yet some answer must be found. Unhappily the ills no longer can be nursed or cured by loans. It is, in fact, the presence of too much money in Mexico that is the core of the trouble.

THE DELUGE OF DOLLARS

Within one year Mexico‘s problem shifted from an acute shortage of dollar exchange to an embarrassing surplus. As recently as the fall of 1941 the U.S. found it necessary to set aside $40 million to help Mexico stabilize her currency; but that money was never needed or used. During 1941 Mexican purchases were greater than ever before, and were far larger than her sales. She had lost export markets in Europe, and the U.S. had not yet filled in the gap by heavy purchases. Retailers and wholesalers in Mexico stocked up against the probability of higher prices and U.S. participation in the war. For a while, in 1941, the Mexican Government considered putting the brakes on imports. Instead, the unfavorable trade balance was allowed to rise freely. It finally reached nearly $50 million.

But the year 1942 was almost precisely the opposite of 1941; it ended with a favorable balance of $50 million. The $40 million stabilization loan obviously became unnecessary, since Mexico was building up a big excess of dollar exchange. Imports had continued to be enormous through the first half of the year, because Mexico was not dependent on the sea lanes for her U.S. purchases. Of all U.S. goods sent to Latin America in 1942, Mexico got 20 per cent (Brazil with a population over twice as large received but 12 per cent). Only in the last few months of the year did Mexico‘s imports shrink; meanwhile shipments to the U.S. rose enormously. Exports of cattle rose 18 per cent; vegetables, 18 (green peas, 1,000 per cent); minerals, 135.

By the time Mr. Villaseñor spoke up, dollar exchange, for which fewer and fewer U.S. products could be bought, was piling up at the rate of $20 million a month. In addition to dollars for goods there was an accumulation of capital that had entered during the last two years. Throughout 1941-42 Mexicans, who had customarily invested abroad, had brought their money back home to find safer and more profitable havens. Europeans had entered, from King Carol and Axel Wenner-Gren to many less famous, less wealthy individuals.

Wenner-Gren had been invited to Mexico in the fall of 1941 by Maximino Avila Camacho, brother of the President and Minister of Communications. Soon the local newspapers were talking in breathless, Hollywood terms of a gigantic plan—first it was called a $100 million then a $500 million “syndicate”—which Wenner-Gren and various Americans were about to form. John A. Hastings, former state Senator in New York, was the most articulate spokesman for the proposed “empire.” Glorious seaside resorts, a chemical plant, a paper mill, a railroad were only fragments of the Wenner-Gren dream. (Possibly Hastings and the newspapers were responsible for some of the extravaganza, but they seemed to be speaking for Wenner-Gren.) In January, 1942, Axel Wenner-Gren was put on the American black list, and a number of U.S. citizens, in and out of Mexico City, were deeply embarrassed. He is not black-listed by Mexico, and seems to be a close friend of Maximino Avila Camacho today.

The total of refugee capital is difficult to ascertain; estimates vary from $25 million to $50 million for the year 1942. During that year scores of new mines were opened and mining security prices rose 154 per cent. Shields & Co. of New York in August bought from an old-time MexicoCity resident, Harry Wright, all the common stock of Consolidada, a steel-fabricating plant, for $5 million. A miscellany of smaller investments from city real estate to minority shares in a variety of companies soaked up smaller sums of flight dollars. Money also accumulated in the tills of American companies operating in Mexico, which preferred to keep the profits south of the border for income-tax reasons.

Manuel Avila Camacho, who took office in 1940, had led Americans to understand that the days of expropriation were over. Mexico seemed like a good place in which to make money quickly, at a time when nearly all U.S. industry was being pressed into war production. Maximino Avila Camacho was even more friendly to U.S. capital than his brother, the President. Hopeful promoters and plungers, during the winter of 1942-43, boasted in the Ritz bar of their connections with either Maximino or his son-in-law. Without these “contacts” an American was considered ill-equipped. By this spring opportunities for investment were few, no matter how good one’s connections. Lack of new machinery stifled the possibility of many an economically desirable industry. A few men left their money in pesos, hoping that Mexico would revalue.

With capital in search of investment, pesos in search of products to buy, and both industrial and agricultural income rising, the signs of inflation became alarming. During 1942 bank deposits increased from 517 million to 813 million pesos, while money in circulation rose 40 per cent, and early in 1943 stood at the total of 1,920,000,000 pesos. Beginning in the fall of 1942 Mexico made efforts to check credit expansion. At first bank reserves were limited to 20 per cent of deposits, then were raised to 30, and finally in January, 1943, to 33 per cent. Early in 1943 a further restriction was imposed: a bank’s loans must be kept down to the October, 1942, level, no matter how high deposits had risen. But these measures looked better in theory than in practice. Private loan institutions did a roaring business and so did individual lenders, at interest rates as high as 3 or 4 per cent a month. One banker estimated that, in spite of the controls, there was more credit available in March, 1943, than in the previous October. In April Mexico decided to issue gold coins to encourage hoarding by the people, who have a profound trust in gold resulting from valueless paper currency issued during past revolutions.

The cost-of-living index, the Ministry of Economy itself admitted, was rapidly rising. In March it stood at 219 (the base, 100, is 1934); in May it was 247. The C.T.M. (Confederation of Mexican Laborers) had been shouting for months for a 50 per cent wage increase and effective price controls. Both the press and labor insisted that withdrawal of essential foods from the market by speculators was largely responsible for artificial shortages and price rises. There were repeated hints that much of the speculation was with the knowledge of high officials in the government, and could be abruptly stopped.

BLAMING IT ON THE GRINGO

Yet, when Mexicans asked the storekeeper (usually a Spaniard, often pro-Franco) why the price of rice, bread, salt, or anything else had risen, he was apt to say, “The gringos are buying up everything.” In the big, open markets where fresh foods are sold, usually by Indians, the reason given for the high prices of potatoes, meat, tortillas, or any other food was the same. Only those Mexicans who took the trouble to look for the truth knew that such accusations were well-disseminated canards. The gringo is not to blame for the food crisis.

Corn (for tortillas) and frijoles (black beans) are the basic foods of the Mexican people and neither is exported. Rice, which might be considered the third food, has gone north in infinitesimal volume. One small shipment purchased by the U.S. Government, of which everyone heard early this year, was actually destined for Cuba.

Live cattle and meat from Mexico‘s northern states have been moving across the border under close supervision by the Mexican Government. This area, however, is not the normal source of supply for the middle and southern parts of Mexico; it produces expressly for the U.S. market. Exports have been heavy during this year—and possibly some were bootleg. In May the Mexican authorities imposed new restrictions—limiting American purchases to 500,000 head a year. Fresh vegetables, too, are specifically grown for the U.S. Tomatoes, for example, could not be shipped all the way south to Mexico City, nor is there demand for them. They are not the food about which Mexicans are now worried.

Although the U.S. State Department has been fully aware of the persistent grumbling in the market places, it has remained inexplicably silent on the clear policy of its government, to wit: avoidance of buying the basic foods of Mexico; the fullest cooperation with the Mexican Government in restraining excess purchases of any commodity whatever that is needed south of the border. Those Mexicans who have studied the food problem without political bias attribute high prices and shortages of food to two causes: speculative operations, and transportation difficulties due to the overloaded, worn-out condition of Mexico‘s railroads.

Although anti-gringo feeling is, in a sense, traditional to Mexicans, some of it evidently results from deliberate campaigning. The misinformation about food is only one example. There are other anti-American stories so detailed in their form that they must have been carefully planned. For example, there is the tale that General MacArthur has asked for 250,000 Mexicans to serve in the South Pacific. The story continues with the explanation that Mexican soldiers are brave; they don’t eat as much as gringos; and they could save the lives of many blond American youths. There are statements that Mexican soldiers will definitely be sent immediately to this or that front. There is a vivid story about the Japanese releasing three big bombers from an oversized submarine, and bombing Los Angeles severely. And a similar one about German destruction of New York City.

Where do such explicit and malicious stories come from? One must assume that antidemocratic groups in Mexico invent and spread them. Mexico permits considerable freedom of expression to various types of political organizations and movements. The Sinarquistas are the most dangerous and expanding of Mexico‘s antidemocratic groups, working particularly in the small towns and rural districts. Their appeal and their purpose are quite like Father Coughlin’s Social Justice. Violently anti-Communist, thoroughly rightist and pro-Church (although the Church disclaims any alliance), they have a six-year history of opposition to the aims of Mexico‘s social revolution and to democratic principles generally.

Then there are the pro-Franco Spaniards, the Falangists, the devotees of Hispanidad yearning for a Franco union of all Spanish-speaking peoples, and, of course, restoration of the privileges of both the Church and the landowners. With food distribution largely in the hands of Spaniards, it obviously serves a dual purpose for many a retailer and wholesaler to blame the U.S. for high prices: it explains away their own profiteering and feeds the anti-American, antiwar spirit in Mexico. The more acute Mexico‘s problems, the more fertile the ground for cultivation of fascist propaganda and the more ominously powerful such groups as the Sinarquistas become.

MEXICO HERSELF CAN ACT

Every thoughtful Mexican admits that there are steps that only his own government can take to curb inflation. One of them, exclusion of undesirable American capital, was mentioned by Villaseñor. Practically all of the recent influx of foreign capital is patently undesirable because of the channels into which most of it has gone. When Americans buy up shares in sound Mexican companies, skimming off the cream of local investments, the equity held by the nationals is decreased. No farsighted American or Mexican wants to see this happen. Mexican capital, displaced from the well-established companies, is apt to gravitate into more speculative operations such as high-interest loans and unsound building.

The American Embassy, recognizing the danger to the Mexican economy, would doubtless have welcomed any move of Eduardo Villaseñor, as head of the central bank, to check the 1942-43 influx of speculative money. The U.S. has every reason to regret the activities of many Americans in Mexico today. The recent purchase of a half-interest in Mexico City‘s Hotel Reforma, by A. C. Blumenthal (who left the U.S. in 1941, before he was to testify in the Joseph Schenck trial) is the latest transfer of Mexican interests to U.S. investors.

The Mexican Government could have called a halt, early in 1942, to the building of the Hipódromo, and can today pounce on many a U.S. businessman traveling on a tourist card issued by a Mexican consulate in the U.S. The tourist card specifically forbids any activity beyond pure vacation pleasures and threatens, in black and white, serious punishment for violation of its terms. Yet there have been Americans buying up alarm clocks, bobby pins, and Swiss watches for shipment to the U.S., thereby nearly closing out Mexican supplies and causing fantastic price rises. Only the Mexican Government can decide when the purchase of its textiles by droves of American buyers, entering as tourists, causes too serious a depletion of Mexican supplies.

The U.S. can ration travel or, if passports were required for Mexico, the State Department could sift and limit the number of people who go to Mexico. This would obviously help curb inflation by weeding out many a “tourist” heading south for dubious purposes. Mexico must, however, first indicate that she is willing to give up a good hotel, resort, and souvenir business in the interest of checking inflation. To date, the Mexican Government tourist bureau evidently wants to hang on to the business, and proudly states that some $25 million will be spent this year by American visitors in Mexico City, Cuernavaca, Taxco, Acapulco, and the other resorts.

The Mexican Government alone could have braked the building boom that will almost certainly cause many of its citizens painful financial losses. Mexicans, not Americans, can curb the expansion of credit and the large-scale hoarding and speculation in foods. If meat intended for the U.S. market is urgently needed to feed the capital, the Mexican Government must see that it is routed south. Many a well-informed Mexican is convinced that the government has hesitated to take drastic steps because politicians themselves, or their close friends or relatives, are mixed up in the businesses that might be affected whether it be food speculation, building construction, or operation of a race track or hotel.

Although Mexican bankers have advised the government to cut down its expenditures on public works, it is scarcely sound to curtail defense works, roads, or irrigation—which absorb most of the public spending. (Waste could, of course, be cut down.) Extension of the Pan-American highway south toward Guatemala is justifiable more for defense than economic reasons. Mexico now spends about 10 per cent of her budget on irrigation—and so she should. Most of the 20 million population extract a miserable living from the earth, yet only about 4 per cent of the country’s area is under cultivation. Even with irrigation works installed wherever possible, only about 8 per cent of the land can be brought into use, since most of Mexico is dry, bony, high, unyielding earth.

TOUCHY ISSUES

Granted that Mexico is not doing enough to tackle her own problems, still her bill of complaints against the U.S. contains some legitimate grievances. Others, though insoluble, are understandable causes for friction. When the U.S., for example, promises to help open up 500,000 new acres for the cultivation of castor and other oil-bearing seeds Mexico shrilly demands the necessary tractors, trucks, and other farm equipment. When she fails to get them she is understandably indignant.

Certain other demands are less reasonable. Mexico has promised to deliver tree rubber and guayule to the U.S. in exchange for American-fabricated rubber for use in her tire plants. This spring the Mexican Government, through the press, accused the U.S. of failure to send down the promised rubber. Rubber inventories for tires were down to a mere two-month supply, and the factories would shortly have to close. The press failed to mention that tree rubber expected from the southern state of Chiapas had failed to materialize.

Today in Mexico City a tourist can rent a car and drive as far and wide and fast as he cares to. Meanwhile both tires and automobiles are being worn out at an extravagant rate, even with the new six-day ruling. But it would be extremely painful for the Mexicans to ration gasoline since the petroleum industry is state-owned. To cut down the sale of gasoline, and the taxes therefrom, would not only seriously reduce government income, it would put a further strain on Pemex, the national monopoly that Mexico wants very much to prove a success—to its own people and to the outside world.

When Mexico complains that she sends minerals north to the U.S. in constantly larger quantity, yet gets back copper bars, sheet metal, hardware, copper wire, etc., in diminishing volume, she fails to recognize the problems of war. In fact, civilian industry has been affected less in Mexico than anywhere else in the hemisphere; but the pinch is inevitably coming. Hard as it may be for Mexico to curtail a few manufactures, the wartime necessity for just that must be faced.

Underlying the question of supplies is another more serious if less obvious friction between the Mexican Government and our own. Some Mexicans choose to call it the issue of “sovereignty.” When the U.S. offers an outright grant to rehabilitate the Mexican National Railways, every precaution must be taken that the expenditure of precious locomotives, rail, and every other item of equipment is used to the fullest advantage. This means that Mexican laborers on the national lines must be induced to give up some “privileges,” like their prohibition of mixed passenger-freight trains. It means that bribery, by which a shipper has been able to get a few cars for nonessential goods, while freight more vital to the war is held up, must be stopped. To insist on these and many other reforms means something akin to U.S. operation of the railroad.

As U.S. export and priority restrictions become tighter, Americans, through the BEW, have an ever-greater power of decision over the internal economy of Mexico. In addition to checking and rechecking every request for scarce materials, the U.S. Government tries to make certain, later, that the tractor and the ton of copper bars actually have gone to the intended destination; Thus to control not merely what Mexico buys, but precisely what she does with it is, to many a Mexican, a violation of sovereignty. The future implications are understandably alarming, but the irritating checkup is necessary because of political conditions in Mexico.

The Mexican Government has always been cursed with mordida. (The word means “bite.”) Public funds leak away in graft, big and small; public officials engage in dubious private business. Labor leaders as well as government officials are cynically considered by the Mexican citizenry to be in on the mordida. When a Mexican charges that a member of the Cabinet has 1,000 suits of clothes, he adds, justly or unjustly, that the country’s most important labor leader has thirty—all alike. There is an adage that Mexico will never have a clean government until a requisite for the presidency is that the candidate be brotherless. Many Mexicans are convinced (although they scrupulously make exceptions for their President, Manuel Avila Camacho, and for ex-President Cárdenas) that most men in public office, where money is handy, take it.

These days copper, tractors, trucks, etc., are more valuable than pesos and dollars. Few Mexicans will deny the need for a checkup, to make certain that the trucks and tractors earmarked for a new agricultural area are not sidetracked to the motor agency of a politician’s relative; or that copper destined to make shells in the national arsenal does not wind up in a real-estate development. Proper use of these supplies, in wartime, is more important than the feelings of individual politicians whose “sense of sovereignty” may be offended.

POLITICOS — IN AND OUT

As inflation grows, Mexico‘s regime faces an uneasy, restless people. Under Manuel Avila Camacho the Mexican Revolution is said to be “in equilibrium.” The compromise government has encouraged foreign capital to enter and has made some important concessions to the Church. In the President’s Cabinet are both ex-President Lázaro Cárdenas who expropriated the oil companies and divided millions of acres of land, and Maximino Avila Camacho whom many Mexicans consider a reactionary ally of both foreign and domestic business.

For some time there has been growing anxiety that Maximino Avila Camacho is grooming himself to succeed his brother in 1946. The lefts have viewed this possibility with real horror; they can imagine no more thorough betrayal of Mexico‘s revolution. Even the rightists are now skeptical of Maximino, because of the widespread popular distrust he has incurred. In May, in a long, inspired interview published in the Mexico City press, he elaborately denied the various charges made against him as a man who had become enormously rich during the last few years. He likewise disavowed any ambitions for the presidency, but the Mexicans were by no means reassured.

As Minister of Defense, Cárdenas, still the untarnished hero of the lefts, and of many in the middle, has an important job, which he is doing quietly. He studiously avoids any activity or speech that could be interpreted as politics, and has nothing to do with the internal economic problems worrying the government. He is quoted as saying, “We know how to deal with ex-Presidents who meddle.” (In 1936 he deported ex-President Calles.) By remaining quiet Cárdenas is, in fact, gaining stature. Although his reelection is not permitted, he can, at the right moment, exert a strong influence.

Mexico‘s most important labor leader, Vicente Lombardo Toledano, has lost the power he once had in C.T.M. but he is by no means finished. More of a fellow-traveling left than a home-grown radical, he roots loudly for Mexico‘s war effort, and for wartime cooperation with the U.S. He is important as Mexico‘s ablest and sharpest critic of the government’s failure to meet its domestic problems. Lacking the purely native quality of revolutionary thinking characteristic of Cárdenas, Lombardo Toledano still has an appeal to the people, who may well become fed up with the Avila Camacho government by 1946 when a new President will be chosen. It is naive to believe that the Mexican people choose their President. They do not, but their dissatisfaction can be clearly felt in the higher councils where Presidents are made.

To Mexican labor and to thousands of campesinos in the agricultural areas, the thirty-three-year-old revolution is a living movement that must not be arrested. In the Mexican language La Revolución is a term used in the present tense and in capital letters. Possibly a million men have already died in it—yet the living standard is still incredibly low. With inflation it tends to go lower. Only vigorous action to stem price rises can revive in the people what confidence they had in President Avila Camacho’s middle-of-the-road government just before a splendid prosperity turned into dangerous inflation. Today the President himself wrestles with price controls and during May and June showed signs of tightening up enforcement. The job is hard in any country; we have not been able to control inflation in the U.S.; it is much more difficult in a less organized, less disciplined nation.

WHAT CAN THE U.S. DO?

Soon after President Roosevelt visited Mexico, the two governments announced that a joint economic commission would be set up, half Mexican, half American, to find ways of helping Mexico in her present problems. Someone in Mexico made a remark that Eduardo Villaseñor, like Admiral Standley, had spoken out of turn and too boldly; but he may have precipitated action. Whether he did or not depends on the effectiveness of the new four-man commission.

Like the Mexican Government, we have been slow to see the trouble brewing and to muster what few resources we could. The most difficult job is to find something for Mexico to buy from the U.S. Secondhand but still useful machinery no longer needed in the U.S. could be continually surveyed in relation to Mexico‘s needs. Chile, for example, has been most enterprising about this. Keeping a representative in the U.S. constantly in search of useful machinery, she has been able to pick up and ship considerable quantities. Possibly, as construction of war plants and Army bases slows down, idle cement machinery may become available. This would be useful to Mexico for her road building, irrigation works, and a probable postwar construction boom. Ice-making plants, supplemented with small factories turning out the simplest form of old-fashioned wooden iceboxes, could be helpful in a country virtually without refrigeration. Textile (cotton and rayon) machinery, cotton gins, and equipment with which to make newsprint and glass have all been available from time to time. A few secondhand steam turbines have already gone down. Although only a fraction of the dollar balances could be absorbed by secondhand machinery, it would be worth the effort to explore every possibility applicable to Mexico‘s economy.

From these imports small industries, preferably with all Mexican or mixed capital, could help in the present crisis. Obviously they should be planned solely in consideration of Mexico‘s needs, with BEW and the State Department resisting every pressure to protect future exports of the U.S.

In recent years the U.S. has given tangible evidence of just this approach toward industrialization in Latin America. Right now both Brazil and Mexico are building, with technical and credit help from the U.S., nationally owned steel industries. Mexico‘s mill, called Altos Hornos, will be in partial operation at the end of this year. The U.S. Government is now negotiating with Mexico to find ways to modernize the oil industry; if possible, to provide machinery for a high-octane gasoline plant. If American private capital is involved one can only hope that the terms are so fair to Mexico that there can be no backfire if a left government succeeds Manuel Avila Camacho.

What little we can do seeps down, as it always has, only in dilute form to the people, who are fed Sinarquista propaganda, who are congenitally disposed to believe the worst of the gringo, and who are desperately poor, Possibly there are opportunities to reach the 70 per cent who make their living out of the land, with only a slight margin from starvation. The U.S., through Rockefeller’s office, is already helping nine Latin countries to increase food production. The distribution of better seed, provided by the U.S., and simple agricultural tools manufactured in large quantities with Mexican materials in Mexican factories, might result in bigger corn, bean, and rice crops. Six million dollars’ worth of seeds and tools, or $6 million put into sewers and water systems might mean more than the same amount of money loaned to the Altos Hornos steel mill. If the U.S. could help organize and implement an effective, widespread program of food and health, it might convince the people as a whole that gringos, too, believe that the Revolution must go on toward a constantly better living for all Mexicans.

*The peso is worth between 20 and 21 cents.

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