- Historic Sites
The Amateur Diplomats
How a J. P. Morgan partner and the former Secretary of the Navy defused a revolution just by being good guys
April 1997 | Volume 48, Issue 2
Like any peacemaker, Morrow caught it from both sides—from leftists for slowing down Mexico’s march to reform and from the right for coddling “Red Mexico.” But his achievements held firm until 1934, when another Mexican president, Lázaro Cárdenas, repudiated Calles’s retreat toward conservatism, and another American ambassador had to deal with a resulting drift toward a collapse of Mexican-American relations.
This, of course, was Daniels. His appointment the preceding year had brought initial groans in Mexico City, where memories of Veracruz had not faded. But Daniels was no gunboat diplomat. As the owner-editor of the Raleigh (North Carolina) News and Observer , he was actually an anti-imperialist.
Like Morrow, Daniels practiced an easygoing, shirtsleeve diplomacy. He freely expressed himself to Mexican reporters and embraced them as colleagues. He also visited the countryside, tried on a traditional charro costume, and in other ways endeared himself to the locals, if not to the U.S. business world.
Then, in 1937, a long labor dispute in the American-owned Mexican oil fields came to a boil. After a bitter strike, Mexico’s labor arbitration board awarded a heavy retroactive payment to the unionized workers. The companies promptly declared that they could not pay without bankruptcy and, as was their long custom, looked to Washington—even New Deal Washington—for support. It was a time for diplomatic deftness, but in April of 1938 Cardenas nearly made Daniels’s mission impossible by abruptly declaring the full nationalization of the industry.
Secretary of State Cordell Hull drafted furious notes demanding immediate restoration of the seized properties or immediate payment of huge compensatory sums asked by the companies and threatening economic warfare.
While Hull and Assistant Secretary Sumner Welles raged, Daniels struggled valiantly to soften their tone, begged them to keep their demands unofficial and secret and thereby not back Cárdenas into a corner, and tried to get a hearing for Cárdenas’s counteroffers to make limited paybacks over a long term or allow the companies to operate the wells for his government and share in the revenues. Hull swore angrily that “Daniels is down there taking sides with the Mexican government and I have to deal with these Communists . . . and . . . carry out international law.” But though theoretically Daniels was Hull’s subordinate, the old man had a trump card in his private relationship with the President. In personal letters to FDR, Daniels pleaded for time. “We are strong,” he wrote. “Mexico is weak. It is always noble in the strong to be generous.” And he reminded the President, who needed no reminding, of Mexico’s other options. Germany, Italy, and Japan, preparing for war, would be happy to deal with the Mexicans if America should scuttle the Good Neighbor policy. So Roosevelt tactfully backed Daniels and smoothed his way by telling reporters that the oil companies, if compensated at all, should be reimbursed for actual investment expenditures, not inflated estimates of future profits.
Long-run victory went to the peacemakers. The State Department eventually accepted a proposal for arbitration, which dragged along for months until finally a “global” settlement was reached. Mexico would gradually pay a sum within its means for seized American lands and a total of $234 million for the oil-drilling properties. The figure, arrived at by independent experts named by both sides, was about half of the companies’ original claim. The United States would stabilize the peso, conclude trade agreements with Mexico, and lend help with Mexican highway development. These agreements, inaugurating a new, somewhat “postcolonial” attitude toward Mexico, were signed in November of 1941, a month after Daniels’s retirement and a month before Pearl Harbor.
During World War II and the Cold War, Mexico remained a United States ally. Its Revolutionary National party gradually became the establishment, and economic links were steadily forged between the two nations. What disagreements exist today never remotely approach the intensity of 1927 or 1938.
I like this story. Of course, all historical parallels are tricky. And, of course, the personal skills of ambassadors cannot by themselves bring peace without willing governments and favoring circumstances. Still, the tale of a J. P. Morgan partner and, eleven years later, the “villain” of Veracruz managing to cool jingoistic feelings and help their country to an accommodation with a revolutionary neighbor is one of those “stranger than fiction” episodes that are history’s occasional delight. It’s also worth remembering that the process began by dealing with “enemies” rather than by ostracizing them.