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THE MEXICAN SITUATION

By S. W. Reynolds, formerly President of the Mexican
Central Railway Company, Limited

It is with a great deal of diffidence that I appear before you today to address you on a subject which, at the present time, is of such world-wide importance, and which seems likely at any moment to involve our country in a contest with our neighboring republic of Mexico; a contest which, if ever entered into, would no doubt in the end prove successful, but which would cost a great number of lives and a vast amount of treasure. This success will come in part from the fact that Mexico has not the men or the money to spend in such a conflict that we have, and, consequently, will not have the endurance to carry through a defensive contest.

In considering the present situation, it is well to look at the past and see what Mexico has been in the more recent years of her history, and what has been accomplished in the development of the country. You are all too familiar with the early history of Mexico to make it necessary for me to go into that part of her national life. You will be more interested in taking up her course since what might be termed the beginning of a peaceful and progressive term of government in that country.

Her greatest and most material advance began when Gen. Porfirio Diaz became her President. General Diaz was born September 15, 1830, in Oaxaca. He was the son of an inn-keeper, and of mixed Indian and Spanish decent, his mother having belonged to the Mixteca tribe. He was one of six children. His father died when he was three years old. He was originally intended for the church, but his temperament not tending in that direction, he afterward studied law in the office of Benito Juarez, who afterward became President of the Republic. Later on, he entered

the army and took a very active and important part in military life.

General Diaz's first wife died in 1880, leaving a son and two daughters. Three years later he married Carmen Romero Rubio, the daughter of Romero Rubio, who was a member of the cabinet for many years, and until his death. She was a woman of great beauty and refinement, and was affectionately called "Carmelita" by the people and was much loved by them. She was of great assistance to General Diaz in his work.

I will not go into the detail of his life up to the time he became President. He assumed the executive power on November 24, 1876. At that time the constitution of the Republic provided that a man could not succeed himself as President, therefore, at the end of his term he was succeeded by Gen. Manuel Gonzalez, who served his term, and in turn was succeeded by General Diaz. In 1884, the provision in the Constitution was altered so that a man might succeed himself, and thereafter General Diaz continued as constitutional President.

With the advent of General Diaz began the important development of the country. In 1876, the Republic was bankrupt, a prey to civil war, brigandage, etc. In 1886, the credit of Mexico abroad was firmly established through a proper and satisfactory adjustment of the foreign debt, and this condition continued until the latter part of the Madero government. When General Diaz became President the treasury was bankrupt, when he left it he left $62,000,000 in it.

One of General Diaz's early methods of restoring peace was to organize the bandits, who had previously preyed upon the country and made travel through it dangerous, into what is known as the "Corps of Rurales," which afterwards became one of the most reliable and efficient arms of the government's service. He also made it much more to the advantage of his enemies to become his friends, and in that way pacified the contending elements.

General Diaz's greatest move toward development came through the promotion of railroad construction in the

country. Then took place what might be termed the peaceful American invasion of Mexico. It was his policy to invite anyone to come there with their money and enter into the country's development, and the first to accept this invitation were the Americans.

The first enterprise of any importance was taken up by Boston capitalists, and what was known as the Sonora Railroad was begun. This line of road ran from Guaymas on the Gulf of California, to Nogales on the American frontier. It was begun in 1879. In later years it became a part of the Atchison, Topeka and Sante Fe Railroad system, and is now a part of the Southern Pacific system, and has been extended nearly to Guadalajara in the central part of the Republic.

The next railroad taken up was also by Boston capitalists, who began in 1880 the building of the Mexican Central Railway between El Paso and the City of Mexico, and completed its whole length of 1224 miles to the City of Mexico in 1884, and it was opened for through traffic March 22 of that year. Since then additional lines have been built, until the system covered something over 3200 miles of road. The corporations which built both these roads were organized under the laws of the State of Massachusetts, which had been changed so as to permit the organization of corporations here to build railroads in foreign countries. Other railroads were undertaken by Massachusetts capital, but they were not generally successful. One, however, formed the nucleus of what has since become an important system; that is the line across the Isthmus of Tehauntapec, which has now become a national highway of traffic between the Atlantic and Pacific. Other important railway lines were built with American capital, in fact, by far the larger part of the railway construction in Mexico has been done by Americans.

As showing the methods of the government in handling this great development and the wisdom of the course pursued in aiding and subsidizing the roads, the experience of the Mexican Central Road will serve as an illustration. To aid in the construction of this road the government granted

a subsidy of $9,500 for each kilometer built. In order to make it easy to pay this subsidy, certificates of indebtedness were issued by the government on completion of defined sections of the road, and these certificates were redeemable with a certain percentage, which varied from time to time, of the gross customs receipts of the country. These certificates were placed on sale at every place where duties were collected, and importers were obliged to buy the percentage of their duties of these certificates, and pay them in to the government as a part of the duties which they had to pay. By this method the road was assured of its proper proportion of the country's revenues, and the government not having received it did not have to pay it out.

Subsidies were given to other roads on this and other bases, until quite an important part of the revenues of the country had been pledged for this purpose. The government wished to make a loan abroad, but found itself handicapped on account of these obligations. They finally, however, arranged a loan for an amount sufficient in addition to their other wants to take care of the obligations to the railroads.

Under the original conditions, the collections by the railroads would have extended over a number of years, so in order to meet the equitable result of anticipating payment, negotiations were entered into with the various roads for an equitable adjustment of this anticipation; a discount of 25 per cent was finally agreed upon in the case of the Mexican Central. The amount due the Company at that time was $19,820,793.01. After deducting the 25 per cent and some other items entering into the settlement, the sum of $14,335,732.06 was paid to them in cash.

In 1876, Mexico had but 578 kilometers of railroad. She has now upwards of 10,000 kilometers. Up to June 30, 1896, she had paid in subsidies on 9196 kilometers of road the sum of $107,743,660.25.

I tell you this as an illustration of the credit that the country had attained, and the justice with which they treated their obligations to the railroads.

General Diaz had as an ally and assistant in working out

his financial policies and the results attained, Jose Yves Limantour, who was his secretary of the treasury. Limantour was of mixed Mexican and French descent, and was one of the ablest financiers of the age and commanded the respect and admiration of the people of his own country and of all other nations with whom he dealt.

General Diaz's policy in opening his country in the way he did for development was not shared by many of his advisers, but his theory was that the country could afford to offer the opportunity to anyone freely to go there and invest their money on the promise of liberal aid from the government for whatever they might do, as, if the railroads were not built, the government would incur no obligation, and if they were built, the benefit to the country would amply compensate for any aid that might be given them. The value of this policy is shown by the immense results which came, for probably nowhere in any country has there been so great a development is so short a time.

Practically, the whole of this wonderful development has come as a result of the opening up of the country by the railroads, so that natural and latent resources might be made productive.

Another important advantage obtained was the power it gave the government in establishing and maintaining peace throughout the country. Formerly when disturbances arose, it took so long for troops to reach the scene, there was time for a powerful organization to form, and it took a longer time for it to be subdued. Later when trouble occurred, the government was able to reach the scene and subdue it before it assumed formidable proportions. In other words, the railroads opened up the country to practically immediate control from the capital.

The methods of government followed by General Diaz were in every respect those of a dictator. He had absolute control of all the details of government, appointed his own cabinet and officials, even directing who should be governors of the various states of the Republic. He also had complete control of congress, whose duties for a long time were merely nominal. He and his cabinet arranged the various matters

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