# Mexico's dilemma/Appendix A

APPENDIX A
Bills presented to the Chamber of Deputies to relieve the financial crisis
I
Translation—Bill presented to Congress of Mexico providing for an interior or foreign loan to cover the current deficit of the Government. From El Democrata, Mexico City, July 8, 1917.
Mexico Needs to Obtain a Loan of 150,000,000 Pesos to Cover the Deficits in the National Budgets.
THE EXECUTIVE, WITH THE SAME TENDENCIES WHICH ACTUATED THE REVOLUTION, WILL AVOID ANY FOREIGN LOAN AND ATTEMPT TO MAKE THE FINANCIAL DEAL IN THE COUNTRY.
IF IMPOSSIBLE HE BELIEVES IN ADVANCE THAT HIS CONDUCT WILL BE JUSTIFIED SINCE HE IS TRYING TO DEFINITELY REORGANISE FINANCES.
In the Department of Finance and Public Credit we were given yesterday by the Sub-Secretary in ​Charge of this Department, Don Rafael Nieto, a copy of the following important bill in which the Executive is authorised to negotiate a loan up to 150,000,000 pesos to be exclusively destined to cover the deficit appearing in the national budgets until they are adjusted. The text of the important bill to which we refer, and which will soon go before Congress, states as follows:
"The Congress of the Union has been already informed by the Executive that the budgets of the federation at present show a monthly deficit of about 5,000,000 pesos.
"To make up this figure we took into account only the normal expenses of administration, omitting the great number of small obligations of the Government which were not considered urgent, but which in any case organise a great floating debt which is increasing day by day.
"If, furthermore, we take into consideration the high cost of living, higher every day, and the necessity which we will later meet as a consequence of it of raising the wages of public employes; if we take into account the possibility that the work of pacification already is necessitating constant expenses, the supposition that the real deficit will exceed the amount above is not exaggerated.
"In order to arrest the gravity of the foregoing considerations it is sufficient to state others in respect to the future which makes a favourable ​solution of the financial problems appear less remote.
"On the one hand for some time the Government has not believed the time has come to pay divers claims which may be presented on account of damages caused by the revolution, although it is now studying the particular way to recognise and liquidate them, and in due time will have to submit a bill covering this matter to Congress.
"In the same order of ideas the Executive does not believe that the payment of the public exterior debt should be renewed until the deficit referred to herein has been met. These two important responsibilities then may by the very force of circumstances be put off until later, and should therefore be excluded from consideration for the present.
"On the other hand the present incomes, in spite of the fact that conditions of the country have not yet resumed normality, are in comparison greater than those which were being received in the period before the revolution and in view of this fact, which has some significance as showing the vitality of our people, it is logical to hope that when peace is re-established in the whole of the Republic and railway service and communication in general are completely normalised, the discrepancy between income and expenses will gradually diminish until the day in which the discrepancy, which is now one of the most serious difficulties of the Government, shall disappear. ​"As the indispensable bases for these objects can be realised in the effective liquidation of the present deficit, since its existence would indefinitely retire the equilibrium desired, the Executive believes the time has come when it is necessary to obtain a loan exclusively destined to fill such objects, and hopes that the National Congress, sharing with him the conviction that such a means is the only effective way to meet this important emergency, will at once grant him the authorisation necessary to begin due explorations in financial centres in the Republic and in other countries, impossible to know in advance even the possibility of obtaining a loan of such a nature.
"On account of these same difficulties the Executive could not propose to the Congress precise bases in respect to the exact amount of the operation and the conditions of issue, maturity, interest rate, etc., for the fixing of these details principally depends on the conditions of the world's financial markets which, as one of the many effects of the war, have lost all stability and it may be said change from day to day.
"Therefore, the Executive deems prudent to ask at once the Congress of the Union to grant him necessary powers to take all preliminary steps which will permit him to fix in the proper time these terms and possible conditions of the loan, the nature of the guarantees that will try to be established so far as possible on the basis that it shall not impose a charge upon public taxes, ​the class of contracts which should be entered into with the holders of former obligations and all other aspects of the operations, reserving the right to submit them definitely to the Congress so that the Houses may determine the propriety of carrying the project into execution.
"The Executive, following the same tendencies which prompted the Revolution to avoid any exterior debt, will make all sorts of efforts to carry out the financial transaction within the territory of the Republic and will not apply to foreign countries until he is convinced of the impossibility of obtaining an interior loan.
"If this impossibility shall oblige him to disobey the tendencies indicated, he believes in advance that his conduct will be justified in consideration that the object he seeks is to definitely reorganise by peaceful means the finances and national public payments.
"In view of the foregoing, the Executive hopes that the national representation will see fit to give its approval to the bill hereto annexed. Mexico City, July 7, 1917. V. Carranza (Rubrica)."
BILL PROPOSED
"The Congress of the United States of Mexico in use of the power conceded by Section VIII, of Article 73, of the federal constitution, has seen fit to decree the following:
"Art. 1st.—The Executive is authorised to ​negotiate a loan up to 150,000,000 pesos to be exclusively destined to cover the deficits met in the national budgets until they are adjusted.
"Art. 2nd.—The Executive is empowered to contract the loan referred to in the foregoing article either in the Republic or in foreign countries in the form of an operation over a long period, or by obligations of the Treasury redeemable or convertible in a brief term according to the greater or lesser difficulty encountered in obtaining the funds.
"He is also empowered to stipulate the conditions of interest, the type of interest, the form of amortization, the guarantee, and all other arrangements relating to the operation, including the contracts to be entered into with the holders of legitimate former obligations.
II
Translation—Bill authorising the executive of Mexico to negotiate a loan for the rehabilitation of the National Railways.—From El Universal, Mexico City, July 10, 1917.
Loan of Fifty Million Pesos for the National Lines.
will be destined to the repair of track, replacement of equipment and the reorganisation of service.
The Executive has sent to the Chamber of Deputies a bill in which the National Representation is informed that it is indispensable for the Government to contract a loan of 50,000,000 pesos to cope with the imperious necessities of the railway problem in the Republic.
The text of the bill is as follows:
STATEMENT OF THE QUESTION
By reason of the needs of the campaign, the Constitutionalist Government found itself obliged to take possession, first of certain lines of railway crossing the country, and later of entire systems, very particularly of the system of the National Railways of Mexico. To administer this ​great organisation, the Constitutionalist Government created an autonomous Department, called Direction of Constitutionalist Railways. The execution of such acts was not arbitrary, but based on express provisions of the Railway Law.
This state of affairs and the destruction caused by the war created a situation, special to the Mexican Railway and special to the National Railway of Mexico Company, in which the Nation has a preponderance of shares. This company remains in existence to conserve its legal personality, and to administer certain properties outside of the traffic service; but the service of traffic was suspended and the system of exploitation was altered. This being so, on constitutional reorganisation of the country, the National Government must solve the grave problem of the rehabilitation of the railway companies, that they may carry on the service of traffic in the constant and systematic manner satisfactory to the needs of the Nation, which cannot live without a proper service of railway transport.
The condition of the National Railways of Mexico Company particularly interests the Government, as much because this system is the most extensive and necessary for the national life, as because the country has extended its guaranty for the payment of its debt and is the owner of the majority of its shares, by reason of which it controls the system. ​
THE RAILWAY PROBLEM
There are three problems related to the National Railways. First, the reconstruction of the lines, including the repair of fixed material; the construction of the works of art destroyed and the replacement of equipment. The payment of the indemnity which according to the Railway Law the Government must make to the Company must also be considered; in other terms, the first problem consists in the settlement between the Company and the Government. Second, the financial reorganisation of the company, including the indispensable arrangements with the Trust Companies representing the bond holders, the consolidation of the floating debt and the arrangements relating to certain bonds to secure interests that have matured. Third, the administrative and technical reorganisation of the Company's services, so that the system may be again operated by the owner company on the new bases exacted by the social transformation the Nation has suffered.
Of all these problems the most pressing is the replacement of the lines, which public necessity is imperiously demanding. At the same time the solution of this problem is indispensable so the rest may be studied and decided successfully.
The Executive of the Nation needs, then, to be ready to cope with all the obligations related with this preliminary problem, and for this needs the authorisation of the Legislative Power in order to ​obtain the indispensable amount of money. The "modus operandi" of the investment of the necessary sums, the preferred-claim nature that will be given to the required moneys advanced, and the further details and conditions of the expenditure of the money, are secondary questions which cannot be decided until the Government can dispose of the sums to which I have referred.
For the foregoing-reasons, the Executive of the Union asks for the passage of the following DECREE by the General Congress:
DECREE
SOLE ARTICLE:—The Executive of the Union is authorised to charge the credit of the State up to the sum of 50,000,000 pesos, destined to the repair of track, replacement of equipment and the reorganisation of the services of the National Railways of Mexico Company, it being understood that the Executive shall submit to the General Congress in advance the bases of the contracts he may make and the investment of the loan he shall obtain.
Mexico, July 9, 1917.
V. CARRANZA (Seal)