by means of an agreement protecting the interests and persons of their nationals who have settled in our territory, has already begun negotiations with the British Government, and has taken the preliminary steps with the French and Belgian.

As the English Government suggested a plan for a Convention which should include all kinds of claims which the nationals of one country might have against the Government of the other-and not restricted to those arising from damage sustained in the course of revolution-the Mexican Chancellery made the counterproposal, first, of organizing a Joint Commission which should be in conformity with the Decree of May 10, 1913-which provides that the signature of such a Convention automatically renews diplomatic relations between the two Governments-and, secondly, providing that this Commission take charge of all pending claims. These proposals were delivered to the Foreign Office in London the 4th of last March.

As the French Government, at the time of the conversations for the establishment of a Joint Commission on Claims, insisted that the signature of the Convention would not imply the resumption of diplomatic relations between the two countries, our Chancery refused to continue the conversations which had been initiated.

The same thing occurred in the negotiations commenced between the Belgian and Mexican Chanceries, on account of the former having declared, January 24th of this year, that it considered the questions of resuming diplomatic relations, and the establishment of a Joint Committee, separate and distinct. But I should fall short of my duty were I not to mention here-in spite of the above exposition-certain subsequent acts of mutual sympathy and appreciable importance in behalf of a commercial and spiritual rapprochement of the two peoples and of a better understanding between their Governments.

In the first place, I must mention the Belgian Economic Mission, which arrived in this capital February 20th of the present year, and which was organized by the Ministry of Foreign Affairs and the Central Industrial Committee of Belgium. The Delegate of the Government and Chief of the Mission was M. Georges Rouma, a great sympathizer with Latin-America and of Mexico of which he has made especial studies for many years as was proved in the course of most interesting lectures which he delivered, and the principal object of which was, as he himself expressed it, to make Belgium known in Mexico, and to maintain and cultivate the existing sympathy between the two countries.

In the second place, I must mention the Great Exposition of contemporary Belgian Painting, the exhibition which was held last month in our National Academy of Fine Arts. It was under the joint patronage of the Ministries of Foreign Affairs and of Public Education, as a double factor in the spiritual rapprochement between the Belgian and Mexican peoples and in the artistic progress of the latter. In answer to the opening address the Chargé d'Affaires of Belgium made a speech which abounded in gratifying references to Mexico. Lastly, I wish to inform you that the Government of His Majesty Albert I of Belgium, on May 12th of this year, duly accredited with the Letters of the Cabinet now in power as Chargé-d'Affaires to the Mexican Government, His Lordship Baron Henry de Woelmont, who has the rank of Envoy Extraordinary and Minister Plenipotentiary, in the Belgian diplomatic service.

OUR DIPLOMATIC RELATIONS WITH THE UNITED STATES

In my message of a year ago this day, read in this same place, I concretely explained the attitude at that time assumed by the Governments of the United States and Mexico, toward the problems which lay in the way of normalizing their political relations, as follows:

Attitude of the American Government: To refuse to recognize the present Government of Mexico, or to renew diplomatic relations with it, so long as it fails to secure those guarantees which, in its opinion, are necessary for the security of rights legally acquired by American eitizens in our territory, previous to the adoption of the Constitution of 1917. The Department of State in Washington, proposed to at end,

on May 27, 1921, a project for a Commercial Treaty, containing stipulations for the accomplishment of that end.

Attitude of the Mexican Government: rather than accept a conditional recognition on the part of any foreign Government, for the sake of obvious considerations of dignity and convenience, it would rather "eliminate-through the natural development of its political and administrative program-any occasion for promises which might humiliate it, and continue in this way until the situation be considered sufficiently free from obstacles as to be recognized without loss of national dignity and sovereignty, and to be able then to formulate whatever Treaties might be judged necessary for the greater cordiality in the renewed diplomatic relations."

The Executive is convinced of the great advantages to both countries which would result from the immediate recognition of the Government of Mexico by the Government of the United States, and the consequent normalization of their diplomatic relations, but considering that the Mexican nation is a State whose existence and sovereignty have not been questioned for a hundred years, when it succeeded in winning emancipation from the Spanish crown, and therefore that its Government has the right to be recognized by the Governments of other countries in accordance with the established usage, in other words, without other conditions save that of its stability and its capacity to fulfil its international obligations; considering further that the stability of the present Government of Mexico is incontestable and its authority is peacefully enforced throughout the entire Republic, and its activities are the genuine emanation of a political and administrative program which includes among its postulateswith the apparent approval of the other Authorities of the Federation, of the remaining entities of the Republic, and of the great majority of the people governed, and in conformity, morever, with the standing laws-that principle referring to the rights legitimately acquired by natives and by foreigners, and reparation for the losses their interests might have suffered on our soil during the last ten years of internal fighting, and that, consequently, there could be no greater nor more effective protection of those rights and interests mentioned above than that resulting naturally from the slow but sure evolution-slow, because of the magnitude of the resistance engendered in that struggle of the difficult political program of building up, out of the chaos of revolution, the absolute supremacy of the Law, and considering, finally, that-as has just been explained-the signing of the proposed Commercial Treaty with the Government of the United States, or whatsoever other written guarantees of the protection of the rights legally acquired in our territory by its citizens, previously to recognition of the Mexican Government, and as an indispensable condition thereto, would be threatening to the dignity of said Government and to the sovereignty of the Nation, the Executive, instead of immediately normalizing its diplomatic situation in regard to the White House Governmentthus suffering loss of prestige for himself and for the nation which had placed its confidence in him-preferred to await being recognized formally, counting as he has, and continues to do-on the patriotic cooperation of the other authorities of the country and on the firm support of public opinionthat he may trust in the realization in the near future of the results of his policy.

This hope has, fortunately, been realized in the course of the year covered by this message, as is proved on the one hand by the steady extension of the circle of our international friendships, and on the other by the manifestations of increasing cordiality in the relations developed within that circle, both of which things I have reported to the Honorable Assembly. Furthermore, the good effects of the internal policy of Mexico are not limited to the cases that I have mentioned, but have also made themselves felt in the United States, not only calling forth expressions of popular sympathy and frequent petitions to the State Department in Washington, from many local Legislatures, Chambers of Commerce, and other Organizations, in favor of immediate recognition of Mexico-actions for which our country is profoundly grateful—and, without

having known before, of more petitions in opposition such as those systematically presented by members of the so-called Association for the Protection of American Rights (Ass'n Protectora de Intereses Americanos) who seem to eare more for their own material interests than the mutual moral interests of the two nations; not only in this connection-as I was saying-have the good effects of the sane governmental policy of Mexico been felt, but, also-as will be seen later in the White House itself.

Having followed, as I have explained, the only way open to the Government over which I have the honor of presiding, in so difficult a situation, I have ever striven to clear away the difficulties, both internally, by trying to allow the political and administrative program that has been adopted the maximum development possible, being limited only by human capacity and by nature; and in external affairs, by compromising when necessary in all cases where the dignity of the Nation was not thereby put in jeopardy. As the State Department in Washington continued to urge (insist on) the signing of the Commercial Treaty in order that it might recognize the Government of Mexico, and as it would submit for our consideration a plan for a Compact-to be signed after the ratification of the Treaty-creating the Joint Commission for the study and settlement of all claims pending between the two Governments, the Executive, ever faithful to that policy of reconciliation which has served as his guide, made a Counter-proposal calling for two Compacts: (1) The first, which would correspond to the general invitation of July 12, 1921, to all Governments whose citizens might have claims pending for damage sustained in the course of the Mexican Revolution-an invitation, as I have already explained, based on Article 50 of the Decree of May 10, 1913, and on Article 130, revised, of the Law of December 24, 1917-which would not have the character of reciprocity, but would aim, as the Mexican Government contrary to the usual conventionalities thus defined it, only to compensate American interests for losses sustained in Mexico; and for greater proof of the good will of the proposing party and of its desire to satisfy all just claims, these elaims would be determined (to the greater advantage of the claimants) in a simple spirit of equity. With the acceptance of this Compact the Government of Mexico would be implicitly recognized without loss of national prestige; and (2) would then proceed to the second Compact by virtue of which the Joint Commission would be established to decide according to the principles of International Law all the other difficulties which have arisen between the two Governments from the signing of the Convention of July 4, 1868, up to the date of the one under discussion now. With the field thus clear of present and past difficulties, it would be possible to proceed to the study of a Treaty, if that be considered an efficient basis for the further development of future diplomatic relations.

This Counter-proposal, an admirable example of the good faith of the present Mexican Government; and all its other accomplishments-despite great and innumerable obstacles-in the direction of normalizing the national life (sustained only by means of a political program with a sound moral and legal basis), achievements among which I must mention, for example, especially the restitution of foreign properties which had been confiscated by a former legal Administration, and the Compact recently drawn up in New York by the Secretary of Treasury of this Government and the International Bankers Commission for the renewal of the Public Debt service, and which now only awaits ratification which Congress is now requested kindly to grant, as well as the hoped-for patriotic cooperation of this exalted Assembly, in order that the Mexican Administration may be able to continue with firm step the course on which it has started; together with the interchange of extra official correspondence carried on in the course of the year which ends to-day by the two Governments-correspondence which has led gradually to a better understanding of the respective points of view; and the currents of sympathy and common interests growing out of the necessary and inevitable proximity of two neighboring peoples; all these elements-I repeat-have tended to produce very recently an appreciable rapprochement from the positions originally held by the Governments of the United States and Mexico.

It is very pleasant to me, therefore, to close this part of my Message with the announcement of the possible substitution for this proposed Commercial and Friendly Treaty (as a previous and indispensable condition to the recogni. tion of the Government of Mexico) by the development of spontaneous political action of this Government, which would be the equivalent of the desired guarantees for property legally acquired in our territory by American citizens; and that such a substitution of equivalent values will suffice to change the attitude of the Government of the United States-though maintaining all that has been deemed essential-until it be compatible with the only attitude which the Government of Mexico could decorously assume, and which up to the present it has preserved, namely to eliminate-by the natural development of its political and administrative program-all occasion for promises which might humiliate it, and to follow this course until the field be felt sufficiently free from obstacles to be recognized without detriment to the national dignity and sovereignty. . ."

SECRETARIAT OF THE TREASURY AND PUBLIC CREDIT

The present report contains only the broad and general features of the treasury operations of the Executive. In the Memorandum of that Department, the Congress of the Union will find with complete statistics an itemized account of the details of that work.

The grave economic situation that prevails throughout the world as the chief consequence of the recent war, and the inevitable and profound disorders of the same nature caused in this country by the events of the last decade have made reconstruction work, which the Executive is developing in all the branches of the Public Administration, extremely difficult in this Department.

REVENUE

Of all matters concerning the Treasury Department the one in greatest danger of being affected by previous conditions is the revenue, because, probably, the importance and volume of local and international transactions serve to form an index of the productivity of the taxes. Consequently the Executive has done his best to counteract the effect of these unfavorable factors with what equipment the law provides; and as the very corner-stone of such an attempt depends on not damaging or injuring the sources of revenue by diverting them from their former channels, he deemed it advisable to postpone, until the situation be cleared, the application of the reforms which he plans gradually to introduce in the fiscal system inherited from the past, which system, besides being to a great extent incompatible with the needs of modern life, serves to aggravate the losses naturally suffered, in such circumstances, by the Public Treasury and by the tax-payers as well.

The fiscal policy of the Executive, based on these ideas, could necessarily manifest itself only in the execution of isolated measures of limited scope which, without altering the general features of the standing Revenue Law, modified some of its provisions as well as others contained in Regulative Law, relative to the selection of attached properties, the fixing of proportional shares, and the methods of collection; (1) first, in order to adapt them to the never-ending changes in market conditions which by altering or even reversing the circumstances foreseen at the time of enforcing those requirements, make the tax either insignificant or excessive, ruin its effectiveness, give it a social or economic importance which it has never intended to have, or even reach the point of making collection impossible; (2) second, in order to obtain greater revenue without increasing the existing burdens, by suppressing or reducing certain imposts which were not only unproductive but also actually costly and harmful as to collection, by facilitating the payment of arrears by slow tax-payers, or by reforming the administrative requirements which in different ways hampered the collecting offices and permitted the tax-payers to evade the levy or to make it fall on other persons.

The Executive issued a decree exempting from duties for a period of four months construction material imported to repair buildings destroyed by the

recent floods of the Río Bravo del Norte.

This measure greatly accelerated

the restoration of the extensive zone damaged by these floods.

Again, with a view to reducing the inevitable inconveniences to the taxpayers, and the excessive collecting expenses which the Treasury makes up by collecting together different though related duties, and to increasing the productivity of these levies, the Executive decided to unite the numerous charges on maritime traffic under one head.

The

With respect to internal revenue, the Executive observed a policy conforming in all respects to that enunciated in the preceding paragraphs. General Stamp Tax Law and those pertaining to the sale of alcoholic beverages were brought in harmony with that policy by means of several unimportant changes in order to facilitate the collection of some of the taxes therein, and to permit the collecting offices to prevent and prosecute irresponsible persons from attempting to evade payment or to shift payment to others than those intended by the law to bear it. Further, he reduced to a half the tax on sealed bottles, and suppressed the inconvenient and unproductive taxes on the consumption of electric light and power, on the use of telephones, and on capital belonging to the institutions of Private Charity. He established a tax, payable at the rate of 1% per annum, on investments guaranteed by mortgages, consignments of annuities, or agreements to pay in kind, and he doubled the revenue yielded by the domestic production of beer, in accordance with the decree of January 6, 1919. Finally, he decided to substitute for the system for collecting the tax on domestic petroleum established by the decree of May 24, 1921, another which fixes the proportion and the yield of this tax: this measure was adopted because of the great loss suffered by the treasury and by the tax-payers on account of the constant fluctuations in the price of this article.

For a different reason, the Executive revised the decree of June 7, 1917, which put a special tax on crude petroleum and its by-products, the proceeds of which should be applied wholly to the Public Debt, in accordance with the regulations later adopted.

The Executive had several ends to serve in issuing this decree. In the first place, as he announced to the National Assembly in his former report, he sought to protect the nation's oil fields from excessive and unremunerative exploitation, especially since the cost of production of Mexican petroleum being lower than that in foreign countries, it was beginning to be sold at a very low price for an ordinary combustible, without any benefit being derived from its by-products. In the second place, he believed it right and just that the most prosperous industry and the one which had suffered least damage from the Revolution should bear a large part of the burden of the national debt. Lastly, he wished once and for all to put an end to the difficulties which stood between the Government and those paying the tax on petroleum, and to open negotiations for an agreement with the nation's creditors on a modus operandi which would permit the country to honor its pledges without injuring its sovereignty nor compromising its reconstruction, and requiring both groups of interested parties resolutely to seek a settlement.

All these aims were attained, thanks to the agreement reached September 3rd of the year previous with the representatives of the principal petroleum companies which stipulated that they pay the decreed tax in cash or in Government bonds, receivable at face value, and furthermore that they give the Government certain accommodations, which would practically convert them into auxiliary agencies for the redeeming of the debt. With these stipulations stated in the decree of February 12 of this year, and the conversations ended between the Secretary of the Treasury, representing the Executivo, and the representatives of the government bond holders, all that remained was to readjust the apportionment of the tax referred to, equalizing it with what had been paid as a result of the agreement of September 3, 1921, and the decree of February 12, 1922. The decree of August 8 answered this purpose, the enforcement of which assures, on the one hand, sufficiently protective amounts on Mexican oil, and on the other, enough revenue to cover a considerable part of the sums which the Nation owes its creditors.