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Rh Later, under the Obregón government, moves against the petroleum interests were made through the taxing power, under a decree to become effective July 1, 1921. The alleged purposes of the new regulation were to stabilize the world's oil market, to conserve the national resources, and to furnish funds with which the government could again begin payment of interest on the national debt. The rates of taxation were so high that they were alleged to be confiscatory.

As the negotiations for recognition of the Obregón government proceeded this question became bound up with the older controversy. The oil producing interests protested to the United States government that recognition should not be granted unless the alleged confiscatory program of the Mexican government, under whatever guise presented, should be abandoned.

On June 7, 1921, Secretary of State Hughes issued a statement outlining the fundamental position of the United States. It pointed out that the matter at issue was much more important than the question of the recognition of any particular government in Mexico and declared:

The fundamental question which confronts the Government of the United States in considering its relations with Mexico is the safeguarding of property rights against confiscation. Mexico is free to adopt any policy which she pleases with respect to her public lands, but she is not free to destroy without compensation valid titles which have been obtained by American citizens under Mexican laws. A confiscatory policy strikes not only at the interests of particular individuals, but at the