Suspension of Transfers

Because France has too much gold (see p. 19) and Mexico too much silver, financiers in half a dozen countries worried last week. At the end of the week Mexico's silver troubles came to an abrupt climax with the announcement that for the next two years Mexico would suspend gold payments of $25,500,000 on bonds normally falling due Jan. 1, 1933 according to the Lamont-Montes de Oca agreement of last July. At the office of Finance Minister Luis Montes de Oca in Mexico City and at the offices of J. P. Morgan & Co. in New York where this announcement was given out simultaneously, officials fought shy of the word Moratorium, explained that this was a mere "suspension of transfers."

Like the Dawes and Young plans for German Reparations, the Lamont-Montes de Oca agreement provided for such a suspension whenever Mexican revenues, collected for the most part in silver, could not stand the pressure of translation into gold. Since 1929, the average price of silver has dropped from 53-c- to 29-c- an ounce. The suspension was obviously necessary. This however does not mean the suspension of all payment. Until Jan. 1, 1933, the Mexican Government will continue to make payments, but in silver pesos at the exchange rate prevailing last July when the debt agreement was signed. If the price of silver should go up, gold payments will be resumed. What happens if silver stays down will be decided at a comfortable manana, two years hence.

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