Troubles & Taxes

Main problem facing the Government of chub-cheeked President Lazaro Cardenas is to find revenues with which to operate. When Mexico four months ago expropriated the British and U. S.-owned oil industry, the Government lost one out of every 15 pesos of Federal income which had come from oil taxes. So far the former foreign-owned oilfields, now Government operated, have proved a liability. British and U. S. purchases of Mexican oil have dried up. Virtually the only oil the country has disposed of has been several hundred thousand barrels delivered to Germany in return for German machinery.

As a result storage tanks are full, wells are capped, and grumbling workers have taken pay cuts. To quiet unrest, President Cardenas, accompanied by his little-seen brother, Alberto, and a trainload of loyal followers, toured the affected areas. Last week the President extended his trouble-shooting activities to the once-productive Tuxpan area.

Another sizable loss of revenues, springing out of the expropriations, was the cancellation of the U. S. Treasury arrangement to buy 5,000,000 ounces of silver monthly directly from the Mexican Government. Since then Mexican silver, largely mined by U. S. concerns, has been regularly shipped to Manhattan where the Treasury has purchased it in open market at its current price of 43-c- an ounce. From these shipments, however, the Mexican Government has realized only a 5.5% tax.

Last week, to balance the budget deficit caused by the loss of oil and silver revenues, the Cardenas Government decreed a 12% tax on all exports. Since more than 70% of Mexico's exports are minerals and metals, the burden will thus fall on the U. S. mining concerns, which will be forced to pay the tax before they can get their products to the U. S. market. U. S. interests were further hit when the Government established a semi-permanent limitation on Mexico's imports, 65% of which are supplied by the U. S.

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