British Lions and Mexican Eagles. Business, Politics, and Empire in the Career of Weetman Pearson in Mexico, 1889-1919

British Lions and Mexican Eagles British Lions and Mexican Eagles Business, Politics, and Empire in the Career of Wee...

Author: Paul Garner

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British Lions and Mexican Eagles

British Lions and Mexican Eagles Business, Politics, and Empire in the Career of Weetman Pearson in Mexico, 1889–1919

Paul Garner

;

Stanford University Press Stanford, California

Stanford University Press Stanford, California ©2011 by the Board of Trustees of the Leland Stanford Junior University. All rights reserved. This book has been published with the assistance of The School of Modern Languages and Cultures at the University of Leeds. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, or in any information storage or retrieval system without the prior written permission of Stanford University Press. Printed in the United States of America on acid-free, archival-quality paper Library of Congress Cataloging-in-Publication Data Garner, Paul H. author. British lions and Mexican eagles : business, politics, and empire in the career of Weetman Pearson in Mexico, 1889-1919 / Paul Garner. pages cm Includes bibliographical references and index. ISBN 978-0-8047-7445-1 (cloth : alk. paper) 1. Cowdray, Weetman Pearson, Viscount, 1856-1927. 2. Engineers— Great Britain—Biography. 3. Businessmen—Great Britain—Biography. 4. Corporations, British—Mexico—History. 5. Great Britain—Relations— Mexico. 6. Mexico—Relations—Great Britain. 7. Mexico—History— 1867–1910. 8. Mexico—History—Revolution, 1910–1920. I. Title. TA140.C67G37 2011 624.092—dc22 [B] 2011009656 Typeset by Westchester Book Group in 10/12 Sabon

For Louise

Table of Contents

Acknowledgments, ix Introduction, 1 1. Weetman Pearson in Historical and Historiographical Context: British-Mexican Relations, Informal Empire, Mexican National Development, and the Rise of Global Business in the Late Nineteenth Century, 6 2. British Lions: Business and Politics in Late Victorian and Edwardian Britain, 31 3. The Foundations of a Business Empire: The Gran Canal in Mexico, 1889–1900, 61 4. The Extension of Empire: The Tehuantepec National Railway, 1896–1918, 94 5. The Birth of El Aguila and the Apotheosis of Empire, 1901–10, 138 6. The Empire Strikes Back: Revolution and Counter-Revolution, 1911–13, 165 7. The Unravelling of Empire: Civil War and World War, 1914–19, 201 Conclusions, 230 Appendix, 241 Notes, 243 Bibliography, 301 Index, 311

Acknowledgments

I am deeply indebted to a number of institutions and individuals who have helped me in the research and writing for this book. I appreciate the support of the Nuffield Foundation, the British Academy, the Central Research Fund of the University of London, Pearson PLC, and the Leverhulme Trust in sponsoring different periods of research and writing over the past decade. I am grateful to my former employer, Goldsmiths, University of London, for obliging me to give an inaugural lecture in which I first explored the connections between the UK and Mexico in the late nineteenth century, and used the case of Pearson/Cowdray to connect Mexico to the development of Hispanic Studies in the UK. Special thanks go to Eric Van Young and Wayne Cornelius of the University of California, San Diego, for inviting me as a Guest Scholar in 2002–03 to the Center for US-Mexican Studies, where the project began to take shape. In Mexico, Javier Garciadiego, Guillermo Palacios, Carlos Marichal, and Ariel Rodríguez have generously invited me at different times to take advantage of the superb research facilities of the Centro de Estudios Históricos at the Colegio de México. Roger Bartra invited me to present my ideas to the Seminario de Estudios Avanzados in the Instituto de Investigaciones Sociales at UNAM in 2005. The current and former directors of the Pemex Historical Archive, Eduardo Clavé and Alberto García López Galindo, generously allowed me access to the archive’s significant holdings on El Aguila in 2005 and 2007. I am also grateful to the University of Leeds for appointing me to the Cowdray Chair of Spanish in 2004, and thus providing me with an opportunity to revive my personal and professional interest in the Cowdray legacy. In 2007 the Leverhulme Trust awarded me a Research Fellowship to enable me to complete a first draft of the manuscript. Authors never write books, only manuscripts. The task of turning this into a book has been managed by Norris Pope and Sarah Crane Newman of Stanford with consummate professionalism and considerable empathy.

x

Acknowledgments

On a personal note, I owe a considerable debt to three of the pioneering generation of British historians of Latin America, Brian Hamnett, John Fisher, and Michael Costeloe, for their advice and support, always generously offered. I would like to thank my very good friends Lorena Hernández and Tony Stanton in Mexico City for their generous hospitality on more than one occasion. I also appreciate the assistance of Armando Rojas in tracking down materials in the Archivo General de la Nación in 2003, and of Cara Levey in checking the footnotes and bibliography during the final stages. Last, but certainly not least, this book would not have been written had it not been for the support of my wife, Louise Gibbs. Dedications to spouses, however sincerely made, somehow manage always to sound cloying. This, I fear, will be no exception. Quite simply, I dedicate this book to the most complete partner I could ever wish to have. Paul Garner, Leeds, 2010

to Monterrrey and Texas

Oilfield Refinery Pipeline Railway

TAMAULIPAS

SAN LUIS POTOSÍ Tampico

San Luis Potosí

N Tanguijo Potrero

Tamiahua Tuxpan

GULF OF MEXICO

Furbero

HILDAGO Zumpango

VERACRUZ

Gran Canal Mexico City

Lake Texcoco

DISTRITO FEDERAL

Veracruz

Puebla Orizaba

PUEBLA Coatzacoalcos Minatitlán

Oaxaca

Tehuantepec National Railway

Salina Cruz

0 0

50 50

100 mi 100

150 km

PACIFIC OCEAN

Pearson’s Major Interests in Mexico (1889–1919)

British Lions and Mexican Eagles

Introduction

; In early March 2002, a group of local dignitaries from Veracruz, the most important port on Mexico’s Atlantic seaboard, gathered to unveil a set of statues commissioned to commemorate the centenary of major engineering works inaugurated in 1902.1 At the centre of the group of sculptures were the two figures of Porfirio Díaz (president of Mexico 1876–80, 1884–1911) whose government had commissioned the port works, and the work’s contractor, the British businessman Weetman Pearson. The political and symbolic significance of the centenary celebrations and the unveiling ceremony was underlined by the attendance not only of Mexican President Vicente Fox, but also by the heir to the British throne, Charles, Prince of Wales, as part of a weeklong tour to Latin America.2 Shortly before what would have been anticipated as an anodyne occasion of the unveiling ceremony, a controversy broke over the inauguration of the statues which received extensive coverage in the Mexican press. Humberto Peraza, the sculptor commissioned to execute the statues, whose previous commissions had included a statue of Mexico’s most famous comedian, Mario Moreno Cantinflas, probably had little idea of the comedy that was to follow.3 In what can perhaps be described as a fit of emotional and/or revolutionary pique, the governor of Veracruz at the time, and the official host of the commemoration, Miguel Alemán Velasco, declared his refusal to unveil the statue of Porfirio Díaz and promised instead that he would tear it down at the first available opportunity. He accused Díaz not only of being a traitor to his country, but also of assassinating his grandfather, Miguel Alemán Gonzalez. As a result of the controversy, the celebrations went ahead, but they were hurriedly reorganised. Prince Charles put in a brief appearance, made no speeches, and was then dispatched on a tour of the restoration work in Mexico City’s colonial centre (Centro Histórico), and, appropriately enough for a man who talks to plants and animals, to a butterfly sanctuary in Michoacán.4

2

Introduction

Governor Alemán’s impassioned intervention contained elements of both high farce and political melodrama. The governor seemed to be unaware that his grandfather was not a victim of political repression or of Don Porfirio’s henchmen, but had committed suicide in 1929—fourteen years after Porfirio Díaz’s own death in exile in Paris in 1915. Alemán’s grandfather, in fact, sadly took his own life after making the fateful decision to join what has become infamous as the last attempted military coup (pronunciamiento) in Mexico in the twentieth century—the abortive rebellion led by General Gonzalo Escobar against President Emilio Portes Gil in 1929.5 Aside from its value as an anecdote, the controversy had broader implications. In the first place, the identity of its main protagonist was significant in itself. Governor Alemán was one of the most influential figures within the hierarchy of the Partido Revolucionario Institucional (the Party of the Institutionalised Revolution, universally known in Mexico as the PRI), a former chief executive of Televisa, and last but not least, the son of former President Miguel Alemán Valdés (1946–52), one of the PRI’s founding fathers. Throughout its extensive and exclusive domination of Mexican politics from its founding in 1946 to its first electoral defeat in July 2000, the PRI was responsible for the forceful articulation of its brand of nationalist rhetoric and of an official version of national history (or historia patria) which branded the regime of Porfirio Díaz as the supreme example of political tyranny and national betrayal.6 The controversy therefore served to draw attention to the significant level of historiographical distortion and inaccuracy to which the Díaz regime continues to be subject, and the persistent, albeit increasingly discredited belief—but one which nevertheless is still frequently articulated by Mexican politicians and the Mexican media—that Porfirio Díaz was a traitor to his country. An integral part of this historiographical distortion is the trope that the relationship between the Díaz regime and overseas businessmen such as Pearson constituted a type of Faustian pact between corrupt elites and rapacious foreigners in a conspiracy to plunder Mexico’s economic resources. These accusations have their roots in nationalist, structuralist, and dependentista historiographies which still retain a high degree of popular (although no longer academic) currency on both sides of the Atlantic. One of the central purposes of this book is to suggest that this historiography has been less than helpful in explaining Pearson’s success in Mexico. Instead, the explanation lies in a series of interlocking and overlapping factors which relate not only to Pearson’s personal agency and modus operandi but also to the political, economic, and business context of Victorian Britain and Porfirian Mexico.

Introduction

3

While any discussion of individual case studies inevitably contains a good deal of biographical detail, what follows is less a biography of Weetman Pearson than an attempt to contextualise and analyse the nature of his extensive business activities in late nineteenth- and early twentiethcentury Mexico.7 It is based upon two fundamental premises. First, Pearson was not only the most influential British businessman in Mexico in this period, but also one of the most successful—if not the most successful—of British overseas entrepreneurs, not only in Latin America, but anywhere within the formal or the informal British Empire. Second, Pearson’s extraordinarily diverse business interests in Mexico constituted a veritable business empire, ranging from construction, mining, and public utilities, to manufacturing, transportation, and, most significantly, oil. As such, it constitutes an ideal case study of the rise of global business organisations and British entrepreneurial agency in late nineteenth-century Latin America, and provides an ideal opportunity to question previous historiographical frameworks for the understanding of the role of overseas interests in this crucial phase of national development in Mexico. Hitherto, the success of nineteenth-century British businessmen overseas (the “British Lions” of the book’s title)—and especially in countries outside the core of the industrialised North Atlantic—has largely been understood as a function of either the dynamic character of British formal or informal imperialism in the “golden age” of empire, and/or of the inequalities within the structure of the international economy in the nineteenth-century Atlantic world which, as the argument goes, rendered economies on the periphery of world trade and finance (such as Mexico) vulnerable to dependent, distorted development and systemic exploitation. Chapter One explores and challenges these frameworks, and seeks instead to emphasise the agency of the Mexican political elite (the “Mexican Eagles” of the title) in the process of state- and nation-building, and their harnessing of overseas capital, technology, and expertise in the pursuit of a strategy of national development. It also explores the context of Pearson’s arrival in Mexico from the perspective of British-Mexican relations in the nineteenth century. Despite the persistent obstacles faced by overseas entrepreneurs in Mexico throughout most of the nineteenth century, Pearson, by contrast, was able to take advantage of the unprecedented opportunities made available to British businessmen following the reestablishment of British-Mexican diplomatic relations in 1884, and the settlement of outstanding debts to British bondholders (the Deuda Inglesa or English Debt) in 1886. Chapter Two examines the political and economic environment of late Victorian and Edwardian Britain from which Pearson emerged to construct his Mexican business empire. Emphasis is placed on the vital interplay of

4

Introduction

politics and business in Pearson’s career. He had already established himself as a successful public works contractor in Victorian Britain through the family firm of S. Pearson and Son before his first venture into overseas contracting in the 1880s. But his business success was both reflected in and enhanced by a political career that took him to the House of Commons in 1895 and from there to the House of Lords in 1910 when he was granted a peerage (as, first, Baron, and later Viscount Cowdray).8 Chapter Three examines the context of Pearson’s first contract in Mexico, the construction of a drainage canal (Gran Canal del Desagüe) to relieve the perennial problems of flooding and water-borne disease in Mexico City. It is important to emphasise here that Pearson came to Mexico not as an overseas investor but as a public works contractor and, therefore, in effect, an employee of the Mexican government. The Gran Canal was one of the most important public works projects in nineteenthcentury Mexico, and it proved vital to Pearson’s subsequent success. The technical and organisational skills he employed in the completion of the project—where many had previously failed—combined with his empathy to the developmentalist project of the Díaz government, and his assiduous cultivation of a clientalist network, facilitated the award of further public works contracts—most notably the reconstruction and management of the Tehuantepec National Railway, which promised to open up to international commerce an interoceanic trade route between Mexico’s Atlantic and Pacific coasts (the subject of Chapter Four). Pearson’s affinity with the strategy of Mexican national development, and the support offered to him by its leading and most influential advocates in Mexico, encouraged him to commit himself to what would become his most significant, and his most profitable, Mexican enterprise— the oil business, under the auspices of his Mexican Eagle Oil Company (Compañía Mexicana de Petróleo El Aguila), registered as a Mexican company in 1909. It is important here to emphasise the difference between Pearson’s oil business and the public works projects he had carried out in Mexico since 1889. These earlier projects had been funded by Mexican public debt, planned by the Mexican government as part of a strategy to develop Mexico’s infrastructure, and entrusted to Pearson in the role of contractor and project manager. The risks and the responsibilities of bringing these projects to fruition lay almost entirely with the Mexican government. Pearson’s entry into the oil business still depended on the development of the personal and business connections which he had cultivated with the political and social elite since 1889. The fundamental differences between the oil business and his other activities lay, first, in the investment of his own capital; and, second, in the assumption of the main burden of risk and responsibility.

Introduction

5

With no prior experience in the oil business, Pearson encountered considerable early difficulties in establishing his operations on a profitable footing, as explained in Chapter Five. The discovery of major deposits in northern Veracruz in 1910—in the same year that Pearson had been awarded a peerage—encouraged him to stay in Mexico, despite the popular protests, political upheaval, and the economic disruptions which followed the outbreak of the Mexican Revolution in November of the same year, circumstances which forced many other foreign businessmen to abandon the country. Paradoxically, therefore, Cowdray’s oil business profited during the Revolution, principally as a result of the dramatic rise in the demand for oil, especially during the course of World War I (Chapter Six). Nevertheless, the Mexican Revolution represented a watershed for his Mexican interests. The structural and technological limitations of El Aguila, and the multiple practical and political difficulties he encountered during the periods of revolution, counter-revolution, and civil war, obliged him to search for a way out of his Mexican commitments. Chapter Seven explores the developments after 1914 which led to the sale of the controlling interest in El Aguila to the Shell group in May 1919. Although Cowdray had given up management of his Mexican oil business, this did not signal the end of his interests in Mexico, since the Pearson Group retained a significant number of shares in El Aguila until the nationalisation of oil by the government of President Lázaro Cárdenas in 1938. Nevertheless, the transfer of managerial control of El Aguila in 1919 signalled the beginning of the end of the Pearson business empire in Mexico. It marked the end of one era, and the transition to another: not only in the case of S. Pearson and Son and the diversification of its contracting business and eventual consolidation (as the media group Pearson PLC), but also, in a much broader sense, from an era of globalisation, imperialism, and liberal nationalism which characterised the late nineteenth and the early twentieth centuries, to a period of deglobalisation, imperial decline, and revolutionary nationalism which would define the half century after 1929 and transform the context and character of British overseas enterprise.

chapter one

Weetman Pearson in Historical and Historiographical Context British-Mexican Relations, Informal Empire, Mexican National Development, and the Rise of Global Business in the Late Nineteenth Century “If the Mexican Republic is prepared to conform to the usages common between civilised nations, this country will be the first to welcome her re-appearance among them. It may prove beneficial to England. It must perforce be an immense boon to Mexico.” —The Times, London, 14/08/1884.

; This chapter explores the historical and historiographical context of the emergence and consolidation of the global business empire of Weetman Pearson in Mexico after 1889. It begins with an overview of the historiography of British capital, trade, entrepreneurial endeavour, and “informal empire” in the nineteenth-century Atlantic World, and its impact on national development in Latin America and, specifically, on Mexico. It also reflects on the relationship between the globalisation of international business and imperial expansion in the latter half of the nineteenth century, in order to place the strategies adopted by multinational companies (such as Pearson’s firm S. Pearson and Son) into context. Even a cursory examination of the frameworks of interpretation hitherto adopted to explain the impact of Latin America’s external relations on the region’s development reveals a fundamental schism. Throughout most of the second half of the twentieth century, the explanation of Latin American economic “underperformance” and “underdevelopment” was to

Weetman Pearson in Historical and Historiographical Context

7

be found in the negative impact on the region of the structure and function of the international economy favoured by the nationalist/dependency schools of interpretation, and broadly shared by those imperial historians who sympathised with the view that Latin America formed part of Britain’s informal empire. These more negative interpretations contrasted with the liberal/developmentalist interpretation of progressive stateand nation-building peddled and promoted by contemporary political and social elites of Latin America in the late nineteenth century as they sought to entice and to harness foreign expertise, technology, and capital in the execution of their strategy. By the late twentieth century, the historiographical wheel appeared to have turned almost full circle, and these more positive (and now more empirically based) interpretations of the role of overseas investors and entrepreneurs in host economies have been revived and revamped, and now themselves form part of a powerful critique of the nationalist/dependency paradigm. The chapter also provides an overview of British-Mexican relations since independence in order to set the context for Pearson’s arrival in Mexico in 1889. It examines the consequences of Mexico’s persistent confrontation with British bondholders over the course of the century, and the rupture of formal relations in 1867 following British support for France’s abortive imperial adventure in Mexico (1862–67). Particular attention is paid to the resumption of diplomatic relations (1884) and the settlement of the “English Debt” (1886), and the new opportunities for British business in Mexico created as a consequence. It was this favourable conjuncture which provided the context for Weetman Pearson’s first public works contract from the Mexican government in 1889. informal empire and global business Throughout most of the twentieth century, especially during the latter half when nationalist and structuralist historiography dominated the academy on both sides of the Atlantic, it was generally supposed that British commercial preeminence in the nineteenth-century Atlantic, and the evolution of Britain’s “informal empire” in Latin America (pace Robinson and Gallagher), was an adequate explanation in itself of British business success.1 The thesis is familiar. Most textbooks and general histories on Latin American history written before (and some after) the 1990s described a region enslaved by a process of neocolonial exploitation and distorted development which resulted in a serious loss of economic and political sovereignty. As the predominant maritime power in the nineteenthcentury Atlantic World, and as an advocate of free trade, low tariffs, and

8

Chapter One

“sound money” in a distinctly asymmetric and “divergent” global economic environment, British complicity in the perpetuation of Latin American underdevelopment has always been central to the thesis.2 The double orthodoxies of dependency and informal imperialism have, of course, never had the field entirely to themselves, and have come under sustained attack. Initially—and, perhaps, predictably—there was a defensive response from empiricist British economic historians who argued not only that export specialisation followed naturally from comparative advantage rather than imperial coercion, but also that the British government consistently refused to intervene to protect the interests of British businessmen or bondholders.3 More recently, economic historians in the United States who are advocates of the empirical “growtheconomics” school of economic history have attempted to deliver the coup de grace to dependency analysis by dismissing it as untestable, unscientific, and counterfactual.4 At the same time, the exponential growth of the business history of Latin America in the United States, Britain, and, most recently, Latin America itself during the past two decades has provided detailed analysis of the fate of individual enterprises and entrepreneurs whose fortunes were not always exclusively determined by the structures imposed by formal or informal Western imperialism.5 As Geoffrey Jones has recently argued, business enterprises were, in fact, the “key to globalization.”6 During the period under study, which Jones calls “first globalization” between 1850 and 1929, business enterprise put in place a global banking and trading infrastructure and global transportation and communication networks (railways, shipping, cable, and telegraph). In search of the raw materials and foodstuffs in demand in the industrialised and urbanised West, unprecedented levels of foreign direct investment relative to the size of the world economy were channelled into developing countries. In these ventures global business in this period enjoyed a number of advantages and benefited from a very favourable set of circumstances: in terms of political economy, overseas entrepreneurs were assisted by the policies enacted by colonial and noncolonial governments on the periphery of the world economy (in the latter case, the independent states of Latin America) to create a more business-friendly environment—including exemption from taxation—to improve their institutional and legislative environment, and to develop their economic and social infrastructure, with the fundamental goal of protecting their economic and political sovereignty. At the same time, overseas entrepreneurs faced little (or no) competition from local entrepreneurs, who had limited expertise and limited access to technology or capital. Nevertheless, as Jones makes clear, overseas entrepreneurs faced considerable logistical obstacles in the execu-


9

tion of their projects and enterprises, which could only be overcome with technology, organisational and managerial skills, flexibility, and adaptation to different legal, market, political, and cultural contexts. For example: Finding oil when exploration techniques were primitive: transporting oil from where it was found to where it could be shipped to consumers; building bridges and railroads in inhospitable and physically-dangerous terrains; turning malariainfested tropical lands into banana plantations, were all massive technological, financial, and organizational tasks.7

The businesses which succeeded in developing countries in this period, therefore, combined political, financial, and cultural awareness with organisational and managerial skills in order to overcome major logistical problems. These were precisely the challenges faced by Weetman Pearson in Mexico, and the talents he would exploit to solve them. He would also be the beneficiary, as explained further below, of a particular configuration of circumstances in the 1880s which would give him distinct advantages over his potential rivals. But it is precisely the importance of individual agency and business acumen which is crucial to explaining Pearson’s success. Pearson shared, and more important, understood many of the values and preoccupations of the Porfirian political elite. In particular he fully understood their commitment to a project of state- and nationbuilding which he fully endorsed. He also understood their fears of becoming over-dependent on capital and investment emanating from the United States, and the opportunities this created for European entrepreneurs. In addition, Pearson would offer his services in a number of ways as both official and unofficial agent of the Mexican government in the implementation of its developmentalist strategy—because he saw that it was clearly in his interests to do so. In short, Pearson possessed the technological expertise, the business acumen, the commitment, the confidence, the empathy, the personal skills, the political sensitivity—and even the nationality—which suited the needs of the Porfirian political elite in the 1880s. His relationship with the Porfirian elite was, in short, based less upon cultural or class affinity than on hard-headed (and perhaps even cold-blooded) calculation of the business opportunities available, and the profits to be made. He was, therefore, pursuing far more personal goals than those of grand (or even subconscious) imperial design. He was not, therefore, to paraphrase Jones, merely a “free rider” on the coattails of British imperialism.8

10

Chapter One

gentlemanly capitalism and mexican national development An important and refreshing contribution to the debate on the impact of British imperial expansion on the development of host economies across the globe was made in the 1990s by Peter Cain and Anthony Hopkins’s British Imperialism.9 In the case of British contact with Latin America in the late nineteenth century, Cain and Hopkins generally found themselves in sympathy with the structuralist or dependentista camp, but their interpretation was more nuanced. They examined the specific cases of Argentina, Brazil, and Chile in the nineteenth century—countries where, by 1914, 85 percent of British trade with Latin America and 69 percent of British investment were concentrated. While the authors recognised the positive contribution made by overseas trade investment to the development of an economic infrastructure and to the construction of statehood and nationhood in late nineteenth-century Latin America, they nevertheless concluded that British control of trade and finance in these countries was such that it “infringed” national sovereignty. Britain therefore exercised an “honorary dominion”—a slightly diluted version, it seems, of “informal imperialism”—in these countries during the second half of the century. Significantly, Cain and Hopkins refused to “lump” British–Latin American relations into a single structural paradigm, emphasising instead, as Latin American historians have always known, that Latin America in the nineteenth century did not constitute—and never has constituted—an undifferentiated market for British trade and investment. Even more significantly in the context of this study, Mexico was absent from Cain and Hopkins’s imperial paradigm. Although Mexico’s absence was never explained or accounted for, it was a significant omission, since the evidence suggests that Mexico does not fit the paradigm very well.10 In fact, it might be argued that it fails to fit it at all. According to Cain and Hopkins, in order to “qualify” for the status of subjection to British imperialism, host economies had to be “heavily dependent upon British trade and credit” and “obliged to accommodate to British political and economic liberalism.”11 This was clearly not the case of Mexico at any time in the nineteenth century, and especially not during the high tide of British imperial power after 1850. This was for two fundamental reasons. The first was Mexico’s enforced isolation from sources of capital and credit in European financial markets from the 1830s until the late 1880s; the second was the development after 1867 of ever-closer economic ties with the neighbouring United States.12 Aside from Britain’s brief support for France’s abortive imperial “incursion into the sovereignty” of Mexico in 1862, discussed further


11

below, there is precious little evidence to suggest that that Britain was ever successfully able to use either what Cain and Hopkins define as its “structural” power (financial or military/naval power) or its less formal “relational” power (pressure, coercion, intimidation) to force the Mexican political elite to conform to the interests of the City of London, still less to “copy aspects of British constitutional procedures,” and certainly not to “adopt the cultural values of Britain’s gentlemanly elite.”13 As shall be argued below, and in subsequent chapters, despite the demonstrable Anglophilia of some of the members of the social elite of late nineteenth-century Mexico, the latter were generally more impressed by French than British culture. More significantly still, they were even more interested in discussing the nature of Mexico’s own emerging national culture and identity, and the path that the development of the nation should take. The most influential group within the Mexican political elite was committed to a strategy of national infrastructural development and industrialisation as fundamental components of a project of state- and nation-building. In pursuit of that strategy, it is certainly true that Mexico adopted a series of measures to place (to quote Cain and Hopkins) “monetary and fiscal policy on a sound footing” in this period, in order to be able to raise funds for infrastructural projects in London and other European financial markets. But this was certainly not exclusively because the City of London or the British Foreign Office determined that they should do so. In pursuit of the elusive goal of national development, the Porfirian regime in Mexico sought to respond to new economic opportunities and to capitalise upon the structural and technological changes taking place in the international economy in the last decades of the nineteenth century. In other words, the agency for the structural changes in the Mexican economy in the period under study was as much domestic as it was global. One of the most influential, and at the same time most controversial aspects of Cain and Hopkins’s hypothesis has been their use of the term “gentlemanly capitalism” to describe the set of behavioural patterns and cultural and moral values which linked landed interests, the political establishment, and the City of London to constitute the beating heart of imperial expansion. Crucial in this context is the pervasive influence of a behavioural code which underpinned what they describe as the “gentlemanly ethos,” and which operated on the basis of the “doux” values of order, duty and loyalty, honour, and obligation in the business transactions of the City, and in the political interactions and encounters in the corridors of Whitehall and Westminster. The notion of “gentlemanly capitalism,” and the argument that a “gentlemanly ethos” pervaded the minds, conditioned the attitudes, and

12

Chapter One

determined the actions of Britain’s social and political elite, is clearly relevant to a study such as this, which aims to comprehend and explain the modus operandi of one of Britain’s most successful overseas entrepreneurs, who had himself been assimilated into the ranks of the nobility, in a period in which British imperial power, influence, and prestige were at their height. But how and to what extent does Weetman Pearson fit the mould of a “gentleman capitalist”? There is no doubt that there is a reasonable “fit” between the archetypal “gentleman” and the figure of Weetman Pearson, especially at the height of his career after the mid-1890s. But it was status he had to graft for throughout his life, and certainly not one which came to him by dint of birth. The “fit” is, therefore, far from perfect. Pearson’s middle-class origins, and his provincial, Yorkshire birthplace, his minor public school education, and the original manufacturing base of the family firm might well in fact exclude him from consideration as a “true” gentleman, given the emphasis placed within the “gentlemanly” model on the metropolitan base in London, the importance of the “old school tie,” and the prejudice exercised toward the joint “vulgarities” of trade and manufacturing.14 It appears, then, that Pearson faced a number of obstacles in the acquisition of gentlemanly status, some of which were never successfully overcome. It could be argued that the first obstacle was removed as a consequence of the transformation of the family firm into a contracting business, rather than one based on manufacturing, after Pearson joined the family firm as a partner in 1879. However, it might also be argued that the contracting business, by its very nature, retained its links both to “services” (through access to financial networks) as well as to the manufacturing sector (on which the contractor relied for his equipment, machinery, and the tools of his trade). Whether the cutthroat competition within the contracting business curbed or stimulated some of Pearson’s “rougher” edges in the conduct of his business affairs is open to question. That Pearson was singleminded and ruthless in the defence of his business interests is unquestionable. The motto he attached to his heraldic coat of arms in 1910 was “Do It with Thy Might,” which suggests, aside from the clear reference to the support of Divine Intervention, a more brutal ethos than that associated with a gentlemanly code of behaviour. The second, major obstacle to the acquisition of gentlemanly status was more successfully overcome by Pearson’s successive moves up the rungs of the British social ladder. The first stage was his access to the corridors of Westminster, following his election to the House of Commons as Liberal MP for Colchester in 1895, and two subsequent successful defences of his parliamentary seat before 1910. The confirmation of his


13

“gentlemanly status,” however, was not achieved until the award of a knighthood in 1894, although this honour, according to Cain and Hopkins, apparently represented only the bottom rung on the ladder of British upward social mobility. His promotion to the House of Lords as Baron (1910) and subsequently Viscount Cowdray (1917) may well have satisfied any lingering doubts about his noble status, although, if Cain and Hopkins’s account is accurate, there would have been many within the ranks of the more aristocratic of the “gentlemanly capitalists” who would always have dismissively and condescendingly described Pearson’s credentials as those of “trade” and “new money,” and would have treated Pearson as a provincial parvenu who was, as one contemporary commentator noted, “animated with all the avarice of the age.”15 Where the model fits best is in Pearson’s relationships with leading politicians, City financiers, bankers, and brokers. As a Liberal Member of Parliament from 1895 to 1910, and subsequently as a Liberal peer after 1910, and through his sponsorship (and subsequent ownership) of the Liberal Party newspaper, the Westminster Gazette, he was very well connected to the upper echelons of the Liberal Party, especially to the conservative group of “Liberal-Imperialists” led by Prime Ministers Rosebery and Asquith.16 Even though Pearson was a contractor and not a financier, he clearly had excellent connections with City banks and bankers. A good example of the strength of these political and financial connections came, for example, in 1903 when Pearson organised a reception for Mexican Finance Minister José Yves Limantour in London which was attended by Prime Minister Balfour and the presidents of the Bank of England, William Deacons, Glyn Mills and Co., the Chartered Bank of India, the Dresdener Bank, the London Bank of Mexico, Lord Rothschild and Mssrs. G. Baring, and D. A. Seligman.17 Conversely, where Pearson deviates significantly from the model is his relationship with the “guardians of empire”—the overseas representatives of the British imperial elite, and those members of the Mexican political elite with whom he established his business relationships. According to Cain and Hopkins, the very functioning of gentlemanly capitalism as a global system was predicated on the establishment of alliances with “sets of like-minded rulers and congenial states which were designed to be dependable allies in a global campaign to subdue republicanism and democracy by demonstrating the liberal ideal of improvement.”18 This requires further reflection. First, it is important to point out that the political and social elite of Porfirian Mexico did indeed share the liberal development ethos of material and social improvement which predominated in the increasingly globalised world of the 1880s. However, while integration into the world

14

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economy was seen as a prerequisite for Mexico’s development as a modern nation, rather than expressing blind faith in markets and the free movement of capital, Mexico’s modernity was to be constructed within a programme of state- and nation-building which required the state to protect economic and political sovereignty and to keep in check the market’s most dangerous tendencies. As the representatives of a modern, liberal, republican, and secular nation-state which, as they saw it, had conquered by 1867 the domestic obstacles to progress—the combined demons of imperialism, monarchy, and conservative clericalism—Mexico’s late nineteenthcentury political leaders had precious little interest in the promotion of monarchy or the suppression of republicanism. If anything, the opposite was the case. The Mexican political elite with whom Pearson developed such a close relationship broadly endorsed the goals of nineteenth-century Mexican liberalism—the removal of absolutist monarchy, corporate privilege and colonial restriction, and the creation of a federal republic based upon popularly elected, representative institutions which would foster and protect citizenship, legal equality, and the secularisation of civil society. At the same time, it is true that they preferred a more conservative, developmentalist, and authoritarian form of liberalism—a Mexican adaptation of the version espoused by Comtean positivism—which advocated the principle of “scientific” political administration by an educated elite over the more metaphysical and abstract notions of “pure” democracy for a country such as Mexico with very low levels of literacy and equally high levels of social and ethnic stratification.19 At no time, however, did they endorse the notion of suppressing democracy—they argued, instead, that, as President Díaz himself famously put it in 1908, “democracy was the only true principle of just and true government,” while at the same time, and, of course, conveniently for their own interests, arguing that “in practice, it is only possible for nations with a sufficient degree of development.”20 Second, it is also true that the regime of Porfirio Díaz, in keeping with an overall policy of pragmatic political reconciliation with the former enemies of liberalism—especially vis-à-vis the Church—took full advantage of the linguistic, social, and cultural talents of the rump of Mexico’s aristocrats in the diplomatic corps to represent the Mexican Republic overseas, and, therefore, to present an image of a serious and “respectable” face to the aristocratic courts, and to the financial markets of Europe.21 But this does not mean that the Porfirian political elite universally shared, or aspired to share, the habits of deference toward aristocratic values expected of colonial elites according to the model described by Cain and Hopkins. The incorporation of Mexican aristocrats into the ranks of the regime’s


15

allies and supporters, like that of other former enemies of liberalism such as the Mexican episcopate, was part of a successful political strategy to subordinate all political and social actors to presidential authority, or, as Jose Valadés accurately described it many years ago, “to the will of the patriarch.”22 It represented, therefore, a strategic political alliance rather than ideological or cultural affinity—although it does not, of course, necessarily preclude the latter.23 On reflection, Pearson appears to have occupied an intermediate position on the fringes of the gentlemanly capitalist elite. He undoubtedly certainly shared their ethos and values, and was able to function effectively within these elite circles, especially within Westminster and the City. At the same time, as subsequent chapters will show, his ability to influence, even less to dictate British foreign policy toward Mexico within Whitehall and the Foreign Office, was limited in the extreme. He also retained a degree of distance from the inner circle of the elite groups, partly by dint of his Liberal Party affiliations, but mainly because he resolutely remained an independent and opportunistic businessman who lived by his wits, experience, and entrepreneurial talents. These allowed him to exploit both the opportunities which were made available to him, and those which he was able to engineer for himself. What he crafted in Mexico was a remarkable personal business empire which clearly took full advantage of prevailing circumstances: first, the desire of the Mexican political elite to modernise their material and social infrastructure; second, the opportunities which were made available to British businessmen overseas in an era of unprecedented globalisation; and, finally, by the rapid rise in demand for oil after 1912 as a consequence of global technological change and wartime demand. The case of oil, in which he had absolutely no prior experience prior to 1901, is, in fact, a classic example of his ability to identify and exploit new business opportunities. It is therefore very difficult to argue that it was Pearson’s membership of a gentlemanly elite which gave him the social connections and the business opportunities which made him one of Britain’s most successful overseas entrepreneurs. It was, if anything, an inversion of the process. It was his business success which allowed him to become assimilated into the ranks of the British political and social elite, which in turn provided him with new business opportunities which he would exploit to the full. And while his relationship with the Mexican social and political elite was undoubtedly based in part upon social, class, and political/ideological affinities, these did not constitute the only, or the most important, aspect of the relationship. Much more important to his business success in Mexico, as we shall see in subsequent chapters, was his role as an agent of late nineteenth-century Mexican modernisation and nation-building.

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an overview of british– latin american relations, 1860– 1914 One of the unfortunate consequences of the adoption of “informal imperialism” or “honorary dominion” as models to explain the nature of the relationship between Britain and Latin America in the nineteenth century has been to oversimplify what were, in reality, complex and variegated forms of interaction. In fact, British “interests” in Latin America over the course of the nineteenth century, whether strategic, commercial, or political, were neither homogeneous nor consistent. Given the geographical, political, commercial, and demographic variables within the region, and Britain’s other imperial commitments, levels of British presence or influence in the region varied considerably according to time, place, and circumstance.24 Nevertheless, it is a fact that, in the period which concerns us here—from the 1860s until the outbreak of the First World War in 1914—British trade and investment in Latin America increased exponentially. As has already been highlighted, a number of factors contributed to this significant shift: inter alia, increased demand in the industrialising world for foodstuffs and raw materials, the revolution in global communication and transportation, Britain’s commitment to free trade, Latin America’s commitment to exportled growth, and the restoration of Latin America’s credit on the London bond markets. Britain was particularly well placed to take advantage of these international trends. It dominated worldwide commercial shipping, and London’s preeminence as a financial centre meant not only that it was the principal source of capital, but also that sterling was the principal medium of international trade.25 As a result, between the middle years of the nineteenth century and the First World War, Britain supplied more manufactured and capital goods, more loans, and more capital investment to Latin America than any other single nation.26 By 1913, 10 percent of total British exports went to Latin America, and Britain received a similar proportion of total imports from Latin America. To put these figures into perspective, these market shares were larger than any other continent or country within the British Empire, with the exception of India.27 These impressive levels of British–Latin American trade were even more significant from the perspective of the major Latin American republics, representing an average of between 25 and 35 percent of their total imports and exports. At the same time, the proportion of British foreign investment which found its way to Latin America was even more spectacular. In a region where Britain had very few formal colonial possessions, British investments amounted to a remarkable 25 percent of total British overseas in-


17

vestment. These investments were both direct—in land, mines, mills, refineries, public utilities, banks, and, above all, railways—and portfolio—in bonds issued by both national and provincial governments, and, increasingly after 1895, in minority holdings in non-British joint-stock companies. Until 1895, portfolio investment (the bulk of which consisted of loans to national governments) was far more significant than direct investment. Between 1895 and 1913, when the sharpest growth of British investment was registered, direct investment accounted for some 40 percent of the total. Total investment, both direct and portfolio, rose from £80 million in 1865 to over £1.1 billion by 1913.28 On the eve of the First World War, British “preeminence” in Latin America appeared to be unchallenged. A closer examination, however, reveals that, even with British trade and investment at their peak, Britain’s position as the principal international capital market, and as the principal supplier of manufactured and capital goods, was under threat. The development of international capital markets in New York, Paris, Berlin, Amsterdam, Brussels, and Hamburg during the latter half of the nineteenth century was reflected in the increasing levels of direct foreign investment from the United States and other parts of Europe. Most significantly, while levels of British investment increased rapidly between 1895 and 1913, they failed to match the rate of increase in US direct investment, which rose dramatically from $308 million in 1897 to $1.6 billion by 1913. It would be wrong, however, to conclude from this that the rise of competition was symptomatic of a loss of “business nerve” by British investors before 1914, since it is clear that, faced with new market opportunities, British investors made direct investments in overseas enterprises, most significantly in free-standing companies, but also in minority holdings of North American (US and Canadian) and European enterprises.29 In the case of trade, however, it was unequivocally true that Britain had begun to lose its market share in those regions which were the principal commercial and strategic targets of US merchants, manufacturers, and politicians—Mexico, the Caribbean, and Central America. This had happened long before 1914. At the same time as the United States was tightening its grip on areas which bordered the Caribbean—subsequently perceived as a region of crucial geopolitical significance popularly known as the “American Lake”—Germany also began to focus its attention on Latin American trade after the 1870s in an attempt to practice its own version of “informal imperialism” and to break what was seen as Britain’s commercial and financial stranglehold in the region. German exports to Latin America increased rapidly—they trebled between 1873 and 1889, and trebled again between 1889 and 1913.30

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In response to this increased competition, British investors and exporters concentrated their efforts and their attention to the countries in the region where Britain had by far the largest market share—Argentina, Brazil, and Chile. By 1914, these three markets accounted for 85 percent of British trade to Latin America, and 69 percent of British capital investment.31 It is precisely the extent of British direct and indirect influence as the principal creditor of these three countries—vastly greater than British influence elsewhere in the continent—that led Cain and Hopkins to argue that Britain was guilty of exercising an “honorary dominion” and of “infringing” Argentinian, Brazilian, and Chilean sovereignty as a consequence.32 In general terms, there can be no doubt that British presence and influence in Latin America was at its most profound in the two decades prior to 1914. The contrast with the period after 1914, and especially after 1929, could not be starker. During the course of the twentieth century, a combination of structural changes in the domestic economies of both Britain and the Latin American states, prompted and conditioned by the impact of a series of “external shocks”—two World Wars and the Great Depression—profoundly altered British–Latin American relations. The severing of former ties with Britain over the course of the century contrasted sharply with the strengthening military, diplomatic, and economic relations between Latin American governments and the United States in the same period. As Eric Johnson, president of the US Chamber of Commerce, commented at the end of World War II, if the nineteenth century had been “a ‘British century’ in Latin America, the next would be an American century.”33 In retrospect, the scale and scope of Britain’s postwar restructuring (including the demise of its “formal” empire), the rise of US influence, and the consolidation of Latin American economic nationalism give an air of inevitability to the decline of British presence in Latin America in the second half of the twentieth century. It is therefore possible to identify an overall, if not a precise symmetry to the history of British–Latin American relations over the past two centuries. The slow climb to “preeminence” in the nineteenth was, if not a mirror image, then certainly a counterpart to the steady decline over the course of the twentieth century. In short, the two decades which preceded the outbreak of the First World War provided new and extensive opportunities for British businessmen in Latin America. Weetman Pearson would be direct beneficiary. In fact, as will be explained below, he was presented with a particularly favourable conjuncture of circumstances in which to develop his interests in Mexico.


19

british- mexican relations in the nineteenth century It is possible to identify three phases in the evolution of British presence in Mexico from independence (in 1821) to 1889, the year in which Pearson embarked upon his first Mexican venture. The first (1821–c. 1850) corresponds to the period of frenzied speculation and “bubble-mania” in the 1820s which followed, and was intimately related to the extension of British diplomatic recognition masterminded by Foreign Secretary George Canning in 1823. The crash which followed this early speculative boom required pragmatic readjustments by British merchants, the London bondholders, and their agents in Mexico to the harsh realities of postindependence political life in Mexico. The second phase (c. 1850–c. 1880) represented the low point of British-Mexican relations in the nineteenth century. Three years of bitter civil war (the Wars of the Reforma 1858–61) were followed by the decision of the government of President Benito Juárez in 1861 to suspend payments on all outstanding foreign debts, in order to allocate what was left of the Mexican Treasury’s meagre funds toward repairing the damage to domestic infrastructure. It provoked a predictably angry reaction from all of Mexico’s overseas creditors. In addition, some of the outstanding compensation claims made by British subjects against the arbitrary actions of the Mexican government since 1826 were now (after the 1840s) supported by a series of diplomatic conventions. The breach of those conventions prompted France, Britain, and Spain to approve joint military action to occupy Mexico’s principal ports and customs houses in order to force the Mexican government to meet its obligations. This decision had far-reaching effects on British-Mexican relations. Although Britain (and Spain) withdrew from military action once France’s imperial ambitions became clear, the damage had been done. Formal diplomatic and commercial relations were severed in 1867, and remained so for the next seventeen years.34 The final phase (1880–1889) corresponds to the resumption of diplomatic relations in 1884 and the final settlement of the English debt in 1886. The restoration of Mexico’s international credit allowed new loans to be negotiated for the first time since 1825. These new loans formed part of an emerging domestic strategy of national development and coincided with the resurgence of international efforts (including those from British merchants and financiers) to incorporate Mexico’s economic resources and raw materials into a growing international network of world trade and finance. Mexico’s restored relations with Britain laid the foundation for the recovery and expansion of British trade and investment in the 1880s. They

20

Chapter One

were crucial in determining the context in which Pearson first arrived in Mexico in 1889. The broad pattern of British–Latin American relations in the nineteenth century applies equally well to British-Mexican relations. There were, nevertheless, some significant differences. First, British presence in Mexico was more immediate, and certainly more profound than in other Latin American states. The extent of the early loans (and their prompt conversion into debt), the level of British investment in Mexican mines, and the concentration of over fifty British merchant houses and agencies by 1835 are testimony to the strength of British presence.35 One estimate suggests that more than half of Mexico’s imports in the period 1821–60 came from British ports, and more than three-quarters of Mexican exports (70 percent of which was bullion) went to Britain.36 British investment in Mexican silver mines in the same period represented more than half of British mining investments in Latin America.37 Second, the impact of Mexico’s prolonged indebtedness to British bondholders throughout most of the nineteenth century was also arguably more pernicious for Mexico than for Mexico’s sister republics in Latin America. Not only did it deny Mexico access to new sources of capital for a period of more than sixty years—with an important hiatus during the years of French intervention—it also led to a full-scale military invasion in 1862. Moreover, Mexico’s postindependence vulnerability made it a particular target for postcolonial retribution from its former colonial master, Spain, and neocolonial ambition from the United States and France. No other nation in Latin America experienced the foreign invasions to which Mexico was subjected to in the middle years of the century. This had profound, if paradoxical implications for Mexico’s erratic progress in state- and nation-building throughout the nineteenth century. On the one hand, it had a clearly detrimental impact on Mexico’s ability to defend and protect its sovereignty, or to implement the ultimate goal of the liberal project—the construction of a secular state and a cohesive nation. On the other, it gave a conflictive character to Mexico’s international relations and, in response, contributed to the early growth and articulation of Mexican nationalism. Mexico’s isolation from international trade and finance until the 1880s thus contrasts with the “rediscovery” and integration of other parts of the continent into the international economy and the resumption of international trade after 1850.38 Third, when the thaw in diplomatic relations with Britain—suspended between 1867 and 1884—and the settlement of the long-standing English Debt finally occurred, there was a notable confluence of business, commercial, and diplomatic interests which was arguably uncharacteristic of British practice elsewhere in the region.39 Fourth, despite the fact that the


21

restoration of financial and diplomatic links prompted a substantial boom in British trade and investment in Mexico after 1886, it would be mistaken to presume that Britain ever exercised “honorary dominion,” let alone “informal imperialism” over Mexican affairs during this period. Not only were British trade and investment on a different scale, and of a different character, to investments elsewhere in Latin America, but British presence in Mexico after 1880 was always less significant than that of Mexico’s northern neighbour, the United States. These factors played a significant part in determining the parameters and constraints—but also the advantages—under which British interests, including Pearson’s, operated in Mexico over this period. the restoration of diplomatic relations in 1884 The consequences for British-Mexican relations of Britain’s participation in the military invasion of Mexico in 1862, and Britain’s subsequent support for the abortive restoration of French imperial power until 1867, had been little short of disastrous. Even though British troops had withdrawn once Napoleon III’s ambitious plans to add Mexico to France’s imperial adventures in Indo-China and North Africa had become clear, the triumphant Liberal government of the Restored Republic under Benito Juárez was unforgiving. Mexican determination to resist the imposition of neocolonial rule had been symbolised by the execution of the Emperor Maximilian in 1867.40 Even moderate or conservative Liberals, such as Minister of Finance Manuel Payno, who before 1860 had been assiduous in attempting to honour Mexico’s obligations to European creditors, now adopted a much more critical view of the crude and self-interested actions of the European monarchies in pursuing their claims regardless of the financial or political difficulties faced by successive Mexican governments. Profoundly shocked by the experience of the French intervention, Payno, Juárez, and Mexican liberals of the Reforma generation now adopted a more radical and nationalist approach to the solution of Mexico’s domestic problems, and refused to subordinate Mexico’s finances to diplomatic discussion.41 As a result, all debt repayments, and all diplomatic relations and treaties with those European powers which had recognised, supported, and funded Maximilian’s empire, were suspended in 1867. The governments of the Restored Republic were especially resistant to recognising the legitimacy or legality of the loans made to the imperial regime. Faute de mieux, Mexico responded, not without some trepidation, to the growing clamour

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of voices from both sides of the border which argued for closer financial, commercial, and diplomatic relations with the United States.42 As British trade and investment expanded rapidly elsewhere in Latin America after 1850 (especially in Argentina, Chile, and Brazil), in Mexico it failed to develop as rapidly or extensively. Between 1867 and 1876, no more than six British merchant houses and four limited companies were actively conducting business in Mexico.43 To judge from the evidence of the financial papers published in London, investors now considered Mexico to be beyond the pale and, frequently, beneath contempt. As an editorial from the London financial newspaper Money commented on yet another suspension of bondholder negotiations in 1883: “We never had any belief in the alleged Mexican prosperity, nor did we ever entertain for a moment any confidence in the integrity of the officials of the Republic . . . for all the world knows how poverty-stricken and faithless Mexico is.”44 In a similar vein, the financial editor of the Times, on the eve of the resumption of diplomatic relations in 1884, referred to Mexico with only thinly disguised contempt: “the renunciation of its debts by a state can never be actually excused. Under any circumstances it must be an international offence of the first magnitude.” He concluded on what he must have considered an optimistic and conciliatory note, inadvertently highlighting the fundamental inequalities which had always existed, and would continue to exist in British-Mexican relations: “However, . . . If the Mexican Republic is prepared to conform to the usages common between civilised nations, this country will be the first to welcome her re-appearance among them. It may prove beneficial to England. It must perforce be an immense boon to Mexico.”45 The arrogance and insouciance of the Times’s correspondent reflected the major stumbling block to the resumption of British-Mexican relations after 1867—the satisfactory settlement of what was referred to in Mexico as the “Deuda Inglesa” (English Debt). Scant progress was made for over a decade after 1867. The strategy adopted by the Committee of Mexican Bondholders (CMB), which represented the bulk of British (London) bondholders, also did little to improve the situation, and their activities only served to exacerbate the problem. Not only did they consistently (and unsuccessfully) press the British government to intervene on their behalf, they actively (and successfully) sought to deny Mexico’s access to capital markets throughout Europe by protesting to the stock exchanges of London, Paris, and Amsterdam against the flotation of any new loans by a “defaulting nation.”46 The CMB’s success in blocking the flotation of railway bonds served to emphasise to the Mexican government that new sources of European finance for developmental projects—above all, the


23

railway projects which represented the main plank in Mexico’s strategy of national development—would not be forthcoming until the debt question was settled. They also reminded the British government that British business was in danger of missing out on potential new markets which were emerging as part of Mexico’s developmentalist project. While the Foreign Office was not prepared to take action on behalf of the London bondholders—whose claims they now insisted were a private matter—they continued to uphold the defence of the Convention bondholders whose agreements negotiated in the 1850s with the Mexican government had been afforded treaty status. British diplomats thus maintained the position that no renewal of relations would be possible until Mexico agreed first to settle these claims—the original cause of the conflict. They also insisted that, since Mexico had broken off relations, the Mexican government was obliged to make the first move toward reconciliation. The Mexican government, on the other hand, while not seeking to repudiate Mexico’s debt obligations, insisted instead that negotiations to settle the Convention bondholders’ claims—and those of other private citizens—should be kept separate from those concerning the restoration of diplomatic relations. In addition, as far as the Mexican Liberal governments of the Restored Republic were concerned, British support for France’s imperial adventure constituted a hostile act and the fundamental cause of the rupture of relations. Britain would therefore have to take the initiative in restoring them. By the early 1880s, however, circumstances had changed considerably, and pressures were brought to bear on both governments, which eventually resulted in the settlement of the long-standing impasse. One very significant factor was the growth of British trade with Mexico. British merchants and chambers of commerce now pressed for commercial treaties and diplomatic protection for British subjects doing business in Mexico, and persistently reminded the Foreign Office that new business opportunities were being lost. As early as 1876, fifty-five branches of the Association of Chambers of Commerce of the United Kingdom had pointed out to the Foreign Office the participation of British merchants in the recent growth in Mexican trade. They claimed that some 200 British ships were annually registered at Mexican ports—more than any other European power—but that the lack of diplomatic representation made British merchants very vulnerable to fines and other arbitrary impositions of Mexican customs officials.47 Seven years later, in March 1883, the same organisation (which, perhaps significantly, included a representation from the Chamber of Commerce in

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Chapter One

Weetman Pearson’s home town of Huddersfield, and one from his business base in Bradford) informed the Foreign Office that the disadvantages to the “merchants, manufacturers and ship owners of Great Britain” as a result of the absence of formal British representation had reached a critical stage. In the intervening period, Mexico had “made enormous strides in material prosperity . . . 2,500 miles of railway are now in operation, and a further 1,000 miles may be opened this year.” The Association’s main concern was that Mexico’s burgeoning prosperity would be exploited by Britain’s commercial rivals. Mexico had strengthened its diplomatic and commercial relations with the United States and Germany, restored its relations with France, and was in the process of negotiating similar treaties with Spain and Italy. The Association placed special emphasis on the Treaty of Reciprocity between the United States and Mexico recently ratified by the US Senate. This would allow the free admission into Mexico of all materials and equipment required for railway construction, mining, and agriculture, the effect of which “will be largely to exclude British goods from Mexico.”48 They argued, in short, that “while other commercial countries are arranging fresh Treaties of Commerce with a nation consisting of 10,000,000 people, Great Britain is the only State precluded from the possibility of availing herself of so large and advantageous a market for her goods by being prevented from entering into any negotiations on equal terms with other Powers in consequence of having no diplomatic relations with the Republic of Mexico.” From the Mexican perspective, there were also very tangible and pressing domestic reasons in the early 1880s for restoring Mexico’s diplomatic relations with London and its creditworthiness in the eyes of London’s financial markets. As Silvestre Villegas has argued, the desperate economic crisis in the latter years of the government of Manuel González (1880–84) prompted a desperate search for new sources of finance in order to meet basic government expenditure, including the cost of the subsidies and the generous terms promised in the large number of contracts and concessions awarded by the González administration to a number of railway companies.49 At the same time, there was growing consensus among the Mexican political elite that the courtship of increased commerce and investment with the United States carried with it real danger for Mexico’s economic and political sovereignty. The constant fear of the political elite in Porfirian Mexico was the same fear which had preoccupied Mexican conservatives throughout the whole of the nineteenth century—that Mexico was in danger of being engulfed by the Anglo-Saxon, Protestant, and materialist “Caliban” of the United States. By seeking to stimulate European links with Mexico, this would not only provide access to alternative sources of


25

capital, but also create a counterbalance to excessive dependence on US capital. These concerns were rarely expressed in public, given the fear of upsetting the continued flow of US capital and commerce. But they were widely held in private and can be found in diplomatic correspondence of the period. They were articulated with the utmost clarity by the Mexican minister in Paris, Emilio Velasco, who had been appointed following the restoration of Mexican relations with France in 1880, in his correspondence with the British ambassador to France, Viscount Lyons. The informal conversations between these two diplomats after 1880, subsequently relayed to the British foreign secretary, Earl Granville, were important in establishing a semiformal channel of communication between the British and the Mexican governments, which eventually led to formal restoration in 1884. In a confidential and revealing dispatch sent by Lyons in January 1882, the Mexican government’s fears over the protection of its sovereignty were made explicit. It is worth quoting at some length: The one consideration, the one anxiety which overruled all others in the minds of Mexicans was, he (Velasco) said, the maintenance of the independence of their country against encroachments from their all powerful neighbour. The United States’ Government was not, in general, inclined to war, and the Mexicans did not apprehend any actual invasion or attempt at conquest, unless important commercial or other material interests should be at stake. The object of the Mexicans had therefore been to endeavour to ward off interference from the United States’ Government by giving it full satisfaction with regard to commerce and to the employment of the capital of its citizens in enterprises in Mexico. They had, in particular, encouraged the construction of railroads between the two countries, and had endeavoured in various ways to give United States’ citizens an interest in the preservation of the existing state of things in Mexico. They had even gone so far as to denounce their Commercial Treaties with other countries, in order that the most-favoured nation clauses in them might not be an obstacle to granting special advantages to the United States. However . . . it had become apparent to the more reflecting among the Mexicans that this policy was being carried too far, that the magnitude and predominance of United States’ interests in Mexico were growing into a serious danger to the independence of the country, and that endeavours should be made to redress the balance by attracting European sympathy and fostering European interests. . . . Mexico had already resumed diplomatic relations with France, and was now anxious to renew them with England . . . (because) . . . they should derive very great moral support from the mere fact of the existence of friendly political relations and of active commercial and other intercourse with the great nations of Europe. They were, consequently, most particularly desirous to resume diplomatic relations with England, and to attract English commerce and English capital to Mexico.50

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The strategy of diversifying the sources of foreign capital and investment and therefore creating rivalries between competing overseas interests (whether in mining, industry, or, as will be explained in subsequent chapters, in the emerging oil business) between the “Great Powers” was also central to the Díaz government’s policy of protecting national sovereignty. José Yves Limantour, finance minister in the government of President Díaz between 1893 and 1911, and one of the main protagonists of the story which follows, explained the strategy of playing off the competing interests of foreign governments against one another in order to defend (and enhance) Mexico’s security: “The security of the (Mexican) Republic will, above all, be the result of the competing claims between the Great Powers who are keen to keep a protective eye over their citizen’s business affairs.”51 The evidence suggests that pressure from British business interests was a vital element in convincing the Foreign Office to modify its position— that, in actively seeking the resumption of full diplomatic relations, commercial considerations, and not the protection of creditors, would henceforth be paramount.52 This was confirmed by the positive reaction to the reports sent to London by Lionel Carden, the British vice consul in Havana, Cuba, who was sent on a “fact-finding” mission to Mexico in 1883 to report on commercial conditions.53 The financial papers in London subsequently published statistics to show that the British manufacturing exports to Mexico had more than tripled between 1879 and 1881.54 Between 1876 and 1884, sixteen new British companies had been organised in London.55 These reports were, no doubt, a further encouragement to potential investors, and generated a more receptive climate in London to the reestablishment of relations. The shift in the Foreign Office’s position also reflected its recognition that Mexico was not going to compromise on its basic demands. Mexico’s position had been consistent throughout. An interview in the New York Herald with Porfirio Díaz following his first reelection as president in 1884 underlined the central fact—that the renewal of relations was more in the interests of Britain than of Mexico. Díaz explained that Mexico had always been willing to recognise the English debt but “most assuredly” would not do so in order to bring about the renewal of diplomatic relations. “This,” he explained, “was of more interest to England than to Mexico, for they are the producers, and we the consumers, and they should certainly be more anxious to sell us their goods than we to buy them.”56 The president-elect failed to mention, however, the increasingly desperate plight of the Mexican Treasury, and the fact that the railway concessions he and his predecessor Manuel González (1880–84) had signed were unlikely to succeed without the restoration of Mexican credit


27

in the London market, given the recent uncertainties in the New York capital markets.57 As a result, both the Foreign Office and the Mexican government now showed renewed enthusiasm for negotiations. An important step forward was the recognition by both sides of the principle of “simultaneity” of negotiations between sovereign states.58 Carden’s mission was upgraded by the Foreign Office in 1883 to allow him to engage in informal discussions with Ignacio Mariscal, the Mexican minister of foreign affairs, over the possibilities of a renewal of formal relations. Special envoys were appointed—Mariscal for the Mexican government, and career diplomat Sir Spencer St. John for Her Majesty’s Government. It would hardly be true to say that they were concluded with any great haste, but by August 1884, formal diplomatic relations between Britain and Mexico had been officially restored.59 In the final protocol, the Mexican government had been successful in achieving its main aim that the issue of restoration should be kept separate from the renegotiation of debts to the London bondholders, and from the settlement of private claims from British citizens. The final version, in fact, made no reference to debt, and concentrated instead on establishing mechanisms for the settlement of the claims of private citizens, both British and Mexican, and for the negotiation of regulations governing tariffs and trade.60 One of the most disputed areas of disagreement was the settlement of the claims made by British subjects against the Mexican government for damages or losses since 1842. The concession made by Mariscal led directly to the establishment of the Anglo-Mexican Claims Commission in 1884. The commission sat for the next eleven years, until 1895, deliberating on a total of 281 claims from British citizens. In a report in 1889 by Lionel Carden, now British consul in Mexico, no fewer than 224 of the British claims were dismissed either for lack of evidence or because they had been withdrawn by the claimants themselves. By 1891, the Mexican government had paid out a total of $125,275 in government bonds to the successful claimants. Some $70,000 of this total remained unclaimed when the commission closed its books in 1895. However, the significance of the Anglo-Mexican Claims Commission was, as Alfred Tischendorf suggests, political rather than financial. It provided tangible evidence that Mexico was now, in contrast to the previous history of default, capable of honouring its treaty obligations toward British subjects.61 Those same subjects could now have more confidence in risking their capital and undertaking business ventures in Mexico.

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the settlement of the en glish debt, 1886 The final act in the drama of British-Mexican relations in the 1880s (and, perhaps, the final proof of Mexico’s deliverance from its former “faithlessness”) was the most important—the final settlement of debt obligations to British bondholders, the cause of so much aggravation throughout the century. Negotiations between the Committee of Mexican Bondholders (CMB) and the Mexican government had been going on for nearly sixty years on a more or less permanent—and, for the bondholders at least, permanently frustrating—basis. Although its critics frequently accused it of incompetence, the CMB could certainly not be accused of inactivity. Following its reorganisation and incorporation into the Corporation of Foreign Bondholders in 1876, it met almost once a month. Despite its best efforts, and despite the elaboration of a number of draft agreements with a variety of representatives of the Mexican government, little or no progress was made.62 The restoration of diplomatic relations was crucial in giving new direction and purpose to the negotiations. Equally important was the establishment of the Banco Nacional de Mexico in 1882, which provided the institutional mechanism through which future payments to Mexico’s overseas creditors would be channelled. Of similar significance was the reelection of Porfirio Díaz to the presidency in June 1884. Díaz had made it clear to Spencer St. John that, while he would honour any agreement which had been approved by both parties, he did not personally approve of any arrangement between the bondholders and the administration of his predecessor, General Manuel González. Given the financial crisis which had befallen the González government in the early months of 1884, Díaz suspected that the outgoing president would attempt to hastily construct a deal with the bondholders, and then negotiate a new loan on unfavourable terms which his own administration would then have to repay.63 Almost immediately following the resumption of diplomatic relations, a draft agreement was signed in September 1884 between the chairman of the CMB and Mexico’s representative, Edward Noetzlin. This agreement, however, fell foul of the escalating economic crisis in Mexico, which provoked demonstrations against the terms of an agreement perceived to be too favourable to foreign capital. In November 1884 riots broke out on the streets of Mexico City against the devaluation of the currency, in which a number of protestors were killed.64 The Mexican Congress immediately suspended its discussion of the ratification of the Noetzlin treaty.65 Once González had left office, Díaz proceeded to act on his commitment to reorganise Mexico’s public finances, reduce public expenditure,


29

and reach a final settlement of the debt. First, in accordance with his new minister of finance, Manuel Dublán, he appointed a commission (Junta Consultiva de Crédito Público) to examine the whole question of public debt, both internal and external. The committee’s report led to a proposal in June 1885 for the gradual consolidation of Mexico’s entire public debt incurred since independence, to be serviced from customs revenue from the port of Veracruz, and supervised by the newly created Banco Nacional. Second, the Díaz government established a financial agency in London in January 1886 under the stewardship of General Francisco Mena (then the Mexican minister in Berlin, and later appointed Mexican minister in London), whose first and principal task was to carry out the conversion and liquidation of the English Debt. Despite some internal dissent and wrangling within the CMB, and unfavourable comments in the London financial press, the London bondholders eventually (and unanimously) accepted the proposals of what became known as the Dublán Conversion at what was to be their last public meeting, in June 1886. The bondholders agreed to accept the issue of new bonds of the consolidated debt at a fixed rate of interest. Thereafter the CMB was disbanded, its work finally completed after a period which spanned no fewer than fifty-eight years.66 With hindsight, the Dublán Conversion can be interpreted as a significant triumph for the Díaz regime. The London bondholders accepted not only that obligations incurred by the Conservative and Imperial governments of 1857–60 and 1863–67 would not be recognised, but also that the accumulated interest on the unpaid debt between 1866 and 1886 was to be fixed at only 15 percent of its nominal value. This meant that the London bondholders had effectively accepted the “punishment” which the Juárez government had wanted to impose on those overseas creditors who had supported Maximilian’s empire. It also meant that the level of Mexico’s acknowledged foreign debt had been significantly reduced.67 Most significantly of all, the universally favourable response which greeted the Conversion in the financial markets of London and Berlin allowed the Díaz government to raise a new loan (Deuda Consolidada Exterior Mexicana) in March 1888 for a nominal amount of £10.5 million.68 Although most of these new funds were hypothecated to payments on the internal, or floating debt, and to the redemption of the 1886 bonds, the new loan—the first since 1825—showed above all that Mexico’s reputation in the eyes of international financial markets had begun to be restored.69 The second loan (the “Municipal Loan” of 1889) would be raised specifically to fund the Gran Canal Project, which brought Pearson to Mexico.

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Although the renewal of diplomatic relations in 1884 was undoubtedly significant in determining the future character of British-Mexican relations under the long regime of Porfirio Díaz, the settlement of Mexico’s debt obligations was even more so. The effect on British trade and investment was immediate. According to one estimate, already by 1890 levels of direct and portfolio investment from investors in London had quadrupled in comparison to the level of 1880.70 And whereas only 20 businesses working in Mexico had been registered in the Company Registration Office in London prior to 1884, a further 283 would be incorporated between 1884 and 1910.71 As the Mexican Financier commented with obvious enthusiasm in September 1889, only two months before Weetman Pearson’s first visit to Mexico, “In Mexico, English capital is clearly in preponderance, and almost every week sees a new company organised in London.”72 Hyperbole aside, it was clear that the opportunities available for energetic and ambitious British entrepreneurs in Mexico after 1886 were better than they had been at any time over the course of the nineteenth century. There was one young British entrepreneur in particular who would benefit spectacularly from this favourable conjuncture of circumstances.

chapter two

British Lions Business and Politics in Late Victorian and Edwardian Britain “If I were asked to define the two principles of Liberalism, I should select these: Do unto others as you would be done unto, and, secondly, fair play and equal opportunity. . . . If these principles were given effect, Socialism or Bolshevism could not arrive in this country.” —Pearson to the National Liberal Club 31/03/1922. (SMA:PEA Box F5 Westminster Gazette 1922)

; This chapter focuses on the origins of the parallel career of Weetman Pearson as businessman and politician in late Victorian Britain. His business career is examined in the context of the new opportunities for contracting provided by developments within the Victorian economy and the growth of business opportunities overseas. His political career will be viewed through the prism of his long career as Liberal MP for Colchester (1895–1910) as Liberal peer of the realm (from 1910 until his death in 1927)—a period in which the Liberal Party was a major force in British politics, although it was increasingly clear after 1910 that its force was in serious decline. Although Pearson always devoted far more time and energy to his business activities than to his political ones, this chapter will argue that the linkages between the two were profound. Always a highly political animal, Pearson used his political career as a vital source of support for his business activities—and vice versa. As a Liberal MP and Liberal peer between 1895 and 1927, and one of the Liberal Party’s principal benefactors throughout this period, his proximity to the sources of political

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decision-making and to the decision-makers themselves was clearly a considerable advantage to an entrepreneur whose business consisted of contracting for public works. At the same time, it is also important to emphasise that his contracting business was already well established before he entered Parliament in 1895. He therefore had no special reason to seek political office in order to further his business career. Nevertheless, his career remains a clear example of the importance of political contacts in the advancement of business success. In other words, political contacts may not have been essential to entrepreneurial success, but they undoubtedly helped. In Mexico, as will be demonstrated in subsequent chapters, they would prove to be of the utmost importance. Finally, the chapter also seeks to examine the guiding principles and practices of Pearson’s business modus operandi, which would also be transferred to Mexico after 1889. One of the most distinctive and dynamic sectors of the British economy which flourished in the Victorian era was that of construction and engineering, most clearly manifest in the transport revolution and the dramatic extension of Britain’s domestic infrastructure of public works, railways, shipbuilding, and ports. Within the construction industry in Britain, competition was always fierce, but the business opportunities opened up by the planning and execution of large-scale public works and engineering projects were unparalleled. The impact of the transport revolution was felt not only in the domestic sphere, but also in the international arena. Although Britain was one of the earliest and most spectacular examples, the development of material infrastructure in the second half of the nineteenth century became a truly global phenomenon. The role of the contractor was central, and, arguably, the internationalisation of the contracting business was one of the key features of the Victorian era, with a central role in influencing or, as has been argued, even determining the nature of international development through the development of a world market for technical expertise, commodities, and capital.1 Prominent amongst the individuals who helped to transform the infrastructure of Victorian Britain and that of many parts of the globe were the engineers and contractors, entrepreneurs such as Thomas Brassey, John Aird, John Norton-Griffiths, and Pearson himself, who built the railways, ports, and steamships which constituted the cornerstone of a transport and commercial revolution crucial to Britain’s material progress, industrial development, and the domination of world trade and finance.2 In this evolving capitalist nexus which reached its peak in the last quarter of the nineteenth century, the prominent role played by the City of London was central.3 Those countries on the periphery of international capitalist development which aspired to extend their internal processes of state- and nation-building (such as Mexico), and, therefore,

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to gain access to the latest industrial technology and capital for infrastructural investment, were inexorably, although never unconsciously, drawn into the City’s web. These growing international connections and mutual aspirations not only explain Pearson’s arrival in Mexico but also form the broader context for the extension of his Mexican business empire. As already stated, the intersections between business and politics are essential to the understanding of the career of Weetman Pearson. Pearson’s background and experience in construction and contracting provided him with the necessary experience to take advantage of the new business opportunities which opened up at home and abroad. His immersion into Liberal politics provided him with further business opportunities, and the means through which to link his business interests and his talent for political networking with his social aspirations of assimilation into the upper ranks of the British establishment. the entrepreneurial dynamic of victorian britain It has long been recognised that the final quarter of the nineteenth century presented unprecedented, if not optimum conditions for the development and the internationalisation of business enterprise in Victorian Britain. As the distribution of resources and labour shifted incrementally from agriculture to industry, it was not just the structure of community and individual lives which were transformed, but even the physiognomy of the landscape. The list of contributory factors is a long one. The growth of population and labour mobility, changes in land tenure and usufruct, the development of technology and new sources of energy, increasingly secure access to capital through the growth and stability of international financial markets (with London at the core of the international system), the economic opportunities afforded by imperial expansion, and, last but not least, the widespread consensus and confidence amongst industrialists, entrepreneurs, and the professional middle classes in the onward march of science and material progress created not only the economic but also the political, psychological, and cultural foundations of what would later become seen, and not just by contemporary imperial nostalgists, as a “golden age” of British capitalism, industry, enterprise, and empire. In an era in which the volume of international trade across the globe quadrupled, British participation, both in terms of exports and merchant shipping, was by far the most significant of any single nation. By 1885

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British exports constituted an exceptional 38 percent of world trade, and British merchant fleets transported over half of total world trade, at a time when Britain had less than 2 percent of the world’s population. As we have already seen in the previous chapter, the flow of British investment overseas also reached unprecedented levels in this period—levels which had never been achieved before, and have never been achieved since. By 1900, Britain’s overseas investments were twice as large as those of Germany or France, and twenty-four times those of the United States. The sum of British overseas investments by 1913 has recently been estimated to be the equivalent of as much as one-third of net national wealth. Put simply, by the second quarter of the nineteenth century, Britain had become, in the words of Theodore Hoppen, the “first industrial nation,” the first urban industrialised economy in the modern world, and the world’s leading trading nation. It became “the richest country the world had ever known.”4 It was, in short, by the end of the nineteenth century, a “global superpower.”5 In the recent historiography of the British Empire there is clear evidence of a spirited revival of a genre of benign imperial narrative with the recent publication of a new crop of revisionist interpretations of empire.6 For others, however, this demonstrates little more than the manifestation of a characteristically smug example of British chauvinism.7 The triumphalist revival nevertheless requires some important qualifications.8 In the first place, the internationalisation of the contracting business from which Pearson was ultimately to benefit so spectacularly in Mexico was not simply a reflection of expansion, but rather a response to a serious depression in the British domestic economy in the 1870s, as industrial competition emanating from Germany, Japan, and the United States had begun to disturb any sense of complacency regarding British industrial preeminence.9 The impact of the economic depression on Pearson’s business career was significant. As business opportunities at home declined, the logical step was to seek similar opportunities overseas. As indicated below, this explains the transfer of Pearson’s main office from Bradford to London in 1884 and his assiduous tendering for overseas contracts throughout the latter half of the 1880s. Second, a good deal of the published literature suggests that the muchvaunted entrepreneurial culture of late Victorian Britain was neither as strong nor as pervasive as has often been supposed, and did not necessarily create the optimum conditions for the development of business enterprise. In fact, much of the literature focuses its attention on the explanation for the failure of Victorian enterprise. Explanations of failure have sought to blame, inter alia, a lack of adequate investment, education, or training, state hostility or incompetence in the form of excessive taxation

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and inadequate planning, obstructive labour practices, and even an allpervasive “cultural hostility” to industrialisation.10 The “classic” structuralist explanation for the ultimate “failure” of Victorian enterprise is its relative political weakness—the argument that the business interests of an entrepreneurial middle class failed to conquer a divisive and inflexible class system and thereby to dominate British politics or to govern in its own interests. Despite relatively successful Liberal campaigns of the mid-century to replace mercantilist restriction with laissez-faire liberalisation of trade and commerce, and despite the strong links between businessmen or industrialists with the Liberal Party during a period of Liberal predominance in British politics, this line of argument suggests that the control of national politics remained in the hands of the landed aristocracy, in alliance with City financiers (the “gentleman capitalists” discussed in the previous chapter). This meant the continuation throughout the nineteenth and into the twentieth century of an economic and imperial policy which continued to support the Liberal shibboleths of “free trade, low taxation, and sound money.” Calls from British industry for fiscal protection from overseas competition and state investment in infrastructure, as practised by Britain’s industrial competitors in this period, went largely unheeded. As a result, industrial performance declined.11 In short, as the argument runs, there had been no “bourgeois revolution” in Victorian Britain, and the interests of industrialists and businessmen had failed to achieve political influence commensurate with their economic power.12 The historiography of British business in the Victorian and Edwardian eras is a flourishing and densely populated field. A particular focus of attention of this vast body of literature has been the multiple shortcomings of the late Victorian entrepreneur, often portrayed as amateurish, complacent, conservative, and indifferent to innovation, and thus one of the principal causes of business failure. While it may be true that some entrepreneurs were “guilty” of continuing to concentrate their efforts in the industries which had emerged from the era of the Industrial Revolution (textiles, coal, iron, machinery) and had failed to invest in the emerging technology-intensive, capital-intensive, and management-intensive industries of mechanical, chemical, and electrical engineering (such as those emerging in Germany and the United States), others had certainly not lost their capacity to innovate. Andrew Godley and Mark Casson argue that, far from failing, the large group of British entrepreneurs in the late Victorian period who had concentrated their energies into direct overseas investments across the globe, and not just within the confines of the British Empire, constitute a clear example of entrepreneurial success—a success, moreover, which has been largely ignored in the historiography.13 The

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vehicle for successful British entrepreneurship in this era was, therefore, not the multinational but the small-scale enterprise known as the freestanding company, an organisation of speculators, financiers, lawyers, surveyors and professionals with expert knowledge of the specific venture in a specific country—whether the project was plantation agriculture, mining, railways, banking, insurance, or public utilities.14 While the myriad British-owned free-standing companies were not innovative in terms of creating new technology, and lacked sophisticated managerial hierarchies, they were nonetheless highly effective in harnessing a combination of entrepreneurial and professional skills with financial expertise which proved to be highly effective as a business organisation.15 Godley and Casson argue that Collectively this role of overseas entrepreneurship was enormously important. The stock of British foreign direct investment was 45 per cent of total global foreign direct investment in 1913. British Free Standing Companies–style overseas investments were, in other words, the key entrepreneurial route for integrating resources into the global economy at the time, not the world’s emerging giants in automobiles, chemicals and electricals.16

While the model of the British overseas free-standing company is important in understanding the nature of enterprise in late Victorian Britain, it does not fully explain the nature or structure of Pearson’s business activities in Mexico. As will be shown in greater detail in the following chapters, his major public works projects certainly do not fit the model, since they did not require the direct investment of private capital under the aegis of a private company. Rather, they were government projects commissioned, financed, and managed by the Mexican state, and Pearson’s role was that of public contractor rather than private investor. Even his most important Mexican company, Mexican Eagle Petroleum (El Aguila), was not technically a free-standing company, since it was registered not in London but in Mexico, and its board of directors comprised prominent Mexican businessmen and financiers. However, Pearson’s many subsidiary companies which developed as a consequence of his public works contracts, such as his investments in railways, mines, public utilities, and land, shared the characteristics of free-standing companies.17 Even if it is conceded that favourable conditions for business enterprise did exist in the late Victorian era, especially abroad, it is important to stress that entrepreneurial success for British businessmen was far from inevitable, whether they participated in free-standing firms or in other enterprises. In the case of British enterprise in nineteenth-century Latin America, as indicated in the previous chapter, because of the multiple logistical (as well as political and cultural) challenges they had to overcome,

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while there were spectacular successes for a handful of individuals, there were many more examples of business failures and shattered illusions. This was very much the case in Mexico. As Francisco Bulnes, one of the most acute, most acerbic, and most influential of Mexican intellectuals of the Porfirian era, famously remarked, “What foreign capitalists in Mexico have lost as a result of bad business is vastly more than what they have earned from good business.”18 Under these circumstances, individual agency was a vital factor. As Asa Briggs pointed out many years ago in specific relation to the contracting business in which Pearson initially made his mark, while Victorian contractors enjoyed considerable freedom of action, at home, and especially abroad (where regulation, as will become clear in the case of Mexico, was often less strict), they were nevertheless obliged to operate in a highly competitive market. The successful contractor had to develop and deploy a range of key skills; knowledge of bricks and mortar (not to mention the most important materials of the age—iron and steel); the management of a large and heterogeneous workforce; knowledge and manipulation of sources of finance; and, last but not least, considerable political capacity, not only to secure contracts, but to complete them.19 As he would prove on many occasions over his long career, Pearson was highly capable and highly effective in each of these domains. In fact, Pearson’s ability to harness the skills and talents of a range of managers and employees and to create an extraordinarily diverse and vertically integrated business organisation which employed many thousands of men around the globe, all controlled by a single, privately controlled holding company (S. Pearson and Son), suggests that Pearson might well be seen as the model of a late Victorian entrepreneur. the origins of the pearson business empire The origins of the Pearson family business were far more humble than those of the multinational giant which it later became. They are well documented and have been narrated many times.20 Samuel Pearson, Weetman’s grandfather, who provided the original name for the family firm, had taken advantage of the economic opportunities provided by the exponential growth of the Yorkshire industrial towns of Huddersfield and Bradford east of the Pennines at the centre of the woollen and worsted industries in the north of England. The populations of the principal industrial towns in the region had more than doubled in the period 1830–60: Bradford from 29,000 to 77,000; Huddersfield—home of the Pearson family— from 15,000 to 34,000; Leeds from 53,000 to 123,000.21

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Samuel Pearson had become a partner in a building and manufacturing firm in Huddersfield in 1844 and had made a modest success of the family business. In 1856—the year Weetman was born—Samuel brought his eldest son, George—Weetman’s father—into the family firm, which thereafter became known as S. Pearson and Son. In the following year, the fortunes of the firm were considerably enhanced by the award of a contract for work in the most dynamic sector of the Victorian economy—the railway—with the extension and refurbishment of the Lancashire and Yorkshire Railway. With the firm’s horizons expanding, Samuel moved his base of operations to Bradford, where his grandson Weetman was brought up and educated in minor public schools in Bradford and Harrogate. Rather than continue his studies, Weetman left school at sixteen to learn his engineering, accounting, and management skills as part of his daily responsibilities. He never obtained professional qualifications, either as an engineer, surveyor, or accountant, although through experience he became both highly knowledgeable and proficient in all three. He proved, however, to be not only capable, but diligent and hardworking, and in 1874, at the age of eighteen, his father placed him in charge of the firm’s brickyard at Cleckheaton. Whilst this may have not been the most glamorous undertaking for an ambitious young man, brick manufacture was nevertheless one of the most dynamic industries of the Victorian era.22 Partly as a reward for his diligence and application at Cleckheaton, and partly as an opportunity to seek out new markets, Weetman’s father sent him on a tour of the United States in the summer of 1875. It proved to be a memorable experience—both in terms of his personal development and his exposure to the wealth of business opportunities for contractors available in the Americas in the late nineteenth century, as his personal diaries recorded in great detail. He travelled from New York— where he was very impressed by the early phase of the construction of the Brooklyn Bridge—to Montreal, Toronto, and Chicago. In St. Louis he was so moved by the bridge over the Mississippi that he described it as “the finest feat of engineering skill in the world.”23 He travelled by paddle steamer to New Orleans, and, for the first time but certainly not the last, he visited the Gulf of Mexico—the future site, many years hence, of his oil business—which, significantly, and perhaps prophetically, he described as an “earthly Paradise.” His reflections on this trip are significant. Although he considered that in terms of engineering and technological progress there was little to distinguish Chicago from Leeds or Bradford at this time, he was most impressed by the levels of energy, ambition, and enterprise in the Americas and, above all, by the business opportunities it afforded. He wrote in his diary: “I returned with an intense admiration for Americans. I marvelled

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at their progress during their short hundred years as a nation . . . some of their methods were instructive and their energy and ambition infectious.”24 These contagions would last throughout his lifetime, and they prompted him later to seek (and obtain) the firm’s first overseas contracts in Canada and the United States in the 1880s. It was from this base that he would embark on his first business venture in Mexico in 1889. Following his return to Yorkshire, Pearson’s career within the family firm took on a new dimension. At the age of twenty-one, in 1877, he was given charge of the firm’s most important contract to date—the construction of a new drainage system for the Lancashire coastal town of Southport. Although it was far from the most lucrative contract the firm would undertake, Pearson himself later described it as one of the most difficult he had ever undertaken, given the nature of the sandy subsoil where the foundations had to be constructed. In 1879, soon after the completion of the Southport contract, his grandfather Samuel retired, and Weetman became his father’s sole partner. This elevation brought with it new responsibilities, particularly financial ones. As Pearson again confided shortly before his death to his biographer J. A. Spender, it was clear that, because of his father’s distinctly cavalier attitude to bookkeeping, the firm’s overdraft (with the Yorkshire Banking Company of Bradford, with whom Pearson retained his account throughout his career) was not supported by the firm’s assets or prospects. Dealing with his father’s casual attitude to finance, which at times appears to have bordered on profligacy, arguably made the young Pearson even more fastidious in his attention to detailed costing and accounting, and to the elaboration of a basic philosophy of business practice, which could be summed up in one of his favourite homilies, founded, as always, on familiar Victorian clichés: “The coat must be cut according to the cloth.”25 With the cloth of the family firm looking distinctly threadbare in the late 1870s, the young partner was determined not only to restore its ailing fortunes but also to establish his own independence. In 1879 the firm won two important contracts—the drainage system for Ipswich in Suffolk and the King’s Lynn dock on the Norfolk coast. Pearson took personal charge of the detailed costings and the management of both contracts. As the records in the Pearson Archive testify, he was meticulous with both. The rigorous attention to the most minute technical and financial details of all of his tenders for his construction projects would become a hallmark of his business practice, and one of the secrets of his success. The experience of Southport had prepared him for Ipswich, but he was much less experienced in large-scale dredging, the construction of underwater foundations and sea walls, and having to cope with tides, currents, and not-infrequent flooding.26 The King’s Lynn contract took

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five years to complete, and, as Pearson himself confirmed, it consolidated the rudiments and the basic skills required for what would become the firm’s subaquatic and underground specialisms—the construction of canals, tunnels, docks, and port works—which would, amongst other advantages, make his highly practical knowledge of engineering so invaluable to the developmentalist plans of the Mexican political elite.27 One vital plank in the young Pearson’s ambitious plans for the reorganisation of the structure and the future of the family firm remained unfulfilled—the relocation of the business to London—not only the national capital but also the epicentre of British domestic and imperial power, and the undisputed centre of international finance.28 Relocation to London was also, as already indicated, a reflection of a change of fortune in the British economy in the 1870s and, in particular, the collapse of the railway boom which had been largely responsible for the expansion of the family firm. The opportunity to broaden both his geographical and business horizons came in 1882 with a successful tender for the construction of a storm water sewer at Deptford in southeast London for the Metropolitan Board of Works. Two years later, Pearson achieved his ambition and moved the company’s headquarters to London, first to Delahay Street, Westminster, and in 1888, to 10 Victoria Street.29 A number of significant domestic contracts were won over the next five years—in the UK, the Sheffield Main Sewer (1884), the Milford Haven Docks in west Wales (1885), and the Empress Dock at Southampton (1886). Even more significantly, in 1886 the firm won its first overseas contract for the Halifax Dry Dock in Nova Scotia, followed two years later, in 1888, by the firm’s first overseas railway contract—a short line between Ávila and Salamanca in northwest Spain, the main purpose of which was to shorten the route between Madrid and Lisbon by more than 100 kilometres. The following year, Pearson won the contract to remove 30,000 cubic yards of sunken rock in order to widen and deepen access to the Egyptian port of Alexandria, under British occupation since 1882. This was a clear example of the international business opportunities opened up by imperial expansion in this era.30 Also in 1889, Pearson was offered his most prestigious—and most dangerous—overseas contract to date, the completion of a mile-long tunnel under the Hudson River in New York City to connect the railway services which converged from the south and the west of Manhattan Island. The tunnel had been started in 1874 by the US contractor De Witt Haskins but was abandoned in 1882—with some 2,000 feet of tunnel completed—following the failure to find adequate capital to finance the project, and a serious accident which had killed over twenty tunnel workers. In November 1889, Pearson took over the tunnel.

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At the same time, he began the negotiations with the Mexican Government for the Gran Canal contract which would take him to Mexico for the first time at the end of the following month.31 The transfer of Pearson’s business operations to London augured a dramatic shift in fortunes. Over the next four decades S. Pearson and Son became one of the leading international contracting firms and an international business phenomenon. Between 1880 and 1920 the firm completed more than eighty worldwide engineering contracts, ranging from the distinctly unglamorous contract to upgrade the Deptford sewer in 1882, to far more prestigious projects on three continents, such as the Admiralty Harbour at Dover (1898), the Hudson and East River Tunnels in New York (1889 and 1904), and the Sennar Dam in the Sudan in 1922. They would also include railway and port installations in Ireland, Spain, Chile, Brazil, and Colombia. However, despite the undoubted importance of his various international projects and his growing international reputation, the catalyst for the expansion of Pearson’s international business empire would be, as we shall see in the next chapter, the Republic of Mexico. pearson and liberal politics One of the most notable features in late nineteenth-century British politics was the incremental shift in the balance of power between landed and business interests, with the balance increasingly tilted in favour of the latter.32 As indicated earlier, the question as to whether the Victorian and Edwardian periods of British history witnessed the triumph or the defeat of “entrepreneurial politics” is one which has generated considerable historiographical controversy.33 It is nevertheless the case that the social and occupational background of MPs representing both the main political parties of the day, Liberal and Conservative, had shifted gradually in favour of commerce and industry by the end of the century, even if MPs from business or industrial backgrounds never constituted a majority over those from landed or professional ones. This leads us to the question as to what precisely attracted Pearson, and many other businessmen of his generation, to the Liberal Party in the early 1890s. Was it Liberal advocacy of a broad, Gladstonian range of moral and progressive causes? Or the profound clientalist links between business and party? Or the seductions of political power in a period of Liberal ascendancy in British politics?34 Even the most cursory glance at the extent of Pearson’s restless hunt throughout his lifetime for business opportunities demonstrates his preference for business rather than politics. Nevertheless, politics was a vital

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part of his life, although it was always subordinate to business. In fact, it needs to be understood primarily as a component of, and an adjunct to, his business activities. In ideological terms Pearson was a pragmatic and conservative Gladstonian Liberal, although he also demonstrated a degree of enthusiasm for the “social radicalism”—especially on questions of social and labour reform— of the Edwardian or “New” Liberalism espoused by the CampbellBannerman and Asquith governments between 1905 and 1915. Gladstonian Liberalism covered a broad and far from uniform ideological spectrum. It was characterised by its advocacy of private, individual, Protestant (and nonconformist) moral values. These combined self-reliance and temperance with public action to promote equality, social improvement and material progress, religious toleration, and anti-clericalism, and to challenge corruption and privilege, especially the monopoly of power and wealth exercised by landed interests (despite Gladstone’s personal support for aristocratic privilege and hereditary title).35 In general, mid-century Liberals supported electoral reform (if not universal, and certainly not at this stage, female suffrage), constitutional reform, and the principle of national self-determination. There was, of course, considerable internal debate and division within the party over the practical application of these principles. The implementation of the principal of self-determination in the context of the cause of home rule for Ireland, for example, provoked internal schism and split the party in 1886. A less charitable and more cynical assessment would suggest that Gladstonian Liberalism promoted a narrow chauvinistic version of British identity, exalting the myth of the “free-born, self-reliant Briton, resistant to tyranny and taxes, proudly Protestant . . . luxuriating in the sense of British superiority to European rivals.”36 Liberal economic policy in general tended to favour low taxation and the principle of free trade over protectionism or state intervention. Although “New” Liberalism after 1906 continued to pursue many of these goals, it was far more committed to the intervention of the state— through regulation and the provision of state services—to improve the material and moral condition of the most vulnerable members of society, in particular the sick, the elderly, and the unemployed, and to establish trade union rights.37 This new social radicalism produced a wave of legislative initiatives between 1909 and 1911 to provide national insurance, unemployment insurance, and retirement pensions, the basis for the subsequent development of the welfare state over the course of the twentieth century. Pearson paid lip service to most, if not all of these causes over the course of his political career, but the evidence—which is itself limited by his less than active participation in the day-to-day business of the House

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of Commons—suggests that he adopted a cautious, conservative, and pragmatic approach, and a focus on a limited number of causes, especially ones which related to his business interests. Not surprisingly, as a contractor often paid in foreign government bonds (see below), he remained an advocate of financial stability, “sound money,” and the gold standard. In a similar vein, the nature of his overseas business interests—he was not a manufacturer threatened by overseas competition—and his oft-repeated belief in the sanctity of “fair play” and “equal opportunity” (as demonstrated in the epigraph to this chapter) dictated that he would be an advocate of free trade over protective tariff reform.38 On the vexed question of home rule for Ireland, he was a moderate, supporting the right of autonomy and self-determination, but strongly opposed to the creation of an independent Irish state. He made reference in his campaign literature to the evils of alcohol and the benefits of temperance but certainly did not practise abstention in his private life.39 Already a baronet before he entered Parliament in 1895, and a practicising Anglican, he adopted a Gladstonian position, heavily influenced by self-interest and personal ambition, on the virtues of Christian morality and the importance of the landed aristocracy. This put him at odds with the more radical wing within the Liberal Party who advocated land reform and attacked landed interests. He was, as a result, parodied in the Conservative press for his extensive landholdings (some 20,000 acres in England and an additional 15,000 in Scotland), which made him, as a journalist from the Times ironically commented, “just the sort of man to advise Mr. Lloyd George when he is next attacking the iniquitous land system.”40 In keeping with the notorious factionalism within the Liberal Party, this moderate stance drew Pearson into the camp of Liberal Prime Ministers Lord Rosebery (1894–96) and Herbert Asquith (1908–15), two of his closest associates within the party. Like them, he was a committed “Liberal-Imperialist,” a supporter of centrist, pragmatic, and fundamentally conservative programme of “national efficiency” in domestic affairs and “sane Imperialism” abroad—the maintenance and consolidation, as opposed to the extension, of empire. Pearson served as an elected member of the Imperial Liberal Council after 1900, the platform for the LiberalImperialist faction of Liberal MPs in opposition to the Conservative governments of Salisbury and Balfour.41 While Pearson was clearly a conservative Liberal “plutocrat,” he was nevertheless also supportive of social and labour reform, and advocated the cause of progressive income tax, retirement pensions, sickness and industrial insurance for workers, and, in particular, female suffrage.42 He also, for very practical reasons as an employer of many thousands of men over the course of his business career, took close personal interest in the

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question of labour.43 In his address in October 1920 to the students of Aberdeen University following his election as rector, he gave a public speech on the subject of “Labour: Its Problems and the Ideal Wage.” Here he provided a characteristic “common-sense” distillation of his practical experience of more than forty years of dealing with the problems between management and labour. Disdaining systems which placed the decision over the level of wages exclusively to either employers or the state (although he was especially disdainful of the latter), he instead advocated the principle of partnership between labour and capital, while at the same time basing his proposals on the firm belief that “men are not equal in either hands or brains.” His solution to the determination of the “ideal wage” had three basic components: first, a minimum wage “to secure that no man or woman shall receive less than will enable him or her to maintain a relatively decent standard of existence”; second, variable pay “according to the output of the individual”; and third, a further variable (or bonus) based upon the final outcome of the transaction. In short, he advocated the principle of “piecework with a guaranteed minimum, and a bonus on profits.”44 pearson and the liberal party Pearson had formally entered politics in 1892, when he was persuaded to contest the safe Conservative seat of Colchester in Essex for the Liberal Party, despite the fact that he had no personal or political connections with the town. Colchester was a small but growing urban centre with a small industrial base. It was one of the town’s leading businessmen, James Paxman, a partner in the town’s principal ironworks, and Liberal councillor and former mayor of Colchester, who invited Pearson to stand for election. It has been suggested that local Liberals believed that bringing in an outsider, especially a young Liberal businessman with a national profile, would improve their chances of electoral success. If so, they were right.45 Although he failed to be elected at the first attempt, Pearson subsequently won the seat in a bye-election in 1895. He hinted at the time that he had not voluntarily entered politics, but that he had been persuaded to contest the seat. He also showed that he had a less than profound knowledge of the details of electoral politics, and a rather inflated view of his own importance: I have had to fight a Bye Election at Colchester. It has been a hard fight, but I have secured a majority of 263. The Government are in a tight place, and they relied upon my winning this seat. It is considered by those in the know that if I

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lost the Government would be unable to continue in office, but with my victory, I think they will get over the Session alright.46

As already indicated, Pearson was very far from being a model constituency MP. There were aspects of professional political life for which he clearly had little or no patience. His detachment from, disinterest in, and even distaste for the House of Commons are apparent from his private correspondence. He confided to his wife after his first visit to Westminster in February 1895 that he found the House of Commons “a waste of time.”47 His frequent absences—mainly on business trips to visit his Mexican enterprises, which took up an average of three months a year between 1895 and 1912—earned him the epithet amongst his fellow MPs of the “Member for Mexico.” He was, as a consequence, a less than regular participant in the day-to-day business of the House.48 He nevertheless held this marginal seat for the next fifteen years, eleven of which coincided with a period in which the Liberal Party was out of government. The fact that he had been able to keep his Conservative opponents at bay seems to have been far more important than the implementation of any specific political project or policy. Following his third reelection as MP for Colchester in 1906, he indicated that he approached competition in politics very much as he approached competition in business: Colchester ought, by rights, to belong to the Conservatives, as it is a Conservative seat, but thanks to good organisation and hard work, I have now been able to retain my seat there for four elections.49

Despite his failure to represent his constituents in the House of Commons, on the evidence of his two subsequent reelections (in 1900, when he was reelected despite the Liberal Party’s defeat at the national level, and again in 1906), he appears to have been an efficient and effective electoral campaigner. He was certainly not above adapting his philanthropic urges to the cause of electoral success. Prior to his first election in 1895, he agreed to fund a free library for the town’s citizens.50 This act of philanthropy—characteristic of Pearson’s general modus operandi— cannot have failed to make an impression on his constituents. His opponents accused him of other forms of largesse which were potentially more controversial. At successive elections his Conservative opponents accused him of using a “lavish outpouring of wealth” in order to influence and suborn voters. There appears, however, to be little evidence to support these claims.51 Pearson, in short, was never a profound political thinker, and less still an ideologue, but rather a political animal with acute political antennae and an intense loyalty to the party. This loyalty, manifest in his frequent

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contributions to party funds and, as outlined below, donations to keep the Liberal Party’s mouthpiece the Westminster Gazette from bankruptcy, brought him significant personal rewards and honours. As indicated above, Pearson was awarded a baronetcy in 1894 by Prime Minister Lord Rosebery, ostensibly in recognition of his firm’s construction of the Blackwall Tunnel under the Thames (1891–97). In 1910, the Asquith government recommended Pearson for a peerage. He chose to associate his title (Baron Cowdray) with the 13,000-acre property which he had acquired in Midhurst in Sussex, formerly owned by the Earl of Egmont and known as the Cowdray Estate. He entered the House of Lords as Baron Cowdray of Midhurst, and henceforth would be referred to as Lord Cowdray. In 1917, coinciding with his appointment as a privy councillor and as a member of David Lloyd George’s wartime cabinet as president of the Air Board, he was “promoted” to viscount. Despite the association of Liberal governments after 1905 with political corruption and scandal, including the sale of honours, there is certainly no evidence that Pearson used his wealth to “buy” his peerage in 1910.52 Nevertheless, G. R. Searle’s detailed study of corruption in British politics in the era of Liberal predominance states without equivocation that Pearson’s peerage had “undoubtedly” been secured as a consequence of his “generosity to party funds.”53 The broader political context also needs to be understood. The elevation of prominent Liberal supporters to the House of Lords had been part of the strategy of the Liberal government after 1905 to challenge the overwhelming predominance in the Upper Chamber of Conservative peers and their propensity to block legislation already passed by the Liberal House of Commons. A number of bills across a broad spectrum of social legislation from education to licensing laws had been passed by the Commons between 1906 and 1908, but then halted by the House of Lords. The conflict reached a point of constitutional crisis in 1909 with the rejection by the Lords of Liberal Chancellor Lloyd George’s radical “War Budget” of 1909 (“war” in this context was the battle “against poverty and squalidness”), which controversially sought to redistribute wealth through the introduction of graduated taxation.54 The Lords had thus provocatively ignored the long-standing convention that finance bills would receive automatic assent. The Liberal government fought a second general election in December 1910 on the specific platform of legislation (a Parliament bill) which would create 250 Liberal peers to challenge Conservative predominance in the Lords. Liberal victory in that election meant that the Lords were finally forced to capitulate to a reduction in their own powers of veto over subsequent legislation or face being overwhelmed by such a large number of new peerages. In the end the Lords capitulated,

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but during the course of 1910, as an insurance against the failure of the bill, an unprecedented number of new peerages were created, including that awarded to Pearson.55 Pearson explained to his wife that he was not only pleased with the honour, but also that he understood the context in which it had been granted: “I am really glad it has come. I expect there will be a settlement with the Peers about their veto—but there may not. In any event we will come in under the old regime.”56 Even if Pearson did not receive his peerage as a direct result of his “generosity” to the party, there is evidence, albeit circumstantial, that he used his political contacts and wealth in more subtle ways for personal and business advantage. As already indicated, he had already established his reputation as a successful businessman prior to entering politics in 1895, and therefore it might be argued that he did not need to enter politics to further his business career. It might even be argued that entering politics might be detrimental to his business interests, given that, as a Member of Parliament, he was prevented by law (the Contractors Act of 1782) from tendering for government contracts. This problem, however, was solved through the registration of S. Pearson and Son as a limited company in 1897.57 While this was perfectly legal, it was nevertheless perceived at a time of rising anxiety in Parliament and the national press over levels of political corruption as an evasion of “questionable morality.”58 Ironically, Pearson himself claimed that this course of action had been suggested to him by the admiralty itself.59 No less ironically, in the very same year, Pearson won the second–most expensive contract he was ever awarded from the British government—the complete refurbishment of the Admiralty Harbour at Dover.60 It is, therefore, perhaps circumstantial but nevertheless a fact that the growth of S. Pearson and Son in these years was exponential, even meteoric, and coincided precisely with Pearson’s tenure of political office. By 1901, four more directors had been appointed, and another four had been added by 1919, as a clear reflection of the dramatic expansion of the firm’s activities after 1900. This expansion was also reflected in the acquisition of new premises in London in 1906 with the acquisition of the former location of the Whitehall Club at 47 Parliament Street, which became the centre of the firm’s worldwide operations.61 Even if there was no direct link between his status as MP, his donations to the party, his “close association” with the party hierarchy, and the award of lucrative government contracts, Pearson became increasingly portrayed in the Conservative press in Britain as a leading member of the group of “Radical Plutocrats” described in his private diary by the chief whip of the Unionist Party (the name by which the Conservatives were known after 1886) in 1912 as a group which “vie with one another in

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payment for honours and in recoupment via public contracts. Never before have such rumours been so prevalent, nor has there been so much ground for their foundation.”62 Pearson’s greatest contribution to British political life was undoubtedly his skill as mediator between different (and increasingly warring) factions of the Liberal Party, using his wealth and influence to grease the cogs of the party machinery. His various residences in London, Sussex, and the 15,000-acre Dunecht Estate in Aberdeenshire were centres for regular social and political gatherings of the great and the good of the party hierarchy.63 His skill as a behind-the-scenes political operator was seen to greatest effect, however, in his involvement with the political press, and in particular the financial support he gave to the leading Liberal evening paper in London, the Westminster Gazette, which he helped to save from imminent bankruptcy in 1908, and in which he acquired a controlling interest in 1918. pearson and the fourth estate Pearson’s interest in the press presaged a far greater involvement in publishing and the media which characterises the interests of the descendants of S. Pearson and Son, the Pearson Group of companies, especially since the late twentieth century.64 It is also important to note here that the acquisition of a number of national and provincial newspapers under the auspices of the Westminster Press in Pearson’s own lifetime was unlike all of his other enterprises worldwide, in that profit did not appear to have been the principal motivation. This was, first, because the financial rewards of newspaper ownership were notoriously precarious65 and, second, because the newspaper with which he became most intimately involved, the Westminster Gazette, was one of the most overtly political newspapers of its day. In a survey of the twenty-one major metropolitan papers published in London in 1904, the former editor of one of the less-influential daily newspapers noted that the Westminster Gazette, despite its daily circulation of no more than 20,000 copies, ranked alongside the Times as the most influential political newspapers of the period prior to the First World War. As Stephen Koss indicates, this was still an era in which politicians or syndicates made up of party supporters established, owned, and managed specific newspapers aimed at very specific political constituencies. He describes the Westminster Gazette as being exclusively “as its name proclaimed, aimed at a circulation within Parliament and its environs . . . (and) read by men of both parties.”66 Its influence within national politics

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in general, and within the Liberal Party in particular, was therefore profound. Prior to the expansion of the mass media over the course of the twentieth century—which competed for and subsequently came to dominate the reporting of news and opinion—newspapers had constituted the most powerful and influential means of expressing and influencing political debate, and the mutual dependence of Liberal politicians and the editors and journalists who worked in the political press was extremely strong. As Koss describes it, in this period “newspapers held a monopoly on the commodity of propaganda.”67 Its influence was, however, not destined to last, and the fate of the political organs (such as the Gazette) which were party mouthpieces mirrored that of the Liberal Party itself as its political fortunes dramatically declined in the 1920s. The extension of the franchise, the rise of class politics in postwar Britain which the Liberal Party had always been reluctant to countenance, the subsequent rise of the Labour Party, and internal factionalism combined to undermine the Liberal Party as an electoral force. Moreover, political failure was compounded by business failure. Although Pearson spent enormous sums (apparently in excess of £1 million sterling) between 1918 and 1921 in acquiring a controlling interest in the Gazette as part of the Westminster Press group (which controlled a number of provincial newspapers), and in vainly attempting to increase its circulation by converting it from an evening to a morning newspaper, the Westminster Gazette finally folded in 1928, the year after Pearson’s death.68 Pearson’s “generosity” toward the Gazette was also clearly inspired by his personal desire to keep it as the mouthpiece of the Asquithian wing of the party in order to support its ongoing feud with Lloyd George. In this sense Pearson clearly helped to fuel a bitter internal feud which itself contributed to the demise of the Liberal Party. Pearson’s personal antipathy toward Lloyd George was profound. He had been unable to forgive the prime minister for causing what he saw as his own public and political humiliation at the end of 1917. Having been invited to join Lloyd George’s wartime coalition cabinet as president of the Air Board in early 1917, he took on the task of acting as a broker between the Army and the Navy in the design, allocation, and distribution of aeroplanes and seaplanes for the varied needs of the Allied war effort—defence against air raids, antisubmarine patrols, and the bombing of enemy positions. He also became a strong advocate of the creation of a separate Air Ministry and an autonomous Air Force. He naturally expected to be nominated as the first Secretary of State for the Air, but in November 1917, an open letter was published in the Times from Lord Northcliffe rejecting the prime minister’s offer to him (Northcliffe) to take charge of the Air Ministry. Pearson had not been consulted on this appointment and felt not only humiliated but

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also profoundly angry and bitter. He never forgave Lloyd George for the rest of his life. He wrote immediately and curtly to the prime minister to offer his resignation: It ought not to have been left to me to receive from Lord Northcliffe’s letter to the Times the first intimation that you desire a change at the Air Ministry, and I think in consequence you cannot be surprised to receive my resignation. I hope it will be accepted with as little delay as possible so that the work of the department may not unduly suffer during the transfer of my duties to my successor.69

The point to emphasise here is that the evidence provided by his strong involvement with the Westminster Gazette demonstrates a visceral link between business and politics in Pearson’s career. In his lifetime, Pearson was less than candid about his personal motivations for delving into the treacherous waters of newspaper proprietorship. His biographer J. A. Spender, who himself was editor of the Westminster Gazette until 1921— and as such once was described by one contemporary as “an unofficial member of the Liberal Cabinet”—is more explicit regarding the primacy of political over commercial considerations in Pearson’s case. Spender suggests that Pearson considered that the Gazette should first of all be “an organ of opinion expounding the Liberal view,” and only after that, “if at all,” to earn dividends for its proprietor. Koss is also clear that, in the heyday of the political press, investments in newspaper enterprises “continued to pay political dividends” for those who invested. At the same time, he admits that these dividends are not always easy to compute. The individual who “assumed newspaper obligations” did so “to amplify his public voice, to defend constituency interests, and generally impress the party chiefs by his dedication. For aspiring politicians as well as apologetic ones, involvement with the press complemented parliamentary service. . . . All craved recognition.”70 While Pearson’s involvement with the political press in Britain was profound, there is also evidence from Mexico of Pearson’s recognition of the importance of the press as a vehicle for exercising political influence and for spreading propaganda.71 For example, during the early stages of the Mexican Revolution, Pearson showed a profound desire to foster good relations with the new revolutionary government of President Francisco Madero, and he welcomed the invitation of Madero’s brother Ernesto to the manager of his Mexican interests, John Body, to take an “interest” in the Mexico City daily newspapers Imparcial, Diario, El País, and the English-language Mexican Herald. The Madero government was seeking to acquire control over these newspapers in order “to stop sensational [i.e., anti-government] news being so widely disseminated.” However, the proposed buyout never took place, since less than a week after

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the offer was made, a military coup was launched in February 1913 to remove Madero from the presidency.72 business strategy and modus operandi: the methods of the contractor and the secrets of success Before embarking on a more detailed analysis of the development of Pearson’s business empire in Mexico after 1889, it is appropriate here to examine some of the key components of Pearson’s general modus operandi in his business affairs which he would adapt to a Mexican context after 1889. This is particularly important given the emphasis here on individual agency and the exercise of entrepreneurial skills which combined with unprecedented historical opportunity (as explained in the previous chapter) to constitute two of the keys to understanding Pearson’s entrepreneurial success in Mexico. One of the most remarkable hagiographic portraits of Pearson came from the pen of political journalist and fellow Liberal Member of Parliament T. P. O’Connor in the Pall Mall Magazine in 1913.73 No doubt responding to the press attacks which Pearson had attracted in the United States over his business affairs in Mexico during the revolution, O’Connor described Pearson as a “typical Yorkshireman,” with his “robust frame, the cold, self-controlled voice and manner, the deliberate and terse speech, and a suggestion of grim yet genial strength.” Warming to his theme, O’Connor compared him to Napoleon as “a natural-born ruler of men.” He further highlighted self-confidence and meticulousness as two of Pearson’s most significant characteristics: Whatever happens, this cool, phlegmatic, quietly self-confident man will have no waverings, no dark hours, no nights without sleep. He measures the ground with such exactitude as perhaps has never been surpassed; with an instinct as to facts, figures, conditions, possibilities . . . and having gone through all this preparation, he is perfectly satisfied; he has left nothing to chance; nothing is going to surprise, nothing is going to intimidate him.74

The independent financier Henry Osborne O’Hagan gave the following glowing assessment of Pearson’s character and achievement in his memoirs, published in 1929: In my fifty-three years of City life I have come across men of all sorts. Many one would not take at their own valuation, but, on the other hand, there have been many brilliant men who had my keen admiration and respect. Foremost amongst

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these stood the late Lord Cowdray. I had many opportunities of judging and appreciating this exceptional man. . . . He was a great man, he was an able man: there was no littleness about him, no pettiness.75

His compatriot and future collaborator in the Mexican oil business, Percy Furber, also highlighted his calmness and confidence, and the ability to inspire his colleagues: “He had a wonderful talent for inspiring his associates. . . . We were close friends and more than once he had encouraged and heartened me when the going was rough.”76 Alongside his astute managerial skills and extraordinary personal energy, his meticulous attention to detail, and his apparently boundless confidence, optimism, and tenacity, and an obvious capacity for organisation, hard work, and identifying business opportunities, Pearson also demonstrated less than “gentlemanly” values in the conduct of his business affairs—stubbornness, boastfulness, opportunism, secrecy, and ruthlessness. His desire to gain competitive advantage over potential business rivals would also highlight a penchant for industrial espionage and secrecy.77 But these were far from unusual, unexpected, and still less unpardonable practices adopted by successful entrepreneurs of the Victorian period, or, indeed, by those of any other period. In the same article referred to above, T. P. O’Connor cited Pearson’s own sober and modest assessment of the secrets of success in the contracting business. First was “knowledge of the job.” “The contractor,” Pearson told O’Connor, “must be his own foreman; he must have learned his job in all of its details; he must know everybody’s work as well as his own.” Second, the contractor must have “an analytic and logical mind; that is to say, he must be able to get at the heart of a question, then to separate its different factors and balance them one with the other, and so arrive at a logical conclusion.” Finally, the contractor must apply both memory and imagination, and be prepared to learn from past mistakes, to be “able to recall all that had happened to him in previous experiences; to apply them to the new problem on hand; and by this means to face the new situation with all that his imaginative memory had retained from the lessons of the old.” Pearson himself concluded: Look at the great commercial houses, at the men in iron, cotton, and such like industries; you will find men of large fortunes in these businesses by the score. Look, on the other hand, at the world of contractors; you won’t find more than a dozen who are men of great wealth. It is a strenuous, uncertain, in some cases a speculative life; and there are many failures and few great successes.78

Pearson was adamant that the ultimate responsibility for all activities within the firm must rest with senior management. As he told Calouste Gulbenkian, the chief executive of Royal Dutch and Shell during the ne-

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gotiations over the latter’s purchase of Pearson’s oil interests in 1919, “Responsibility cannot and ought not to be divided . . . (and) it must remain with the Managers and Directors.” Pearson gave similar advice to his son, as the latter was on the point of assuming control over the family firm, highlighting the value of autocracy in the exercise of executive responsibility: Do not allow any responsibility to be taken by any colleagues beyond that which you give them. Care will be necessary to keep them within the limits you allow. . . . All decisions taken must be those of which you thoroughly approve. Avoid compromise decisions made primarily to let your colleagues feel that their views are being listened to and acted upon. . . . Do not hesitate for one second to be in opposition to your colleagues; or in overriding their decisions. No business can be a permanent success unless its head be an autocrat—of course, the more disguised by the silken glove the better.79

At the same time, given the extent and scope of the firm’s international business commitments, great importance was attached to the selection of competent managers who could be entrusted with the day-to-day implementation of the contracts. Each contract was, in effect, a separate business, with its own accounts, its own workforce and materials, and its own balance sheet. This was the only practical way in which the large number of simultaneous contracts could be managed at one time. Contract managers therefore needed not only to exercise sound judgement but also to shoulder considerable responsibility. For example, in 1890, Pearson wrote to Guillermo de Landa y Escandón, the Mexican politician and businessman who had acted as an intermediary between the firm and the Mexican government in securing the contract for the Gran Canal, to introduce him to the manager of the project, T. L. Walsh, who had been seconded from the Hudson River project: Mr. Walsh is our agent who will take charge of the Canal Contract. He is a gentleman in whom we have unbounded confidence, and he has absolute authority from us to act in all matters of carrying out the work.80

Managers also had a wide range of autonomy over a broad range of responsibilities. For example, as Pearson explained to Walsh himself, “Any increase in salary you may agree with any of your staff will, of course, be all right. It is a power you have absolutely in your hands. Of course, you will use it discreetly.”81 Managers were expected, nevertheless, to submit regular and detailed reports to “the Chief” (as Pearson insisted on being referred to) in London, which would then be subjected to equally detailed supervision. Pearson certainly did not stint in offering advice or giving instructions to his managers, particularly over the question of the need to

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employ competent management. He was sometimes ruthless, but always pragmatic. He explained to Walsh in the same letter: You will have to keep a strict hand with your staff and men, especially the latter. Allow no liberties that you may hereafter have to curtail, as dissatisfaction would then arise and against this you want to exercise every precaution. If any of them are dissatisfied get rid of them before disaffection spreads.

He gave similar advice to Thomas Ryder, the managing director of El Aguila: Do not hesitate to shred your incompetents after you have been able to gauge them and find them wanting. The money we have spent and are spending on the (oil) fields is not a gamble but a business enterprise, and must be as carefully watched and taken care of as in any ordinary every day business.82

The evidence shows Pearson to have been a demanding employer. He certainly took exception to complaints from his management staff about personal hardships encountered in the course of their work. He wrote an appropriately glacial and ironic response to a young member of his management team, J. B. Glacier, who had complained about the standard of accommodation and service available on a forthcoming transatlantic trip: Sorry to hear you have been uncomfortable on the Majestic, but, as she is designed to be a splendid seaboat and has been furnished with every convenience regardless of cost, I utterly fail to see why you should not go out in her. A contrator’s assistant who grows faint-hearted at personal discomfort has not chosen the business he is fitted for.83

At the same time he was also sensitive to the fact that at times he could appear very demanding to his staff. He commented to his wife that he had “to possess both [sic] patience, skill & strength to get the best out of (John) Body & (Thomas) Ryder [the senior managers of his Mexican enterprises]. They are not much of a help as 1st class self-sustaining supports. . . . Poor Body I know he finds my lack of appreciation is much distressing & not what he expected.”84 He was nevertheless careful to write to congratulate his managers and employees for having made special or exceptional efforts in his service, and to pay them generous cash bonuses for outstanding contributions. At a board meeting of El Aguila in Mexico City in 1910, for example, he singled out managing director Ryder for specific praise in his efforts to establish the business on a strong and secure basis after years of difficulties with El Aguila’s rival in the Mexican oil business, the Waters Pierce Oil Company.85 For the managers of his Mexican projects, who were mostly recruited from England or the United States, he provided superior quality accommodation, facilities for sport and recreation, schools,

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and, in the case of El Aguila’s two oil refineries at Minatitlán and Tampico, free access to modern medical facilities.86 His attitude to the relationship between management and labour has already been alluded to in the context of his Liberal political affiliations and his years of practical experience as an employer of a large and heterogeneous workforce. There is no doubt, however, that in practice he drew a distinction between the treatment of his British and his Mexican workforce. An example of the former was the benefits offered to workers on the project to construct a new dock system for Port Talbot in South Wales on the eastern side of Swansea Bay in 1895. As part of the contract the firm established a Sick and Accident Fund to which both the company and the workforce contributed, which provided medical cover for all accidents, home visits to those too ill to visit the doctor’s surgery, and sick pay (based upon half of the average weekly salary) for up to twenty-six weeks.87 In Mexico, no such benefits were offered to his Mexican workers, and Pearson was more than happy for his local managers to perpetuate “traditional” Mexican labour practices by subcontracting the supply of forced labour (enganche) to work on his major projects, through the longestablished medium of either state agencies, the Church, or local municipalities. In her detailed study of Pearson’s first two contracts in Mexico (the Gran Canal and the Port works at Veracruz), Patricia Connolly found variations in the nature of payments made to manual labour depending on the nature and location of the contract. In the case of the Gran Canal, manual labour was in short supply, and secured through subcontractors on a piecemeal basis depending on the volume of work performed. In the more fluid labour marketplace in Veracruz, by contrast, manual labour was contracted on the basis of a daily salary.88 In cases where wages were paid to manual labourers (peones), it is notable that he set wage levels for his Mexican workers at a lower rate than for his English or Irish workers, and justified this differential not on grounds of ethnic or racial discrimination, but on an assessment of the value and the cost of labour: “as only half a day’s work may be done by peón labour in the hot country, it is right to say the work will cost the same.”89 There is also, nevertheless, evidence of more blatant ethnic discrimination—hardly uncommon in this era—practiced against Japanese workers (of whom there were over 1,000 working on the Tehuantepec Railway project in 1907). Whereas Chinese and “native Mexican” workers were given double pay for night work, the Japanese workers were paid for only ten hours for eight hours of night work.90 While Pearson advised his managers in Mexico to attend to the training of Mexican managers or skilled workers for his various enterprises,

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there is limited evidence of any serious or systematic attempt to do so. There is evidence of a degree of “in-house” training for Mexican workers to acquire new skills (such as in the workshops of the Tehuantepec National Railway), but this was more a pragmatic response to the shortage of skilled labour than a coherent training programme.91 Along with other Mexican employers of the era, Pearson manifested (albeit indirectly, through the medium of his local managers and subcontractors) a thoroughly “traditional” paternalism toward his Mexican workforce rather than concern for their education, training, or advancement. Nevertheless, he showed particular concern for their welfare, advising Body to treat his Mexican workers with appropriate care and attention. However, this was, again, as much a result of the shortage of labour as it was concern for the welfare of his Mexican peones: The question of labour is one that wants very seriously, consistently, and day by day dealing with. You cannot rush it, but by the co-operation of the Church and well-known and reliable people I do not think that there ought to be any difficulty in getting the labour you want. Of course, when we get it, it must be made comfortable: the mere fact of getting it and not looking after it when it is got [sic] is, I fear, what we are suffering from.92

Finally, sound financial management and accounting were clearly two of the hallmarks of Pearson’s success as contractor and businessman. There are three aspects of financial management which should be highlighted here; the first was the need to make accurate calculations and costings in the preparation of the tender, and to keep tight control of costs in the execution of the contract (including, of course, the cost of labour); second, to keep the need for borrowing or credit to a minimum by limiting the initial outlay required to set each project in motion, and by setting up bespoke companies to carry out each project, each with its own management structure and accounting system—in effect, making each contract account for and pay for itself; third, and closely related to the latter, the need to ensure the regular receipt of payments according to the contract. In Mexico, because a significant proportion of the payments made to Pearson were in the form of government bonds or securities, a detailed knowledge of international bond markets and a close relationship with brokers in the City of London were also essential requirements. Pearson made frequent references to the essential need for prudent, even frugal management to control costs and expenditure in all of his business endeavours. For example, in a letter to the manager of the contract awarded to the firm for the Chesterfield-to-Lincoln section of the Lancashire, Derbyshire, and East Coast Railway in 1892:

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We admit no gauge of good management than that of costs. If the costs are not satisfactory, the management is not satisfactory, and therefore it is most important that every care be exercised, and every corner watched to keep the costs low.93

The consistency of the message was underlined by a similar exchange in a very different context nearly thirty years later, in 1921, with Calouste Gulbenkian, chief executive of Royal Dutch and Shell, following the negotiations which had led to the management takeover of Pearson’s El Aguila Oil Company in 1919: The finances of a company are the monetary expressions of its policy. Policy determines what money is needed and money determines the extent to which such policy can be carried out. The coat must be cut according to the cloth.94

As Spender explains in detail, Pearson was highly adept at keeping his need for borrowing to a minimum, despite the exponential increase in the number of simultaneous contracts during the 1890s. In 1886, for example, despite the fact that the firm had secured contracts worth more than £1 million sterling, his overdraft at the Yorkshire Banking Company did not exceed £35,000. In 1892 a second account was opened with Messrs. Williams Deacons Company, and a third with the Capital and Counties Bank in 1900. By that time, the assets of the company were calculated at £869,000, with annual profits of £130,000, and the value of contracts had risen to over £9 million, yet the firm’s total credit from these three banks did not exceed £400,000.95 Pearson’s drive to minimize borrowing explains his insistence on specifying both the terms and regularity of payment in the contract itself. This, as we shall see in the next two chapters, became a regular bone of contention between Pearson and Mexican Finance Minister José Yves Limantour, since Pearson was inevitably at the mercy of Limantour’s strict control of Mexican financial and market manoeuvres and, in addition, at the mercy of the volatility of international bond markets over which neither Limantour nor Pearson had control. As a result, in addition to his negotiating skills, part of the secret of Pearson’s financial success in the years before the oil business became the almost exclusive focus of his attention was his ability to dispose of the variety of Mexican government bonds which he received as part payment for his government contracts, in order to maintain the necessary flow of income. There were three crucial aspects to Pearson’s success in this regard. First, his knowledge of financial markets; second, the interventions by the Mexican Ministry of Finance (in other words, by Finance Minister Limantour) to safeguard payments made to Pearson by attempting to

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mitigate the ever-present risk of a crisis of confidence in Mexican securities in European financial markets; and third, his personal contacts with brokers in the City of London who were able to find a market for these often risky securities. That Pearson was knowledgeable about bonds and securities markets was not in doubt. It was, after all, vital to the success of his business to pay close attention to them. He was quick to complain when market movements were detrimental to his interests, but, at the same time, indicated both his deference to Finance Minister Limantour and his willingness to compromise in order to find a solution. It was clearly a pact of mutual self-interest, since it was clear to both men that the deterioration of the value of Mexican securities was not in the interests of either. For example, as Pearson explained to Limantour in May 1897: The recent big fall in the price of silver necessarily depreciates the sterling value of the Bonds to a proportionate extent, whilst in addition we have had extremely dull markets here. . . . I hope you understand that I am desirous of doing everything I possibly can to assist your financial arrangements. I think, however, that such alterations ought not to place me in a worse position than that I previously held. I am fully prepared to place myself in your hands, and to abide by your decision on all occasions when you approach the subject as a Judge, and not as an Advocate of the Government. Personally, I try to view the financial position from an impartial standpoint, and only to ask for what appears to me to be equitable. One thing I have not made clear. Under the terms of our contract we virtually are paid in dollars in London, because the proceeds from the sale of the Bonds in London are converted into dollars at the rates dollars are selling for in London; whereas, when we receive payment in Mexico we have to bear the cost of remitting the dollars here, which will cost us about one and one third per cent. Every expense in our contract is paid from here, except wages paid to the peons, and consequently at least two thirds of the amount of our certificates is invested here.96

In this case, his complaints were listened to, although it is important to emphasise, as Limantour explained to Pearson on numerous occasions, that the measures adopted by the Mexican government were not designed to safeguard the profitability of Pearson’s contract, but to avoid a general crisis of confidence in Mexican securities in European markets. In 1897, and again in 1900, Finance Minister Limantour signed an agreement with the Mexican National Bank which obliged the latter to purchase the bonds Pearson had received from the Mexican government at the price stipulated in the contract.97 In addition to his own knowledge and experience, and Limantour’s financial manoeuvres to support the international value of Mexican securities, Pearson was able to call upon the services of financial brokers with a good deal of experience in the field. In this regard, his relationship with

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Alexander Henderson (later Lord Faringdon) of London brokers Greenwood, Henderson and Company was of vital importance. There are interesting parallels between the careers of Pearson and Henderson. Both men started their careers as public works contractors in the UK (in Henderson’s case, most notably for the Manchester Ship Canal), and both would build railways and run public utility companies in Latin America (Henderson in Argentina, Pearson in Mexico). Both would develop an interest in oil—Henderson in the Turkish Petroleum Company. Both became MPs and Peers of the Realm, although Henderson was a Conservative; and both—in an era of close affiliations between the press and politics, already discussed—owned newspapers. Henderson acquired the Standard and the Evening Standard in 1907.98 Pearson had consulted Henderson during the negotiations for his first overseas contract in the Americas, the dock works at Halifax, Nova Scotia, precisely as a result of difficulties in “placing the stock or getting the bondholders to exchange their bonds for stock.” He described Henderson’s firm as “probably one of the very best firms in London . . . they have in several transactions acted as brokers for us when we have had investments to make. It is absolutely necessary for us to get some influential firm to take the lead and more or less father the scheme. Greenwoods have agreed to act as brokers and to do all the work necessary to get a Stock Exchange quotation.”99 In the case of Mexican bonds, which would be so crucial to Pearson’s business success in that country, Henderson was arguably an even more appropriate choice of broker, since, as Henderson’s biographer comments, “no South American business seeking London finance approached the City without first consulting Lord Faringdon.”100 The importance of influential contacts in the City of London had been made clear to the Mexican government following the restoration of diplomatic and financial relations with Britain after 1886. According to Francisco Mena, Mexican minister in London between 1886 and 1892, it was precisely the absence of these contacts which had prevented Benito Gómez Farías, the first Mexican financial agent appointed to London since the settlement of the English Debt, from being able to place the municipal loan to finance the Gran Canal in 1889: Don Benito has not been able sign any contract for the (£2,000,000) Municipal Loan on behalf of the Ayuntamiento (City Government) of Mexico City, because the people he has been dealing with have no capital or contacts (círculo) at all with the right businessmen.101

There is clear evidence, too, that Pearson not only used influential brokers to act on his behalf, but was increasingly prepared personally to take

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on the role of intermediary between the Mexican government and the European banks and banking houses. This would be one of the many services which he would provide to the political elite of Porfirian Mexico over the course of more than two decades after 1889. The nature of those services, and the nature of the close relationship on which they were based, will be explored in detail in the next chapter. Finally, it is important to reiterate that, prior to his arrival in Mexico in 1889 at the tender age of thirty-three, Weetman Pearson was already an accomplished and successful businessman with a well-tuned and sensitive (if embryonic) set of political antennae. As the previous chapter indicated, his arrival in Mexico coincided with a particularly auspicious period for overseas entrepreneurs. Mexico was in the process of consolidating an unprecedented era of political stability, under the guidance of liberal political elite with a particular vision of statecraft and nation-building, and with clear ideas of how to build a modern state and economy. At the same time, the persistent problem of Mexico’s indebtedness had recently been tackled, and the restoration of its international creditworthiness was under way. What this liberal-developmentalist agenda lacked were foreign entrepreneurs with technical expertise, organisational skills, and access to external sources of finance. Pearson was able to prove within a short space of time not only that he was up to the task, but also that he was able to meet the expectations placed upon him.

chapter three

The Foundations of a Business Empire The Gran Canal in Mexico, 1889–1900 “S. Pearson & Sons is considered one of the minor Departments of State in Mexico.” —Pearson to US Ambassador Walter Page, London, 1914.1

; On Christmas Eve, 24 December, 1889, the president of the board of directors of the Valley of Mexico Canal Project (Junta Directiva del Desagüe del Valle de México), Pedro Rincón Gallardo, sent a letter to the junta’s vice president, José Yves Limantour, then professor of international law at the National School of Jurisprudence. Rincón Gallardo informed his colleague (the latter was in Paris at the time) of the progress of the canal project and described his recent trip from New Orleans to Mexico City, during which he was accompanied by a young Englishman making his first trip to Mexico. He wrote: I travelled from New Orleans with Mr Pierson [sic], summoned by the Board to finalise the business of the Canal contract. I soon saw that he was a very competent man, who had done his homework and was prepared to offer all manner of guarantees, but who was only going to spend nine days in Mexico . . . and since the modifications (to the contract) which he was proposing were substantial, I supposed that we would get no further with him, but this has not been the case, and I am pleased to inform you that the draft agreement has been signed, and the deeds are being drawn up at great speed. You can rest assured that the great work will be finished in three years.2

There is no record of Limantour’s reply, but it is clear from his subsequent correspondence to the canal board that he was angry that such an important step had been taken without his consent, and without his direct involvement.3 This meant that relations between Pearson and Limantour

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began in 1889 in a distinctly antagonistic, even hostile atmosphere. Limantour would have direct contact with Pearson in subsequent years over the implementation of the Gran Canal contract—since Limantour took on the role of acting president of the Junta Directiva on several occasions between 1890 and 1893. Following Limantour’s appointment as minister of finance (secretario de Hacienda) in 1893, contact became more direct. Limantour’s ministerial post, which he would occupy for the following eighteen years, gave him the overall responsibility for all major public works projects constructed during the latter part of the regime of President Porfirio Díaz (1876–1880, 1884–1911). As a result, the financing and implementation of Pearson’s two subsequent contracts—the modernisation of the port of Veracruz (1895–1902) and the reconstruction of the Tehuantepec National Railway (1896–1907)—were personally supervised by Limantour. Over the course of Pearson’s profound involvement in Mexican affairs during the next twenty-six years—as a result of which Mexico would become the epicentre of his international business empire—the relationship underwent many changes. It would certainly have its difficult moments, and, whilst it could never be described as intimate, it remained cordial. It was, however, a relationship which holds the key to understanding the origins and evolution of Pearson’s business “empire” in Mexico, and the context in which it developed. The focus of this chapter will be an examination of the relationship’s principal characteristics. Pearson’s first visit to Mexico in 1889 took place in a highly charged political atmosphere. Porfirio Díaz, following his second reelection as president in 1888, had embarked on a process of consolidation of his personal and patriarchal authority at the apex of national power which would transform and dominate Mexican political life for the next twenty years.4 It was a risky strategy, since it would require persuading the warring factions within the governing Liberal coalition that permanent presidential reelection, and the parallel process of political and executive consolidation—both inimical to the fundamental precepts of Mexican liberalism—were justifiable and necessary options. While the strategy was ultimately unsuccessful and was eventually undermined by the Revolution of 1910, it nevertheless provided Mexico with two further decades of uninterrupted political peace for the first time since the achievement of independence from Spain in 1821. It also provided the political space for the regime to exchange its constitutional legitimacy for the pursuit of social order and material progress, as part of an ambitious attempt to transform the physiognomy and to define the soul of the nation. In short, had Díaz not been reelected in 1884, and again in 1888, it is unlikely that the Gran Canal would ever have been completed.5 The Gran Canal was very much part of the nineteenth-century Mexican Liberal vision of material progress and nation-building. It was a proj-

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ect of grandiose and ambitious proportions—a channel to control the level of the lakes in the Valley of Mexico which stretched some thirtyseven miles (and, in places, up to a depth of seventy-two feet), from Zumpango to the Lago de Texcoco from the north to the east of the capital, including a tunnel four miles long which would discharge excess water into the lower valleys. Its essential purpose was to relieve the perennial problems of persistent flooding and inadequate drainage which frequently left large parts of Mexico City underwater in the rainy season.6 These problems had become even more pressing with the accelerated pace of population growth of Mexico City during last quarter of the nineteenth century. In addition, the causal link made in this era of scientific positivism by the city fathers of the Mexico City Ayuntamiento (City Council) between urbanisation and the spread of contagious diseases gave new urgency to the project.7 The fundamental problem of perennial flooding had preoccupied, but largely defeated, all governments—whether Aztec/Mexica, colonial, or national—since the earliest settlements in the Valley of Mexico in the fifteenth century. Successive administrations had been hampered in their attempts to tackle the problem by a lack of adequate resources, appropriate technology, or political stability. Even a cursory examination of the antecedents of the Porfirian Gran Canal indicates that the problem had drawn the attention of some of the leading intellectual advocates of stateand nation-building in nineteenth-century Mexico. The most famous foreign visitor to colonial New Spain on the eve of political independence, the Enlightenment polymath Alexander Van Humboldt commented in his widely read Political Essay on the Kingdom of New Spain, first published in 1803, that “Mexico City will always be at risk until a canal is opened directly to Lake Texcoco.”8 Commenting in the wake of major floods which occurred in 1819 and which had largely destroyed the existing defences constructed at the very end of the colonial period, the Conservative statesman Lucas Alamán commented on the urgent need to provide funds “for repair and restoration” far in excess of the sums which had previously been allocated.9 In 1833, leading Liberal intellectual José María Luis Mora wrote a report as an elected representative of the Mexico City government on the inadequate state of the city’s flood defences and called for further work. It was not, however, until the establishment of the Ministry of Development (Fomento) after 1853 that tenders were invited for the construction of a large-scale engineering works designed to tackle the problem. Even then, work on the project was frequently interrupted during the lengthy period of civil war and foreign intervention after 1854, during two of the most turbulent decades in what had already been a tumultuous first halfcentury of Mexico’s precarious life as an independent nation.10

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The Gran Canal therefore represented far more than simply a pragmatic solution to a long-standing problem and, indeed, was more than merely a component in the development of an emerging social and economic infrastructure. It was, in essence, along with the other major engineering projects which Pearson would construct at the behest of the Díaz government, a prominent symbol of the Porfirian government’s vision of a country belatedly, but finally, emerging from its early nineteenth-century “backwardness” into late nineteenth-century “modernity,” to take its position as a member of the international community of modern and progressive nations—a metaphor, in other words, for the entire Liberal nineteenthcentury project.11 As the close supervision which he exercised over the canal project demonstrated, it was also a project of personal interest to President Díaz, and had been so long before his rise to the presidency in 1876. In 1867, Díaz, as general in command of the Army of the East, had been lauded as a national hero who had delivered Mexico’s “Second Independence” by expelling the occupying French forces from Mexico City. In response to a request from the engineers who had been in charge of the project under the Emperor Maximilian, he indicated at the time that the “promotion of these works” was of “profound interest” to him, since they represented one of the “few glories I could ever wish to see.”12 A succinct illustration of significance of the Gran Canal project for the Mexican political elite is the description which the governor of Morelos, Pablo Escandón, gave to Rosa King, an Englishwoman who had settled in Cuernavaca during the latter years of the Díaz regime. Escandón’s enthusiastic endorsement reflects not only the project’s symbolism, but also the veneration and affection for the figure of Porfirio Díaz from those who peddled the contemporary myth that the president was personally, even single-handedly responsible for the material, political, and cultural development which characterised the era: Señora King, . . . you cannot understand what barbarians we used to be, before Porfirito civilised us. If you had seen Mexico City in those days, with Lake Texcoco lapping at our ankles in the rainy season, you would appreciate what a project that was, the drainage of the Valley of Mexico. And consider our modern railroads and telegraphs, ports and industries, financed by the foreign capital he has cunningly coaxed in. Today, we are a nation respected by other nations. We are cosmopolitan. . . . And all the work of Porfirio Díaz!13

securing the gran canal contract The contract for which Pearson was competing in 1889 was the construction of the drainage channel, since the contract for the tunnel had


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already been awarded to another British firm (Read and Campbell) in 1888.14 Despite the brevity of Pearson’s initial visit, the Junta unexpectedly decided to accept Pearson’s tender, even though it was more expensive than that submitted by his main rival, the US firm Bucyrus Construction Company of Ohio, who had already completed excavation work on the Gran Canal.15 The Junta’s report curiously made no reference to the rival tender, and suggested that there was little alternative to awarding the contract to Pearson.16 The negotiations were, however, far from over, since Pearson refused to concede on the costing of the works—which required, he argued, expensive dredging below a certain depth of excavation.17 In the light of this impasse, Pearson was summoned to speak, through an interpreter, directly to President Díaz. Whether Pearson knew of the board’s favourable report is not entirely clear. According to Pearson’s own account, as related to his biographer, J. A. Spender, because of his insistence on additional costs, he assumed that he had therefore failed to secure the contract. He was, of course, mistaken: To my surprise . . . the President said: “Well, if you won’t give way, the Government will, provided you assure me on your honour that you will always treat the Government in the same way that you would expect to be treated by them, had they been in the saddle as they ought to be, instead of putting you there.” I gave the promise without hesitation, and from the day the contract was made no question ever arose between us as to its fair interpretation.18

Whatever favourable impression Pearson may personally have made on the members of Canal Board, and on President Díaz himself, there were, as has been suggested in Chapter One, clearly more profound reasons for his “surprise” success. First, Pearson’s existing track record in public works contracting, and his access to and familiarity with the latest technology (in particular the use of mechanical dredgers) meant that the project had every chance of finally being completed quickly and efficiently.19 Second, the award needs to be seen in the context of the Díaz government’s rapprochement with Europe and the renewal of diplomatic, commercial, and financial links with its former adversaries— Britain, France, and Spain—as a counterbalance to increasing economic dependence on US trade and investment.20 Third, as already indicated, Pearson had some powerful agents working on his behalf. The personal interest taken by the president in the project and his approval of Pearson’s proposals were clearly essential factors in securing the contract. In addition, he had the important support of his agents in Mexico, Duff Morison and, most important, Guillermo de Landa y Escandón, who acted as his intermediary in the negotiations with the Mexican government. De Landa y Escandón had extensive and profound

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connections with the Porfirian political elite. A member of one of the wealthiest families of nineteenth-century Mexico, he owned extensive mining properties and rural estates (haciendas), and had been a senator for both Morelos and Chihuahua during the Díaz presidency. He became president of the Mexico City Council in 1900 and governor of the Federal District (Mexico City) in 1903.21 Not for nothing did Pearson later describe Landa as “my great friend in Mexico.” This embryonic clientalist network would become one of the crucial factors in the evolution of Pearson’s business empire in Mexico, and will be explored in greater detail below. Fourth, the terms of the Municipal Loan of 1889, which provided a significant proportion (although far from all) of the financing for the Gran Canal, and the specific recommendation by Mexico’s financial agent in London that the flotation would be much more likely to be successful if awarded to a British firm were undoubtedly highly influential in securing the deal. It is clearly not a coincidence, nor without significance, that, following on from the success of the flotation in London in March 1888 of Mexico’s first international loan in more than sixty years, a further loan had been floated in London in 1889 for the specific purpose of funding the Gran Canal project. The loan was negotiated with the Trustees, Executors and Securities Insurance Corporation of London for a nominal sum of £2.4 million. Whilst the terms of the loan made no specific stipulation that a British company should be employed, it was the explicit view of the Mexican government’s financial agent in London, Benito Gómez Farías, that the appointment of an English contractor would provide “important moral support in the eyes of the British public for the success of the works,” and, therefore, the flotation would be more likely to find investors in London.22 Those same British investors would certainly prefer a British contractor who could more easily be held to account should the project run into difficulties, or should the Mexican government default on its payments, as many investors predicted given Mexico’s track record throughout the nineteenth century.23 Finally, the award of the Gran Canal project to an overseas contractor demonstrated the extent of the power exercised over Porfirian developmentalist Liberals by the ideological and conceptual link between overseas investment, technology, and expertise and the path to economic development and state- and nation-building. These links had been established in the minds of Latin American political leaders at the very birth of the Latin American republics in the 1820s. Throughout the nineteenth century, however, the goals of material progress and national development had proved to be very elusive. Equally difficult had been the maintenance of a balance between the extension of Mexico’s links to the international


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economy and the protection of national sovereignty from its hemispheric and European predators. Attempts to stimulate the export trade and attract foreign investment before the 1870s had faced numerous and seemingly intractable obstacles. Civil war, persistent failure to meet existing debt obligations, foreign intervention, and the lack of infrastructure and markets had all conspired to limit their development—even though recent research would suggest that such generalisations require further clarification and research, and that there were significant pockets of economic growth in the early postindependence period, albeit with considerable regional variation.24 The second half of the nineteenth century, however, witnessed the convergence of factors which created far more favourable conditions for the implementation of the developmentalist project. The establishment of a greater degree of domestic political stability after 1867 combined with the expansion of global trade and finance in the last third of the nineteenth century and prompted renewed efforts, especially in the United States, to incorporate Mexico’s economic resources and raw materials into the expanding international economy. These developments were facilitated by the consolidation of the administrative apparatus of the state—increasingly in the hands of an all-powerful Treasury (Hacienda)—which under Limantour’s stewardship restored equilibrium to the balance of payments, restored Mexico’s reputation in the eyes of international capital markets, reformed the tax system, and attempted to stabilise the peso.25 The Mexican Treasury, therefore, became the driving force, in partnership with private capital, behind the extension of a banking and financial system, and the implementation of a project of infrastructural development—epitomised by the railway—and of an extensive programme of public works which characterised the Porfirian era. Limantour and Pearson were, therefore, in their respective spheres, two of the key agents of this process of Porfirian development. In this broader context, the central role attributed in the developmentalist discourses of Mexico’s late nineteenth-century political and cultural elite to overseas capital, markets, technology, and expertise in Mexican national development needs to be fully understood. From the perspective of the inner circle of the Porfirian political elite—memorably and evocatively described by Mauricio Tenorio Trillo as “the Wizards of Progress”26—the primary role of overseas intermediaries and entrepreneurs (such as Pearson) was to assist, literally and metaphorically, in the construction of the building blocks of the Liberal state and the Mexican nation. According to the científicos—the group of young “liberal developmentalists” or scientific positivists, the financiers, lawyers, and politicians who would group together under the protection of President Díaz’s

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minister of the interior (and his father-in law), Manuel Romero Rubio, and later coalesce around the political project of the Liberal Union in 189227—in order to join the modern world of scientific progress and material advancement, it was necessary first to study and understand the key components and stages of development achieved by other nations, and second to attract foreign capital, technology, and expertise to Mexico as integral components of the project of national development. This was, however, not solely an economic proposition, but one with profound cultural and even biological consequences. To adopt the biological metaphors so common in late nineteenth-century discourses of the Western world, the improvement of the Mexican national “organism” required a transfusion of not only foreign capital (capital extranjero) but also of foreign blood (sangre extranjera).28 At the same time, the opening of Mexico’s multiple frontiers (territorial, cultural, biological, political, and economic) to foreign penetration was a highly risky strategy. The dangers of foreign domination were all too real. To continue the biological metaphor—the injection of foreign microbes might strengthen the national organism, but they might also kill the patient. It was vital, therefore, for the state to strictly supervise the application of the medication—in other words, it was vital for the state to strengthen its role in protecting political and economic sovereignty from the very real threats posed by overseas penetration or infection. This aspect of the científico strategy has received much less attention than it ought to have done—and much less than the familiar stereotype of a supine government ideologically driven by laissez-faire economics, entranced by market forces and genuflecting at the feet of overseas investors or entrepreneurs.29 For Limantour, appointed as Díaz’s minister of finance at the age of thirty-nine as one of the youngest and most gifted of Romero Rubio’s protégés, Mexico’s elites needed to guard against the excesses of either an inferiority complex toward Europeans, which placed the latter and their social and material progress on a pedestal, or, at the other end of the spectrum, a self-satisfied arrogance that Mexico had little to learn from the outside world. In a revealing exchange of correspondence with the científico lawyer Pablo Macedo, who worked under Limantour in the Ministry of Finance and who was visiting Paris as one of Mexico’s representatives at the Universal Exhibition of 1900, Limantour chided Macedo for his observation that Mexicans were an irredeemably inferior people in relation to Europeans. Macedo wrote in awe of European “superiority”: “How small we must seem to the superior peoples here, and if they were ever to visit us they would see how far we still have to travel to be something.”


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Limantour, who was unquestionably the éminence grise of the científicos, replied: It is true that we have a long way to travel to be something in this world, but that is not what should sadden us—because we have amongst our assets certain advantages which should not be undervalued. What should sadden us is the comparison between what we have done and what we could have done with these same elements if only we had judiciously studied the advances these nations have achieved. What disturbs me is not our relative level of backwardness, but the presumption and vanity of many Mexicans who think that we should be satisfied with what we have, and that we can learn little or nothing from abroad.30

In the specific case of the Gran Canal, Limantour, from his position as a founder member of the Junta del Desagüe, had made it clear that he believed progress had been hampered, and would continue to be hampered, by the lack of practical skills, technology, technical expertise, and experience available in Mexico, in contrast to “the superiority of the contractor of large-scale public works, a profession which is unfortunately completely unknown in our country.” The only solution, as he explained to the Mexican minister in Brussels in 1887, was to search outside Mexico, especially in Europe, to find “an eminent engineer, a man of recognised experience, who would be prepared to come to Mexico to take charge of the organisation of the works and study the practical means for its completion.”31 The convergence of all of these factors explains the award of the Gran Canal contract to Weetman Pearson in December 1889. For the thirtythree-year-old Pearson, the award was a significant achievement in itself, since it represented by far the most extensive and largest project he had undertaken up to that point in his career. It also provided him with the base from which his business empire in Mexico would be extended. In the rest of this chapter I shall therefore focus on three key elements which facilitated its expansion: First, the cultivation of an extensive clientalist network with the Porfirian political elite, which included not just those at the apex of the political hierarchy, such as the president and his minister of finance, but a range of politicians, professionals, and national and provincial officeholders. Second, the construction of this network required an assiduous adaptation to Mexican business and political etiquette, which necessitated the payment of retainers and special payments or salaries to individuals who performed a variety of services to the firm in a number of capacities, usually as lawyers or advisers and sometimes as special agents engaged in industrial espionage. At the same time, the firm made “loans” to prominent politicians or to government employees.32 These “advisers”

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or “agents” were usually members of the social and political elite with particular posts in the state bureaucracy whose public roles had a bearing on some aspect of the firm’s business activities. Third, Pearson’s willingness to provide additional services to the Mexican government, such as those of diplomatic or political agent, publicist, and general advocate, further extended his connections with the Mexican political elite. When Limantour described Pearson in 1898 as “agent and representative” (agente y mandatario) of the Mexican government—in the context of the award of the Tehuantepec National Railway contract— he was describing the essential nature of Pearson’s relationship to the Díaz government and its modernisation project. the establishment of a clientalist network One of the central arguments of this book is that Pearson’s success in his Mexican enterprises was due to the clientalist network which he and his senior managers and lieutenants in Mexico—from the 1890s, John Body, and after 1901, Thomas Ryder—developed in the two decades between 1890 and 1910. As already indicated, the prevailing discourses espoused by a Porfirian elite wedded to the notion that national development could be achieved only by attracting foreign capital and therefore protecting the interests and, especially, the property rights of overseas investors clearly made the task of constructing this network a good deal easier. Neither was it a case of having to construct a clientalist network from scratch, since the close linkages between business and politics through such elite networks have always been pervasive in Mexican society, and they proliferated during the Porfiriato.33 What Pearson needed to do was to infiltrate the social networks which already existed, and to develop them. To do so required a level of commitment to, understanding of, and above all, empathy for the Porfirian national project. It also required an instinctive understanding of Mexican business etiquette. Clientalist networks clearly had mutual benefits for both parties. The advantages to Pearson were obvious, but they also helped Pearson’s collaborators to consolidate their role as intermediaries with overseas capital, and, on that basis, to secure important political and administrative positions within the Díaz regime. As Ariel Rodríguez Kuri and Manuel Perló Cohen have pointed out, because these young businessmen and financiers would later become recognised as members of Limantour’s científico clan or camarilla,34 it can be argued that the Gran Canal contract played an important role in the consolidation of this influential political and financial group. For example, two of the principal Mexican


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beneficiaries of Pearson’s Gran Canal contract—Guillermo de Landa y Escandón and Sebastián Camacho, both original shareholders in the National Bank (established in 1882),35 to whom Pearson gave the responsibility for the allocation of an extraordinary fund of US$500,000 for “special expenses” in association with the implementation of the contract—would take advantage of this newly found power to exercise greater influence and ultimately take control of the Mexico City Council (Ayuntamiento) in subsequent years. Camacho would be president between 1894 and 1897, and de Landa y Escandón president between 1900 and 1902. De Landa y Escandón would also act as inaugural governor of the Federal District (Mexico City) from 1903 to 1911.36 In keeping with the prevailing ideological discourses outlined above which lauded the technical skills and financial acumen of foreigners, the favourable treatment of overseas businessmen and foreign investors became central to the character, structure, and development of the Díaz regime. Foreign intermediaries brought either their capital or (as in the case of Pearson) their expertise and financial contacts to the construction of major development projects which would, on the one hand, create a modern infrastructure of the nation and, on the other, on a more prosaic and perhaps more venal level, increase the value of the properties which the Porfirian elite was in the process of acquiring. The type of business practices adopted by overseas entrepreneurs and their Mexican allies operated as a form of what William Schell describes as “tributary capitalism,” which operated during the Porfiriato in the absence of more formal, regulatory institutions.37 Foreign entrepreneurs thus collectively acted as a powerful and significant pro-Díaz camarilla within the structure of Porfirian domestic politics, but also acted as advocates or lobbyists for the Díaz government with their own national governments. Crucial to what evolved over the years as a special relationship between Pearson, his agents, and the Mexican government was the fact that Pearson (when he was in Mexico) and Body were invited to regular, private meetings with both the president and his finance minister. It must be said in this context that personal invitations to the presidential palace at Chapultepec made to overseas businessmen were commonplace, especially if the latter were, like the president himself, members of Masonic lodges. There are numerous examples. In one case, Díaz explained to the representative of US businessmen seeking a railway concession in 1900 that “the attitude of the government was friendly to foreign capital, and I would regard it as a great misfortune if any foreign capital should withdraw from my country.”38 Another US visitor came away with the impression that foreign businessmen were able to gain the more privileged access to the president’s counsel than Díaz’s own ministers:

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He [Porfirio Díaz] said that, so far as the ambassador was concerned, he was a Mexican, for whom mañana would do as well as today. As for the Secretary of Foreign Affairs, he could also wait. But I, as one of the “collaborators in the development of Mexico,” deserved instant admittance, day or night, for “Mexico herself” waited on me.39

At the same time, a personal visit to the president was essential for any overseas entrepreneur who wanted to establish a business enterprise in Porfirian Mexico, given the hierarchical structure of Mexican politics and the extraordinary, if not absolute, authority of the president at the apex of the pyramid. British Minister Reginald Tower commented in his annual report to the Foreign Office for 1907 on the autocratic nature of Porfirian political culture, and the fact that the authority of the president over his cabinet was “absolute.” He commented further: “It often strikes me as strange in a Republican country to hear the responsible minister in charge of a Department of State say ‘if I get orders to that effect from the President I shall be very glad to do what you ask.’ ”40 In the case of the Pearson firm’s interests, there was clearly also an element of necessity and routine in the regular meetings between Díaz, Limantour, and John Body, given the extent and importance of the firm’s government contracts. Nevertheless, the degree of confidentiality and the guarantees, assurances, and advantages received by Pearson and Body from both Díaz and Limantour at these meetings were both extensive and exceptional. One example illustrates the president’s willingness not only to exercise authority over the Mexican judiciary, but also to do so specifically in order to assist the firm. Body protested directly to Díaz at a private meeting in 1908 about a decision taken by Minister of Development Olegario Molina which he perceived to be against the firm’s interests. Díaz informed him that the matter “will be settled,” but in a manner which would save the embarrassment of his minister: “Señor Molina has asked me not to reverse the decision, and on that account I abstain. The case will go before the Supreme Court, and I have given them my instructions as to their judgement.”41 The president’s relationship with provincial governors was always more complex and varied than the traditional image of executive centralisation during the Porfiriato would suggest, but where it was effective, his influence with the provincial governors could also prove to be very useful in securing contracts for Pearson.42 At a private audience in July 1905, for example, Body told the president that the governor of Veracruz, Teodoro Dehesa, was “compromised to some Americans” over the Coatzacoalcos sanitation contract, and had therefore not granted it to Pearson’s firm. Díaz told Body that he:


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doubted if the Governor was compromised to the extent reported, but, no doubt, what many of them would be looking for down there would be some compensation from us if we got the work, and he told me to be very careful of any arrangements we might make with these people, as their word was not always to be depended upon. He told me he would see the Governor who was now in town and recommend to him that we should be given the work and be preferred on equal terms with anyone else.43

The intervention brought direct and tangible rewards. Body reported several months later that “Dehesa had formally been hostile to us,” but now had changed his attitude and welcomed Body to Veracruz “with open arms.”44 A further example of the way that business was conducted in Porfirian Mexico, of the crucial role of presidential imprimatur in the awarding of contracts, and of Pearson’s adaptation to Mexican business etiquette can be seen in the negotiations surrounding the major contract for the refurbishment of the port of Veracruz. This was Pearson’s second major contract after that of the Gran Canal. In November 1894 Pearson wrote to Guillermo de Landa y Escandón to inform him that he had had a visit from the Mexican engineer Agustín Cerdán, the Mexican contractor for one of the breakwaters at Veracruz, and from the newly appointed Mexican financial agent in London, Luis Camacho. Cerdán explained to Pearson that he had nearly completed the breakwater contract he had been awarded in 1887 but that his attempts to tender for the remaining contracts for the port works in partnership with “a French firm” had been rejected by President Díaz. He then told Pearson that the Mexican government was prepared to pay some Mex$8 million for the remaining works and that “when he and the President had talked over matters in times past, that the President had expressed a wish that we would take the matter in hand, but he was almost afraid to mention it as our prices were so high.”45 Cerdán then confirmed that the president’s confidence in Pearson meant that the firm “could get a better price than anybody else . . . and the Government was prepared to pay pretty liberally for it.” Cerdán then made what at first appeared to be a gesture of self-sacrifice, offering to “go into the business with us, he leaving the management entirely in our hands, or he was prepared to step on one side for us to have the contract to ourselves.” Pearson immediately recognised that Cerdán was inviting him, in accordance with the rules of Mexican business etiquette, to offer “a small share” to him for this information, and for his assistance in delivering the contract to Pearson’s firm. After a further lengthy exchange of correspondence between Pearson and de Landa y Escandón, and after Pearson’s tender had finally been accepted, it was agreed to pay Cerdán a “fee” of Mex$200,000.46

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The views of Luis Camacho, Mexico’s financial agent in London under Limantour’s long tenure of office, who accompanied Cerdán to the initial meeting with Pearson in November 1894, were also clearly influential in convincing the president that the Veracruz contract should be awarded to Pearson. Camacho wrote at length to explain to Díaz that, although Pearson’s tender was more expensive than the others which had been received, the government could be confident that the works would be completed correctly and to the required specification. The letter also serves to explain one of the fundamental reasons why Pearson would be awarded the Tehuantepec Railway contract four years later: In my opinion, if the Government wants the Vera Cruz port works finished, the best thing it can do is to take advantage of Mr. Pearson’s willingness to take it on, and offer him the contract. Perhaps his terms and conditions are more onerous than those of any other contractor; but, in my judgement, two vitally important points must be taken into account. First is the magnitude of the works, and, second, that the Government, knowing the outcome of the works this firm has undertaken, is guaranteed to have the works carried out to the letter, and finished correctly; and perhaps in the final analysis this will be more economical on such a large scale project, because, if the contract is offered to another firm which does not offer the same guarantees, and instead offers more attractive conditions, and ones more favourable in terms of budget, but without bothering about the fulfilment of their commitments, even at the cost of sacrificing their deposit, which may have been calculated in advance, the most probable outcome will be negative, that the works will never be completed, and the port will be in worse condition than it was before; or that it will end up costing two or three times more than it should. The example of the Tehuantepec Railway which has cost the nation so many sacrifices, and so many heartaches for the Government before its completion, is the absolute proof of my point of view.47

Although no evidence has been uncovered to suggest that Pearson directly rewarded Luis Camacho for his services to the firm (although there is also no evidence that he did not), the demands of business etiquette nevertheless required that some recompense be given. In this case it was a job in the firm’s London office for Luis’s son Dionisio.48 The reciprocal nature of this clientalist network meant that Pearson, in exchange for suitable financial or other rewards, was able to enlist the support and assistance of, as he put it, “the most influential political and financial men in Mexico” as advisers or members of the boards of directors of his numerous enterprises. A specific example was the appointments made to the board of directors of S. Pearson and Son Sucesores, registered as a Mexican company in October 1909 and charged with carrying out all of the firm’s contract work in Mexico.49 A further example was the composition of the board of the El Aguila Oil Company in December 1909,


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which contained the “flor y nata” (literally, the “flower and the cream”) of the Porfirian political and financial elite (including, once again, de Landa y Escandón and “Porfirito” Díaz, the president’s son).50 the relationship with limantour As already indicated, the role played by Limantour as the architect of the project of national development pursued by the Díaz government after 1893, and that played by Pearson as one of the government’s principal overseas agents, meant that the relationship between them was of vital importance. The relationship was characterised by elements of clientalism, and certainly conformed to the rules of Mexican business etiquette, but fundamentally it was defined and determined by the roles each assumed in relation to the Porfirian project of national development. It was clearly a crucial relationship from the point of view of Pearson’s Mexican business interests, which were initially constructed on the basis of government contracts paid for by public funds raised through public debt, over which Limantour presided as the minister of finance. Keeping in close contact with Limantour, and keeping him informed through regular, private meetings of the firm’s activities and plans not only was a necessity for Pearson but also became a fundamental instinct, and one which continued long after the collapse of the Díaz regime in 1911.51 By contrast, Limantour’s central task was not only to attract foreign capital and overseas entrepreneurs to Mexico but also to protect Mexico’s economic and political sovereignty. According to his own dry and cautious account of his tenure of public office, his principal concern on entering the Ministry of Finance in 1893 had been the stabilisation of Mexico’s public finances, which had been severely undermined by years of deficit financing and the severe fluctuations in the international price of silver, on which the value of the Mexican peso was based. The primary goal was to secure a balanced budget, by reducing government expenditure, stabilising the peso, and introducing fiscal reforms (reducing, for example, the Treasury’s dependence on taxes on commerce, which dated back to the colonial period, and replacing them with a new stamp tax on consumption, manufacturing, and a range of business transactions). These measures were designed to increase government revenue, with the longer term aim of eliminating the permanent fiscal deficit from which all nineteenth-century Mexican governments had suffered, and which had contributed to their downfall. The second task would be to consolidate and improve the management of Mexico’s public debt, with the principal aim of reducing the burden

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of Mexico’s dependence on short-term or “floating” debt contracted at high rates of interest, and to renegotiate more favourable terms with Mexico’s creditors in order to reduce the burden of servicing debt repayments. Stricter supervision and regulation would allow, at the appropriate moment, new loans to be secured and public debt to be increased, in order to provide “benefits to the nation” in the form of a national rail network and extensive public works. But public debt required prudent management and, of crucial importance, the restoration and improvement in the level of confidence in Mexico and Mexican securities in international financial markets, as part of what Limantour referred to as the need to pay close attention to the “psychological aspects of credit” (el lado psicológico del crédito). He explained this aspect of his strategy in quasi-mystical terms, arguing that the purpose of government action was to instil, at a national and international level, the hope, which little by little will be transformed into a principle, that the road to salvation has been found and will be pursued with firmness and conviction. In the front line of these government actions must be an honourable and vigorous will to establish order and pay back what is owed.52

The third, no less ambitious, but certainly less quantifiable aspect of Limantour’s strategy would be a moral crusade to “instil a sense of public morality” (moralizar) in the staff and in the administrative procedures of the Ministry of Finance, “to persecute fraud and destroy the corrupt practices which have left us three quarters of a century of revolutions, bankruptcy, and disorders of every kind.” Only then could the government embark upon a programme of legislative reform to create an environment more conducive to entrepreneurial activity, abolishing internal restrictions on trade, introducing monetary reform, and exercising tighter control and regulation of the banking system. What Limantour and his predecessors in the Ministry of Finance (most notably Matías Romero, minister for three separate terms of office in 1868–72, 1877–79, and 1892–93), were advocating was nothing less than a radical restructuring of public finances in order to provide a boost to the Liberal project of national development.53 It required the centralisation of financial and economic planning, the consolidation of Mexico’s public debt, tax reform, monetary stabilisation, and close supervision of all the projects either subsidised or funded by public debt by the Ministry of Finance (and, naturally, in the hands of the minister of finance). At the same time, it required a restructuring of the basis on which the programme of large-scale public works at the heart of Porfirian state- and nationbuilding would be financed and constructed. No longer would the state offer concessions and subsidies to private companies willing to undertake


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large-scale engineering projects (such as had been the case with the development of the railway network). In the Limantourian vision of the future, public works projects essential to the creation of a modern state and a progressive economy would be planned and financed by the state. There were limitations, however, on the extent of state control. Limantour believed that the state was a poor manager and, as a result, always sought managers from the private sector to run public works projects (as would be the case of the Tehuantepec National Railway, discussed in the next chapter). This strategy was clearly favourable to the interests of public works contractors, such as Pearson, and it would provide the basis on which Pearson’s business empire in Mexico would develop. All the responsibility for planning and financing public works projects rested with the Mexican government (and, fundamentally, with Limantour). What Pearson had to do was convince Limantour that he understood and supported the strategy, its purpose, and its implications, and that his firm had the requisite experience, expertise, and integrity, and therefore constituted the most effective option. In this endeavour, Pearson was spectacularly successful. As Patricia Connolly has emphasised, the public works contracts awarded to Pearson and his firm between 1890 and 1911 represented no less than a third of total Mexican state investment in public works over this period.54 Pearson was fully aware, nevertheless, that his relationship with Limantour was an unequal one, and his role as agent, representative, and partner (as would be the case with the Tehuantepec Railway) of the Mexican government was essentially a subordinate one. At the same time, Pearson, as an ambitious and independent entrepreneur, would also be tenacious in defending his business interests and in seeking to maximise the opportunities for profit which the Porfirian modernisation project opened up for him. As a result, Limantour’s determination to exercise tighter government regulation over the management of public finances and government spending meant that he would frequently lock horns with Pearson on a number of issues, usually relating to the escalating costs. At times, their relationship would be anything but harmonious. For some commentators, the nature of their personal relationship was attributable to the personalities of the two men. According to José LópezPortillo y Weber, for example, the personal rivalry stemmed from personal similarities, especially in relation to their close attention to detail. They were “birds of a feather” (aves del mismo plumaje) who fought “peso for peso, centavo for centavo” over the details of Pearson’s public works contracts.55 Guillermo de Landa y Escandón suggested that Limantour had a sneaking regard for Pearson’s negotiating skills, and told Pearson that Limantour “is a very hard man to deal with, . . . and he believes you are the

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only man who gets the best of him.”56 Limantour’s respect was clearly reciprocated. Pearson explained to London financier Henry Osborne O’Hagan that “the ablest man [in Mexico] is Limantour, the Finance Minister.”57 During the tense negotiations surrounding the establishment of his oil company, El Aguila, in 1908, Pearson told his wife following a meeting with Limantour: “He is the same as of old—but there will be a fight before I get what I want from him.”58 Even a superficial reading of the correspondence between these two key agents of Porfirian modernisation over a period of nearly three decades indicates that Pearson was always cautious, courteous, and even deferential in his interactions with the man who would be the key figure determining the fate of his business interests in Mexico. This caution was also no doubt enhanced by their initial interactions over the Gran Canal, which had been far from easy.59 Pearson was certainly never afraid of confronting Limantour, but he would always be prepared to negotiate, to compromise, and even to back down in the interests of moving the negotiations forward. Pearson recognised Limantour’s puritanical qualities, but also his vanity, and acknowledged in a very pragmatic way that Limantour had the ultimate word over the approval and expenditure of public works projects, and over which projects would be presented to the president for approval.60 It was vital, therefore, to maintain Limantour’s approval and support. As he explained to Body in the context of the early development of his oil business after 1901, “It is essential to keep Limantour satisfied . . . and let him be convinced that we are absolutely straight in all our actions.”61 Illustrative of this high degree of calculated—and calculating—deference shown by Pearson was his fawning letter of congratulation to Limantour following the latter’s appointment to the post of minister of finance in June 1893. It demonstrates once again the qualities Pearson himself most admired, as well as his own deeply rooted political instincts: General Díaz and the whole of Mexico have been fortunate in securing your services. Great ability, absolute thoroughness, a passion for hard work, integrity and a character commanding confidence both in Mexico and in Europe . . . these qualifications, permit me to say, you have. Your external debt bonds will, materially, and surely, if slowly, increase in value, and the Dawn of Prosperity will quickly return to Mexico. I sincerely trust that your health may not suffer from the strain of office, and that you may long guide and control the destinies of your high office and so restore to Mexico that Financial Position in the world which she should occupy.62

Further evidence of deference, nuanced by a quiet determination to argue his corner, can be found in the correspondence between Pearson


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and Limantour over payments made in the stages of the Veracruz port works project, granted to the firm in 1895. After one serious disagreement in May 1897, Pearson wrote, in conciliatory mode: I hope you understand that I am desirous of doing everything I possibly can to assist your financial arrangements. I think, however, that such alterations ought not to place me in a worse position than that I previously held. I am fully prepared to place myself in your hands, and to abide by your decision on all occasions when you approach the subject as a Judge, and not as an Advocate of the Government.63

There is no doubt, however, that Limantour always had the upper hand in negotiations. Even when Limantour may have favoured Pearson’s tenders over those submitted by other contractors, it did not mean that the firm would always be awarded the contract. An example is the negotiation in 1901 surrounding the contract for a dry dock at Veracruz, a project supplementary to the contract for the modernisation of the port which had already been granted to the firm. In one of his regular meetings with Limantour, Body had even been given confidential information which had allowed him to assess rival tenders for the dry dock before submitting a bid. In the event, Body’s tender was considerably more expensive than that of their principal rival for the contract.64 Instead of rejecting the Pearson tender outright, Limantour tried to persuade Body to reduce his prices, arguing that the firm’s experience and knowledge in the port works since 1895, and the fact that they already had an experienced and competent team of engineers and workers on site, would enable Pearson to reconsider his pricings. Although it was clear that Limantour preferred S. Pearson and Son to get the contract, Pearson was prepared only to make minor concessions. Finally, Limantour decided that, given the considerable expenses already committed at Veracruz, “perhaps it would be convenient to stop for the present and to think about other works which might be more important than the dry dock at Veracruz.”65 The project was postponed, to be resurrected in very different circumstances in 1913.66 Also illustrative of the dynamics of the relationship, and Limantour’s use of brinkmanship, is the fallout between Pearson and Limantour over the final stages of the negotiations over the terms of the Tehuantepec National Railway contract in 1898. Pearson was indignant that last-minute changes had been made to the original agreement, such as would, in my opinion, be certain to involve the Contract in a serious loss . . . I extremely regret that my mission to Mexico has not been more successful, but I have the satisfaction of feeling that the failure can in no way be attributable to me. . . . I have devoted four weeks of my time exclusively to this Contract

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and it has had my best thoughts. I have done everything I could to meet the wishes of the government; in fact, in my desire to please, I have conceded many points and agreed to others that my experience and judgement tell me it was unwise to do.67

Limantour’s response was equally indignant and expressed the hope that “you will not continue to bear the unjustified reproach in your letter to me last night, a reproach which I did not think you were capable of expressing to me.”68 In these combative exchanges, often involving bluff and counter-bluff, there was no doubt who was the victor. As soon as Pearson received Limantour’s letter, he immediately wrote back in stumbling prose and an apologetic, almost obsequious tone: I regret extremely that my letter should have caused you pain, the very last thing I desired to do. My letter was wrongly expressed as what I meant was that questions were raised that had been granted in the first contract. I beg you to always remember that I must be indulgently judged as I fail to give sufficient clearness [sic] to my views.69

To make amends, Pearson enclosed a gift, a tiepin (fistol), with the letter. Limantour responded with thanks and reiterated that he regarded Pearson “with the same respect as ever.” Although Pearson was eventually awarded the contract, he was left in no doubt that Limantour was in charge and that he retained the authority to determine how all aspects of the terms of the contract would be implemented. Even in the case of the oil business, to which, as will be explained in Chapter Five, Pearson began to devote more time, energy, and interest than any other of his Mexican enterprises after 1901, he was highly deferential to Limantour. During the early phase of negotiations with Henry Clay Pierce over a possible amalgamation of El Aguila, now registered as a Mexican company, and the Waters-Pierce Oil Company in 1909, Pearson confirmed that “I had not entered negotiations without first asking Mr. Limantour’s permission to do so.”70 As Pearson recognised, Limantour’s role and influence in the negotiations over the future of his oil business was vital. As he confided to his wife: Of course, any pressure we can get [Limantour] to exert will be of inestimable value. He is with us. But at the same time, he cannot go further than say the Government must assist as far as it properly can a Mexican Company.71

Although the relationship was principally formal and businesslike, there were moments nevertheless which indicated a degree of human contact, even empathy. For the most part, the exchanges were polite and conformed to conventions of social class and etiquette, such as enquiries


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about personal heath (Limantour’s was notoriously fragile) and the conveyance of good wishes to spouses and family. Occasionally there were surprises, since most of the correspondence consisted of Pearson contacting Limantour rather than the other way round. Pearson was, as a result, surprised to receive a personal letter from Limantour congratulating him on his fourth reelection as MP for Colchester in 1906.72 When news reached Cowdray of Limantour’s resignation in May 1911, he was clearly moved as well as concerned. He sent a telegram to Limantour: “Most profoundly regret your leaving government: such regret is universal: result of your unparalleled work will speak for all time.”73 There is evidence that the relationship became even closer after Limantour’s exile to Paris. When, for example, Cowdray learned that Limantour had been declared free of all the charges levelled against him by the Carranza government, he was able to expand on his admiration for the former minister of finance, in his characteristically convoluted prose: History will do justice to you, to whom Mexico is indebted to an extent that can only be appreciated by those (like myself) who had the opportunity of knowing your brilliantly able and self-sacrificing work. But waiting for history to vindicate one’s character or to realise one’s worth is neither satisfying nor very comforting.74

Much of the correspondence after 1911 concerned Cowdray’s involvement in the Huerta government’s abortive attempts to raise a loan in London, and the possibility that there was oil on Limantour’s properties in the isthmus (there was, unfortunately for Limantour, no oil, or nothing which could be profitably exploited).75 But there were many other favours which Pearson performed for the ex-minister. When, for example, Limantour tried to pay for the cost of transporting a family friend across the Atlantic to visit Mexico, Body insisted that “Lord Cowdray will not hear of it . . . we have often called upon you, and want to feel free to do so at any time, and we want you to feel perfectly free at all times to call upon us.”76 Cowdray wrote to Limantour a year later and extended his offer: “do not hesitate for one moment to call upon me for financial assistance whenever you need a friend to help you.”77 In fact, Limantour’s confidence, trust, and above all, dependence on Body and Cowdray increased as his contacts in Mexico and the United States became less available or less trustworthy during the course of the Mexican Revolution. In October 1916 Limantour decided to sell some of his properties in Mexico in order to, as he put it, “salvage as much as possible from the shipwreck which is Mexico.” He proposed selling “all of my estates in the centre of the capital including my own home, which might be used for an Embassy, my country house in Mixcoac, and my estates on

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the Isthmus.” Despite his professed hostility to the United States, he was interested mainly in selling to US buyers for US dollars. He asked Body to help, or to find a “discreet and trustworthy” individual who would act as his representative. Body replied that he would be glad to oblige.78 adaptation to mexican business etiquette The extensive clientalist relationships with the Porfirian elite were cemented by a range and combination of interpersonal contacts, financial rewards or payments in the form of fees or retainers, and personal favours which complied with Mexican social and business etiquette. Percy Furber, the British businessman who arrived in Mexico in the 1890s and preceded Pearson as one of the first pioneers in the Mexican oil business, expressed familiar cultural stereotypes of the peculiarities of life in “Latin countries” but also commented perceptively on the advantages in Mexico of having friends in high places, and the advantages of being a member of the Jockey Club in Mexico City, which allowed him to socialise with the Porfirian elite: It is generally accepted that a foreigner in a Latin country gets along better, whatever his business, if he first makes friends socially. I found this to be true, especially when it came to avoiding the natural Latin tendency to delay . . . once I had made friends at the Jockey Club I could meet a government minister or other persons of importance at the club instead of having to wait interminably for an appointment at an office, and whatever I wished to accomplish was put through without the usual red tape.79

What Furber had identified, and what Pearson also recognised at an early stage, was the necessity of adapting to Mexican business etiquette and, more generally, to the rules associated with what might best be described as Mexico’s ritual and hierarchical cultura de la amistad, for which a literal translation into English (“the culture of friendship”) inadequately captures the level of obligation, loyalty, and commitment it implies. The importance of the culture of friendship not just to modes of social interaction, but also to politics and to the conduct of business in Porfirian Mexico, was explained by Andrés Molina Enríquez in his influential contemporary analysis of what he saw as the evils of the Díaz regime. Here, Molina Enríquez describes the regime as one fundamentally based upon ritual exchanges of amistad: The fibres which twist and intertwine within the system and converge on the knot which is the figure of President Díaz are based upon personal “amistad,” a friendship which . . . gives the individual a right to extract everything that the


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friend can concede, depending on the degree of friendship and the status, personality, and circumstances of the friend in question; but it also, by contrast, imposes equal obligations on the recipient to respond in kind.80

For Molina Enríquez, it was a system which operated at all social levels, and which created a cohesive bond far stronger than patriotism, which, he explained, “has never been a concept of sufficient precision or clarity to serve as a unifying bond between all sectors of society.” For his part, Limantour railed not only against the culture of “friendship” but also against the culture of “patronage,” the common practice in Mexico by which members of the public presented themselves at the offices of public officials, at all levels of the state bureaucracy, from local municipal presidents, through state governors, up to the president of the republic, with petitions for special favours on behalf of themselves, members of their immediate or extended family, or their communities. For the petitioners, their claims to special favours were justified on the basis of close or tenuous personal links through family or kinship ties (compadrazgo) to the official in question, or because they had been personally “recommended” to him by another individual with family or kinship ties, or because the petitioner had performed some service either to the official being petitioned or to the nation itself (usually in the latter case through military service): The more senior the public official, the more crowded the reception rooms of their offices, and the greater the guile and nuisance of the petitioners. Their pretensions are limitless, and it can be stated without exaggeration that nearly all of them come to these audiences to request things which are either absurd or against the law, and they consider that the request should be automatically granted because the petitioner has “recommendations,” almost always based upon sympathy or kinship, or on services supposedly rendered to the nation.81

Pearson and his representatives, and all other members of the overseas business community whose numbers swelled during the course of the Porfiriato, were obliged to adapt to these deeply rooted cultural practices, and to their accompanying rituals of gift-giving and reciprocal obligation. They did so, partly to assist the smooth running of their businesses, but also as a precaution against offending public officials, or, as Thomas Ryder, the general manager of Pearson’s oil business (El Aguila), euphemistically explained to Pearson, “the inadvisability of making enemies of politicians.”82 Pearson not only paid fees, commissions, “retainers,” and loans to prominent members of the elite, but also ensured that the conclusion of business contracts was supported by lavish gifts and bonuses. For example, following the extension of the Gran Canal contract in 1891, he sent

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presents not only to President Díaz (he suggested to Body that “a gun would be better than a carriage for the President”) and to the negotiator of the contract, Guillermo de Landa y Escandón, but also to Landa’s brother, and to the Mexican engineers involved in the project.83 At the same time Rincón Gallardo, president of the Junta del Desagüe, received £1,000 “to cover his expenses” and “a pair of racing fillies,” valued at £2,000. Lionel Carden, the British minister in Mexico, was rewarded for his support for Pearson with a Coupe Brougham carriage, which was registered as a gift to Carden’s wife in order to avoid any suggestion that Pearson was bribing consular officials.84 A further example provides evidence that the firm found lucrative posts for public officials as agents or representatives of overseas firms. Angel Peimbert, described by Body as “the engineer who built the Juile Railway for S.P.&S.,” and subsequently, the government’s inspector on the Tehuantepec Railway, was named the agent in Mexico for the Wouldham Cement Company of Essex, which Pearson had acquired in 1899. Unsurprisingly, Wouldham’s cement was used extensively in the port works at Veracruz, Coatzacoalcos, and Salina Cruz.85 Perhaps Pearson’s most notorious, controversial, lavish, and ill-judged gift was the solid silver fitted dressing table which he presented to the daughter of President Victoriano Huerta in July 1913. It not only appeared to confirm his endorsement of the military coup against the constitutionally elected government of President Francisco Madero, but also was widely interpreted as an indication of his influence in securing British diplomatic recognition for the Huerta regime.86 The individual who received more “gifts” than anyone else was, naturally, Finance Minister Limantour. He was showered with luxury goods and objets d’art of European manufacture and, on a regular basis, with crates of his favourite indulgence or “tipple”—Scotch whisky. This giftgiving was accompanied by a standard, ritual response from Limantour, insisting that he pay for any associated expenses. In an equally ritual response, Limantour’s request was ignored. For example, in 1896 Limantour wrote “to thank Sir Weetman for the cut-glass dinner service” which he had received. In an attempt to deflect any suggestion that this was an inappropriate gift, Limantour asked for the bill but received no reply.87 Limantour received not only gifts of luxury goods but also a range of personal favours and services. He and his family were given an open invitation to Pearson’s residences in Mexico City, Orizaba (where Pearson was chairman of the board of directors of the Santa Gertrudis Jute Mill), Veracruz, and the United Kingdom.88 Pearson allowed Limantour to use his private railway coach for his trips to and from the United States and


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even acted as an intermediary in procuring a succession of English governesses to educate the children of the Limantour family.89 While Limantour was in London in 1903, Pearson arranged for him to visit Buckingham Palace to have a private audience with the King, and also arranged for Limantour to receive an invitation to attend a state ball in honour of the president of France.90 Although there is no evidence that Limantour ever received any form of direct loans or payments from Pearson, he was certainly offered very generous terms for oil exploration rights on the extensive properties owned by Limantour and his brother Julio on the Isthmus of Tehuantepec (see Chapter Five). The last, and perhaps most bizarre service he received was in September 1919 when Body employed a private detective to investigate the background of an army captain from Scotland who was seeking to marry the daughter of one of Limantour’s acquaintances.91 Here it is appropriate to pose the question as to whether the retainers, loans, and gifts with which Pearson showered public officials and prominent members of the Porfirian elite constituted what Limantour, more than a little ironically, later himself described as the “corrupt practices” (corruptelas) which were rife in Porfirian Mexico.92 Pearson’s experiences as an international contractor had certainly exposed him to the widespread corruption of public officials, and he was fully aware of how the system operated. On his trip to Europe and the Middle East as a young man of twenty-two in 1878 he had described his experiences in Turkey in very explicit terms: On landing we were desired to register our names at the passport office which we did, but on leaving the officer in charge demanded Bucksheech [sic] but we did not respond to the outrageous request. A person on becoming acquainted or having to deal with any Turkish official from the highest to the lowest, from the Judges of Governors to the Custom House examiners is made aware that nothing can be done without Bucksheech & with it, everything. The entire system of government is rotten to the core.93

Here it is worth noting that throughout his many years of dealing with Mexico and Mexicans, there is no evidence that Pearson ever described them in anything other than complimentary terms. This distinguishes him from many of his compatriots who travelled to Mexico in this period, and returned to describe Mexico in derogatory terms as a country which abounded with lawlessness, corruption, foul odours, religious bigotry, and congenital sloth, or, as Alan Knight has succinctly described it, with “smells, bells and lazy natives,”94 He certainly never accused its citizens or its ruling clan of being corrupt.

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In fact, the opposite was the case. Pearson was often highly complimentary about Mexico and its ruling clan. In 1915 Limantour approached Body to secure funding for a book to be written by historian, constitutional lawyer, and politician Emilio Rabasa as part of a “publicity campaign” to explain to the citizens of the United States “to what extent Mexico, and honest, intelligent, & law abiding citizens of that country have suffered” as a result of the Mexican Revolution. Body, who usually replied to such requests with a stock response that the firm “did not interfere in Mexican politics,” agreed to fund the project, commenting to Limantour that “both Lord Cowdray and myself have more than a purely commercial interest in Mexico. We are both deeply attached to the country, and we have many sincere and loyal friends among the Mexican people.”95 Pearson himself was particularly complimentary about the figure of President Díaz, for whom he held a high degree of respect and admiration. Spender suggests that Pearson even compared his relationship with the president with that of a father and son. Pearson was particularly scathing about any suggestion that the president had been corrupt in any way during his long term of office. Pearson told the US ambassador to London in 1914 that “General Díaz was absolutely my hero . . . one of the straightest and most able men I have ever met . . . the idea that he had made a big fortune was practically libellous . . . his utmost fortune was £30–40,000, largely made by the increment in the value of a little property he had. . . . I considered that posterity would rank him as one of the great men of his age.”96 The fact is that the allocation of retainers, fees, or loans (or whatever label one might wish to use) was normal business practice in Porfirian Mexico. Thomas B. Hohler, secretary to the British Legation in Mexico City during the final years of the Díaz regime, commented in his memoirs that “I never knew whether Cowdray actually bribed any of the Mexicans, but it is my firm conviction that he did not. He sometimes gave valuable presents and he appointed prominent Mexicans to positions which did not involve much work in his businesses, but I believe he acted throughout in an entirely honourable and straightforward way.”97 In other words, such practices were necessary to the establishment and development of clientalist relationships, which were themselves a vital component of business success. The same can be argued for the range of additional services Pearson supplied to the Díaz government as their agente y mandatario, which served to strengthen his clientalist relationship still further.


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additional ser vices Pearson famously boasted to US Ambassador Walter Page in London in 1914 that his firm was considered “one of the minor Departments of State” in Mexico.98 Although this was clearly both a typical and a typically boastful statement on Pearson’s part, there was a good deal of truth in the claim. Pearson not only assisted in the construction of the physical infrastructure of the nation but also acted as spokesman and advocate of government policy and strategy. This section explores the additional roles he performed on behalf of the Díaz government as diplomatic agent, financial representative, publicist, and procurement agent for the Mexican Navy. Despite Pearson’s repeated claims that he always refrained from interfering in politics in Mexico, he had from an early stage offered his “good offices” in finding a solution to one of Mexico’s most pressing diplomatic concerns throughout the nineteenth century—the dispute over sovereignty of territorial borders between Mexico, Guatemala, and Belize (British Honduras).99 His good offices would, of course, be much more useful to the Mexican government now that he was an elected member of the House of Commons. Pearson sent a coded telegram to Guillermo de Landa y Escandón in February 1895: “Can I be of any service in England in Guatemala question? Please inform President Díaz he can dispose of us.”100 He received a positive reply: President Díaz fully appreciates telegram wishes that you would prove in accordance with Mexican Legation to English Ministry the justice of Mexico refuting any misleading statement on the part of Guatemala if it is in your power. Necessary papers will be sent by first post and instructions.101

In pursuit of this unusual role as Mexico’s informal diplomatic agent, Pearson arranged to meet Foreign Secretary Lord Kimberly. The foreign secretary clearly was unaware of the dispute, but Pearson was satisfied with Kimberly’s positive and distinctly undiplomatic response, which he immediately reported to Luis Camacho: Lord Kimberly assured me that, naturally, if a question had to arise as to which of the Nations were in the right, that Mexico would have the sympathies of the Foreign Office, as they knew the Country had been governed so long and ably under General Díaz that the presumption would be that Mexico was in the right until it was proved to be in the wrong.102

In November 1906, Limantour asked Pearson to propose to the Foreign Office that Britain consider leasing Belize to Mexico in exchange for Mexican islands in the Pacific which might be suitable as coaling stations.

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Pearson wrote to Foreign Secretary Sir Edward Grey, a fellow Liberal Imperialist whom Pearson would later propose as a future leader of the Liberal Party, to explain that “Belize would be of inestimable value to Mexico, which finds it very difficult to control their Indians on the border line, as they slip into Belize to escape punishment.” Grey, in keeping with the British government’s increasing deference to Washington over policy toward Mexico and the Caribbean, replied that the US government would interpret this arrangement as a clear infringement of the Monroe Doctrine and, therefore, that the proposal was “out of the question.”103 Although there is no suggestion here that Pearson’s interventions into international diplomacy were in any way influential in determining British foreign policy toward Mexico, they are nevertheless evidence of a role which went much further than that normally expected of a government contractor. The same might be said for Pearson’s interventions as unofficial financial agent for the Mexican government, in entering negotiations with a number of European banking houses during the summer of 1897 over the terms of the reconversion of the Tehuantepec loan of 1888. Limantour had approved of Pearson’s assistance in the search for new funds with which to finance the reconstruction of the Tehuantepec Railway and the construction of the harbour works at Salina Cruz and Coatzacoalcos following the award of the contract to S. Pearson and Son. Although on this occasion Pearson’s efforts came to nothing, since Limantour decided to postpone the negotiations until circumstances were more favourable to Mexican financial interests, this does not diminish the significance of Pearson’s informal but influential role in these negotiations. The reception which he organised for Limantour in 1903 with a large group of prominent British bankers and former prime minister Lord Rosebery, is another example of Pearson’s personal interventions on behalf of the Mexican government.104 There are further examples of the informal but significant ways Pearson’s assistance was requested. For example, in October 1897, he was asked by Luis Camacho, Mexico’s financial agent in London, to evaluate a project by Ricardo Mason for a new supply of drinking water to Mexico City.105 In the same year, the Mexican government nominated Camacho as president of a naval commission to seek out suitable contractors to construct a series of ships for the Mexican Navy. He immediately consulted Pearson, who promptly recommended the engineering and shipbuilding firm of Lobnitz of Renfrew on the Clyde (which just happened to be owned by Pearson’s brother-in-law Frederick Lobnitz). Camacho’s committee consequently recommended Lobnitz as the contractor.106 This recommendation, however, prompted internal disagreement within the Mexican cabinet, and between Limantour’s Ministry of Finance and


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the Ministry of War and the Navy (Secretaría de Guerra y Marina) as to whether the Mexican Navy needed large cruisers or battleships. Limantour was of the opinion that the only open conflicts in which Mexico might become involved were with either the United States or Guatemala. In the case of the former, Limantour argued that the Mexican Navy could never be a match for the US fleet, and the Mexican fleet would be lost; in the case of the latter, Limantour argued for smaller, more flexible craft.107 As a consequence, Limantour asked Pearson in 1900 on behalf of the Mexican Navy to seek contractors for a fleet of small cañoneras (gunboats) to patrol Mexico’s extensive coastline. At the same time he instructed Camacho to supervise the search. Pearson, as he had done before, recommended Lobnitz. Although the gunboats were eventually supplied not by Lobnitz, but by a US manufacturer, these requests clearly indicated the level of confidence which Pearson enjoyed with the Mexican government, which went well beyond his remit as a public works contractor.108 In addition to these other roles, Pearson took on that of publicist and propaganda agent for the government’s project of national development, by sponsoring the publication of an “Official Year Book,” which he explicitly described as a work of “national propaganda,” containing reliable and up-to-date general and statistical information on trade and finance in Mexico to be distributed free to “Public Institutions, Libraries, Clubs and Reading Rooms of the principal cosmopolitan Hotels in the United Kingdom and Europe.”109 He also made it clear that, at the same time as he was keen to publish positive information on Mexico in the UK and in Europe, he was also prepared to censor any adverse or negative reports. In 1910, as news was being reported of “barbarities committed in Yucatán towards indians from Sonora,” and as questions were being raised in the British House of Commons about the repressive tactics the Díaz government was imposing on its own citizens, Pearson promised Body that he would use his influence in the British press to “sit on any possible agitation that is inclined to brew.”110 A further example of Pearson’s employment as an agent of government policy was his appointment, engineered by Limantour, to the board of Interoceanic Railway in November 1907. This was highly significant, since, as Limantour noted in his memoirs, the acquisition by the Mexican government of the majority of shares in the Interoceanic was the key component of his strategy to “mexicanise” the main lines of the railway network to avoid their takeover by powerful US corporations, and to create a more coordinated, integrated, and genuinely national rail system, still privately managed, but with the government as a majority shareholder.111 In this new role Pearson would be representing not only his own interests, but also those of the Mexican government.

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The most convincing evidence of Pearson’s role as agent was the highly unusual partnership agreement with the Mexican government over the management of the Tehuantepec National Railway. As will be explored further in the next chapter, this constituted comprehensive proof of Pearson’s commitment to the Porfirian strategy of national development. the completion of the canal project While Pearson’s series contracts for the Gran Canal between 1889 and 1896 acted as the springboard from which he would extend his business empire in Mexico, the project itself was certainly not the most successful or, indeed, the most profitable of his career.112 It was subject to considerable delays, caused partly by the regular breakdown of the five dredgers specially constructed by Lobnitz of Renfrew and imported from the UK.113 Relations between Pearson and the intermediary who had negotiated the contract on his behalf, the somewhat shadowy figure of Duff Morison, also became strained at an early stage over the division of the profits.114 There were also frequent and persistent disagreements between Walsh, Pearson’s project manager, and the Junta over the costing of the works.115 The principal obstacle, however, was the persistent shortage of funds. The financial problems had not been helped by the fact that, from the very beginning of the negotiations, neither the Junta del Desagüe, which was supervising the project, nor the contractor himself had a very clear idea of precisely how much work would be involved in completing the project. More significant, however, were the serious financial difficulties which faced the Mexican government in the early 1890s, and the way in which the sources of finance on which the project relied had been structured.116 The finances of the Mexican government were so precarious by the middle of 1892 that they threatened bankruptcy. The depth of the crisis was reflected in the emergency reappointment (for the third time in his career) of the steadying hand of Matías Romero, Mexico’s representative in Washington, as minister of finance, with the young José Yves Limantour , who had never before held public or political office, as his second-in-command (oficial mayor). When Romero returned to Washington in February 1893, Limantour became minister of finance in his own right.117 Pearson’s correspondence with Guillermo de Landa y Escandón at the time reflected the serious economic difficulties facing the government and, of course, his own concerns, which centred on the difficulties in dis-


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posing of internal government bonds, which he was receiving as part of his payments according to the contract:118 My Dear Landa, I can think of very little else during this silver crisis, than what will happen to Mexico and our friends there. I am awfully sorry to see the National “A” Bonds so far down. . . . Silver is, in my opinion, now at the bottom, but for some time it will not improve. What it will be eventually no one knows. Is Mexico going to be able to stand the strain? It’s fortunate that General Diaz is at the head of affairs as it will require the whole of a brave man’s courage to meet the position. Personally I feel Mexico will meet all her obligations but the general opinion here believes otherwise & the result is that her Bonds have gone down to under 60. What is your opinion? I should like you to be perfectly free with me. Is the government going to be able to meet all its obligations? Is it going to have to suspend the Canal works? Or what is going to happen? Of course with silver at the present price we shall make a very heavy loss each month, but we shall have to hold the silver for a better price & reduce the loss as much as possible. We are ordering from $50,000 to $100,000 worth of spare parts so as to make the dredgers able to dredge the rock without breaking down. But if the work is going to have to stop we ought to cancel as many of these orders as we can. The position is extremely critical & I do want your opinion of what you think with your intimate knowledge and private information, will happen.119

The severity of the crisis, coupled with the fact that funds from the municipal loan of 1889 which had hitherto provided the bulk of the funds for the Gran Canal project were all but exhausted by 1893, and Limantour’s insistence on drastic reductions in public expenditure, seriously hampered the completion of the canal. The project manager, T. L. Walsh, wrote to inform Pearson in December 1894 that Limantour had stated that the government could no longer continue to pay the monthly sum (of Mex$70,000) which had been guaranteed to the firm according to the contract. Limantour further requested that the firm accept all future payments in bonds (and not the mixture of 80 percent cash and 20 percent bonds which the contract had stipulated), and, finally, that the government itself would undertake part of the outstanding work itself. Pearson was clearly dismayed by these proposals, but his response showed his willingness to compromise. He was also secure in the knowledge that the terms of the latest contract required the Junta to pay an indemnity, which would not reduce the costs of the project, since, as he reminded Walsh, the firm would have to be compensated for any savings made: If they [the Junta] would give us an indemnity, even in internal bonds, equal to the difference between the price we have . . . and that which they consider it would cost them . . . then we should be very pleased to take our indemnity. We must remember that the Contract is a lump sum contract, and that we shall be in

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a different position in case of recision to what [sic] we have been before. Under the former contracts, the government could claim they were entitled to rescind the contract upon paying us an indemnity of 10% of the schedule price. Under the last contract, the indemnity to be paid would have to be the balance of the Contract sum that we had not received less the fair cost of carrying out the work remaining to be done.120

Despite the numerous difficulties which the project faced, they were eventually overcome. This was largely due to the federal government’s agreement (approved, of course, by President Díaz) to fund a third of the outstanding costs of the project after 1893.121 The Gran Canal was finally completed in 1897 and formally inaugurated in March 1900, in a public ceremony presided over by President Díaz, accompanied by his ministers of communications, development (fomento), justice, and defence, along with Pearson and other members of the Diplomatic Corps, an event which received extensive coverage in the Mexico City press.122 On the eve of the completion of the project, in a classic piece of Porfirian political discourse, Díaz had ironically commented on the project’s grandiose scale (and its equally grandiose cost to the public purse) and what its completion represented to the onward march of Mexico’s order and progress under his tutelage: One of the most grandiose tasks which modern man has been able to bring to fruition, its obscure problems appeared to challenge science itself, and its huge budgets appeared to challenge the state . . . this great work, the glory of our generation . . . is the fruit of peace and a monument which will commemorate the period of evolution in which the Mexican people, putting aside their weapons and their political enmities, devoted themselves to the work of peace, and in which, upon the basis of order, they were able to achieve peace.123

The project’s symbolic importance to Porfirian modernisation was further confirmed some years later during the Fiestas del Centenario, the lavish monthlong celebration in Mexico City in September 1910 of the centenary of Mexican independence from Spain—an event which was also, in both concept and execution, essentially a celebration of the Porfirian modernisation project.124 Delegates from many parts of Europe and the Americas were entertained, and suitably impressed, by an extraordinary range of monuments, civic ceremonies, and patriotic rituals. These ranged from the unveiling of commemorative plaques, and the inauguration of civic and educational institutions, museums, monuments, processions, recreational facilities, to banquets, dances, parades, and firework displays. They included, significantly, visits to the Gran Canal.125 For Pearson, while the Gran Canal project may not have been his most profitable contract, it had demonstrated to him the enormous business


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opportunities available to him in Porfirian Mexico, provided he was able to continue to develop his clientalist network with the Porfirian political elite, and extend his role as agent of the national development project. Long before the formal inauguration of the Gran Canal in 1900, he had been able to secure the contract for the modernisation of Mexico’s most important Atlantic port, at Veracruz (1895–1902), and had signed the first in a series of contracts for a project which Pearson himself would later describe as “the greatest of all our undertakings”—the reconstruction of the interoceanic Tehuantepec National Railway, the subject of the next chapter.

chapter four

The Extension of Empire The Tehuantepec National Railway, 1896–1918 “The greatest of our undertakings.”

—Weetman Pearson (1898).1

; The rapid expansion of the railway network was without a doubt the most visible and tangible symbol of the developmentalist economic strategy pursued by the Mexican political elite during the long presidency of Porfirio Díaz. The Porfirian railway network has, in fact, always borne a heavy weight of expectation—both in the minds of contemporaries who saw both its emblematic and practical value, and for those historians who have seen it as the central metaphor for Porfirian modernisation. For the latter, Enrique Cárdenas, for example, makes the claim that “the construction of the railroads was the most important event of the last third of the [nineteenth] century.”2 For the former, railway construction represented a providential component in the extension of the domestic transportation network, the stimulation of Mexico’s export trade, and in the integration and consolidation of the state and the nation. The construction of an interoceanic railway across the Isthmus of Tehuantepec through the southern states of Oaxaca and Veracruz was part of that project, but it was also a national project with a much longer and more complex trajectory, and a broader purpose. The Tehuantepec project would link the Atlantic to the Pacific, and was destined, according to its many contemporary apologists, not only to extend the domestic railway network but also to improve Mexico’s hemispheric profile and future prosperity as an axis of international commerce. For its detractors, it was a “white elephant,” a symbol of excessive and inappropriate ambition, a monstrous waste of the state’s meagre resources, and a symbol not of modernisation and progress but of distorted and dependent develop-

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ment. This negative image grew in strength and in direct proportion to the disuse and abandonment into which the trans-isthmus line sank in the postrevolutionary era over the course of the twentieth century.3 The first discussions extolling the virtues and benefits of interoceanic trade and the establishment of a permanent link between the Atlantic and the Pacific date back to the late colonial period. There had been periodic speculation over the practicality of the project, and the first formal survey had been carried out in 1771, but the project remained firmly confined to the realm of the colonial imagination. After independence, the project began to take on the character of a national obsession. This is demonstrated not only by the active promotion of a variety of schemes by successive governments, but also by the vast quantity of scarce resources which were used to subsidise a large number of mostly foreign contractors who were given the task of completing the route. Given the geopolitical significance of the control of interoceanic communication in an era of burgeoning imperial rivalries in the North Atlantic, the project was also inevitably the focus of frequent, and sometimes intense diplomatic manoeuvring between Washington, London, Paris, and Mexico City. Successive administrations, from that of Santa Anna to that of Porfirio Díaz, therefore became enmeshed in a protracted but frustrating search for a viable interoceanic route. It proved to be an immensely costly undertaking. A recent estimate of total government expenditure on the Tehuantepec project prior to the Pearson contract over the course of the nineteenth century, including the amount spent on the first line completed in 1894, suggests a figure of Mex$125 million.4 After several unsuccessful ventures, the first version of the Tehuantepec National Railway (hereafter TNR) was completed in 1894, but the general defects in construction and the lack of suitable harbour facilities at either the Gulf or the Pacific terminals made the line of little value, despite the huge costs involved. It was obvious to the Díaz administration even before its completion that the line was virtually worthless, and that it would be necessary to invest more resources to make it operable and to find a new and more responsible contractor to carry out the work. Mexico’s financial agent in London, Luis Camacho, advised Porfirio Díaz in December 1894 not to accept the cheapest tender on offer, since the experience of the first Tehuantepec Railway which, according to Camacho, “has cost the nation so many sacrifices, and so many heartaches for the Government before its completion,” ought to be an object lesson in how not to construct major public works.5 Camacho would become one of the strongest advocates of the award of the contract to Pearson. Convinced of the real and symbolic importance of the TNR to Mexican sovereignty and prosperity, the Díaz government sought to rectify these

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deficiencies, and in 1898 signed the first of a series of contracts with Pearson. The Pearson contract, as will be explained below, had itself been under discussion for some time. Through the mediation of the shadowy figure of Duff Morison, who had secured the Gran Canal contract for Pearson in 1889, Pearson had been asked as early as 1891—even before the first line had been completed—whether he would consider such an undertaking, but the terms he had sought were considered too demanding by the Mexican government.6 The government did not care to work with Pearson on this occasion and awarded the contract to another British contractor, Chandos Stanhope. Once the Díaz government became aware of the inadequacy of Stanhope’s work, negotiations with Pearson resumed in 1896, and the first in a series of contracts was signed in 1898. The Pearson reconstruction of the Tehuantepec line and port facilities was to become arguably the most important, and certainly the most expensive, engineering project undertaken in Porfirian Mexico. It has been estimated that payments to the Pearson group between 1899 and 1913 on the basis of three contracts amounted to a total of just over Mex$100,424,000.7 I shall argue here that Pearson’s success in obtaining the TNR contract—as in the case of his other government contracts—was due to a number of factors. Pearson’s technical and entrepreneurial skills, his track record of successful public works (including, of course, his work on the Gran Canal in Mexico), and his role as agent of the Mexican government, as well as to the inner workings and internal logic of a sophisticated clientalist network resulted in the active promotion of his interests by the inner circle of the Porfirian elite. There was, in addition, a vital factor which had been of significance in the award of Pearson’s previous contracts, but which loomed particularly large in the case of the Tehuantepec project—the overwhelming fear of the Porfirian elite (articulated above all by Finance Minister Limantour) that the Tehuantepec route might fall into the clutches of Mexico’s powerful northern neighbour, the United States. Although Pearson had to contend with powerful US rivals to win the contract, he successfully played on his trump card—the fact that with his firm as contractor and partner to the government, the TNR would not fall into the hands of US trusts. the evolution of porfirian railway policy In order to provide the context for the TNR project, it is appropriate first to examine the evolution of railway policy under the Díaz regime. The railway was both a crucial component as well as the quintessential em-


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blem of Porfirian modernisation strategy, within which the TNR played a central, but also distinct, role. The emblematic status of railways in Porfirian Mexico was to a large extent a direct consequence of their painfully slow development over the course of the nineteenth century. Symptomatic of the multiple obstacles facing the improvement of communications so passionately desired and so frequently articulated by Mexico’s post-colonial elite—ranging from complexities of topography, political instability, and decentralisation to the persistence of debt—was the fact that numerous concessions had been granted from the 1830s onward, but very few projects had ever reached the stage of construction.8 The classic example was the fate of the Mexican Railway linking the capital of the republic with Veracruz, its principal port. The first concession had been granted in 1837, but the line was not completed for an additional thirty-five years. However, after 1876, and over the subsequent three decades, the Mexican railway network experienced phenomenal growth. One of the best-known statistics of Porfirian Mexico is the increase in the length of railway tracks laid from 640 kilometres in 1877 to 20,000 by 1910, with an additional 8,000 kilometres of commuter and feeder lines.9 It was precisely the inability to attract foreign capital, a direct consequence of the failure to meet Mexico’s external debt obligations and Mexico’s international reputation as a pariah state (see Chapter One), which meant that the early source of railway financing would have to come from domestic sources. Under the scheme promoted by Vicente Riva Palacio, minister of finance during the first Díaz presidency (1876–80), it was to be the individual states within the federation, in partnership with the federal government itself, which were envisaged as the principal contractors, granting concessions for local lines which could ultimately be incorporated into a nationwide system. Over thirty concessions were granted, but only in very few cases was construction ever initiated, let alone completed.10 However, the slow rate of progress and the fundamental shortage of domestic capital investment—in short, the failure of the original strategy—combined with pressure from both sides of the border to strengthen US-Mexican commercial links and the desire of railway companies in the southern United States to extend their lines into Mexico, heralded a shift in policy. After 1880, therefore, the priority in railway policy in the final years of Díaz’s first presidency and under Díaz’s successor, President Manuel González (1880–84), and the latter’s minister of development, Carlos Pacheco, shifted decisively toward the award of federal government concessions and subsidies to initiatives from private, overseas enterprises.11 Given the delicate state of relations with European powers in the 1880s,

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this meant the award of concessions to contractors from the United States. The results were distinctly mixed. There was certainly a dramatic increase in construction, but the overall result was a poorly coordinated or integrated system dominated by north–south lines linking Mexico with the United States. This produced a noticeable northward shift in Mexico’s export traffic, but communication between lines was impeded by the failure to impose a standardized gauge. The strategy also represented a very high cost to the Mexican Treasury, since approximately half of the cost of this construction was carried out on the basis of government subsidies. One estimate, for example, claims that between 1880 and 1896 the Department of Development (Fomento) swallowed an average of 16 percent of total government expenditure. Railway subsidies alone, which had risen to a total of Mex$134 million by 1902, accounted for approximately 50 percent of Fomento’s total budget.12 A further significant stage of railway development occurred during the 1890s under the auspices of the newly created Secretaria de Comunicaciones y Obras Públicas (1891), culminating in the enactment of a revised General Railway Law (Ley Sobre Ferrocarriles) (1899), the brainchild of Finance Minister Limantour. The purpose of the new law was threefold: first, to integrate the railway system by restricting federal subsidies to new lines which would link up the disparate parts of the existing network; second, to reduce the overall levels of government subsidy; and third, progressively to “mexicanise” the system by increasing the level of state ownership, thus extending the level of state supervision, planning, and control of the network. This process culminated in the formation of a new company in 1907, the National Railways of Mexico (Ferrocarriles Nacionales de México), which gave the government the controlling interest in roughly half of the railway network. To finance these high levels of government expenditure, Limantour negotiated a series of conversions of existing loans and new sources of finance, at ever more favourable rates of interest, which had the effect of substantially increasing the level of Mexico’s public debt, whilst at the same time reducing the burden of debt servicing to the Mexican Treasury.13 Until recently, the orthodox view of mexicanisation was that it was not a radical shift in policy, but an internal reorganisation which maintained the logic and the existing priorities of export development. John Coatsworth argued that mexicanisation did not represent a deviation from the general economic policy orientation of the Porfirian regime, which saw in foreign capital and export markets “the key to economic growth and the nation’s newfound political stability.”14 Neither was it necessarily resisted by individual railway companies or investors: in fact, the opposite was the case. Those overseas investors in Mexican railway stocks who were disap-


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pointed by the returns on their investment (and there were many) positively welcomed mexicanisation. For the individual railway companies there were economic and managerial advantages in greater central government control over an unwieldy and unprofitable network—control which was more likely to promote reasonable tariffs and a more efficient service.15 It is nevertheless also possible to interpret mexicanisation as a response to the growth of economic nationalism in late nineteenth-century Mexico, and an integral component of the Porfirian national development project. In the specific case of the railways, there was a widespread contemporary perception that the foreign ownership and the pattern of construction (especially the extension of north–south lines and the relative absence of east–west lines) had hitherto followed almost exclusively the dictates of US interests, and consequently represented a threat to Mexican economic sovereignty. Explaining his overall strategy, Limantour wrote: There is nobody in Mexico who thinks that the danger of our main lines passing into the hands of American lines is illusory. The disastrous consequences for Mexico would be widely felt, both in terms of the exploitation of our railways by foreigners, and in terms of the pressure that would be exerted on our most important public enterprises.16

Sandra Kuntz Ficker has reflected upon the political and symbolic significance of mexicanisation, and has argued that “although the conventional literature on the period fails to recognise the significance of the event, with the creation of National Railways of Mexico, the Porfirian regime pioneered the nationalist stance usually associated with the Mexican Revolution.”17 As we have seen in previous chapters, there is growing evidence to support the idea that the Mexican governing class during the Porfiriato continued to fear the loss of political and economic sovereignty to the United States. In the 1890s those fears became more acute. The combination of the US victory in the war with Spain in 1898, Washington’s reinterpretation of the Monroe Doctrine, and the interventionist policies pursued in Cuba, Panama, and Haiti confirmed the very real threat posed to Mexican political sovereignty. The threat to Mexican sovereignty from the United States was acutely perceived by Limantour, even if he failed, for obvious political reasons, to express his true feelings in public. As the internal political crisis mounted after the elections of 1906, however, he became ever more forthright in his views. Evidence for this comes from his correspondence with Francisco León de la Barra, Mexican ambassador to the United States in 1910 and subsequently minister for foreign affairs and interim president following the resignation of Porfirio Díaz in May 1911. He wrote, for example, to

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de la Barra in February 1910 to express his fears of US ambitions in the region, and the negative consequences for Mexico: The financial network which our Northern neighbours are establishing in the whole of Central America, taking control of railways and customs houses, will continue to be a cause for serious concern to us.18

One month later (March 1910) Limantour showed his scepticism in regard to the reasons for the mobilisation of US troops to the Mexican border, sent according to de la Barra in response to alarmist reports from US Ambassador to Mexico Henry Lane Wilson of attacks on American lives and properties “in order to protect American interests.” “I believe we should insist that the US treats us with the same respect that European nations have shown to Spain and Portugal by not sending troops to the border whenever there have been revolutions or disturbances.”19 British diplomatic sources in Mexico confirm the regime’s growing preoccupations. Reginald Tower, the minister of the British Legation in Mexico City, commented in 1908 on the growth of what he called “selfreliant patriotism or Mexican Nationalism.” With the characteristic scepticism of the British diplomat, he interpreted the new shift in policy of the Díaz administration as “a desire to obtain the direction and control of mines and railways, in the expectation that the foreigner will continue to pour his gold into the Republic, notwithstanding the disabilities which will then be imposed upon him.”20 The fears of the Porfirian elite over the loss of sovereignty, and the desire to extend state control and regulation over the national railway network, would have a vital bearing on the eventual award of the Tehuantepec contract to Pearson. the ferrocarril nacional de tehuantepec The circumstances surrounding the development and reconstruction of the TNR reflect the general trends in Porfirian railway policy, but it is important to emphasise that the trans-isthmus project was always a special case, since from its inception it was envisaged primarily as a national project. As a consequence, broader national concerns would be a permanent and prominent feature of a scheme which must be seen as the most enduring (and costly) of all railway sagas in nineteenth-century Mexico. This is not to suggest, however, that local interests were insignificant, since two of the most prominent and powerful advocates of the Tehuantepec line were both from the southern state of Oaxaca, where the west-


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ern part of the isthmus was located—Porfirio Díaz himself, and Matías Romero, former Mexican minister in Washington under both Benito Juárez and Porfirio Díaz.21 Romero in particular was a tireless advocate of foreign (and especially US) investment in Oaxaca’s untapped mineral and agricultural resources. Díaz had demonstrated throughout his personal correspondence with his innumerable oaxaqueño friends, colleagues, and compadres the profound personal desire to see his native state recover from a long period of economic depression since independence which followed in part from the decline of the natural dye (cochineal and indigo) and textile trades. Urging the state government to give its fullest assistance to the contractors for the original Tehuantepec line, then under construction, Díaz wrote to his compadre, Gregorio Chávez, the governor of Oaxaca in 1890: I have a profound interest in the unhindered progress and prompt completion of the line, which I perceive to be of immense benefit to the future prosperity of our native state.22

The promotion of provincial interests nevertheless took second place to broader, national concerns. Romero, for example, published a series of articles in the pro-government El Universal in 1894 in which he extolled at length on the benefits which would accrue to Mexico once the nation became the axis of world trade, and sought to reassure the Mexican public that the route would be neither subsidised nor controlled by US interests. Díaz himself referred to the project as “a development of great importance and transcendence for the economic future of the country.”23 Clear evidence of the patriotic symbolism associated with the construction of an interoceanic route comes from the aspirations of all Mexican governments since 1842 to complete the project. As an internal report on the convoluted history of the scheme produced by the Secretaria de Comunicaciones y Obras Públicas in 1895 highlighted: “the fact that the attempt has been made many times to construct a route across the Isthmus, shows that, since the consummation of independence, the [Mexican] government has consistently been concerned with solving this problem.”24 The Tehuantepec route has, in fact, an even longer history and had been discussed as a serious project during the late colonial period.25 So important was the project to successive Mexican governments after independence, however, that John Coatsworth, who presented a pioneering but largely negative analysis of the impact of nineteenth-century Mexican railway development, saw the Tehuantepec project as the only example of coherent national policy, arguing at the same time that the project itself was fundamentally flawed: “To the extent that the government acted on any priorities at all, it devoted its energies to a misguided search for

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private capitalists, domestic or foreign, willing to complete a line across the Isthmus of Tehuantepec.”26 As a consequence, at least ten different contractors, and many more engineers and speculators, were involved in the various stages of construction of the railway between 1842 and 1894. The period can be divided into two distinct phases: that between 1842 and 1880 when, despite the granting of five separate concessions by the Mexican Congress for rail or canal routes, not a single kilometre of track or canal was built, and the period 1880–94, during which, despite several setbacks, the first railway line was finally completed. During the first phase, the same combination of circumstances which had hindered the development of railways in general also hindered the Tehuantepec project. The climate of political instability, the weakness of the central state apparatus, the failure to meet external debt obligations, civil war, and foreign intervention were hardly propitious circumstances in which to embark upon the project. Second, some of the potential concessionaries attempted to use their concessions as a source of speculative financial gain, without any evidence of an intention of fulfilling their obligations. It was also evident that the project was never able to attract sufficient capital to allow any of the more committed contractors to do more than conduct technical surveys of the proposed routes. Even some of the more imaginative attempts to turn the persistent problem of Mexico’s debt obligations to overseas bondholders failed to stimulate construction.27 Finally, the strategic, commercial, and political implications surrounding the control of interoceanic communication, which had exercised the governments of Britain, France, and the United States throughout the nineteenth century as a variety of schemes and locations were discussed (the favourites being Nicaragua, Panama, or Tehuantepec) inevitably meant neo-imperial rivalries would be a major factor in determining the fate of an interoceanic route.28 After 1880, following the restoration of a greater degree of internal political stability, the line made slow, but often painful progress, and always at great cost to public finances. A further six concessions were granted (to two US, two Mexican, and two British agents) before the line was completed, at an estimated cost of subsidy to the Mexican Treasury of Mex$22,387,500.29 The Tehuantepec line was by far the most costly in terms of public subsidy per kilometre over the entire network. The average subsidy paid in this period on railway construction was between 8,000 and 9,000 pesos per kilometre, but subsidies on the Tehuantepec line reached over 25,000 pesos.30 Although this might well be interpreted as evidence of financial irresponsibility, the level of subsidy was itself an obvious indication of the significance which the Mexican government attached to the project.


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The most ambitious, most far-fetched, and perhaps least successful of these concessions was that awarded in 1881 to US engineer James Eads for the construction of a parallel system, which would transport entire ships across the isthmus on a specially constructed railway. Apart from the inherent absurdity of the scheme, a noticeable feature of the Eads contract was the extent to which the Mexican government appeared to be prepared to waive aspects of Mexican sovereignty and control over the proposed route. Article 27 of the contract, signed by Porfirio Díaz in his capacity as minister of development under the administration of Manuel González, recognised the rights of any foreign government to protect its investment or its interests, and stated: If as a result of the scale of the works . . . the company should receive aid in money or guarantees from a foreign government, the company will be empowered to provide that government with full safeguards with regard to the allocation or control of profits from the railway, according to the terms of the agreement with that government.31

Eads died in 1887, and the concession died with him, and thus any potential conflict over sovereignty, which might have subsequently embarrassed the regime, was avoided. Díaz later claimed that the government had never taken the Eads contract very seriously. He told Matías Romero that “after granting the concession to Mr. Eads, the Government has regretted some of its clauses, but has made little effort to modify them, given the likelihood that the work would not be completed.”32 The priority given to the project was demonstrated by the fact that after the recuperation of Mexico’s creditworthiness following the Dublán Conversion of the English debt in 1888 (see Chapter One), the first loan raised in international financial markets was floated specifically to finance the Tehuantepec route. The Tehuantepec loan of £2.7 million negotiated through the Dresdner Bank in Berlin and the house of Seligman Brothers, had been authorized in 1882 but only approved by the Mexican Congress in 1888.33 It was this loan which allowed the first TNR line to be completed in 1894. During its final stages it had been under the supervision of the English contractor Chandos Stanhope, later the manager of Mexico Electric Tramways Company, which established the first electrified streetcar system in Mexico City in 1900. Perhaps an indication of the substandard nature of Stanhope’s work can be gleaned from the popular name given to the Mexico City Tramway, “El Ferrocarril Homicida,” due to the large number of accidents which occurred on the line. The same degree of care and attention on the Tehuantepec line earned it the description by Alfred Tischendorf as one of the worst railways in the world. It was impossible to carry heavy loads on unballasted track or over wooden bridges that rotted under the stifling heat and

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torrential rains. The passengers who were willing to ignore the record of derailments and to brave the chances of contracting smallpox and yellow fever at the port cities, puttered along in swaying cars that occasionally reached a speed of thirteen to fifteen miles an hour.34

To rub further salt into the wounds of the Díaz government, a government inspection conducted in December 1894 reported that “the embankment is absolutely eroded, and none of it is adequately ballasted . . . the rolling stock is in truly dreadful condition.”35 The patent inadequacy of the route prompted the Díaz administration to seek new tenders for the substantial reconstruction of the line. Their thoughts turned to their favourite contractor, who was in the process of completing one major public works contract on their behalf—the Gran Canal—and had just started another: the modernisation of the port of Veracruz. Pearson also enjoyed a distinct advantage over other potential contractors—the fact that he was a British and not a US citizen. the pearson contracts Given the high profile of the Tehuantepec project, the Mexican government had received a number of tenders for the contract during 1895, one of which was from US railway magnate C. P. Huntingdon, who already had substantial interests in mining, railway, and steamship companies in Mexico. His bid was formally rejected on the grounds that Huntingdon’s demand for the control of steamship traffic at the ports at either end of the TNR was considered “a monopoly not permitted by the Constitution.”36 However, it emerged from other sources that Huntingdon was suspected of bidding for the TNR contract in order to put pressure on the Panama Railroad Company to improve the terms of its existing arrangement with Huntingdon’s Pacific Mail Steamship Company, and that he was therefore not genuinely interested in improving the fortunes of TNR.37 Huntington’s bid also raised the highly sensitive issue of sovereignty. Pearson was fully attuned to the administration’s concerns over sovereignty in the case of the Tehuantepec project. He told the Mexican financial agent in London, Luis Camacho, that “the Yankee would like to get hold of Tehuantepec so that they [sic] can continue to pool all Pacific traffic as they are doing at present. It would suit them admirably to be able to close the Tehuantepec route entirely except to suit their own conveniences.”38 Pearson then incorporated these concerns into his strategy for securing the contract. During his initial negotiations in 1896, in addition to stressing the commercial viability of the project, he emphasised that it


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would guarantee “freedom from American control . . . and the certainty that English trade and English ships would be pre-disposed to use a route controlled by Englishmen.”39 There is further evidence of Pearson’s awareness that sensitivity to the nationalist aspirations at the heart of the Tehuantepec project was one of his greatest advantages. In an interview in 1901 with the Westminster Gazette (the Liberal newspaper in which he acquired a stake in 1908 and, in 1918, the controlling interest), Pearson declared: “in Mexico English capitalists meet with exceptional favour by the government. It is true that American capital is pouring into the country, but Mexicans are a little afraid of a too-pronounced American invasion.”40 Body later confirmed to Pearson that “[i]t is gratifying to know that both the President and Mr. Limantour are now particularly friendly disposed [sic] towards us . . . we really have no trouble with the government now.”41 In October of the same year John Body gave final confirmation of the advantages S. Pearson and Son enjoyed over its rivals in the award of government contracts which the firm had been cultivating over many years: “Mr. Limantour is more favourably inclined towards us than to the Americans.”42 Although Pearson now sought to press home his advantage, he made no attempt to disguise the project’s technical and logistical difficulties, or the fact that, in order to make the project commercially viable, the Mexican government would have to make a considerable investment not just in the reconstruction of the railway but, most important, in providing adequate harbour facilities at each end of the line. He explained to Luis Camacho: At the present time the Railway is a heavy drain upon the Mexican Government, and it must inevitably remain so until the Harbours are constructed and it can handle the interoceanic trade for which it was built. At present no ship drawing over 10 or 11 feet of water can reach the Coatzacoalcos River, whilst on the Pacific side it is not safe for a ship to take or discharge cargo except for a few days a year and then at heavy cost. Until proper terminal facilities are provided, which will involve the expenditure of a very large sum of money, probably $20,000,000, the Railway must remain in a very unsatisfactory condition, and continue as a heavy charge upon the resources of Mexico. We have given the prospects of this Railway our most careful thought and examination, and are satisfied that with an able, energetic, and wealthy organisation and the construction of the terminal facilities, a splendid business can be obtained in the course of a few years.43

Pearson remained characteristically optimistic about the prospects for the TNR. To demonstrate his commitment to the project, he proposed leasing the existing railway and harbours, and taking responsibility for the management of the line

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on the condition that within three and a half years from the railway being handed over to us we undertake to exclusively bear any loss there may be in the working or maintenance of such Railway, and also of the Harbours once they are completed and to incur all further capital expenditure that may be needed for dealing with the business the railway may enjoy. Under our lease the Government will not be called upon for any further monies in connection with the working or maintenance of the Railways, or of the Harbours or any extension thereof.

Pearson’s firm was to be in charge of the reconstruction, which would be carried out at cost price without the normal contractor’s premium. The cost of reconstructing the railway would be borne equally by Pearson and the Mexican government. Pearson’s conduct of the negotiations provides an insight into the way he approached the project, and his innate confidence in its success. He presented his terms as a significant personal sacrifice: I carry out the betterments to the Railway, costing $5,000,000 without remuneration or profits of any kind. A Contractor’s profit on this of 10% would not be great, hence I save the Government $500,000, but my engineering knowledge combined with my practical knowledge will probably save an equal sum (i.e. $1,000,000 in total). I find $2,500,000 of which I must lose $2,000,000 before I can get free of the contract, for a business that will require great attention and energy and all round business experience . . . [and] that will lose money heavily for at least eight years. Hence I risk a fortune and 12 years work for the sake of benefits I may get after that time.44

Despite Pearson’s considerable powers of persuasion, and the advantages he enjoyed over rival contractors, the contract still required lengthy negotiation. Although he had received the backing of Luis Camacho, he had not yet convinced Limantour, who was, as has been emphasised in the previous chapter, always a very tough negotiator, determined to exercise very close control and scrutiny over the project. The evidence suggests that Limantour’s stance enabled him to wrest important last-minute concessions from Pearson over the details of the 1898 contract, which left Pearson in no doubt that the minister of finance would retain the absolute authority to determine how the details and all other aspects of the terms of the contract would be implemented. There were a number of innovative and noteworthy provisions within the first Tehuantepec contract, the conditions of which were subsequently modified in 1899, 1900, 1902, and 1904. First, it was emphasised above all that this was to be a government project, and not a subsidy to private enterprise, as had been the case with the previous Tehuantepec line prior to 1894. Second, Pearson agreed to take responsibility for the management of the company (the Tehuantepec Railway Company) established


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to run the business. Third, and most significant, the Mexican government and Pearson were to be equal partners in the enterprise, each supplying half the capital investment. In effect, the contract was, as Limantour explained to Camacho, three contracts in one. The first obliged Pearson, whom Limantour very significantly described “as agent and representative (agente y mandatario) of the Mexican Government,” to reconstruct and modernise the Tehuantepec Railway, including the replacement of rail and rolling stock, and the construction of new stations and workshops. Of the costs, Mex$5 million were to be paid for by the government, in forty monthly installments of $125,000, but, as Pearson had already conceded, he would receive no salary or profit of any sort over the first three and a half years. The second contract concerned the construction of the harbour works at Salina Cruz and Coatzacoalcos (at an approximate cost of Mex$15 million for which Pearson would receive a contractor’s premium (as had been the case with the Veracruz contract). The third contract concerned the operation of the railway and the ports, and the establishment of the Tehuantepec Railway Company, to be managed by Pearson, but, in legal terms, an equal partnership between Pearson and the government.45 The novelty and significance of the partnership arrangement was not lost on the secretary to the British Legation in Mexico City, who described it as “the first instance on record where a national government has taken a private firm into partnership.”46 It was envisaged that the partnership would last for fifty years, during the first thirty-five years of which the Mexican government would receive 65 percent of the profits, and Pearson the remaining 35 percent.47 Over the course of every subsequent five-year period the government’s share of the profits was to be progressively increased until the last five years of the arrangement, when all profits would be disposed in favour of the government. A further clause in the contract highlighted the Mexican government’s sensitivities over sovereignty and specifically prevented Pearson from selling any properties he acquired in the isthmus to North American interests.48 Further evidence of the sensitivities between Mexico City and Washington over the question of control over interoceanic communication came from the hostile reaction of the US government to the terms of the Tehuantepec contract, and the fact that it had been awarded to a British contractor. A request in 1899 by US engineer E. L. Corthell, a member of US President William McKinley’s Interoceanic Canal Board, for a copy of the contract signed with Pearson, was followed by a second request that Corthell be nominated as a consulting engineer for the Tehuantepec project. Both requests were rejected by the Mexican government, who maintained that the US government had no right to be consulted.49

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In 1902 diplomatic sensitivities had risen to such a level that the Mexican government was formally asked for an explanation as to why “the United States and its citizens should be so odiously excluded,” a complaint which was immediately passed on to John Body by “a Minister in the Cabinet,” indicating once again the preferential access to inside information on cabinet discussions enjoyed by Pearson and his agents. The official response from the Mexican government emphasised the incompatibility of state laws in the United States with Mexican law, but, as Body cryptically confirmed, this response was entirely spurious: “Of course,” Body wrote to Pearson, “I know you will understand the matter as put by the Mexican government was not the reason.”50 These minor diplomatic spats between Washington and Mexico City continued to linger, if not to fester for some time. In November 1906, less than two months before the official inauguration of the TNR, the Mexican government was asked by “authorities in Washington” to provide the details of the regulations under which US merchandise would be transported on the TNR route, with the threat that failure to provide the information would mean that traffic was suspended. At the same time a request was made to grant US officials inspection rights on the TNR. After Body interceded, the Mexican government eventually granted the first request but rejected the second. As Limantour ironically observed, Mexico would comply only if the US authorities were prepared to grant reciprocal rights to Mexican officials to inspect the transportation of Mexican goods throughout the United States—which, of course, they were not.51 The controversy surrounding the award of the Tehuantepec contract to a British firm thus not only reflected but also made a significant contribution to the growing tensions between influential business and lobbying groups in the United States and the Díaz regime after 1898. The significant deterioration in US-Mexican relations in this period is now widely recognized as an important factor in the demise of the Díaz regime in 1911.52 construction and finance Although the initial contract had been signed in 1898, actual construction had to wait until adequate and sustainable financial arrangements were in place. Here there were considerable difficulties stemming from Limantour’s determination to control public spending and to reschedule Mexico’s existing debts, and his innate caution in not seeking new loans without adequate reserves which might adversely affect Mexico’s international reputation. The negotiation of further loans for the Tehuantepec project was further complicated by the unresolved debt obligations aris-


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ing from the previous loan of 1889.53 The loan had been secured on the basis of a mortgage on all the railway property and half of its proposed revenue. Pearson refused to begin work on the project until the problem of the outstanding mortgage had been resolved, since it threatened to, as Limantour recognized, “snatch the line away from him.”54 The negotiations to settle what Limantour described euphemistically as “this delicate matter” would prove to be long and protracted. At the same time, there were also clear indications that toward the end of the 1890s, Mexico’s international reputation for financial probity had notably improved, which provided Limantour with important opportunity to realise his plans. An editorial entitled “Mexican Bonds” in the Financial Times of London in February 1897 commented favourably: “the strength of Mexican Government Bonds appears to be well-founded, and to warrant a belief in the improvement in quotations. . . . Mexico is doing very well, her trade is improving, her exports are increasing, her railway traffics show that commercial activity is active.”55 Taking advantage of the new mood of cautious optimism, and with Limantour’s full knowledge and approval, Pearson had held a number of meetings in early 1897 with representatives of a number of European banking houses (including Rothchilds, Bleichroeder, and Dresdner) in an attempt to renegotiate the terms of existing Tehuantepec bonds, and to negotiate a new loan to finance the reconstruction of the line and the construction of the harbour works at Salina Cruz and Coatzacoalcos.56 Here, as noted in the previous chapter, Pearson was acting not only on behalf of his own personal interests—which were, of course, paramount— but also as an agent of the Mexican government, and of the Mexican Treasury. He was, however, unsuccessful in his endeavours. Taking note of the various proposals which Mexico’s financial agent in London (Luis Camacho) had received as a result of Pearson’s negotiations, Limantour decided that, for the time being, despite the evidence of more favourable market conditions for Mexican securities, the Tehuantepec project was too costly, and too risky. He told Camacho in May 1897 that: “I propose to postpone the Tehuantepec question until circumstances change and we can address the project with fewer concerns than we have now, so that we can be certain of a favourable outcome.”57 Limantour’s plan was to consolidate Mexico’s existing external debt and to include the existing Tehuantepec bonds in the conversion. Pearson was fully aware, however, that without the negotiation of new loans, the project would never be completed. He therefore naturally opposed the delay, since, apart from other considerations, he wanted to steal a march on the other interoceanic projects under consideration in the United States (in Nicaragua and Panama). In the end, as was always the case, Pearson

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had no option but to defer to Limantour’s judgement. The negotiations continued for two more years, and it was not until the summer of 1899 that Limantour successfully concluded negotiations in Berlin, New York, Paris, and London to consolidate existing obligations and to raise new funds (a nominal £23 million) which would finally allow the TNR project to proceed. Limantour described the deal as very favourable to Mexico, since it had received the approval of “the most powerful European and American houses”—J. S. Morgan (London), J. P. Morgan (New York), Banco Nacional de México (Paris), Bleichroeder, Dresdner Bank, and Deutsche Bank (Berlin). It not only gave Mexican securities an international status “of the first order” but also allowed the current mortgage on the TNR to be redeemed by inviting holders of the bonds of the 1889 Tehuantepec loan to deposit their bonds for conversion with a cash bonus.58 It also reduced the annual payments for the servicing of the outstanding debt by a minimum of £130,000 (Mex$1,300,000).59 Pearson was understandably delighted, since the conversion and the new loan meant that the Tehuantepec project could now finally proceed. He wrote enthusiastically and effusively to Limantour: Let me congratulate you on the brilliant success of your conversion, a success that could not be surpassed and which shows the high appreciation into which Mexican credit has risen during the last few years. The public now recognizes that Mexico is governed wisely and well, that the ability of the Government has produced a revenue sufficient for all purposes, and that the country is prosperous and likely to remain so. Much success as your scheme has had must be intensely gratifying to you personally, and you must feel it is some reward for the arduous work and great ability that has been bestowed upon it.60

But flattery, in this case, failed to guarantee the prompt initiation of the project. Although Limantour agreed in May 1900 to pay US$300,000 per month up to a total of $5 million, few regular payments had been received by the end of 1901.61 Limantour blamed the continued need for financial stringency on the extent of the government’s current debt obligations at home and abroad, the demand for loans within the domestic economy, and the increased demand for silver in the Orient, which had led to an unprecedented level of exports of silver dollars.62 This led to further delays in construction. Regular payments did not begin until 1902, and although improvements to the railway, which were Pearson’s responsibility, were completed in 1904, there continued to be lengthy delays in the completion of adequate harbour facilities at Salina Cruz and Coatzacoalcos.63 The obstacles to the smooth completion of the project were not solely financial. Frequent and heavy rainfall constantly impeded, and often sus-


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pended, work in the rainy season. The isthmus region provided few of the construction materials the project required, and local sources of timber were soon exhausted, prompting the need to extend the search for supplies to more distant regions. The recruitment of a labour force in sufficient numbers was a constant problem, partly because of the low population density of the isthmus region, but also partly because of the reluctance of local inhabitants to commit themselves to working on the line, sometimes because of the priority given to attending to their agricultural duties, or to attending community or religious fiestas, or out of fear of contracting the tropical diseases (principally malaria and yellow fever) which plagued the region.64 Despite these obstacles, there is, nevertheless, evidence of significant levels of local labour recruitment, but it was never sufficient, and independent labour contractors (enganchadores) were employed to import labour from various regions of the country.65 The constant demand for labour also prompted measures to import contract labourers from China, Japan, Korea, Jamaica, and the Bahamas. According to Tischendorf, Pearson used his political connections in London to persuade the Foreign Office to establish a British vice consulate in Salina Cruz, and to instruct its representatives in Jamaica to facilitate the recruitment of local workers.66 The problems of recruitment ranged across the spectrum of the labour hierarchy from managers to unskilled workers. The British manager of the TNR, Fred Adams, complained to Body in 1902 that “station masters and telegraph clerks are at a premium all over the country and here almost impossible to obtain, as no cold country man will come to the hot country unless compelled, as it is almost invariably fatal to them.”67 The situation was no better in the case of unskilled workers. Adams complained that “levels of sickness are alarming—the fresh men brought in by the subcontractors leave immediately when they find out how things are. We cannot get peones.”68 Although as a result of the problems of recruitment, the salaries paid by the Railway Company appear to have been higher than average, there were still regular complaints, but only a limited number of strikes (two in total up to 1911) against inadequate wage levels. There is little evidence that these strikes had any wider political content or rationale, and, in general, the relationship between management and the workforce appears to have functioned without major disruption.69 One aspect of the TNR and the associated port works which is worthy of mention is that there is very little evidence that their construction resulted in the significant displacement of the local peasantry or smallholders from their lands or, as a consequence, prompted local residents to resist or to rebel against the measures taken by the government to appropriate

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lands or resources.70 This contrasts with the experience of other regions of Mexico where local or central elites used railway legislation to attempt to force local inhabitants to comply, thereby prompting intense local resistance.71 It also contrasts with the standard interpretation of railway development as a fundamental cause of agrarian grievances which would erupt during the Revolution of 1910. In the isthmus, it appears, not only were government agents unable or unwilling to occupy lands illegally, but they also were anxious to address and to resolve the concerns of the local inhabitants, many of whom were able to negotiate adequate compensation for the loss of their lands and any improvements they had made to them. There were even smallholders who appeared to be convinced that they should accept the indemnity offered in the interests of local or national development.72 The major problems which continued to hinder the completion of the project continued to be financial. The correspondence between the two business partners after 1902 was characterised by periodic complaints from Limantour about the prohibitive cost of the project, which threatened to bring the country “to ruin,”73 and equally frequent complaints from Pearson that no payments, or only inadequate payments, had been received.74 Body also complained about excessive bureaucracy and the interference of government officials who demanded that the firm seek approval from different government departments for expenditure which had already been agreed on as part of the contracts. At the same time, the escalating costs provoked Limantour into threatening to alter the terms of the contract to enable the Treasury “to be advised and consulted with reference to any modifications or amplifications in the Works contained in the contract” to avoid being “embarrassed” by increased obligations. An additional source of friction was the method of payment. As in the case of all public works projects, these were partly in the form of government bonds, and although Pearson had the assistance of brokers experienced in the placement of Latin American government bonds in European financial markets, the markets remained volatile. In addition, the bonds were priced in silver, and the consistent drop in the international price of silver created serious additional problems. For example, Pearson complained to Body in November 1902 that “the price of silver and outlook simply ruinous; what is going to happen to us I hardly know. It may be that we shall have to suggest to the Government, wrapped up in some way or other so that they can meet us, that we have an increase of price.”75 As a result of these fluctuations, there were frequent disagreements over the true overall cost of the project.76 The solution, even if it was only a partial one, to inadequate financing came in September 1904 with a contract signed between the Mexican government and the German Dresdner Bank for a loan—the Tehuante-


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pec Railway Loan—with a nominal value of £2 million. Again, Pearson was personally involved in negotiating the loan, and Dresdner was selected because of its previous association with the Tehuantepec project. As Clarendon Hyde, now the vice president of S. Pearson and Son, explained to Limantour, “The German Market just now seems to have spare money and the small German investor has a considerable interest in Mexican Bonds . . . [whereas] . . . the interest of the English investor is very limited.”77 Both Limantour and Pearson were highly satisfied with the negotiations with Dresdner. Pearson congratulated Limantour on his negotiating skills and commented that “it cannot but be gratifying to you, as it is to me, that the business has been settled in terms that we must admit are very satisfactory.”78 Limantour replied that he was particularly pleased by the fact that the outcome “had managed to reconcile the Government’s position with the need to implement a project which is of such great importance to the Isthmus.” At the same time, he (modestly) denied that it had anything to do with “the skills of the negotiator” but rather with “the entirely satisfactory economic conditions which the country finds itself.”79 Limantour’s perception was confirmed in a letter from Pearson to Limantour in December 1904 with the news from the Dresdner Bank “that the loan has been subscribed four or five times over.”80 The successful conclusion of the Tehuantepec loan seemed to Pearson an appropriate time to extend an invitation to the members of the inner circle of the Porfirian elite who constituted the core of his clientalist network, to visit the sites of the most important of his current Mexican projects: the port works at Veracruz, the Tehuantepec Railway and its branch lines, the port works at Salina Cruz, and the site of Pearson’s early oil explorations on the Isthmus of Tehuantepec.81 This two-week trip, which took place between 20 January and 3 February 1905, was important for both Pearson and the Díaz regime. It helped to cement Pearson’s personal and social bonds with his closest associates (in keeping with the practices of Mexican social and business etiquette) and at the same time provided tangible proof that the regime’s political support, its confidence in Pearson’s abilities to complete his contractual obligations to a high specification, and its substantial investment in his enterprises had not been wasted. It was also a useful propaganda exercise. The daily newspaper reports made repeated references to the “solid and transcendental” nature of the infrastructure which Pearson had delivered, and the nature of the Porfirian government’s success in bringing these tangible manifestations of national progress to the nation.82 Despite the hyperbole of the press reports in early 1905, the Tehuantepec project was, nevertheless, still far from complete. In order to ensure the TNR’s commercial viability, it was important to ensure that adequate

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arrangements were made to ship the freight from each end of the transisthmus line to its final destination. Pearson consequently entered negotiations for contracts with a number of steamship companies. The most important of these contracts was with the American Hawaiian Steamship Company for weekly sailings from July 1906 between New York and Coatzacoalcos on the Atlantic coast—renamed Puerto México in 1907, because, apparently, it was easier for foreigners to pronounce—and fortnightly sailings between Salina Cruz (on the Pacific coast), San Francisco, and the Hawaiian Islands. An initial annual shipment of 40,000 tons of Hawaiian sugar from Honolulu to the eastern seaboard of the United States was agreed upon, and it was envisaged that before long 250,000 and 300,000 tons of sugar would be transported via the same route.83 Before 1910, other companies had begun to use the line to ship goods from Salina Cruz as far as Tokyo and Vancouver, and Pearson had established another railway company, the Vera Cruz (Mexico) Railway Limited to import goods via the TNR direct to Veracruz.84 These shipments contributed to the profitability of the TNR in its early years of operation. Although the Tehuantepec Railway Loan had injected new capital to complete the TNR, there were still insufficient funds to complete the harbour works, which meant that the Railway Company could transport only local, rather than international freight. Body was concerned enough to request a personal meeting with President Díaz in July 1905 to enlist his support for a final allocation of resources. Body reported to Pearson that the president’s view was that “now we have got so far we had to carry the project through, but understood, of course, that we should reduce to a minimum the cost of the works.”85 Whether it was the president’s support for the final push to finish the project, or whether it was a consequence of Pearson’s offer to Limantour to explore for oil on the finance minister’s extensive properties on the isthmus at a meeting in Paris in October 1906 (see the following chapter), Limantour finally gave his assurances to Body that he would find adequate funding to finish the harbour works, provided he received a guarantee in return that the project “would be finished in an entirely efficient manner.” Body was immensely relieved and wrote to “the Chief”: It is a little difficult to convey to you what this last phrase conveyed so patently to me, which is that he has now made up his mind to face the situation, and get the money to finish the Tehauntepec scheme. . . . I feel what a great burden has been removed from my mind, and I know this news will be a great relief to you.86

The project could, at long last, now be completed.


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the inauguration The official culmination of the project was the elaborate inauguration of the Tehuantepec Railway in January 1907. It was a well-publicised event, obligingly and extensively covered by the Mexican and international press. Pearson and his wife lavishly entertained over 200 guests—both core and peripheral members of his growing clientalist network—for over a week, including President Díaz, five members of his cabinet (including, appropriately enough, Limantour and Leandro Fernández, the minister of communications), Pearson’s “great friend” Guillermo de Landa y Escandón, and the governors of Oaxaca, Mexico, and Tamaulipas. The international and diplomatic significance of the event was underlined by the invitations extended to ambassadors and diplomats from the United States, United Kingdom, Germany, Spain, Japan, Belgium, Russia, El Salvador, Cuba, and Guatemala. President Díaz, in a clearly nostalgic mood, reminisced about the dirt road he had inaugurated forty-eight years before as comandante militar of Tehuantepec, and Pearson patted himself and his employees on the back for having endured “years of hard, unremitting labour” and for having succeeded where the previous nine contractors had failed—an achievement which Pearson told his biographer J. A. Spender was one of the greatest and most difficult of his life.87 The guests were apparently most impressed, especially with the banquets, and the members of the press, who had a special train all to themselves, were highly appreciative of the attention paid to their basic needs. The reporter from the English-language Mexican Herald commented on the “marvel of foresight . . . in the fact that the bottled goods lasted to the end.”88 As a propaganda exercise, if was clearly a success, both for Pearson and for the Díaz regime—the same reporter described the president’s “rugged health and firm, soldierly bearing,” and every opportunity was taken to promote the image of an administration which was still vigorous, progressive, and dynamic. The lengthy and enthusiastic report published in El Tiempo Ilustrado is typical of the tone and tenor of the press reports: The arrival of the Presidential train was saluted by artillery guns . . . and thousands of rockets filled the air with a thunderous noise; the military rhythms of the bands, the cries and “vivas” of the crowd, the whistle of the engines and the steamships in the port combined in deafening concert and brought joy and celebration to the hearts of all those present. Never has the praise which has been lavished on the administration of General Díaz for his diligence and tenacity in bringing the Isthmus works to a happy conclusion been more appropriate than at this moment. All the sacrifices that have been made seem to us today to have been

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amply rewarded with the satisfaction of having provided the world with a route across our territory which represents now and forever one of the major triumphs of the current President.89

Because the elevated expectations for the TNR were only short-lived, it is often forgotten that for at least seven years the route was highly profitable. Pearson had calculated that the handling of an annual 600,000 tons of freight would signify a healthy profit. The figures indicate that the actual freight carried far exceeded Pearson’s own expectations. He commented to Body in June 1909 that “the prospects for business are simply realising our wildest hopes.”90 However, the revenue was apparently insufficient to pay any dividends to the shareholders of the Tehuantepec Railway Company.91 The elevated expectations generated by the project—one contemporary newspaper commented that “Tehuantepec will be like the Suez Canal”92— were ultimately dashed by the combination of the outbreak of revolution in Mexico in 1910, the descent into civil war after 1914, the outbreak of World War I in August 1914, and, principally, the competition from the US-controlled Panama Canal, which also came into operation in 1914. Precise attribution for the decline in the fortunes of the Tehuantepec Railway is, however, a matter of some debate. According to Spender, Pearson apparently believed that with competent management the railway could have survived competition from the Panama Canal. However, these typically optimistic assertions were never tested, since in October 1918 the National Congress decided unilaterally that it was time for the partnership between Pearson and the Mexican government in the Tehuantepec project to be terminated.93 It is important, in conclusion, to reiterate the symbolic significance of the Tehuantepec Railway for the Díaz regime. It represented the triumphant culmination of many years of arduous struggle and sacrifice against innumerable obstacles—obstacles that were as much psychological and political as geographical, technical, or economic. By overcoming them, the regime considered that it had fulfilled important national goals, particularly with regard to the consummation and protection of economic and political sovereignty. It had achieved what all other nineteenth-century governments had failed to do by bringing the project to a successful conclusion. Mexico, as the regime saw it, was now a modern, progressive, strong, sovereign, and independent nation with a positive economic future as the axis of international commerce. The Tehuantepec Railway was therefore a cause for national celebration and pride as a symbol of profound modernisation. As events were shortly to prove, however, this was a cruel illusion. Within a very short period of time, Mexico had descended once again into


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political anarchy and economic chaos, and the modernisation project was put into cold storage until the dust of the Revolution had settled. For Pearson the completion of the Tehuantepec Railway represented a significant personal and professional achievement. He had completed the most complex and difficult project he had had to face in his career as a contractor, and he had done so in the face of considerable difficulties, and for a significant profit. He had extended his political, personal, and clientalist network within the Porfirian political elite, and established his firm as the regime’s most favoured contractor. This meant that he would now be able to call upon the support of the political establishment in the development of what had become by the time of the official inauguration of the TNR in 1907 his major obsession, and what would become his most profitable enterprise, and the core of his Mexican business empire— oil. The links between the TNR project and Pearson’s oil business were, therefore, profound. This was not simply because oil would eventually become the new source of fuel for the TNR (replacing the rising costs and relative inefficiency of firewood or coal) or because the TNR concession had provided extensive subvention lands which could be explored for oil deposits. Most important, the TNR provided a significant platform for the further extension of Pearson’s clientalist network and his intimate relationship with the Díaz government, without which his oil business would never have gotten off the ground, let alone prospered.

Figure 1 Weetman Pearson (1856–1927) at the time of his elevation to the House of Lords as Baron (later Viscount Cowdray), c. 1910. Science Museum/ Science and Society Picture Library, London.

figure 2 Dredger Conchita on the Gran Canal. Specially constructed by the firm of Frederick Lobnitz (Pearson’s brother-in-law) of Renfrew, Scotland, which supplied all of the machinery for harbor and port works used in Pearson’s worldwide contracts, c. 1896. Science Museum/Science and Society Picture Library, London.

figure 3 Galeras para peones (housing for day labourers), specially built to house temporary workers on the port works at Salina Cruz, the Pacific terminal of the Tehuantepec Railway, c. 1900. Science Museum/Science and Society Picture Library, London.

figure 4 Port construction works in 1902. Note the contrast between the modern technology used in Pearson’s engineering projects and the use of Mexican contract labour, as well as the logistical challenges which hampered the completion of the contracts. Science Museum/Science and Society Picture Library, London.

figure 5 Construction works on the dry dock at Salina Cruz, 1905. Science Museum/ Science and Society Picture Library, London.

figure 6 Clientalist network I: President Porfirio Díaz (on the right) and John Body, the general manager of Pearson’s Mexican contracts (ports of Veracruz, Salina Cruz, Coatzacoalcos, the Tehuantepec National Railway), a director of S. Pearson and Son (1901), and later a director of El Aguila. Taken in January 1905 during a tour of inspection at Pearson’s personal invitation of the Tehuantepec Railway and its branch lines, the port works at Salina Cruz, and the site of the firm’s early oil explorations on the Isthmus of Tehuantepec. Science Museum/Science and Society Picture Library, London.

figure 7 Clientalist network II: Inauguration of the Tehuantepec National Railway in January 1907, attended by President Porfirio Díaz (seated, centre), his wife, Carmelita (seated to Porfirio’s right), Pearson’s wife, Annie Cass, Pearson (in khaki, standing), and John Body (Pearson’s left). Science Museum/Science and Society Picture Library, London.

figure 8 Railway bridge over the Tehuantepec River, part of the reconstruction of the Tehuantepec Railway, c. 1907. Science Museum/Science and Society Picture Library, London.

figure 9 Popular festivities which accompanied the inauguration of the Tehuantepec National Railway in January 1907. Science Museum/Science and Society Picture Library, London.

figure 10 Clientalist network III: The presidential party during the inauguration of the Tehuantepec Railway, January 1907. Science Museum/Science and Society Picture Library, London.

figure 11 The tug Ramón Corral (tactfully named after Mexico’s vice president) in the dry dock at Salina Cruz, February 1909. Science Museum/Science and Society Picture Library, London.

figure 12 Modernisation and progress I: Quay and warehouses of the port works at Salina Cruz, recently completed, November 1906. Science Museum/Science and Society Picture Library, London.

figure 13 Modernisation and progress II: Electric cranes in operation at Coatzacoalcos (renamed Puerto México in 1907), the Atlantic terminal of the Tehuantepec Railway, c. 1907. Science Museum/Science and Society Picture Library, London.

figure 14 The vital ingredient: Oil gusher at Potrero del Llano, Faja de Oro (Golden Lane), Northern Veracruz, c. 1910. Science Museum/Science and Society Picture Library, London.

figure 15 The Golden Goose: Potrero del Llano No. 4 capped, with El Aguila’s chief geologist, Everette Lee DeGolyer (seated), c. 1911. Science Museum/Science and Society Picture Library, London.

figure 16 The ever-present danger: Oil tank fire at Potrero, 1914. Science Museum/ Science and Society Picture Library, London.

figure 17 Infrastructure of the oil business I: El Aguila tank car at the Minatitlán Refinery, c. 1912. Science Museum/Science and Society Picture Library, London.

figure 18 Infrastructure of the oil business II: El Aguila’s agency in Veracruz, 1915. Science Museum/Science and Society Picture Library, London.

figure 19 Oil and Revolution: El Aguila’s storage tanks at Coatzacoalcos guarded by federal troops, January 1914. Science Museum/Science and Society Picture Library, London.

figure 20 Oil and revenue: El Aguila’s offices at Tampico, c. 1918. Science Museum/ Science and Society Picture Library, London.

chapter five

The Birth of El Aguila and the Apotheosis of Empire, 1901–10 “El aceite sustituirá dentro de poco al carbón de piedra y a la leña, y será el único combustible que llegue a usarse. Esta nueva fuente de inmensa riqueza descubierta en el país, ha hecho pensar a los especuladores de mayor espíritu de empresa que en Mexico debe haber veneros más ricos que los de Pennsylvania, cuya teoría parece sostenerse por la configuración geológica de la República.” —Matías Romero, 1865.1

; The predictions made in 1865 by Matías Romero, one of the most influential and visionary strategists of Mexico’s nineteenth-century national development, proved to be remarkably prescient given that oil was destined to become Mexico’s most important industry in the following century.2 Although there had been attempts by lone Mexican entrepreneurs between the 1860s and the 1880s to replicate the discoveries in Pennsylvania which had inspired Romero, they had all ended in failure or disappointment, and it would take another generation after the publication of his predictions before there were any serious attempts to develop an oil industry in Mexico.3 Its fate had been the same as that of all of the many frustrated efforts made in the nineteenth century to develop Mexico’s mineral resources for commercial exploitation and to create a basis for future industrial development—the absence of integrated national markets or a skilled labour force, the need to import expensive technology and equipment, inadequate transportation, a weak state apparatus, a lack of codification or regulation of commerce or industry, and a serious shortage of capital investment.4 One of the central themes of this book is that the pursuit of the developmentalist strategy adopted by the Mexican government after 1884

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required these obstacles to national progress and development to be systematically addressed and gradually dismantled. The problem was particularly acute in the case of energy and power, since the goal of industrial development cherished by the científicos required the provision of inexpensive and accessible sources of energy. Although it was common knowledge, and had been so for many centuries, that Mexico possessed natural resources of oil and bitumen in the Gulf Coast region, the extent, quality, and exploitability of those resources was uncertain. At the same time, the high cost of the technology required for oil exploration, coupled with the restrictions on Mexico’s access to international capital markets, constituted a double disincentive for both the Mexican government and domestic entrepreneurs to risk direct involvement in such an uncertain enterprise. As in the case of other areas of industrial development promoted by the Porfirian elite (such as railways, mining, and manufacturing), the Díaz government turned to overseas businessmen and investors to develop the necessary infrastructure for the exploration and development of the oil industry, providing them with legislative protection of property rights and tax incentives on exploration and production.5 At the same time, the government was anxious to break the monopoly of oil-based imports (kerosene, gasoline, paraffin, and lubricating oils) from the United States which had been enjoyed by the Waters-Pierce Oil Company (WPOC—an affiliate of Standard Oil) since the end of the 1880s.6 It was an opportunity which a number of individual overseas pioneers, mostly British and American, found too attractive to resist, and despite the numerous and persistent logistical difficulties they faced in pursuit of their oil interests, their perseverance would ultimately pay them a handsome dividend.7 British entrepreneurs were amongst the first to take advantage of the opportunities to exploit Mexico’s rich deposits of oil. The self-confessed opportunist Percy Norman Furber, an ex–merchant seaman and former jockey from London, claimed to have drilled the first oil well in Mexico at Chijol, near Tampico, in 1894.8 In his subsequent autobiography, Furber reflected on the mutual advantages of the partnership between overseas entrepreneurs and national governments in countries such as Mexico on the periphery of capitalist development: The economic prosperity and industrial advancement during Díaz’ administration was due primarily, I think, to his courageous and far-sighted policies in welcoming foreign trade, foreign capital, foreigners like me, bent on developing the natural wealth of the country. From the day I went to see President Díaz to tell him what I hoped to do at El Cuguas, he never wavered in his loyalty, not so much to me personally, but to my purpose. Díaz understood that the development of oil would mean the creation of wealth, not only for those directly responsible for that development, but for Mexico itself.

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Nevertheless, Furber clearly understood the tensions between the different interests at play: It would be absurd to say that we were working primarily for Mexico. We were working for ourselves, and with faith that success would be rewarded with larger financial gain. Without the promise of gain, none of us would have persisted in the back-breaking, heart-breaking struggle, even though there was invariably one force, completely apart from gain, which drove us on, namely the pure joy of discovery and accomplishment. Díaz knew, however, that our success would be reflected in prosperity for Mexico and Díaz was working for Mexico, not for himself.9

Pearson, who became Furber’s partner in the oil business in 1907, was less prone to reflection, and a man of many fewer, and less eloquent, words. In his private correspondence, however, he also commented on the practical difficulties which the early prospectors had to face, but also alluded to the fact that his involvement in oil, like his involvement in his other Mexican enterprises, had not been achieved with his effort and agency alone. He wrote to his son Clive in March 1908: The oil business is not all beer and skittles. . . . I entered into it lightly, not realising its many problems. . . . Now I know that it would have been wise to surround myself with proven oil men, and not to rely, as I did, on commercial knowledge and hard work, coupled with a superficial knowledge of the trade.10

This chapter argues that the assistance and encouragement received from the Díaz government, not only through legislation and tariffs but also through the direct personal support of President Díaz, Finance Minister Limantour, and other prominent members of the Porfirian political elite, would prove crucial not only in establishing Pearson’s oil business but also in sustaining it during its difficult early years. By the middle of 1909, after nearly a decade of significant investment of his time, energy, and capital, the oil business had become his passion and his personal obsession. But it had also become his principal source of frustration, despite his public displays of optimism in the future of the business. In February 1909 he confided to his wife: I cannot help but think what a craven adventurer I am compared to the men of old. . . . I am slothful and horribly afraid of two things—first that my pride in my judgement and administration should be scattered to the winds; and, secondly, that I should have to begin life again. These fears make me a coward at times.11

For such a confident and successful businessman, with a wealth of experience in managing large and complex infrastructural and engineering projects across the globe, these personal doubts clearly reflect the extent of the difficulties the oil business had presented him by the early months


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of 1909. In his hour of greatest need, Pearson therefore turned for support and reassurance to his Mexican mentor, Finance Minister Limantour, the individual who had had such a key influence on the fate of the former’s Mexican business empire since his arrival in Mexico in 1889. Pearson bluntly told Limantour that he could no longer sustain the losses he was incurring. Adopting a simultaneously plaintive but indignant tone—quite characteristic of his exchanges with Limantour over a period of more than twenty years—he explained that “my actual cash outlay by the end of June [1909] will reach £1,500,000 sterling.” He finished the letter with a scarcely veiled threat: This enterprise, to handle the oil from the well to the lamp, is unique; if I had to lose the Government’s sympathy and support I shall not be justified in personally continuing to bear its responsibility.12

Pearson was reminding Limantour that he was, as he had always been, prepared to support and implement the Mexican government’s developmentalist strategy—which in the case of oil meant challenging the existing monopoly on the sale of oil-based products in Mexico hitherto enjoyed by WPOC—but that that support was predicated on the receipt of a profitable return. That was certainly not the experience of Pearson’s oil business by 1909. Ultimately, however, his patience and resolve would be (amply) rewarded. Less than two years after his ultimatum to Limantour, following the discovery of major deposits in his northern Veracruz oil fields, Pearson’s Compañía Mexicana de Petróleo El Aguila (Mexican Eagle) had begun to show signs of becoming his most profitable enterprise. By 1919, when he sold the controlling interest in El Aguila to the Shell Group, Pearson’s oil business had not only fulfilled but also vastly exceeded his original ambitions. Two basic statistics indicate the phenomenal growth of the Mexican oil industry between 1910 and 1919, and El Aguila’s share of its output. Annual production of Mexican crude rose from 3,634,000 barrels in 1910 to 87,073,000 in 1919, making Mexico the second-largest producer in the world next to the United States. Although many other oil companies had by then entered the Mexican market, 61 percent of production was in the hands of just two companies: Pearson’s El Aguila and Edward Doheny’s Mexican Petroleum Company.13 The ultimate irony of the eventual commercial success of El Aguila lay in the fact that the domestic and international environment in which his oil business would flourish was vastly different from that which had prevailed prior to 1911. How Pearson and El Aguila coped with these seismic shifts in the domestic political environment which accompanied the Mexican Revolution, and in the international environment as a result of

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the repercussions of WWI, is the subject of the following two chapters. This chapter will concentrate on the context in which Pearson’s oil interests became established between 1901 and 1910. the first steps The story of “How We Went into Oil” (the title of a short account written in 1928 by Pearson’s Mexican proconsul, John Body) has been told (and retold) many times before.14 Notable from Body’s account is that Pearson’s initial interest in the commercial possibilities of oil stemmed directly from his firm’s management of the Tehuantepec National Railway (TNR). In 1899, while searching for suitable construction materials with which to build the training walls of the river bar at Coatzacoalcos (the Atlantic terminal of the TNR), John Body had discovered nodules of oil in the rock and had been led by some local inhabitants on the Isthmus of Tehuantepec to a chapopote (a natural oil spring). He wrote a report on his findings to Pearson, who recalled Body’s account when, in April 1901, Pearson found himself temporarily stranded because of a delayed train in Laredo, Texas, amidst the fevered speculation which followed the recent discovery of the famous oil gusher at Spindletop in Texas in January 1901. Body later explained that the initial motivation for seeking to exploit oil was to find an alternative fuel for the “locomotives and other plant,” as a consequence of the fact that the timber which was the current source of locomotive fuel not only was expensive—since it required the use of a scarce labour force to cut down local forests when that same labour force was needed for other contracts—but had also resulted in protests from the owners of estates that ran adjacent to the TNR line, whose crops had been damaged by hot cinders from passing trains. Although Body’s explanation indicates that the company’s initial interest in oil stemmed from the specific domestic needs of the TNR, Pearson himself, from the very start of his oil adventure, clearly harboured wider ambitions, commenting to Body in the same letter from Texas in 1901 that he was “strongly of the opinion a splendid business may be done.”15 He would have been fully aware, from his own experience, and his always acute entrepreneurial antenna, of the rapid expansion of the oil industry in the United States and Russia in the latter half of the nineteenth century, and of the business opportunities this represented. US production of crude had risen from 274 tons in 1859 to 9 million tons in 1900, and would increase again by a factor of 10 by 1930. This rise in production, combined with the increasing sophistication and professionalization of geological analysis and refining technology, and above all the diversification


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of petroleum-based products—first kerosene, then fuel oil, then petrol (or gasoline)—would transform the industry during the first three decades of the twentieth century.16 In 1900, on the eve of Pearson’s foray into oil, kerosene for heating and lighting was by far the most valuable petroleum product, and it was the prospect of supplying illuminating oils to the domestic Mexican and British markets (where, in the latter case, it was estimated in 1902 that there were over eleven million kerosene lamps in daily use) which most excited Pearson in the early years. At the same time, it was also clear that fuel oil was being rapidly adopted as the principal source of power in transportation (for railways and merchant shipping) and industry, especially in those countries, such as Mexico, where coal was in relatively short supply. Although Britain remained a coal-based industrial economy until well into the twentieth century, fuel oil was adopted in certain key sectors at an early stage. When First Lord of the Admiralty Winston Churchill took the “fateful plunge” and commissioned five oil-fired battleships for the Royal Navy in 1912, he was, as Geoffrey Jones has pointed out, effectively committing British naval power to a dependence on a fuel source which not only was located overseas, but whose production was in the hands of large and increasingly oligopolistic oil corporations. These fundamental transformations in the character and structure of the global oil business would radically alter the nature of Pearson’s Mexican oil business, especially after 1913.17 This chapter highlights, first, the very high degree of personal interest shown by Pearson in the minutiae of the organisation and management of his oil business,18 and second, the many and constant difficulties the business faced throughout the early years of its existence. These difficulties were, in fact, far more problematic than most general accounts have acknowledged. Many of these subsequent accounts, if they were not commissioned by Pearson himself or by his employees, were heavily influenced by the optimism which he projected for public consumption. Placing emphasis on the extent of the difficulties which had to be overcome does not, of course, undermine the evidence of Pearson’s considerable tenacity in keeping his oil business alive. If anything they serve to highlight them. By the same token, these profound obstacles also indicate how vital the political support offered by the Porfirian elite was in sustaining Pearson’s involvement in a business which tested his patience and abilities to the limit. As has been indicated in previous chapters, the importance of individual agency—Pearson’s tenacity in the pursuit of a business opportunity, and his careful and consistent courtship of the Mexican political elite— was crucial to the survival of his oil business before 1910. Pearson was acutely aware that success would require pandering not only to the

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national (and nationalist) aspirations of the Porfirian elite, but also to their personal self-interest. In short, in his pursuit of the oil business Pearson demonstrated again that he was as adept at the application of nationalist and developmentalist rhetoric as he was at the organisation of industrial espionage and at the distribution of “gifts,” commissions, and retainers to those at the apex of the Mexican political elite, in return for political favours which would benefit his interests. Although it has been highlighted above, it is important to emphasise the difference between Pearson’s oil business and the public works projects he had carried out in Mexico since 1889. As explained in previous chapters, those projects had been funded by Mexican public debt and entrusted to Pearson in the role of contractor and project manager—and, uniquely, in the case of the TNR, that of a business partner with the Mexican government. The risks and the responsibilities of bringing these projects to fruition lay almost entirely with the Mexican government (and Finance Minister Limantour in particular). The fundamental differences between the oil business and his other activities lay first in the investment of his own capital and second in the assumption of the main burden of risk and responsibility. As will become apparent, the risks—and also the rewards—were significantly higher. Quite how much of Pearson’s private capital was invested in his oil business is, however, difficult to gauge. Even though it was certainly true that the costs of oil exploration exceeded income prior to 1910 and that Pearson consistently lost money on his Mexican oil operations until 1911, it is also clear that income from his other business activities, including his public works contracts, was used to subsidise the costs of acquisition and exploration, and to avoid recourse to extensive borrowing.19 It is also possible that Pearson at times may well have exaggerated, and at others underestimated, the amount of his own capital he claimed was being used to fund oil exploration. At the same time, contemporary accounting conventions made it entirely legitimate to ascribe different values to monies already spent and those committed to be spent in the future as “expenses” or “investments,” or to charge maintenance and upkeep as company profits to make the company’s balance sheet look healthy—or more healthy than it actually was. As a result, it would be unfair to accuse Pearson of a willingness to dissemble in this case. There are, nevertheless, discrepancies in the presentation of the figures. According to the versions written subsequently for public consumption, estimates of expenditure over income before 1911 range between £1.5 million and £3.5 million. A short history of El Aguila written for external publication by an employee of S. Pearson and Son, Mr. C. Reed, in 1928 claimed that “the cash invested by Lord Cowdray in this enterprise at


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June 1910 amounted to £2,500,000; by December 1914 it had increased to £3,750,000, and at the time he sold the control in April 1919 the total had reached £5,000,000.”20 These figures are, however, contradicted by evidence from the company’s internal correspondence. Having told Limantour in March 1909 that his expenditure would have reached £1.5 million by June 1909, he included a copy of an internal memo which stated that the firm’s acquisitions to that point had cost “some $6,000,000 [pesos], more or less with another $1,500,000 allocated for the cost of buildings, pipe lines, and exploratory work in 1909.”21 At the same time, in a revealing letter to the British chancellor of the exchequer, Lloyd George, in December 1913, when Pearson was attempting to persuade the British government to enter into a partnership arrangement with El Aguila, Pearson claimed that the total invested in El Aguila was £8 million, with a further £4 million invested in his two other oil companies (Eagle Oil Transport and Anglo-Mexican Petroleum). No doubt trying to impress Lloyd George with the scale of his oil business, he claimed that the value of the publically owned preference shares was £5 million, which suggests a market valuation of his oil business of around £17 million, which would have made it the seventh-largest company in Britain, and one of the thirty largest companies in the world.22 Whatever the correct figures are, there can be little doubt that expenditure consistently exceeded income before 1910 and that the problem was incremental. In March 1906 Pearson told the manager of his Mexican oil interests, and the future managing director of El Aguila, Thomas Ryder, that “I find to the end of last year [1905] we have spent over £200,000 on our Oil Department from the beginning.”23 In a confidential memo of December 1908 Pearson informed the director of the firm’s Mexican operations, John Body, that due to “extremely heavy expenditure . . . our operations in Mexico for 1908 have cost £286,000 more than income.”24 While this correspondence makes it clear that because of his close personal interest in oil, Pearson was prepared to relax his normal insistence that all of the firm’s multiple international contracts and the bespoke companies set up to administer them must always, without exception and at all times, pay their way, he nevertheless established clear guidelines which he would adopt to cope with the particular problems presented by the oil business. His basic business philosophy was very simple: “plow every possible penny of income back into the ground in exploration and new drillings; drill up the profits, thus pyramid them in the ground.”25 He therefore urged Body not only to keep expenditure under tight control but also to divert revenue from other contracts (both public and private) to crosssubsidise the considerable capital outlay on contracts, rents, construction,

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and the ever-rising costs of exploration. He therefore imposed strict limits on the sums which could be drawn from the London office, reminding Body, for example, that the costs of the refinery at Minatitlán should be covered by income from the contract with the Mexican Railway for supply of fuel oil. In February 1910, Pearson reduced still further the capital Body could draw on from the firm’s headquarters in London.26 Using the income from existing contracts to cross-subsidise the very high costs of oil exploration was no doubt sound business practice and, indeed, the only pragmatic way in which such heavy outgoings could be sustained.27 the acquisition of oil lands and leases In Pearson’s original letter from San Antonio, Texas, at the height of the Spindletop boom of 1901 (cited above), he had given Body urgent instructions “to secure option on oil land with all land for miles around.”28 Body responded swiftly to his “Chief’s” instructions. Land was acquired, either through direct purchase or, most commonly, through rental agreements or royalty leases which provided landowners who held legal titles (either on an individual or a communal basis) with either cash payments or royalty agreements on oil production. Most important, S. Pearson and Son secured exclusive rights to conduct surveys and to exploit any oils or minerals which might be found. The nature of the contracts varied considerably and depended upon a range of variables—where the land was, whether it had been surveyed, whether the title was held by individuals or communities,29 whether there were rival bids from other oil companies, who the owners were, what their status and influence within local community was, and what their political connections were. As El Aguila’s secretary, R. D. Huchison, explained, royalties paid on leased land were usually based either upon a one-off payment of Mex$300 for every 1,000-barrel well brought in, a payment of between 2 and 5 centavos per barrel, or, alternatively, a percentage (between 2 percent and 10 percent) on total production. However, it is clear from the company’s internal correspondence that El Aguila’s lawyers and representatives exercised considerable freedom of manoeuvre in their negotiations with landowners and communal owners, and that these general guidelines were not always strictly adhered to in practice. The outcome of these negotiations was invariably favourable to El Aguila. “We pay annual rents per acre varying from nothing to 50 cents Mex,” Huchison reported, “but the rent usually merges into the Royalty when there is production, so most rent charges are recovered in that way.” He concluded, with an obvious degree of satisfaction, that rents paid on leases on 679,919 acres of land in the


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Isthmus of Tehuantepec, Tabasco, and Chiapas in 1911 amounted to Mex$37,711, or, in other words, “less than 6 cents Mex. per acre.”30 Some landowners faired very well in their negotiations with the company. It was clearly part of the company’s strategy to excite the interest of Mexico’s political and social elite by the wealth-generating potential of oil, and to appeal to instincts which were perhaps less noble than those of national development. For example, one of the most notorious of contracts for the leasing of land and exploration rights from private landowners was that signed in 1902 with Doña Agustina C. vuida de Manuel Romero Rubio, the president’s mother-in-law, for 77,000 hectares in Minatitlán in southern Veracruz, where Pearson’s first refinery would later be constructed. The first royalty payments of 2 cents per barrel were not made until 1908, by which time Carmen Romero Rubio, the president’s wife, popularly known as Carmelita, had inherited the property from her mother.31 One of the most significant relationships which developed between foreign oil companies and local elites in northern Veracruz during the scramble for oil leases after 1906 was the case of the Peláez-Gorrochótegui family, owners of some of the most sought-after oil properties in the region. Ignacio Peláez, a lawyer who, despite the fact that he had also acted on behalf of S. Pearson and Son nevertheless drove a hard bargain in his negotiations with the company’s lawyers on behalf of his own family, and in representation of other local landowners. In March 1909, for example, he signed a contract with El Aguila which provided generous terms to his own family: an annual rent of Mex$5 per hectare, a royalty payment of 5 cents per 150 litres of crude extracted, a down payment of Mex$30,000, and a guaranteed income of not less than Mex$100,000 over the next ten years, irrespective of whether oil was discovered. The nature of these contracts not only made the Peláez family wealthy but also enabled Ignacio’s brother Manuel to play a highly influential role as regional cacique by acting as intermediary between the oil companies, local landowners (hacendados, rancheros, and members of condueñazgos), workers in the oil camps, and the various revolutionary factions which sought to control the region between 1911 and 1920.32 Nowhere was the favouritism shown to influential landowners more clearly demonstrated than in the case of Finance Minister Limantour. Body informed Pearson, following a private meeting with Limantour in October 1905, that “I thought it policy to tell him generally our intentions for refineries, pipe lines, steamers etc., all of which he was most interested in. I also took up with him the matter of making a contract for his lands as the Oil Department believes the oil strike goes right through them. I have arranged with Mr L to take him a project next week. He assures me

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he is entirely in our hands, and is willing to make a fair deal.”33 The matter was not raised again until August 1910, when oil and gas deposits were discovered at El Aguila’s oil field at Tecuanapa, some 400 miles from Limantour’s properties on the isthmus. Pearson immediately offered Limantour “a royalty of 20% on oil actually produced, or 10 cents Mexican per barrel on oil produced and sold”—in other words, double the normal rates offered to other landowners. So concerned was Pearson to curry favour with the finance minister that he threw his normal caution (and his tough bargaining instincts) to the wind. “In fact,” he wrote, “it is really for you to determine what terms you would like.”34 As a result of this overt, covert, and, above all, intense activity in the fevered exchange and negotiation of contracts after 1901, Pearson was able to claim by as early as March 1906 that “we own about 600,000 acres of land in the oil country, in the states of Vera Cruz Tabasco, and Campeche, and have royalty leases for 200,000 or 300,000 acres which we have been 4 or 5 years in securing.”35 The frenetic pace of acquisition continued until 1911, with the last major acquisition (Furber’s Oil Fields of Mexico properties) made in 1914, but the constant negotiation and renegotiation of contracts, sales, and leases over a ten-year period, as well as apparent inconsistencies in the company’s own figures, make it difficult to provide an accurate assessment of the total holdings. An internal memorandum prepared by El Aguila’s secretary in September 1911 gave a total figure of 1,678,011 acres (across the Isthmus of Tehuantepec, and the states of Tabasco, Chiapas, and Veracruz). Of this total, under half (730,592 acres) was directly owned by El Aguila, while the company held subsoil leases on the remaining 947,419 acres. The vast bulk of owned (712,797 acres) and leased (563,530 acres) land was located in the Isthmus of Tehuantepec.36 What emerges clearly from the internal correspondence is that the purpose of acquiring title or drilling rights to such extensive lands had many potential advantages: first, to secure potential oil-producing lands, because, as Pearson explained to Body in his original letter, oil deposits frequently extend over big areas, so the oil rights must extend over a large district to be really valuable. Ten, twenty or forty thousand acres appears to be no uncommon size—so in getting the option, get it over as big a country as possible.37

Second, the acquisition of leases on extensive lands would secure monopoly control—“the great thing,” Pearson told Ryder in 1906, “is to prevent others coming in, and if it is necessary to pay $10,000 or even $30,000 for the next 2 or 3 years as dead rent on leases, we should be justified in entering into the obligation to do so if thereby we can control


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the oil territory and keep it practically to ourselves.”38 Third, the acquisition and trading of leases represented potential business opportunities in themselves. In an atmosphere of fevered speculation characteristic of the oil industry in its early phase, land and leases frequently changed hands between speculators and investors lured by the prospect of making an instant fortune in oil.39 the domestic politics of oil What emerges strongly from the evidence, as had been the case in all of Pearson’s other business interests in Mexico, is the centrality of the relationship with the Porfirian political elite. This has been explored already in the preceding chapters, but the extension and strengthening of Pearson’s clientalist network provided the essential mechanisms through which his oil business became established. Once again, as has already been explored in the cases of the Gran Canal and the TNR, the most significant relationship would be with Finance Minister Limantour. From the very early stages of Pearson’s interest in oil, when he gave instructions to begin the search for oil lands and concessions in 1901, he explained to Body that “it is essential to keep Mr. Limantour satisfied . . . and let him be convinced that we are absolutely straight in all our actions.”40 It is also of note that, when Pearson was planning his most audacious strategy of competing with WPOC in the domestic market for oilbased products (see below), he was very keen to seek Limantour’s advice and approval for his negotiations with Henry Clay Pierce, and to provide Limantour with a blow-by-blow account of his manoeuvres.41 He confided to his wife in March 1909: “Waters Pierce has today had to drop their already largely reduced price by a quarter . . . of course they dropped in the morning papers, and we did so in the evening papers. Limantour is helping us” (my italics).42 In a letter three days later, Pearson explained the advantages which resulted from Limantour’s support: “The fight continues. It has become vigorous . . . they have never had a really tough fight before where their opponents have had all the cards—as we have had here—to fight” (my italics).43 There is also evidence that Pearson’s principal rivals in the oil business, the US oilmen Henry Clay Pierce and Edward Doheny, did not receive the same treatment from Limantour as that afforded to Pearson— quite the opposite, in fact. Limantour’s increasing fear of, and hostility to, US encroachment on Mexico’s economic and political sovereignty has already been referred to in previous chapters, and it appears to have been reflected in his biased treatment of American oil interests.44 Doheny was

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certainly aware of Limantour’s hostility, complaining that the finance minister “tried to create an atmosphere of dislike, almost contempt, for our efforts.”45 And Limantour made his disdain for Clay Pierce clear, commenting to Pearson on the failure of his negotiations over a potential merger between S. Pearson and Son and WPOC in 1909, “I have not yet been able to make up my mind as to whether you should regret or welcome this result.”46 In fact, Limantour’s private assurances of the political support of the government in furthering Pearson’s oil interests were arguably the most crucial guarantor of Pearson’s success. During the course of another extended private interview in January 1906, Body expressed to Limantour his fears about competition from WPOC and received Limantour’s explicit assurance, that “when that time comes we shall certainly have assistance from the Government to withstand such rivalry.” This meant in practice that duties on imported crude (on which Clay Pierce depended for his business, since WPOC was not involved in exploration or production) would be raised “whenever we were able to supply the market, and when it was necessary to do so to ensure the success of our business.”47 At the same time, it is important to emphasise that Limantour’s support for Pearson was never unconditional. As has been consistently argued throughout this book, Limantour’s primary concern was not the protection of the business interests of overseas entrepreneurs but the construction of an economic infrastructure in pursuit of Mexico’s material progress, national development, and industrialisation. And although he clearly favoured European business interests over those of their US counterparts, he was always necessarily sensitive to accusations from Washington and US businessmen that the Mexican government was openly favouring European interests. He was aware that the Díaz government could not afford to be perceived as anti-American, whatever his personal or private views. Although he had given repeated assurances to Pearson that he had the government’s support, Limantour also knew that a prolonged oil price war was not in the long-term interests of stability. In April 1909 he therefore urged Pearson to end the conflict and draw up instead a contract of cooperation. Pearson replied that it was impossible to negotiate a voluntary arrangement with Clay Pierce and that the only solution would be an amalgamation of El Aguila and WPOC with equal shares, and guaranteed by the Mexican government. Pearson explained that this would be acceptable to him because it would provide security for all the capital so far invested in oil, and that “the refinery and the Isthmus land will represent our profit.” Pearson was very pleased that “Limantour agreed and volunteered to be the messenger.”48 But the personal animosity between


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Pearson and Clay Pierce had become so acute that a deal was no longer possible. The continuation of the oil war throughout 1909 and into 1910 became an additional source of tension between Washington and the Díaz regime. The reimbursement of tax on imported crude granted to El Aguila, for example, unsurprisingly prompted complaints from Clay Pierce that the British firm had actually taken the products derived from that crude for the domestic trade, which was, in effect, against the law. Limantour therefore informed Pearson in a private interview in July 1910 that the Mexican government had been privately requested by the American ambassador to see that “no partiality was shown to the English over the American firm,” that he considered these complaints as “not without reason,” and that, therefore, he could not openly intervene to stem the losses which El Aguila continued to sustain on its refining operations.49 As Pearson fully understood, Limantour’s support had to be conditional, and never publicly acknowledged. “Limantour is with us, but he cannot go further than say the government must assist us so far as it properly can a Mexican Company.”50 This again demonstrates that Limantour’s support was vital. Equally important to the establishment of the infrastructure of Pearson’s oil business was the approval of President Díaz. Although it is clear that the president relied heavily on Limantour’s advice for nearly two decades from the latter appointment as minister of finance in 1893 until the collapse of the regime in 1911, there was never any suggestion that Limantour acted as an eminence grise to Díaz, who was always far too skilled a politician to succumb to the will of any of his close advisers. In a revealing (and, significantly, private) interview between Body and Díaz in November 1905, Body reported to Pearson that he began by passing on “very kind messages from Lady P & yourself,” and then: I told him of our oil venture . . . what oil we had found . . . and what were our hopes. He was most interested, and said if we wished a higher duty to protect ourselves he would attend to the matter, when we could assure him we could supply the needs of the Republic. [my italics] I thanked him, and replied I thought we had hardly any need to trouble him to impose a higher duty. He referred to his visit to San Cristobal, and to having seen the oil pumped out, and entered thoroughly into the spirit of our investigations and hopes.51

Pearson also subsequently reminded Limantour in 1909 that President Díaz had on several occasions offered “the full sympathy of the Government” in support of his oil venture.52 A clear example of this was the legislation passed by the Mexican Congress in October 1909 which approved the reimbursement of taxes paid on imported oil which was then

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refined in Mexico and then re-exported. Because of Pearson’s investment in the refinery at Minatitlán, this was a significant advantage to his enterprise—and, at the same time, a significant disadvantage to his most powerful rival, the Waters-Pierce Oil Company, which had no refining capacity in Mexico.53 Pearson’s connections with the inner circle of Porfirian Mexico had always been far more extensive than just his relationship with Limantour and Porfirio Díaz. As analysed in Chapter Three, he had been cultivating a broad spectrum of relationships for more than two decades, and, having turned his full attention to oil, he was able to recruit influential individuals to his cause as intermediaries with state agencies or local authorities to help secure property or leases. For example, in 1904 the services of Captain Porfirio (“Porfirito”) Díaz, the president’s son, were “requisitioned,” as the company secretary in London, R. McDonald Bird, described it, to lobby for the registration of titles to lands at Jaltipan, Veracruz as national lands, which would thereby reduce the company’s expenditure on subterranean rights. “With his influence,” he wrote, “I trust that the Department of Fomento will grant us our appeal.”54 Other “agents” or advisers (euphemistically called consejeros) were employed in a more clandestine role. Ingeniero Ignacio Muñoz, the president’s nephew, was employed in 1908 “in utmost secrecy,” for a fee of Mex$5,000, a monthly salary of Mex$25, and a bonus of Mex$10,000 on securing the contract, to act as an intermediary between S. Pearson and Son and the state government of Veracruz to obtain a favourable judgement over exploration rights on 17,5000 acres belonging to the Hacienda Cerro Viejo (in the oil-rich Faja de Oro, or Golden Lane) which were also claimed by Doheny’s Mexican Petroleum Company, the most serious rival to the Pearson interests as oil producers in the region.55 And if other forms of subterfuge were necessary in order to secure potential oil lands, the firm was certainly not squeamish in their adoption. In April 1910 Ryder urged Pearson to approve the acquisition of additional properties in the much sought-after Tampico-Tuxpan District, but recommended that the negotiations be conducted by a third party who would deny any connection to El Aguila or the Pearson interests.56 As a further example of the adoption of tactics which were less than transparent, El Aguila retained a paid informer to report on the activities of Doheny’s Mexican Petroleum Company, and general oil-related activities in Tampico and the Huasteca. Ryder therefore received not only detailed reports but also copies of Doheny’s maps of geological soundings and pipeline installations.57 These were clearly neither isolated nor uncommon practices, or ones of which Pearson was exclusively guilty. In fact, as has been argued above, they were integral to the conduct of business in


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Mexico. However, it makes the claim that the firm was always “absolutely straight in all our actions” more difficult to defend. legislative support As indicated above, Pearson’s acquisition of concessions, property, and exploration rights would not have been possible without the series of legislative initiatives introduced by the Díaz regime in its strategy of constructing an environment more amenable to entrepreneurial activity and providing overseas investors with protection of property rights as well as tax incentives on exploration and production. The reform of mining legislation contained in the Código de Minería (1884) and the Ley Minera (1892) removed the restrictions of colonial origin on the exploitation of subsoil deposits, including oil, and granted the owners exclusive rights of ownership and exploitation. The first Ley de Petróleo of December 1901 authorised the executive to grant individuals exclusive rights over exploration and exploitation of oil deposits on federal (i.e., national) territories, which effectively gave Pearson the opportunity he required to obtain extensive land contracts after 1901. The legislation most directly favourable to Pearson was the Petroleum Law of 1906, which granted S. Pearson and Son an exclusive concession to exploit the subsoil of lakes, lagoons, rivers, and national and “vacant” (baldíos) federal and state lands in Campeche, Tabasco, Veracruz, San Luis Potosí, and Tamaulipas (a total of more than one million acres). In addition, the firm was granted free importation of all materials and machinery necessary for the exploration of lands and refining of products, and even the right to expropriate private lands for the purposes of the concession (such as the need to lay pipelines). The concessions were to last fifty years—significantly, longer than the ten years granted to Doheny’s Mexican Petroleum, but, also significantly, the same term as that granted to Pearson in the TNR contract in 1898. They also included an exemption from municipal, state, and federal taxes—with the exception of the federal stamp tax, and state licence tax (Derechos de Patente) in Veracruz—on the capital invested in exploration and exploitation. The only obligations imposed upon S. Pearson and Son were a tax on royalties on extraction of crude from federal concessions (of 7 percent to the federal treasury, and 3 percent to the state treasury), to be paid on production of 10,000 barrels per day or more, and a commitment to spend an agreed sum within an agreed time on exploration and exploitation.58 The generosity of the terms awarded to Pearson and to Doheny by the Petroleum Laws of 1901 and 1906 has subsequently incurred the wrath

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of nationalist historians in Mexico, who have interpreted them as squandering precious national resources and a willful abrogation of Mexico’s economic sovereignty.59 It is important to remember, however, that at the time, neither Díaz, Limantour, nor other members of the Porfirian elite had concrete evidence of the true extent or potential of Mexico’s oil reserves.60 In 1902, Limantour had commissioned a survey of oil deposits in the Huasteca on lands owned by Doheny in Veracruz, the site where major deposits would eventually be located after 1910. The survey had provided evidence of significant reserves, but its findings had been subsequently discredited because the surveyors were discovered to be close associates of Doheny, and therefore likely to have embellished the findings.61 In fact, the Porfirian state lacked the institutional means or infrastructure to carry out a systematic analysis of land and resources.62 The Petroleum Laws of 1901 and 1906 were, therefore, based on the assumption that Mexico had only limited oil reserves and that the development of infrastructure which would result from investments made by overseas entrepreneurs would be more beneficial to the nation than the profits those same investors expected to extract from Mexico.63 Once the existence and profitability of oil had been proven, it was clear that the Mexican government had every intention of reviewing these early concessions and of increasing government revenue by raising taxes (as had happened in the case of mining and colonisation companies). The legislation granted the Mexican authorities the right to review the activities of foreign oil companies, which were always regarded as being subject to Mexican law. It was the Díaz government, in fact, which first imposed taxes on oil exports.64 Only with hindsight, therefore, do the Porfirian oil concessions appear excessively generous. Pearson was almost certainly better informed about the scale of potential oil deposits than either Limantour or the Mexican government. He had commissioned a number of geological surveys, inviting the American oilman Anthony F. Lucas, who had drilled the Spindletop well in Texas, to assess his holdings on the Isthmus of Tehuantepec. These early surveys produced mixed results, but they were sufficiently encouraging for Pearson, who was never inclined to take unnecessary risks in his business affairs, to be personally convinced of the existence of substantial deposits.65 As a result, Pearson’s representatives in Mexico were under clear and persistent instruction to lobby the government as hard as possible to secure the necessary legislation. During the months preceding the enactment of the 1906 law, Ryder, perhaps cynically, but certainly effectively, played on the absence of proven reserves, arguing repeatedly that the company required “fair terms” (in other words, favourable terms), given the degree of the “uncertainty of the business.”66


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As in the case of the acquisition of oil lands, the most effective means of lobbying was to enlist the support of prominent members of the Porfirian elite as lawyers or agents to exercise influence, lobby, and negotiate on behalf of the company. This was particularly important, given the debates in Congress and the press in 1905 regarding the future of the domestic oil industry as the latest discoveries became more widely known. Article 10 of the Mining Code of 1884 had conceded that mines and oil wells belonged to the owners of the surface land, and the debate centered on a proposed amendment to allow for nationalisation of subsoil deposits in the national interest.67 In these circumstances, the need for active lobbying on behalf of Pearson’s oil interests was crucial. The lawyer Lorenzo Elizaga (a cousin of President Díaz’s by marriage) was employed to act on behalf of the firm in pursuit of federal and state oil concessions.68 How significant Elizaga’s intervention was can only be a matter of speculation, but he was able to report to Body in November 1905, some months before the legislation had been passed by Congress, that “notwithstanding the adverse decision of the Academy of Jurisprudence, he [President Díaz] has given instructions to the Minister of Fomento that the new Petroleum Law should go into effect.” This was a highly significant development in the evolution of Pearson’s oil interests. Body immediately wrote to Pearson and commented that “there now seems some reasonable hope that our expectations will be fulfilled . . . so as to allow the oil department to devote a lot more time to the direct work of the fields, instead of spending so much time and worry on legal matters and titles to protect ourselves in and around the fields of exploitation.” Pearson was delighted with the outcome, and his reaction demonstrates with the utmost clarity the significance of the level of political and legislative support he enjoyed: “I can hardly say how pleased I was to get the news: If we can get the draft Petroleum Law made effective, we shall have put our position upon a rock foundation.”69 exploration, production, and infrastructure While significant progress had been made in the acquisition of oil lands and the implementation of enabling legislation, the most urgent priority remained exploration and production. It was here that Pearson encountered the greatest logistical obstacles. The discovery of the first productive well at San Cristóbal on the Isthmus of Tehuantepec had taken place

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in 1904, and it was this discovery, coupled with the legislation of 1906, which inspired him to proceed with his next major investment: the construction of a refinery at Minatitlán in Veracruz.70 The site was carefully chosen on the Riberas Coloradas lands, only twenty miles from Puerto México, the terminal port of the Tehuantepec Railway on the Atlantic coast, in order to link production from San Cristóbal to domestic markets via tank steamer on the Coatzacoalcos River and the internal railway network. A small experimental refinery was erected, with a capacity of 2,000 barrels per day. At the same time, a pipeline from San Cristóbal to the refinery was laid, adequate tankage constructed, a 3,000-ton tank steamer commissioned, and a standard-gauge railway built to transport products from the refinery—the gasoline, kerosene, gas oils, diesel oils, fuel oils, paraffin waxes, and asphalts which el Aguila would eventually launch on to the domestic market—the eight miles to the rail connection with the TNR.71 So confident was Pearson in the assured prosperity of the illuminating oil business that he predicted in 1906 that “by the end of the year we expect to have 6,000 tons a week of napthas and illuminating oils to sell. As the total consumption in Mexico is under 50,000 tons a year, this means that we should have minimum of 250,000 tons of such oils to dispose of outside of Mexico.”72 He instructed Body and Ryder to begin the search for domestic clients in Mexico. During 1906 Body entered into negotiations with the major railway companies (for example, the Veracruz and Pacific Railway and Mexican Railway), despite the fact that these companies had existing contracts with WPOC.73 At the same time, a Commercial Department was established in the firm’s London office to secure contracts to supply the growing British market for oil products, and signed a contract with the firm of C. T. Bowring in London (which would later be acquired by S. Pearson and Son) to supply kerosene and asphalt to the British market.74 The optimism of 1906 soon turned, however, to frustration.75 The refinery at Minatitlán did not become operational until March 1908 and was constantly dogged by lack of crude from the San Cristóbal field. In fact, the failure to find adequate supplies of exploitable crude was to be the source of greatest frustration to Pearson before 1910. Pearson sent monthly requests to Ryder for up-to-date reports on the current state of surveys and drillings, along with exhortations to extend the explorations to as many of the potential sites under contract as possible. Ryder’s reports—which occasionally showed exasperation with Pearson’s unrealistic expectations—argued that only so much could be done with limited resources, that it was futile to overextend the resources that existed, and that a more pragmatic approach should be adopted. For exam-


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ple, he wrote to London in March 1906 opposing the idea of extending explorations beyond the firm’s current operations: I dislike the idea, on account of it being so remote from our field of operations. I think what we ought to do for some time to come is to develop producing oil fields to the extent of ensuring an ample supply of crude for our requirements, and not take in new fields remote from our present fields until we have sufficient production. . . . To locate wells at remote places is not as easy an undertaking as you might imagine. In the first place, we do not have transportation facilities; in the second place, under the most favourable conditions it is a very difficult job; and in the third place it is extremely expensive. I think you will admit these are obstacles sufficient to support the stand we take that we should concentrate our operations . . . on those fields which will give us product with the least expenditure.76

Without regular supplies from his own wells, Pearson had to resort to buying Mexican crude from local competitors, and importing (and reexporting) refined oils from Oklahoma to supply Bowring’s in London. He was also forced to import crude from Texas to supply the six oilburning locomotives he had ordered for the Tehuantepec Railway in 1904. In order to remedy the lack of domestic crude, Pearson turned to other domestic producers. The deal signed in 1907 to supply crude from the Furbero well south of Tuxpan (the property of Percy Furber’s Oil Fields of Mexico Company, subsequently acquired by El Aguila in 1914) involved further expenditure to Pearson, since he was obliged to advance the funds for the construction of a fifty-mile pipeline to Tuxpan and a narrow-gauge railway in order to guarantee regular supplies.77 Even then, the first cargo of oil from the Furbero field was not received until May 1910, and its volume (600 barrels per day) was less than the contract had stipulated (between 2,000 and 6,000 barrels per day)—and much less than Pearson needed to maintain a profitable operation. These multiple difficulties led to growing frustration and to an intensification of activities during the course of 1908. First, the pace of, and expenditure on, surveying and exploration were increased, in the hope of discovering major new deposits which would solve the problems of supply. Second, Pearson hatched his plan to establish an independent company which would take charge of domestic sales and marketing in order to compete more effectively with the existing commercial monopoly enjoyed by WPOC. the formation of el aguila In July 1908 came news of a major strike at Dos Bocas in Pearson’s San Diego field, south of Tampico in the Faja de Oro in northern Veracruz.

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The well ignited and burned for fifty-seven days, consuming over one million tons of crude until salt water terminated the life of the well.78 Despite the unmitigated disaster of Dos Bocas, the discovery of substantial deposits gave Pearson renewed impetus to enter the domestic market. In order to do so, Pearson chose to set up an independent distribution company to market the oil-based products from the refinery at Minatitlán within Mexico. Pearson explained his business strategy in a private letter to his wife in February 1908: The company will trade only in Mexico, and I want Mexican capital to be invested. The oil interests on the Isthmus and the refinery would remain ours, and be devoted to the export business. This would mean that my interest in the Mexican company would in time pay for all our properties and expenditure, say in 3 or 4 years’ hence, and therefore the Isthmus property and the refinery, etc., would be the profit on the transaction. In other words I should get my money back in 3 to 4 years, and have the export trade as my profit. This will be a splendid way out for me. So naturally I am going to devote my best efforts to it—it being by far the most important business that needs settling. I admit it is an ambitious scheme but care and patience, etc, should bring it to fruit.79

As a result, the Compañía de Petróleo el Aguila was formerly constituted on 31 August 1908. As already indicated, its initial remit was limited to domestic sales and distribution, with exploration, production, refining, and the export trade left in the hands of the parent company. Those limitations were reflected in its initial share capitalization (Mex$100,000) and the composition of its board of directors, who were all existing employees of S. Pearson and Son.80 The new company immediately set about the task of acquiring sites for oil depots, and of establishing sales agencies throughout the length and breadth of the country. As in the case of the acquisition of land and drilling rights, this operation was carried out with remarkable speed. Already by the end of 1908, 77 agencies had been established. Just over one year later, in January 1910, the number of agencies had more than doubled to 162, 24 of which were staffed by salaried agents, 125 of which were agencies paid on the basis of commission on sales, with the remaining 13 “mixed” agencies recruited on the basis of a combination of salary and commission.81 As already suggested, one of the principal reasons for establishing a more effective weapon with which to penetrate the Mexican market for oil-based products was precisely the failure of the negotiations over a possible accommodation between S. Pearson and Son’s oil interests and WPOC which Pearson had initiated with Henry Clay Pierce, WPOC’s chief executive, in November 1907.82 Pearson had proposed that for a period of two years, in return for one-third of WPOC’s profits, the firm


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would supply WPOC with refined or partially refined oil-based products. He argued that this represented a favourable deal for WPOC, since the payment which would have to be made under the agreement to S. Pearson and Son would represent no more than 10 percent of WPOC’s annual profits. Here, as Jonathan Brown has pointed out, Pearson was effectively proposing a cartel between his firm and WPOC over oil production and the supply of the Mexican domestic market.83 The negotiations dragged on for an additional eighteen months but eventually floundered on the question of the market for fuel oil, which Pearson, as an oil producer, wanted to keep to himself, but of which Clay Pierce also wanted a share.84 They were further complicated by Clay Pierce’s simultaneous, but ultimately unsuccessful, attempt to negotiate a similar deal with Doheny’s Mexican Petroleum Company, and by a decision by the federal Circuit Court in St. Louis, Missouri, that Standard Oil was in violation of US antitrust laws (according to the Sherman Anti-Trust Act) and was therefore required to divest itself of over thirty affiliates, one of which was the Waters-Pierce Oil Company.85 The stand-off between Clay Pierce and Pearson led to further attempts by the latter to broker a deal with Doheny. In return for an agreement to cede to Doheny the disputed territories of Cerro Viejo (which, as indicated above, had been in dispute since 1908), El Aguila would receive a supply of crude from the Huasteca Petroleum’s Juan Casiano field and access to the Huasteca’s pipeline to transport El Aguila’s crude to Tampico.86 As an indication of the rancour which this “oil war” generated amongst its participants, Body explained that El Aguila’s main interest in this arrangement would be “my earnest desire to exclude Pierce from any chance to get crude or distillate from Doheny.”87 The failure of these protracted negotiations not only frustrated and angered Pearson, but also strengthened his resolve to boost the effectiveness of the weapon he had created to conduct his war with Clay Pierce—El Aguila. To do so, he now proposed to restructure the company and to give it exclusive control of exploration and production in Mexico’s most oilrich territories, and to reconstitute it as a Mexican company, the majority of whose board of directors would be Mexican citizens.88 He explained the strategy to his closest confidant—his wife—in March 1909: I am sure a Mexican business should be partly owned by Mexicans . . . a Mexican company would be assured of financial support much more than a foreign company, and I should feel our investment consequently would be on a safer basis than if entirely owned by us. . . . I should like what further money is needed to be found in this country and not by us.

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“This strategy,” he concluded with characteristic bluntness, was “wise, quite apart from it being convenient.”89 The “mexicanisation” of El Aguila in 1909 drew together a number of the strands of Pearson’s modus operandi and business strategy in Mexico. First, it represented a further opportunity to involve prominent members of the Porfirian elite and, thereby, to employ their services to lobby the Díaz government on behalf of Pearson’s oil interests. Elite lobbying would not only guarantee political support in the struggle with WPOC to dominate domestic sales, but also increase the likelihood that future sources of capital for a rapidly expanding and capital-hungry business would be found in Mexico.90 Second, mexicanisation pandered to the nationalist aspirations of the Porfirian elite and served to mitigate the growing fear that foreign (particularly US) corporations were taking over Mexico’s most important economic resources.91 Third, Pearson would retain control over what he considered to be the most lucrative aspect of the oil business—the export trade. Although this might have been considered something of a risk in 1909, given his frustrating experiences since 1901, there were now clear indications that his investment had every chance of paying off. In April 1909 Pearson had obtained a “secret” report to the US government written by C. W. Hayes, chief geologist of the Geological Survey Office in the Department of the Interior in Washington, on the extent, importance, and potential of oil concessions currently being explored by S. Pearson and Son. The report was very positive about the prospects, and Pearson commented to his wife that “when I heard his opinion—which is one to be valued—I nearly cried. But as I cannot shout until I am quite out of the wood I had to refrain from doing so.”92 A final, and equally significant advantage of registering his oil company overseas and not in the UK was that it would now escape the glare of a full listing on the London Stock Exchange, and would therefore be exempt from audit scrutiny and tax liabilities.93 The final step to mexicanise El Aguila necessitated an important modification in its title and constitution. In April 1909 it became the Compañía Mexicana de Petróleo el Aguila, whose board of directors now contained the flor y nata of the Porfirian political elite. Pearson’s longtime ally, Guillermo de Landa y Escandón, now governor of the Federal District, and Enrique Tron, owner of Mexico City’s first (and still most famous) department store, El Palacio de Hierro, and a member of the board of the Banco Nacional de Mexico, were entrusted with domestic sales. Enrique Creel, banker, former governor of Chihuahua, and Mexican ambassador to the United States; the lawyer Pablo Macedo, president of the recently mexicanised Ferrocarriles Nacionales de México; and Fernando Pimentel y Fagoaga, president of the Banco Central Mexicano, were entrusted


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with finance and investment. The lawyers Luis Elguero and Luis Riba (the latter El Aguila’s chief legal representative, who also acted for a number of other railway and tramway companies) were put in charge of land acquisitions and leasing contracts; and last, but far from least, Colonel Porfirio (“Porfirito”) Díaz, the president’s son, was allocated a position in the fuel oil sales team. El Aguila’s Mexican directors were to be generously paid for their services—either 2.5 percent of total earnings, or an allocation of bonds to the value of Mex$500,000 with a similar allocation of preference shares as a bonus.94 The strategy behind persuading so many prominent científico politicians, lawyers, and financiers to serve as either directors or “advisers,” and of rewarding them generously for doing so, was explained to Chairman de Landa y Escandón by Thomas Ryder, who became the general manager (gerente general) of El Aguila’s operations: Our principal objective, since the establishment of our business, has been to obtain those contracts whose importance would bring us, if not decent profits, given the current level of prices in this country, then prestige in the eyes of Mexican consumers, as a result of which we have constantly sustained an energetic campaign to obtain important contracts, calling frequently upon the assistance of our Advisers, as well as that of our friends. . . . Given the importance of this task, and the natural difficulties of persuading important companies who have for so many years been consuming the products of our competitors to change to us, I urge you to enlist the support of all of the members of the Board of Directors in order to expedite this task.95

The strategy was highly and immediately effective. De Landa y Escandón explained to Pearson in March 1910 the results which it had produced: You have no idea how many factories and mining companies have applied to us to supply them with fuel oil, and if we can make contracts with these large industries we can have a sure outcome for our production. . . . By selling this fuel oil, we shall always be in a better position to secure contracts for lubricating and refined oil.96

At the same time, however, the minutes of the board meetings of El Aguila reveal that a number of serious difficulties arose in fulfilling the terms of these new contracts, principally because of delays and deficiencies in production at the Minatitlán refinery. In August 1908, for example, the board was informed that sales would have to be strictly rationed to existing contracts. More serious, the failure to supply fuel oil to one of El Aguila’s most important clients, the Mexican Railway (Ferrocarril Mexicano), according to the terms of a contract signed in November 1908, led to claims for compensation in October 1910 by the railway company for

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the costs associated with reconverting locomotives back to running on coal, and the difference between the cost of the coal which they were obliged to purchase and that of the fuel oil they had already bought. There was little for the board to do but to accept the claim and pay compensation, and to provide a guarantee that the supply of fuel oil to the railway would resume from March 1911; otherwise El Aguila would again be liable to pay further compensation. The central problem remained the absence of adequate supplies of crude.97 Despite these serious setbacks, El Aguila’s penetration of the domestic market during 1909 continued apace. The response of Clay Pierce and WPOC was to reduce the price of their oil-based products, by as much as a third in some cases, and almost half in the case of kerosene, in order to retain their existing buyers and to hold off El Aguila’s attempts to undermine their market share. El Aguila’s management monitored the movement of prices very closely and adjusted their prices accordingly in order to compete. An open and aggressive price war ensued, backed up by a propaganda campaign spearheaded by a new post of head of the Department of Propaganda, and the publication of a company newspaper, which was distributed nationally.98 Pearson was convinced that the strategy was working, and that Clay Pierce was suffering commercially as well as personally as a result of the competition. He also claimed that sales had increased overall by a third and that, by the middle of 1909, El Aguila controlled 50 percent of the domestic market for illuminating oil, and 25 percent of the lubricating trade.99 The board of directors was informed in December 1909 that El Aguila was also now supplying 40 percent of the gasoline consumed within the republic. Despite fluctuations caused by the irregular shifts in prices generated by the intense competition, income from the sales of all Aguila products (illuminating oil, gasoline, lubricating oils and greases, paraffin wax, fuel oil, asphalt) between December 1908 and December 1909 rose from Mex$83,106 to Mex$303,446.100 The positive trends in sales continued throughout 1910, and at the end of the year the chairman was able to report that the first public issue shares on the London Stock Exchange had been a resounding success.101 These developments gave Pearson good grounds for optimism. On his first trip to Mexico since his elevation to the House of Lords in June 1910 as Baron Cowdray of Midhurst, Pearson, who now signed himself “Cowdray” in all of his correspondence, gave a very upbeat address to the board of directors of El Aguila at their meeting in October 1910—the first meeting of the board which Pearson had attended. He singled out the efforts of El Aguila’s managing director, Thomas Ryder, for particular


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praise, commending his energy and determination in establishing a successful business, especially in the face of tough competition from “such a well-known competitor” (referring to Clay Pierce). And he spoke of his optimism for the future of the oil business, both in terms of finding adequate supplies of crude, and in more general terms of overall commercial success.102 The final event in the birth narrative of El Aguila, and the most vital piece in the mosaic of oil interests which Pearson had assiduously assembled since 1901, occurred in December 1910, when what would become El Aguila’s most productive well, and the second-largest well anywhere in the world at the time (Potrero del Llano No. 4, near Tuxpan, Veracruz), was brought in.103 Although it took several weeks before it was brought under control, Potrero del Llano did not simply solve El Aguila’s persistent problem of adequate supplies of crude, but also proceeded to flow at the rate of 100,000 barrels per day for the next nine years, producing a total of well over 100 million barrels.104 In the short term, the supplies from the Potrero field increased El Aguila’s annual production from 210,000 barrels in 1910 to 3.8 million barrels in 1911. The repercussions for the Mexican oil industry were even more profound. With the almost simultaneous discovery in July 1910 by Doheny’s Huasteca Petroleum Company (HPC) of an equally productive well in the “Golden Lane” (Casiano No. 7, only twenty-five miles north of Potrero), the industry entered a dramatic new phase of development and expansion. National production (which effectively meant the combined production of El Aguila and HPC) rose from 3.6 million barrels in 1910 to 12.5 million barrels in 1911, and within a very short space of time Mexico would enter the ranks of the top three oil producers in the world.105 Pearson was now able not only to satisfy his original plans for self-sufficiency in production, refining, and transportation in order to dominate the Mexican domestic market, but also to construct new and more ambitious plans to compete in the export market with Standard Oil in the Americas and Royal Dutch Shell in Europe.106 The supreme irony of the dramatic transformation of El Aguila’s fortunes at the end of 1910 was that it occurred at precisely the same time as the equally dramatic political implosion of the government which had so carefully nurtured them. The outbreak of the Madero Revolution in November 1910 would be the catalyst for the rapid and unforeseen demise of the Porfirio Díaz regime six months later, following more than three decades in power. A further irony is that the subsequent decade of revolution and civil war certainly did not mean the end of Pearson’s interests in Mexico—far from it, since the production of and demand

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for oil-based products increased exponentially throughout the decade. Nevertheless, it marked a significant watershed in Pearson’s relationship with Mexico, which over the course of the next decade would not only transform the nature and scope of his business empire but also ultimately seal the fate of his Mexican enterprises.

chapter six

The Empire Strikes Back Revolution and Counter-Revolution, 1911–13

; One of the predominant trends in the recent historiography of late nineteenth- and early twentieth-century Mexico is the strong challenge which has been mounted to the traditional periodization of Porfiriato (1876– 1911) and Revolution (1910–20), above all, to their previous categorisation as distinct phenomena. In other words, for the post-1968 generation of historians of Mexico, the regime of Porfirio Díaz is no longer seen, as the “official” historiography of the postrevolutionary era had always proclaimed, as the antechamber of the Revolution, a corrupt, and brutal ancien régime overrun in 1911 by a modern, progressive egalitarian and fit-for-purpose revolutionary juggernaut.1 Instead, the Porfirian era is understood increasingly as a location of the roots of Mexico’s identity as a modern nation. A new historiographical consensus is emerging which sees the Porfiriato (a term which itself needs to be reexamined) as a period which witnessed the struggle to establish a modus vivendi between Mexico’s atavistic colonial and precolonial penchant for hierarchy and authoritarian political structures and the nineteenth-century cult of liberalism and constitutionalism; the struggle to stimulate capitalist development and industrialisation and graft them onto precapitalist structures and practices; and the profound and diverse cultural tensions generated within a nation emerging from its postcolonial past and seeking to cast off the shackles of “tradition” to embrace the ambiguous attractions of “modernity.” It was, in short, a “cultural crucible” in which the major themes and issues which would characterise political and cultural debate in twentieth-century Mexico—inter alia, indigenismo, mestizaje, hybridity, nationalism, development, globalisation—were first aired.2 Given these recent trends, it is more than a little ironic that these last two chapters will seek to restore the notion of the Mexican Revolution

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as a significant historical watershed. I do so, not as a challenge to current historiographical trends, but simply to emphasise the profound transformation in the nature of Cowdray’s Mexican interests which took place after 1911.3 This profound transformation occurred on two levels. First, at a more general level, the Porfirian modernisation and nation-building project with which he had been so intimately involved was severely jolted and damaged—but far from destroyed—by the decade of revolutionary violence. The short-term impacts on the domestic economy were certainly substantial, and Cowdray’s Mexican businesses were necessarily affected by the prevailing circumstances. However, at another level, there was a profound shift in the nature of those interests, which prior to the Revolution had encompassed public works contracts, railways, light and power companies, mining, commercial agriculture, and manufacturing. The fact is that, after 1911, Cowdray’s business interests became almost entirely dominated by oil. This was because oil became such a vital factor in domestic Mexican politics during the Revolution, and in international politics during the First World War. In the wake of these seismic shifts in the international significance of oil production, combined with the domestic political significance of economic sovereignty, Cowdray and the management team of El Aguila on the ground in Mexico necessarily had to adapt to these profound changes in the domestic and international environment. With more than two decades of experience in Mexico, Cowdray was familiar with Mexican political culture, and adept at dealing with the Mexican political elite. But the rapid changes in internal Mexican politics following the collapse of the Díaz government meant dealing with not only the consequences of the fragmentation of central authority between 1911 and 1916, but also the subsequent attempts to reconstruct or “reinstitutionalize” the state after 1917.4 In short, the rules by which domestic politics had operated prior to 1911—and the personnel which had operated it—were now subjected to profound challenges. New political faces and new political configurations emerged in this period, sometimes in bewildering profusion, each vying for political control, and each, in the context of the political debate over the nature of modernisation and nationbuilding which had characterised the final years of the Díaz regime, seeking to redefine the role of overseas capital and its regulation by the state. Beyond the borders of Mexico, the dramatic shifts in the politics of the North Atlantic, with the emergence of the United States as the major power in the Western Hemisphere, and the increasing importance of oil as the key to global military and industrial power, also required new accommodations and responses. To say that these new circumstances were challenging would be a gross understatement. The political stakes had risen commensurate with

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Cowdray’s political profile, and the polarisation of opinion inevitably generated by an era of revolution and war made him a controversial figure. As a result, Cowdray became the target not just of hostile rumour and criticism in the press both in Mexico and in the United States, but of a concerted and organised campaign to portray him as an archetypal robber baron bent on the rape and pillage of Mexico’s most valuable resource. It was Henry Clay Pierce—Cowdray’s principal rival in the Mexican oil business, who became the main instigator of the campaign of defamation—and who first articulated the notion that “Cowdray has taken more out of Mexico than any man since Cortés,” an accusation which would subsequently be repeated many times during the decade, and for many years after that.5 At the same time, El Aguila and the other foreign oil companies in Mexico were confronted with a political campaign orchestrated by the Constitutionalist faction led by Venustiano Carranza after 1913 to reverse Porfirian legislation, to restructure property rights and to renationalise subsoil rights on behalf of the nation. In the short term, this vigorous enthusiasm for economic nationalism—which had its origins in the colonial precept of patrimonial ownership of mineral resources by the Crown—coupled with the desperate need of the fragile Constitutionalist coalition to generate an adequate fiscal base for political and economic reconstruction, prompted the introduction of a series of measures designed to increase state regulation of the oil industry. This produced a raft of new and ever-higher state and federal taxes on oil production and property.6 In the longer term, these principles would lead to the nationalisation of oil in 1938 and the dissolution of the foreign oil companies operating in Mexico. Nevertheless, as Cowdray also understood very well, the very importance of oil gave him an important degree of leverage in his dealings with both local and national authorities throughout the decade of Revolution. In Mexico, its role as a vital source of revenue meant that El Aguila, assisted by erratic and sometimes contradictory pressure exerted by Washington and London, would be able to avoid serious interruptions to its business activities. While revolutionary factions of different complexions sought to control and regulate—and, above all, to tax—the activities of the foreign oil companies, they also recognised the necessity of allowing them to function. “My own feeling,” Cowdray astutely predicted in April 1912, “is that the oil industry will not be seriously interfered with by either revolutionists or bandits or instability of the Government. The interests that are involved are too great: they are owned by foreigners, and if they were stopped it would immediately stop the distribution of a great deal of money.”7 In short, foreign oil companies were certainly not powerless in the wake of revolutionary disturbances and ultimately were able

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to function profitably during the Revolution. At the same time, their activities were increasingly hindered by a proliferation of ad hoc and arbitrary demands, and eventually they had to concede to paying higher levels of taxation, and to the imposition of restrictions on their property rights by the revolutionary authorities.8 Beyond Mexico, the growing industrial and military significance of fuel oil after 1914 provided Cowdray not only with a growing and voracious market for his oil, but also with an important degree of political protection—which was, as we shall see, far from unqualified or uncomplicated—from the British and US governments, whose principal concern after 1914 was that the supply of Mexican crude continued to flow, directly or indirectly, into the engines of the Allied war effort. Control over oil supplies also helped to raise Cowdray’s political profile in the UK, culminating in a brief period as a member of Lloyd George’s war cabinet as president of the Air Board in January 1917. Nevertheless, there were also important limitations to the degree of influence Cowdray was able to exert. His attempts to influence British oil policy were ultimately sacrificed on the altar of the increasing deference shown by London toward Washington over Mexican policy after 1914. There had been earlier signs long before the Revolution that Mexico was far from a priority for the Foreign Office. Mexican Finance Minister Limantour, always acutely sensitive to the threats to Mexican sovereignty from the United States, had perceived a shift in British foreign and commercial policy toward Mexico as early as 1902. He commented to Guillermo de Landa y Escandón Cowdray’s closest ally in Mexico, that I fear that in the current climate, in regard to foreign policy, that England is minded to abandon its commercial interest in Mexico and Central America in favour of the Yankees. If the English behave this way they will leave us irredeemably at the mercy of our neighbours.9

There were further indications of the “cooling off” of British diplomatic interests in Mexico prior to the Revolution. Although France, Germany, Italy, Japan, and the United States had all sent special diplomatic missions to the Fiestas del Centenario commemorating the centenary of Mexican independence from Spain in September 1910, the UK had not been officially represented, on the pretext of the recent death of King Edward VII. This had prompted a lively exchange of views between Cowdray and the Foreign Office, after the latter had proposed instead a visit of “three small British ships” to Veracruz, as “compensation for absence of GB presence at the Centenario.” This rather feeble gesture was even criticised by the Admiralty itself, not on the grounds of inadequacy as a demonstration of British naval power, but because Veracruz did not


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have adequate facilities to accommodate “first class cruisers.” Cowdray, for his part, thought this gesture would “hardly be regarded as anything novel or impressive,” and that the Mexican government would be “greatly disappointed” if not insulted. Cowdray’s partner Clarendon Hyde told the Foreign Office that Lord Cowdray feels very strongly on this matter . . . no ships are better than small ships, for unless a really noteworthy display of British strength is provided there will be nothing to strike the Mexican national mind . . . at this juncture, when British interests are subjected to very severe competition from the US and Germany, it is of national commercial importance that some friendly demonstration on behalf of this country should be made in Mexico.10

In effect, Cowdray’s views had been ignored, and the only official British act in the centenary celebrations was a presentation by Cowdray at the head of a small delegation representing the British community in Mexico to President Díaz of a commemorative scroll at a formal but brief ceremony in the Castillo de Chapultepec.11 Aside from this challenging combination of revolutionary disruption and the shifting sands of international diplomacy, the main obstacle to the development of Cowdray’s oil business in Mexico was structural. Despite El Aguila’s impressive rate of expansion after 1912, it lacked the resources to compete with the most powerful of the oil multinationals, which also dramatically expanded their activities in this period. It became increasingly clear to Cowdray that the fate of El Aguila, therefore, ultimately lay in the hands of the chief executives of Standard Oil and the Shell Group. At the same time, although it may at first sight appear paradoxical, this extraordinarily volatile period also presented unprecedented business opportunities for Cowdray and El Aguila. The basic statistics tell their own extraordinary story. While domestic sales of illuminating oil in Mexico—the initial raison d’être of Pearson’s entry into the oil business— progressively fell victim to revolutionary disruptions, exports of crude boomed. Exports of Mexican crude (80 percent of which went to the United States, and 20 percent to the UK and the rest of Latin America) had risen from 900,000 barrels per year in 1911 to 180 million by 1922. The average price of a barrel of Mexican crude before 1914 was US$0.61, but by 1920 the average price had risen to over US$3. In the specific case of El Aguila, production rose from 210,000 barrels per year in 1910, none of which was exported, to 18,740,000 in 1919, of which two-thirds (12,524,000 barrels) were exported. Net profits of the company were registered at Mex$1,360,000 for 1912 but had risen to Mex$29,510,000 by 1919. The dividends paid to the holders of preferential shares began in 1911 (and to those holding ordinary shares in 1914) with a return of never

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less than 8 percent. Not only did dividends continue to be paid throughout the revolutionary years, but they also continued to rise, reaching 45 percent in 1919.12 Despite these spectacular and unprecedented successes, the radical shifts in domestic and international politics forced Cowdray to reassess his connections with Mexico. The period 1911–19 can therefore be seen as one of an uneasy juxtaposition of spectacular profits with growing personal disillusionment, which would lead ultimately to the gradual dissolution of Cowdray’s Mexican empire. Symptomatic of his diminishing interest was the fact that his visit to Mexico in 1912—which followed the pattern of annual visits established back in 1889—would be his last. Two key events in particular marked the definitive scaling down of Cowdray’s Mexican interests—the cancellation in 1918 of the partnership agreement with the Mexican government over the running of the Tehuantepec National Railway, followed in the spring of 1919 by the sale of Cowdray’s controlling interest in El Aguila to the Shell Group. These events should not be seen as an indication of weakness, still less of failure, since both of these negotiations were favourable to Cowdray—the latter especially so—in financial and personal terms. But they effectively meant the end of the Pearson business empire in Mexico. This personally left a very bitter taste for Cowdray. As he commented after a particularly frustrating meeting with Foreign Secretary Arthur Balfour in June 1918, having once again failed to persuade the British government to act decisively to protect his interests in Mexico: “After 30 years unequalled activities in Mexico, to now see our work, day by day wasted, is simply killing me.”13 However, while the business activities—and the profits—of El Aguila witnessed a dramatic expansion over the decade, it is also clear that Cowdray’s relationship to Mexico had begun to change radically long before 1919. An internal memo in January 1914 revealed the essence of his business strategy in Mexico during the decade of Revolution: “No more bids for public works; Sell oil interests without financial loss; Maintain political neutrality from all factions.”14 It is worth examining these priorities in greater depth, since they provide a useful framework for understanding the narrative that follows. The first of these goals was relatively straightforward to achieve, but for largely negative reasons, since very few of the governments which came to power during the Revolution were in a position to finance major public works.15 Even if they had, Cowdray’s close association with the now-demonised Díaz government would have made any tender for government contracts highly controversial. The changes in political mood and in the previous relationship which had been enjoyed with the Porfirian political elite was made plain to Cowdray in August 1912 when his


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firm lost the contract with the Madero government for the dredging of the isthmus ports to a US company. At the same time, Cowdray’s Mexican manager, John Body, was forced to accept terms for a construction contract in Puerto México which he admitted was unlikely to generate any profit to the firm.16 The restoration of Porfirian political connections and practices following the coup of General Victoriano Huerta in February 1913 promised a return to Cowdray’s former position of most-favoured overseas businessman and contractor in Mexico. But it was short-lived, and despite numerous rumours of lucrative contracts being offered to Cowdray, only one was signed, for the construction of a dry (or graving) dock at Veracruz, a project first mooted in 1901 but ultimately rejected by Limantour (see Chapter Three). But the shadow of bankruptcy which plagued Huerta’s brief administration from the very start meant that the contract was never carried out.17 After the overthrow of Huerta and the outbreak of civil war in 1914 there were no public works contracts of any sort on offer. The achievement of the second goal—to sell his oil interests—was more complicated, because although the sale depended ultimately on Cowdray’s assent, there were a number of other factors which impinged upon the negotiations. Some of these related to the domestic political uncertainties in Mexico, others to the disruptions and dislocations which followed from World War I, and still others to the attempt by governments in the United States and the UK to ensure vital supplies of crude for the Allied military campaigns. Although these unprecedented circumstances required the utmost flexibility and adaptability, it is possible to discern a clear strategy guiding Cowdray’s approach. He knew that the major players in the international oil business—Standard Oil of New Jersey, and the Shell Corporation—would be interested in gaining access to El Aguila’s significant production of crude, but he wanted first to build up the sales and distribution networks in order to strengthen his hand in the negotiations. Ultimately the sale of El Aguila would depend upon the interest shown by the company’s major suitors—but Cowdray wanted to be able to negotiate from a position of strength.18 With his tongue only loosely lodged in his cheek, he told the vice president of El Aguila, C. W. Hayes, in the context of the first approach made by Royal Dutch Shell in 1912 that “until we were earning a million pounds a year, which is the goal I have in front of me, I did not care to talk about them becoming interested.”19 The third goal—the advocacy of noninterference in politics—not only was intrinsically difficult in a period of political upheaval, but it was also both disingenuous and utterly inimical to Cowdray’s entire modus operandi in Mexico. One of Cowdray’s principal strategies, and principal successes in pursuit of his business interests in Mexico had always been

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the assiduous cultivation of close contacts with the political elite. As a result, noninterference had never been, and was never going to be, an option as a business strategy. It is commonplace, of course, to note that whenever businessmen advocate “the need for political stability as a pre-requisite of entrepreneurial activity,” or the “freedom to conduct business free of political interference,” or—as Cowdray increasingly claimed in this period— that they “never interfere in politics,” they are engaging in overtly political activities. What Cowdray’s comment reflected in part was that, given the polarisation of political allegiances and the proliferation of factions during the Revolution, it was often difficult to assess the political strengths of the different contenders for power. At root, it demonstrated the extent to which his political fortunes had changed since 1911. “Neutrality,” or “noninterference,” therefore made good business sense, but only when current political configurations were working in his favour, as they had done consistently before 1911. When they were not, as was increasingly the case after 1911, the need to lobby to attempt to influence strategy and policy became ever more urgent. As a consequence, however many times Cowdray asserted—as he did, for example, in August 1911 to Francisco Madero—that he and his firm “had never mixed in politics in this country,” does not mean that it was true.20 There is substantial evidence to suggest that it was not true, particularly during the Huerta dictatorship between February 1913 and July 1914, when Cowdray’s blatant and direct interference in Mexican politics led him into serious difficulties from which, ultimately, he found it impossible to extricate himself. Having had his political fingers badly singed by his relationship to Huerta, he necessarily took a more detached view of Mexican politics after 1914, conscious of the fact that his relationship to Huerta had scarred his reputation and that he was, at least as far as the major contending factions in the internecine war were concerned, now persona non grata. This meant that, for the first time since he had arrived in Mexico in 1889, he would be more cautious in his involvement in domestic politics, although this certainly did not mean that he stopped doing so. cowdray and madero As the Mexican government’s principal overseas agent in channelling the vital resources of foreign capital, technology, and expertise to Mexico’s national development project, Cowdray had seen his success and fate to a remarkable extent become entwined with those of the Díaz regime. Consequently, the unexpected resignation and forced exile of Díaz in May 1911 signalled a potentially serious blow to Cowdray’s interests in Mex-


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ico.21 However, with all the key components of his oil business now in place, especially since the discovery of major deposits in December 1910 had solved the most serious problem he had encountered since entering the oil business in 1901, Cowdray was determined to continue to develop his Mexican oil interests. This he was largely able to do between 1911 and 1914. After 1914, however, he was faced with more serious obstacles. Previous chapters have provided extensive evidence of the intimacy between the Pearson interests and those of the Díaz regime, of the assiduous construction of a clientalist network, and of Cowdray’s role as government agent. This intimacy manifested itself again during the regime’s final agonies. In April 1911, during the tense negotiations between the armed supporters of Francisco Madero’s Antireelectionists and the Díaz regime in El Paso which culminated in Díaz’s resignation, Cowdray engineered a personal meeting with US President Taft, brokered by US Attorney General George Wickersham, a member of the law firm (in which Taft’s brother was a partner) which acted for S. Pearson and Son in the United States. Cowdray tried unsuccessfully to persuade Taft, and Secretary of War Jacob Dickenson, that the US government should relieve the pressure on the Díaz regime caused by the deployment of 20,000 troops to the US-Mexican border, widely perceived in Mexico to be a hostile act. He told Taft that US Ambassador Henry Lane Wilson was of “a highly sensitive nature . . . believing every cock and bull story that he heard,” and was therefore exaggerating the dangers to US lives and property. He tried to be more positive in his subsequent report to Mexican Foreign Minister Manuel Zamacona, explaining that for Taft, US intervention in Mexican affairs “would be the very last thing in the world that they desired.”22 Further evidence of intimacy and agency was provided by the role of Cowdray’s principal aide-de-camp in Mexico, John Body, in making the secret arrangements for ex-President Díaz’s ignominious departure before dawn on the day following his resignation speech to Congress on 25 May.23 Body accompanied Díaz to Veracruz, where he and his family stayed for the next five days in Body’s house awaiting the departure of the German steamer Ypiranga, which would take him into permanent exile. In further recognition of the debt he personally owed to Díaz, Cowdray offered Díaz and his family his 1,000-acre family estate at Paddockhurst in Sussex for his exclusive use for the rest of his life, even offering to pay for all expenses, including those of a private secretary.24 However, unlike so many foreign businessmen and entrepreneurs who would eventually flee Mexico during the Revolution, Cowdray showed every intention of staying in Mexico after the fall of Díaz. He had very

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good reasons for doing so. First, as he explained to Body, significant investments were already under way: “we are too committed to pull out . . . steamers are under construction and on stream next year. The solution is to plough ahead and negotiate contracts for the supply of crude or fuel oil.”25 Second, as Body intimated, there was a strong possibility that excellent relations could be established with the Madero government, given that many of the individuals tipped to occupy posts in Madero’s cabinet, particularly the President’s uncle Ernesto Madero (finance) and Rafael Hernández ( justice), were personally known to him and to the “Chief.”26 Body was also pleased to discover in October 1911 that the new governor of Veracruz, where their major oil fields were located, was Miguel Huidobro de Azúa, a lawyer who had acted on behalf of El Aguila in the acquisition of land leases.27 Using the tried-and-true Pearson strategy, Body embarked upon a campaign to secure further advantages in the relationship with the Madero government, which soon began to bear fruit. “I have made arrangements,” he explained cryptically to Cowdray, “with personages to champion our cause when needed.”28 While relationships with Madero’s inner circle of advisers were being established, Body and Cowdray lost no time in making personal contact with Francisco Madero, the man who would succeed Díaz as president in November 1911. The private meeting took place in August 1911, three months before Madero assumed presidential power, in the house of José Urquidi, subsecretary of communications in President Francisco de la Barra’s interim administration.29 First and foremost, Cowdray sought and received assurances from Madero that he considered the concessions granted to El Aguila by the Díaz government to be legally constituted, given that the firm had “invested a sum nearly equalling 100m. Mex in the oil business, that he proposed to invest a further 60 million pesos that the public had invested 10 million Mex in shares of El Aguila.” His next major concern was to hear Madero’s views on the position of Standard Oil, especially in the light of rumours that the maderista revolution had been partially financed by them. Madero assured Cowdray that “his party had no relations with Standard Oil, and that the money they had got for the revolution was entirely Mexican; that his father had raised loans on his property and that the total cost of the revolution had only been US$350,000 gold. They would look with suspicion on the entrance of Standard Oil into Mexico, and he hoped therefore that we would not sell out to these people, although he acknowledged that he had no right, nor had the Government, to prevent our doing so.”30 The final issue raised by Cowdray with Madero was one that would cause him a good deal of anxiety and frustration in the coming years—the appearance of hostile reports in the Mexico City press to the effect that


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Cowdray’s close association with the Díaz regime had been either corrupt, based upon bribery and the liberal distribution of free shares in El Aguila to government officials, or illegal, having obtained his oil concessions fraudulently, and that as a consequence, he was hostile to Madero and conspired to overthrow him.31 Cowdray was in no doubt that the instigator of these press attacks was his old rival Henry Clay Pierce.32 He had been familiar with Clay Pierce’s less than scrupulous tactics since the outbreak of the oil price war in 1909.33 He nevertheless asked for Madero’s assistance in refuting the recent spate of press attacks on Cowdray or El Aguila which had begun to appear in the Mexico City press. Madero gave his word that he would.34 There is nothing to suggest that Cowdray was anything other than encouraged and reassured by the outcome of his meeting with Madero. The only possible issue of contention between Cowdray and the Madero government was the latter’s attempt to introduce state and federal taxes on oil production, of which the oil companies in Mexico had been entirely exempt as part of the contracts negotiated with the Díaz administration in 1901 and 1906. The first skirmishes in what would become a major bone of contention between foreign oil companies and a succession of governments during the Revolution occurred in June 1912 during an attempt to impose a local (state) production tax (of 14 cents per ton on crude) by the state government of Veracruz.35 The continued deterioration in federal government revenue prompted an attempt to raise additional stamp duties (20 centavos per ton) on oil exports in October 1912. El Aguila was keen to negotiate an agreement with the government on the method of payment, not on the principle of taxation itself, but Doheny’s Mexican Petroleum Company and other US oil companies mounted a legal challenge to the principle of taxation per se, which they claimed to be confiscatory and illegal. In January 1913, a month before the coup which removed Madero from office, a congressional committee discussed raising the stamp tax from 20 centavos to 1.2 pesos and prompted a meeting between Body, Enrique Creel (president of El Aguila), and Ernesto Madero, who admitted privately that the tax was not viable and would not be presented to Congress.36 The issue languished in the courts until after Madero had been deposed. The issue of taxation was not, therefore, one which caused a rift between El Aguila and Madero, and nor would it be with Huerta. This was confirmed in a conversation which took place in February 1914, one year after the coup, between Ernesto Madero and John Body, in which Madero recognised that Pearson’s firm “had been friendly to his nephew’s government, the same as he believed we had been to the previous one, and did not believe that we were acting in another way to the present provisional

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government.” Moreover, Madero expressed his satisfaction that Cowdray’s representatives were “the only ones who had immediately conformed to the taxation his Department had put upon the Petroleum Industry when it was needed to help the Government in their financial straits.”37 There is, therefore, no evidence that Cowdray or the management of El Aguila was ever guilty of conspiring against Madero or his government, since they clearly had no reason to do so. In fact, there is evidence that Cowdray used whatever political influence he had to assist the hapless Madero in withstanding the numerous challenges to his authority which erupted from the moment he took office in November 1911.38 When a serious rebellion broke out in Chihuahua in March 1912 led by Pascual Orozco, one of Madero’s erstwhile allies in the early campaign in the north of Mexico in 1910 and 1911, Cowdray was asked by Ernesto Madero (through the mediation of Enrique Creel) to use his connections with the Taft family to add his voice to those who were demanding that President Taft prohibit the sale of munitions from the United States to rebel forces. It certainly cannot be argued that Cowdray’s intervention tipped the balance in favour of an arms embargo, since there were more influential lobbyists also involved (such as the American business community in northern Mexico, in particular), but his efforts were nevertheless appreciated. Following the implementation of the embargo, Cowdray received a letter from Ernesto Madero expressing “the gratitude of the Government for your efficient co-operation.”39 The only time that he might have been tempted to intervene directly into domestic politics in this period was in response to a request from Colonel Félix Díaz, the nephew of ex-President Díaz (whom Cowdray described as “our old friend”) to provide what was euphemistically described as “cash sympathy” for the rebellion which Díaz launched against Madero in Veracruz in October 1912. Wisely, in this case, given that the rebellion was crushed almost as soon as it had begun with hardly a shot being fired, Cowdray turned down young Díaz, and repeated the familiar but disingenuous mantra he always evoked whenever he wanted to avoid charges of complicity: “It is quite impossible for us to become partisans of any faction.”40 He was also clearly anxious not to upset the connections he had been establishing with the Madero government. This would not be the last time, however, that Cowdray would correspond with Félix Díaz. The next time he would be far more supportive.41


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restructuring el aguila While the revolutionary disturbances continued to have a disruptive impact on domestic sales, Cowdray’s principal concern in 1912 was less with the gathering storm clouds of Mexican domestic politics than in the need to restructure El Aguila’s internal organisation, to make further substantial investments in infrastructure, and to establish new companies overseas to facilitate the exponential growth in the export trade.42 One of his early priorities following the collapse of the Díaz government in 1911 had been to reconstitute the board of directors, partly out of strict necessity because some had followed Porfirio Díaz into exile (such as the lawyer Pablo Macedo and president of the board of directors, Guillermo de Landa y Escandón), and partly because their proximity to the Díaz regime, which had been so valuable to Cowdray between 1910 and 1911, was now perceived as a liability. This pragmatic marginalisation of the most prominent members of the Porfirian elite can be seen in Cowdray’s decision to remove Porfirito Díaz, the ex-president’s son, from the board of directors of El Aguila in November 1911, a decision which he described as being “in the best interests of the company.”43 However, some of Cowdray’s closest Porfirian advisers were kept on the payroll. Guillermo de Landa y Escandón was retained in an advisory capacity (consejero propietario) until July 1915, and prominent porfirista Enrique Creel, who had taken over from de Landa y Escandón as president, remained on the board of directors until his resignation in February 1914.44 Nevertheless, none of the new appointments to the board of El Aguila after 1913, in contrast to the policy adopted under the Díaz regime, were made on the basis of political and social connections, but were either employees of the company, or “insiders” who had business connections with the firm. Despite the previous emphasis on the supposedly “Mexican” character of El Aguila since 1909, there also appears to have been a distinct process of “de-mexicanisation” taking place. By 1916 the accountant Francisco Diez Barroso, appointed in 1913, was the only Mexican national left on the board of directors. Appointments to the board made after 1913 included El Aguila’s chief geologist, the American C. W. Hayes, and El Aguila’s accountants J. de C. Ballardie and A. D. Anderson, the French banker Georges Bénard (Cowdray’s stockbroker in Paris, who also worked on behalf of Royal Dutch Shell), and Walter Morcom, the general manager of the Mexican Railway Company; in January 1916, Thomas Ryder became El Aguila’s president. There appears to be, however, no direct evidence that de-mexicanisation, if such a term is appropriate here, was ever a strategic decision, but rather an accident of circumstance.

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It certainly reflected the fact that El Aguila’s main concern after 1914 was the export, and not the domestic, trade.45 There were further significant changes to the internal organisation of El Aguila’s activities. The division created in 1909 between leasing, exploration, and production in the northern Veracruz oil field (in the hands of El Aguila) and exploration and refining in the isthmus (in the hands of S. Pearson and Son) was centralised and brought under the sole control of El Aguila. This facilitated new investment in infrastructure made necessary by the dramatic increase in the production of crude at Potrero. In 1911 a pipeline with a daily capacity of 30,000 barrels was constructed to connect the Potrero field with the port of Tuxpan. In 1912 construction began on a new refinery on the Panuco River near Tampico with an initial capacity of 10,000 barrels per day (bpd), increasing to 20,000 bpd by 1920. As a result of this substantial investment, by the end of the decade, a total of 175 miles of pipelines were able to pump 80,000 to 100,000 barrels on a daily basis (less than half the estimated 200,000 bpd extracted) from the oil fields to the ports of Tuxpan and Tampico, and to the refineries at Minatitlán and Tampico, which themselves had a combined capacity to process 55,000 bpd. The rest was stored in steel tanks with a combined capacity of six million barrels.46 These figures explain one of El Aguila’s persistent structural difficulties throughout this period—the fact that more oil was produced than could be adequately pumped, stored, or processed; in other words, as Jonathan Brown has argued, El Aguila failed to achieve a “balanced integration” between its capacities of production and those of refining, transportation, and commercialisation.47 This was one of the reasons why Cowdray would ultimately sell out to a company with greater resources and capital. As already indicated, it was clear by the beginning of 1912 that the principal focus of Cowdray’s oil operations had become the export trade.48 This explains why much of Cowdray’s energy and attention throughout that year were focused on the establishment of separate companies in London to handle marketing and transportation of oil exports. In January 1912 the Anglo-Mexican Petroleum Products Company (AMPPCo) was established, with Cowdray’s twenty-five-year-old son, Clive Pearson, as chairman, in order to market El Aguila’s products outside Mexico. By 1914 AMPPCo had established offices and depots in New York, Guatemala City, Belize, Rio de Janeiro, Santos, Buenos Aires, Canada, Uruguay, Paraguay, and Chile, and through its head office in London was supplying not only the Royal Navy but also railways in Russia.49 In February 1912 he formed the Eagle Oil Transport Company (EOTC—under the joint control of El Aguila and S. Pearson and Son) and immediately ordered


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twenty tank steamers (ten of which had a capacity of 15,000 tons, the largest tankers then in existence).50 In March 1912 Cowdray made a significant breakthrough in finding a solution to his single greatest problem in these years—securing an international buyer for the growing supplies of Mexican crude which El Aguila did not have the capacity to process. He travelled to New York and personally negotiated a contract with Standard Oil of New Jersey (Jersey Standard) to supply ten million barrels of crude over a five-year period. In providing a guaranteed market, and guaranteed profits, the deal arguably provided a lifeline crucial to El Aguila’s survival. At the same time, it was clearly a much better deal for Jersey Standard than it was for Cowdray. Jersey Standard was still adjusting in March 1912 to the antitrust order made by the US Supreme Court in June 1911 which had obliged Standard Oil to divest itself of its subsidiaries (including the Waters-Pierce Oil Company) and thus deprived it of supplies of crude from US production companies which it needed to fulfil its contracts.51 The deal with Cowdray thus provided Jersey Standard with not only additional supplies of crude but also very inexpensive ones—the price per barrel offered by Cowdray was considerably less than that available from other Gulf Coast suppliers. At the same time, Cowdray agreed that El Aguila and AMPPCo would not attempt to market El Aguila’s products in the United States, although apparently they would be allowed to do so in South America. This deprived El Aguila and AMPPCo of the opportunity to participate in the world’s most dynamic oil market at the very time AMPPCo was setting up its worldwide marketing operations. It is possible to speculate that Cowdray was prepared to concede more generous terms to Jersey Standard in the hope of securing an even more comprehensive settlement—the sale of his entire Mexican operation to Jersey Standard. No doubt to his disappointment, the proposed deal, which he had offered in strict secrecy, and apparently without the knowledge of his closest associates, failed to materialise. Cowdray had told the president of El Aguila, Enrique Creel, that “so far as we know the Standard Oil Company is not interested in any shape or form in the Aguila shares,” which was strictly true, but clearly also misleading.52 Not without irony, the main reason given to Cowdray for the failure of the negotiations by John D. Archibold, the president of Jersey Standard, was that his company wanted first to settle its internal dispute with Clay Pierce and WPOC before getting further involved in Mexico.53 To soften the blow, Cowdray and his son Clive Pearson were invited as guests of honour to a lavish banquet in New York, at which Archibold apparently made a public apology to Cowdray for the way in which he had been treated by Clay Pierce, one of Archibold’s former associates.54

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Whether it was coincidental, or whether word had spread that Cowdray was seeking to negotiate, the French stockbroker Georges Bénard (whom Cowdray described as “our French Director”) also approached him in March 1912 to pass on an approach made to him in Paris to establish an “understanding” between the Royal Dutch and the El Aguila. The approach was part of the strategy of the Royal Dutch (formed through the amalgamation of Royal Dutch and the British company Shell Oil Transport in 1907) to seek new oil fields in the Americas, having first established itself in Trinidad, and then in Venezuela in 1912. The proposal made in 1912 was either to establish a company, jointly financed by Pearson and Royal Dutch Shell, but managed by the latter, to distribute the products of both companies in the Americas (starting with Argentina and Brazil), or, more boldly, to establish a joint “Manufacturing and Marketing Company” to construct refineries and the necessary “distribution organization” in all countries, to be financed by Royal Dutch, “to construct a line of Fuel Depots encircling the World, so that we could contract with Steamship Companies giving them the advantage of a Fuel supply at every point where they might touch.”55 Cowdray, however, was apparently unimpressed by the proposal, and wary of entering an arrangement which effectively would mean a takeover of his oil interests at a time when they were relatively weak and just beginning to be established. He was nevertheless impressed with Royal Dutch’s ambitions, as he explained to the vice president of El Aguila, the geologist C. W. Hayes: The Royal Dutch will be most formidable competitors, and if they came into business they might spoil the position we shall otherwise have, as no other company could do. By that, I mean that they are very energetic, enterprising, with endless resources and are great transport people. I know their ambition is to get into Mexico, secure a big supply of crude, and with it their fields in Roumania [sic] and the East Indies, to circle the globe with a chain of fuel oil stations.56

Aware that Royal Dutch’s interest was in gaining access to El Aguila’s crude, Cowdray was anxious to bide his time, to wait until his distribution and transport facilities which he was investing in so heavily enabled him to consolidate his position and therefore put him in a stronger negotiating position. He therefore instructed Hayes, with a characteristic combination of canniness and cunning, to “extend what courtesies you can” to Royal Dutch’s representative to be sent to Mexico, making sure to give him the impression that “we have by far the finest Oil properties in Mexico” and that “there are few remaining lands of any value to be acquired,” whilst at the same time refusing to allow Royal Dutch geologists access to El Aguila’s properties. The negotiations continued, but came to end as a result of Cowdray’s insistence on a “sale for cash.”57


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As Jonathan Brown has also pointed out, acquiring oil fields in Mexico and Venezuela would give Royal Dutch Shell access to the US market— the most coveted of all. As a result, having failed to secure an “understanding” with El Aguila, Royal Dutch set up its own subsidiary in Mexico, the N. V. Petroleum Maatshappij La Corona, which continued to develop throughout the revolutionary years, becoming one of the five most significant oil companies in an increasingly competitive Mexican oil business, alongside Huasteca, El Aguila, Penn-Mex, and Standard Oil.58 Although they had been temporarily thwarted in their approach to El Aguila, Royal Dutch had certainly not discounted the possibility of a future arrangement.59 the murray contract in colombia, 1913 One of the most interesting aspects of Cowdray’s supposed “gentlemen’s agreement” with Archibold in March 1912 was the latter’s endorsement of Cowdray’s attempt to extend his search for oil in Latin America. This led, indirectly, to a curious episode which revealed clearly the extent to which British and European business interests in Latin America in general, and Cowdray’s interests in particular, were increasingly circumscribed by Washington’s more aggressive interpretation of the Monroe Doctrine after 1913. It would have important repercussions for the future of Cowdray’s interests in Mexico, and suggests, at the same time, that the “gentlemen’s agreement” with Standard Oil was not worth the paper that it was (not) written on. In 1912, Cowdray recruited Lord Murray of Elibank, a prominent businessman and former MP and Chief Whip, and chief fund raiser of the Liberal Party, and, like Cowdray himself, recently elevated to the House of Lords, to head a new department in AMPPCo whose primary function was to search for new international oil ventures. This followed Murray’s retirement from the House of Commons as a result of the Marconi scandal, which had exposed the “corrupt” connections between prominent members of the Liberal government, the award of government contracts, and subsequent insider trading of shares on the London Stock Exchange.60 In January 1913 Cowdray set Murray on a mission to negotiate oil concessions and public works contracts with the governments of Colombia, Ecuador, and Costa Rica.61 Murray was able to successfully draft and sign contracts for oil exploration, pending the approval of the Colombian Congress. However, once the details of these contracts became known to US Secretary of State William Jennings Bryan, he declared that

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they represented a threat to the Monroe Doctrine and specifically to US interests in the Panama Canal, then nearing completion. “You will inform President Restrepo discreetly and verbally,” Secretary Bryan wrote to the US minister in Colombia, “that the United States is not indifferent to the proposed concession to Pearson and Son by the Colombian Government, and that the United States, in principle, does not feel in sympathy with concessions to companies whose close relations to European governments seem to place their activities as such in a political and commercial field.”62 Rumours subsequently circulated in diplomatic circles in Bogotá to the effect that if the Pearson contract went ahead, the compensation which had been offered by the United States to Colombia in relation to the “independence” of Panama (some US$20 million) would be in jeopardy. In these circumstances, the Colombian Congress was never likely to approve the Cowdray concession. With the Foreign Office refusing to intervene to support Cowdray’s position, Murray was placed under considerable pressure and had little option but to withdraw from the negotiations.63 In December 1912 Cowdray wrote to Foreign Secretary Sir Edward Grey, quoting a newspaper report on an official announcement from the White House to the effect that the US government had not, either directly or indirectly, influenced the withdrawal of S. Pearson and Son from the development of oil in Colombia: While this, I assume, as an official announcement by the US might be contended to be literally accurate, the impression it gives is certainly most misleading. The US might say with truth that they have not approached us on the matter, but it is equally true that they have used their utmost influence on the Colombian Government to prevent the concession being granted. . . . In justice to the US officials I think I ought to state that the American Ambassador here told me that the fear in Washington was that the Concession we were asking for would give us a great hold on Colombia. . . . If our proposed concession had been of the all absorbing nature the US Government appeared to consider it had, but which their Ambassador at Bogotá must have known was wrong, I can understand their objection. But I most strongly feel that as our Concession was merely a commercial one for a specific trade—that of oil—their pressure unquestionable but possibly indirect upon the Colombian Government to prevent such a Concession being granted to us was quite unwarranted.64

The loss of the Colombian contract did not in itself represent a great blow to Cowdray’s oil interests. Murray turned his attention to Europe, North Africa, India, and the Far East, signing concessions on behalf of S. Pearson and Son in 1913 and 1914 in Austria, France, Algeria, Morocco, Tunis, Baluchistan, and the island of Sakhalin off the eastern coast of Siberia.65 What would be of much greater concern for Cowdray was the


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growing recognition that the British government would not support, least of all protect, British business interests in Latin America if it were perceived in Washington that they ran counter to US interests. Added to this was the realisation that the attitude of the newly elected government of President Woodrow Wilson would be overtly hostile to European companies operating in Latin America, deeming their activities as both, to quote Wilson himself, “harmful and imperialistic,” and detrimental to US interests.66 In the short term, in an explicit acknowledgment of the weakness of his position, Cowdray bowed to the inevitable, and, at a subsequent meeting with US Ambassador Page in London, he agreed that his firm would not attempt any new undertakings in Latin America without first canvassing Washington’s views.67 As a result, Cowdray concentrated after 1913 on attempting to strengthen El Aguila’s increasingly vulnerable position, either through a partnership arrangement with, or a takeover by, another oil major, such as the one he had proposed in 1912 to Jersey Standard (his favoured option). After 1914 Cowdray would also advocate a partnership with the British government, whose dependence on oil for naval purposes made it increasingly necessary for the Admiralty to identify and protect safe sources of supply. Both of these goals would, however, prove to be elusive. cowdray and huerta The pronuncimiento (coup d’état launched by rebel generals within the Federal Army) of early February 1913, after a brief period of infighting which brought the armed conflict to Mexico City for the first time since the outbreak of the Revolution, led to the overthrow of Madero and the assumption of executive power by General Victoriano Huerta. The coup, and the subsequent murder soon afterward of President Madero and his vice president, Pino Suárez, would have far-reaching consequences for the escalation of domestic conflict. It not only failed to restore stability to domestic politics, but significantly destabilised and polarised them, and made the restoration of order by officers of the Federal Army—the coup’s principal raison d’etre and raison d’état—more, not less, elusive. Confronted almost immediately with a broad spectrum of domestic opposition and armed rebellion within Mexico, combined with overt hostility from Washington, Huerta’s permanently beleaguered administration would last barely seventeen months before he was forced into exile. For Cowdray, the promise of the restoration of order offered by Huerta proved to be highly seductive, and it led him into making the most serious

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errors of political judgement in his career in Mexico. This, in turn, exposed him to further damaging accusations by his enemies in Mexico and the United States of open collusion with the Huerta government. At the same time, the growing levels of productivity and profitability of the oil business in Mexico meant that El Aguila and other foreign oil companies came under growing pressure as an obvious and most convenient source of tax revenue to sustain both government expenditure and, ironically, local “revolutionary” mobilisations in the areas where the oil fields were located. As a consequence, representatives of the oil companies on the ground had to be very alert to the local consequences of political decentralisation and destabilisation and make a series of ad hoc arrangements with local caciques and intermediaries in order to keep at bay the attempts by different revolutionary factions to occupy the oil fields, and to keep the wells pumping.68 A great deal has been already written on the question of the degree of support Cowdray demonstrated for the Huerta regime, and the degree of influence he exerted over British policy toward Mexico in this period. The controversy centres on the early official diplomatic recognition afforded by the British government to Huerta, in stark contrast to Washington’s failure to do so, and to the overt hostility of US President Woodrow Wilson to the Huerta government, which Wilson famously described as “a government of butchers.” Huerta’s removal from office appears, in fact, to have become Wilson’s personal crusade.69 The different conclusions drawn as to Cowdray’s complicity or innocence have been largely determined by the sources used to reconstruct the narrative. Those based primarily upon British sources (including those of the Foreign Office as well as Cowdray’s private papers) have tended to downplay Cowdray’s influence over both the Huerta administration and the British Foreign Office, while those based upon US diplomatic, business, and journalistic sources have tended to argue the opposite—that Cowdray’s influence was decisive, dangerous, and nefarious.70 It is important to remember amidst all the speculation and accusation that Cowdray’s principal interest throughout this highly turbulent period in Mexican domestic politics was the smooth and profitable functioning of the oil business in which he had invested so much time and energy since 1901. As he saw it, the very turbulence of the political situation required him to attempt to intervene and lobby wherever and whenever he could to influence the policies adopted by the Mexican, British, and US governments which would have far-reaching consequences for his oil business. This was entirely consistent with the modus operandi he had always adopted in Mexico. Now, however, not only were the stakes more uncertain, but they were also considerably higher.


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Cowdray’s initial enthusiasm for the consequences of the coup of February 1913 (rather than for the coup itself, it must be emphasised) was not because the Madero government had represented a serious threat to his interests—which it clearly had not—but because the restoration of patriarchal authority through an alliance of the Federal Army and the vestiges of the Porfirian political elite raised the possibility of a return to the political conditions in which his business had thrived before 1911. There is also evidence to suggest that Cowdray’s preferred solution to the problem of governance in Mexico also made him sympathetic to Huerta. While Huerta was still in office (in January 1914), he revealed to the American ambassador in London his personal preference for authoritarian government in Mexico: “in my opinion, the country must be ruled by a strong hand, or a semi-constitutional one, supported by foreign troops.”71 Body confirmed that Huerta’s political affiliations were firmly associated with the former regime: “There is no doubt that most of the members of the Cabinet of Don Porfirio are now being looked upon with a high degree of favour.”72 Cowdray’s immediate reaction to the dramatic change in political circumstances was to suggest to Limantour that he join the board of directors of El Aguila. The former finance minister was decidedly unenthusiastic, and declined. Barely had the ink dried on the Pacto de la Embajada73 between Huerta and Félix Díaz, giving the former the provisional presidency, and the latter the option to stand as a presidential candidate at the next election, than Body wrote with great enthusiasm to the Chief, letting him know that the new government was “kindly disposed to Pearson interests,” and that Huerta “could restore order in Mexico. . . . In business circles there is a marked feeling that we shall soon have better times ahead.” He also reported: It is understood that Don Félix is to be the next President. This will confirm what I remember telling you about six years ago. So far as Riba [El Aguila’s lawyer and a member of El Aguila’s board of directors] and I know, all of the members of the new cabinet have very kindly feelings towards us as a firm. I do not propose to begin any real propaganda to make friendly alliances with the new people for some time to come, and am rather inclined to think it will be better to let six months pass before doing anything special in this respect. In the meantime, of course, we will cultivate Díaz whom we know entertains very warm feelings for us.74

Body then passed on Díaz’s “best regards” to Cowdray, who immediately replied to the ex-president’s nephew with a personal telegram of congratulation. Barely able to restrain himself, and with the blood of exPresident Madero only just dry (“a horrible affair,” he wrote), Body did not wait six months, but only four days before he approached the new government: On 26 February Body informed Cowdray that “this afternoon I am

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commencing to make my official calls on all the Cabinet Ministers.”75 And a further week later, Body informed Cowdray “that General Huerta wished to see me in order to personally express his regret at the manner in which we had been treated by the late administration, and to assure me that the present Government was disposed to make amends as far as possible by granting any reasonable favour we might ask.”76 Cowdray’s role in this putative alliance was both proactive and explicit. Cowdray and the management of El Aguila expressly offered their services as agents of the Mexican government and undertook to lobby for formal British recognition of Huerta. In pursuit of this objective, Body proceeded to put pressure of the British minister in Mexico, Sir Francis Stronge, to make a favourable report to the Foreign Office in London, in contrast to his more equivocal earlier reports, which had suggested that the murder of Madero might be grounds for refusing to recognise the new government.77 Stronge duly sent a report in early March which emphasised that “the reestablishment of order in Mexico is of the first importance to us, and I think it cannot be doubted that we shall contribute materially to that end by recognising a Government that seems to possess the elements of stability.”78 At the same time, Cowdray had a meeting with Sir Louis Mallet at the Foreign Office in London with the purpose of explaining the damage which would be done to British interests (and, of course, his own) by the failure to recognise Huerta. The outcome of this intense lobbying was the dispatch of a formal letter from the British monarch recognising Huerta as interim president on 7 March 1913. The reasons given by Foreign Secretary Sir Edward Grey for taking the unusual step of extending de facto recognition to a provisional, rather than a constitutional president, and for not establishing beforehand a diplomatic entente with the US and other European governments, emphasised that “our interests in Mexico are so big that I think we should take our own line without making it dependent upon that of other Governments.”79 Although Cowdray’s interests were by no means the only British interests in Mexico, they were unquestionably the most significant. The lobbying appeared to have paid off, despite the claims of Grey’s biographer that “while he was naturally defending British interests in Mexico, he was not dominated by them.”80 Cowdray was clearly delighted with these developments, and he made no attempt to hide his approval: “it is very gratifying, and raises a very heavy and unnecessary load from our shoulders . . . to learn that [Finance Minister] Toribio Esquivel Obregón, Licenciado Rodolfo Reyes [Justice], and Licenciado de la Barra [Foreign Relations] have asked you to assist in getting the new Government recognised by our own government . . . [and that] my seeing the Foreign Office and getting a definite expression of


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opinion from them about recognising the new Government has been appreciated.”81 It is difficult to escape the conclusion that such overt intervention clearly broke Cowdray’s own “rules” of noninterference in politics. His major US rivals in the oil business were clearly much less delighted, and they immediately began to campaign against what they interpreted, not without justification, as the favourable treatment offered to Cowdray and other European capitalists by the new government. Henry Clay Pierce instigated a new wave of hostile press attacks against Cowdray and his intimacy with Huerta, which began to be published in American and Mexican newspapers after the end of February 1913.82 Delbert Haff, a lawyer representing a number of US companies in Mexico, including Doheny’s Mexican Petroleum Company, sent a memorandum to President Wilson in early May expressing the general concerns of US businessmen over the dangers of waning American influence: Foreign nations are . . . seeking to undermine the influence of the United States in Mexico. The British Government has already recognised Huerta . . . due to the efforts of Lord Cowdray, who has the largest interests outside of American interests in the Mexican Republic. . . . If Mexico is helped out of her trouble by British and German influence, American prestige in that country and the commerce of the United States will suffer great damage.83

Haff’s memorandum also stated that Cowdray’s influence extended beyond acting as the mere agent of British diplomatic recognition: “He is using his efforts to obtain a large loan in England, and I am informed that he has succeeded on the condition that the English [sic] Government would recognise Huerta, which has been done.” It was his role in the raising of funds for the Huerta government which represents Cowdray’s most controversial interference in Mexican domestic politics during the Revolution. The accusation of complicity with the “usurper” Huerta, the bête noire of official postrevolutionary historiography, was the most difficult for him to shake off in his lifetime, and it has forever tarnished his reputation amongst nationalist Mexican historians and, it must be said, amongst a number of less partial historians as well. It is only British historians, and especially his two British biographers, who have sought to downplay or to defend his actions. First, the context of the financial schemes launched by the Huerta government needs to be understood. The coup of February 1913 occurred at precisely the same time as a consortium of European and American bankers were discussing the terms of a £20 million loan to the Madero government in order to finance the suppression of strengthening armed rebellion and to stabilise the exchange rate of the Mexican peso, which had deteriorated

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precisely because of the level of domestic disturbances—in short, in order to stave off the impending threat of government bankruptcy.84 While consideration of the loan continued despite the coup and the assassination of Madero, its prospects for success were seriously undermined by the fact that the loan was posited on the recognition of the new government by the United States. The simultaneous declarations by the dissident governor of Coahuila, Venustiano Carranza, that, should the Constitutionalist revolution he had launched be successful, he would not honour the financial obligations undertaken by the Huerta government, did nothing to reassure Mexico’s international creditors. It was for this reason that formal recognition by the British government was so vital to the Huerta government.85 In these circumstances, Huerta’s minister of finance, Toribio Esquivel Obregón, announced a series of measures designed to raise much-needed revenue. Because of the growing schism between Mexico City and Washington, Esquivel Obregón’s only realistic option was to seek the cooperation of European brokers and investors. It was clear from the outset that Cowdray, especially in the light of his recent efforts to secure British diplomatic recognition which was so vital to the success of the proposed schemes, would be called upon to provide agency and assistance to the Huerta government. At the end of March 1913, Esquivel Obregón invited “banks and foreign investors” in Mexico to “demonstrate their confidence in the Government and the future of the country” to invest in a new issue of government bonds, through which “the national credit and the credit of foreign enterprises will be maintained and increased.” Without hesitation, Cowdray agreed to subscribe to bonds to the value of Mex$1 million.86 Although the finance minister soon withdrew his request, and although Cowdray’s contribution was only a relatively small share (less than 5 percent) of the issue, it is difficult to read his prompt and enthusiastic response as anything other than an unequivocal statement of his confidence in, and support for, the Huerta government. Esquivel Obregón’s next initiative was to invite “private capital” to invest in shares and raise the capital stock of a mortgage bank for a federal irrigation project (Caja de Préstamos para Obras de Irrigación) in northern Mexico, which would provide employment for “5,000 or 6,000 men” on public works projects in northern Mexico and thus to lure them away from “the ranks of the Revolutionists.”87 The intention was to issue 5 percent bonds for Mex$50 million, with the bonds secured by mortgages on the irrigation works and the real estate on which the works would be carried out. As an additional guarantee, Esquivel Obregón promised to any investors who subsequently wished to sell their shares that they would be


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bought by the federal government with the proceeds of a new federal loan of £20,000 in 5 percent bonds, to be floated on international financial markets.88 Cowdray was invited to invest in the shares of the Caja de Préstamos and to “take a hand” in the flotation of the projected federal loan. Body made it absolutely clear to Cowdray that “he [Esquivel Obregón] is asking you first.”89 Cowdray’s immediate reaction to this new invitation was as enthusiastic and positive as it had been to the first approach at the end of March. This is more significant than has been generally recognised, especially in the light of his subsequent desire to play down his enthusiasm for the Huerta government. He immediately cabled Body: “I cordially agree that we subscribe such sum as you deem advisable, not exceeding 5% of total.”90 This was, once again, a clear statement of his commitment to the Huerta government. Wisely, however, Cowdray showed more caution over the second invitation to take on the flotation of the federal loan, and immediately, perhaps instinctively, wrote for advice to former Finance Minister José Yves Limantour in his Parisian exile. The letter, and Limantour’s response, are worth quoting at some length, since they are highly revealing, first, of Cowdray’s enthusiasm in supporting the new government; second, of his realistic approach to the nuts and bolts of the proposed arrangement; and, third, of the nature of his relationship with Limantour. “Our great interest” he told Limantour “and naturally so, is to be of any use that it is possible for us to be to the Government” (my italics).91 As a mark of his personal commitment and, no doubt, partly as a means of establishing his bona fides with Huerta and his cabinet, Cowdray insisted that he would receive no commission on the deal. His saw his role as that of an “intermediary between any financial houses and the Government,” an honest broker who, as a result, “might prevent the possibility of the negotiations being handed over to perhaps irresponsible persons.” At the same time, Cowdray acknowledged the difficulties in making the loan happen; “I am afraid that there is no doubt that the placing of the loan will be a very difficult operation: in fact, it is by no means certain that it can be done.” If it were to happen, he continued, “the one person who can handle a business a thousand times better than anyone else, is your goodself.” His flattery went further still: To place the loan on decent terms will need a genius as great as yours; naturally no one would give the same confidence to the financial houses that you would. You will be able to say, which no one else could, what kind of loan the Government could legally and properly make; the securities, if any, that could be properly given having regard to the financial conditions of the European markets, et cetera.

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He finished with an appeal to Limantour’s patriotism, and a plea which clearly shows he understood the importance of the loan to the immediate stability of the Huerta government: “My own strong opinion is that the loan cannot be obtained except through you: hence your services are of priceless value to the Government and if you would assist with your advice and counsel Mexico will have to acknowledge that once more it was indebted to you for a great national service.”92 It is worth speculating on Cowdray’s motives for approaching Limantour. The first was his obvious support for a loan which would stabilise the Huerta government. The second was an instinctive, certainly habitual, and notably reverential appeal to the individual whom Cowdray considered to be capable of bringing off what would be a difficult negotiation with European financial houses. This was despite the fact that Limantour was a political exile, not only without portfolio, but also without any political support or official status in Mexico. However, as had always been the case in the relationship between Cowdray and Limantour, the former’s powers of persuasion over the latter were strictly limited. In fact, convincing Limantour had always been an uphill struggle for Cowdray ever since his arrival in Mexico in 1889. It was no different now. Limantour showed himself, as always in his dealings with Cowdray, to be not only immune to flattery, but also hardheaded, businesslike, and unsentimental. In his reply, Limantour’s first purpose was to squash any hopes Cowdray might have entertained that the ex–minister of finance might take the lead in the negotiations. He gave two reasons: “first, because I have taken the firm resolution not to accept any post or commission from the Government whatever it may be; second, because the Minister [Esquivel Obregón] having been one of those who more criticised publicly [sic] the policy I followed when Head of the Department, I would like to avoid my interference in the matter to be wrongly interpreted.” Nevertheless, he was clearly willing to help “in a strictly confidential way, and without any pecuniary interest, if you, or first class Banking institutions or bankers agree to handle the whole concern.” He obviously was well informed, and still well connected with banking circles in Europe: “You know probably that Noetzlin, with Morgan, Kuhn Loeb, one the one hand, and Speyers with their group, on the other, have already been in touch with the Minister for this same purpose. Moreover, the new Mexican Financial Agent is also trying, through the Hudson Consolidated, to form a syndicate to meet the Government’s requirements.” Even if Cowdray had known, this information certainly put him in his place, since he could no longer claim any exclusivity as the Mexican government’s first choice. Limantour then criticised Esquivel Obregón’s scattergun approach, which he described as


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“knocking at so many doors at a time”: not only was it unwise to seek to deal simultaneously with so many potential bankers or brokers at the same time, but the range of financial “combinations,” as Limantour put it—“a loan of 100 million Mex in 5% bonds; drafts at 90 day renewable; . . . and lately, an issue of shares of the Caja de Préstamos”— suggested that Esquivel Obregón did not have “a definitive plan.” He continued: I am afraid that the Minister has delusive ideas about the condition or terms which can be gotten for the projected loan, because the only fact of hoping to obtain the par value for five per cent bonds is quite an oriental dream. You are right when you say that it is almost impossible now to get money for Mexico by the way of a public loan; and, therefore, I consider that the most practical scheme, while the Balkan crisis and the Mexican troubles will still last, should be the acceptation of drafts with an option on the future loan, at a reasonable price and the guarantee of the custom duties. You must also bear in mind that nothing can be done without the Banco Nacional, whose privileges must be respected.93

Cowdray’s reply showed that he was still hoping to be selected as the government’s agent and that he remained optimistic about taking on the business, with Limantour’s clandestine support: “if by chance the Government appoint me their representative [my italics], putting the business exclusively in my hands and giving me the terms they are prepared to give, I would at once settle with you what the programme of operations should be.”94 In the event, Cowdray appears to have taken no further part in the negotiations over the loan. As Limantour had predicted, Esquivel found it very difficult to realise his “oriental dream.” In June 1913 it was announced that Luis León de la Barra, the Huerta government’s financial agent in London, had signed a contract with a consortium of European bankers through the agency of the Banco Nacional for £16 million over ten years at an interest rate of 6 percent.95 The first issue on the loan was restricted to £6 million (Mex$54 million), most of which was swallowed up by a reserve fund, and by the government’s existing short-term debt commitments (negotiated by the Madero government in 1912), and left the Huerta government with only some Mex$12 million at its disposal. This necessitated the negotiation of a further short-term loan in September 1913, this time with a consortium of banks in Mexico City, for a nominal Mex$18 million. The terms of the loan—interest at 7 percent to be fully repaid by 1 January 1914—were a further indication of the lack of international confidence in the stability of the Huerta government.96 Cowdray was again approached directly to contribute to the new flotation, but for the first time he showed signs of wavering in his hitherto

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enthusiastic support. There were two main factors which influenced his cautious response. The first was that the terms of the loan were much less favourable than had been anticipated. The second was that the political significance of the loan had increased, above all in the context of the widening gulf between the policies of the British and US governments toward Huerta. As Body explained to Ryder: We had to give the matter very serious consideration, as to comply with the Government’s wishes would mean our affiliation with the party in power, and our connection to a certain extent with Mexican politics, which, as you know, is what we have consistently endeavoured to avoid. On the other hand our sympathies are altogether with the Government, and we felt that, if necessary, we should strain a point to do our share in helping them bridge the difficulties with which they are confronted [my italics]. Accordingly, the Chief telegraphed you that we would participate to the extent of $750,000 Mex., provided that it should be absolutely necessary to go to this limit. At the same time the Chief advised you, that if possible our subscription should not exceed $500,000, and I judge from your cables that you will be successful in keeping within this amount.97

If this did not as yet represent a change of heart, it nevertheless showed a greater degree of circumspection. Cowdray was further concerned by the dramatic events of mid-October 1913, and lamented that Huerta’s decision to dissolve Congress, to arrest the majority of elected deputies, to declare the proposed presidential elections void, and to assume dictatorial powers was inimical to the outcome he most desired— the restoration of stability. His only intervention in this crisis was more humanitarian than political. Ernesto Madero contacted Cowdray from exile in Spain, asking him to “intervene with the Foreign Office that Minister Carden use his influence with President Huerta” to avoid any violence toward his three brothers, who had been accused of political conspiracy and arrested in Monterrey. Cowdray’s intervention was successful. He received messages from both Foreign Secretary Grey and Lionel Carden that Huerta had given personal assurance that no further violence would be committed against the Maderos.98 But for the most part, he kept his feelings entirely private and certainly refused to condemn Huerta’s actions in public.99 These subtle changes in Cowdray’s position went entirely unnoticed in the public sphere. In fact, in both Mexico and the United States, opinions of Cowdray polarised significantly toward the end of 1913. The personal attacks on him in the American press, and criticism of the British position from senior officials within the Wilson administration now proliferated. In October the New York Tribune reported that “Cowdray is sup-


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porting Huerta and forcing the British Government to do likewise”; the New York American claimed in November that “Huerta has given Lord Cowdray new concessions”; and, more sensationally, the New York Herald reported in February 1914 that “the oil lands are to be nationalised by General Huerta and then transferred to Lord Cowdray for $50,000 USD.”100 At the same time, John Lind, a former governor of Minnesota who had been sent by President Wilson as special envoy to Mexico in August 1913, proceeded to assail the White House with reports which were explicit in their condemnation of Cowdray’s influence over British policy, and his “absolute” control of the Huerta administration.101 The growing schism which these reports reflected between the British and American governments over policy toward Huerta, and over Cowdray’s role in influencing British policy toward Mexico, was compounded by news of the appointment of Sir Lionel Carden as British minister in September 1913. Carden was well known in Mexico City and Washington for his advocacy and promotion of British interests, and, to an equal degree, his hostility toward the strategic and commercial ambitions of the United States in Mexico and the Caribbean. He had been part of a special mission to Mexico in 1883 which had negotiated the restoration of diplomatic and commercial relations between Britain and Mexico in 1884, subsequently becoming the British chargé d’affaires in Mexico.102 He was still in post when Cowdray (as the young Weetman Pearson) first arrived in Mexico in 1889, and they had a mutual interest in land acquisitions on the Isthmus of Tehuantepec and minor business ventures which dated back to the early 1890s. Carden’s connection to Cowdray, coupled with the former’s profound and outspoken admiration for both Porfirio Díaz and Victoriano Huerta, further fuelled speculations in the press and in diplomatic correspondence that Cowdray was behind the appointment. The US ambassador in London, for example, complained to the Foreign Office that “we deem it most unfortunate that the new British Minister should be guided in action and opinion by Lord Cowdray.”103 The fact that Carden presented his diplomatic credentials to Huerta on the day after Congress had been suspended could not have been more controversial or provocative in the eyes of the Wilson administration.104 Cowdray’s relationship with Carden was a complex one, and although there is no evidence that Carden’s appointment was made at Cowdray’s instigation,105 there is evidence of long-standing personal connections which could be easily misconstrued or misinterpreted as a conflict of interest. Carden had clearly taken advantage of the opportunities which had opened up for British and European investors following Mexico’s rapprochement with their European adversaries in the 1880s. For senior

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figures in the Díaz government, the need to counterbalance growing and, in the opinion of Foreign Minister Ignacio Mariscal, alarming levels of US investment by attracting European capital became an absolute priority. Carden’s position as British chargé d’affaires put him in an even more advantageous position, and he appears to have made extensive speculative investments in land and mines in the early 1890s.106 It was clear to Cowdray at an early stage that Carden was more of a speculator, and an avaricious one to boot, seeking immediate returns on his investments, than an astute businessman.107 Nevertheless, because of his position as British minister in Mexico, the young Pearson was keen, for personal as well as political reasons, not to offend Carden, especially while there were still many lessons to be learnt about Mexican and British business etiquette. As a result, when Carden attempted in 1891 to persuade him to invest in a Mexican mining venture, Pearson was clearly unimpressed with the proposal as a business venture, but circumspect enough to express an interest in the project. He wrote to Duff Morison, who was representing Pearson in the negotiations over the Gran Canal contract: “you know that we don’t wish to put any money into mines if it can be avoided, but we should be prepared to put £500 into Carden’s, albeit we don’t believe in it, if by not doing so would offend him.”108 In 1893 Carden fell foul of new consular regulations issued by the Foreign Office which prohibited British consular officials abroad from making speculative investments, and he was obliged to sell off most of his shareholdings in Mexican ventures.109 He justified the retention of lands he had acquired on the Isthmus of Tehuantepec on the grounds that these were agricultural lands, and not lands held for speculative purposes.110 The award to Pearson of the contract for the Tehuantepec National Railway clearly rekindled his interest in property in the isthmus, and he extended his holdings in 1898, partly funded by a personal loan (of £1,000) from Pearson, and the following year consolidated his holdings in the Uspanapa Land Company.111 This began a long relationship between Carden and Cowdray as debtor and creditor, respectively, which was still extant when Carden returned to Mexico in 1913. In 1906, Carden, now British minister in Guatemala, had borrowed a further £3,000 (Mex$31,200 from Pearson, using 980 shares in Uspanapa as collateral. In 1908, as part of Pearson’s increasingly frantic search for supplies of crude to fulfill his contractual obligation to his growing list of clients, El Aguila signed a contract with Carden to explore the Uspanapa lands. They proved to be no more suitable for oil production than they were for agriculture, and the contract was cancelled in 1911. Despite his disappointment at the lack of oil on his properties, Carden


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was still interested in developing his lands and proposed the establishment of a sugar estate which, as he explained to Cowdray, “with a little backing, which you perhaps might be able to tend, I think it could become a success.” Cowdray once again did his best to accommodate Carden, and commissioned a survey of the Uspanapa lands. The report gave an unequivocal recommendation that the sugar project should be abandoned.112 The idea was finally dropped. As a further favour to Carden, Cowdray agreed in 1912 to extend the term of the original 1898 loan for two more years, at 5 percent interest. When those two years had passed, Carden informed Cowdray that he did not intend to repurchase the shares which had originally been offered as collateral, and offered Cowdray more shares in repayment of his outstanding debts. Cowdray agreed in principle and, as a further concession to Carden, agreed not to require Carden to repay the “delinquent” (i.e., unpaid) interest which had accumulated on the loan. Carden’s final and brazen ploy was to argue, apparently without irony given his earlier claim that the land had not been acquired for speculative purposes, that the lands had increased in value to such an extent that, in order to complete the deal, he was due a cash settlement. Clearly annoyed, Cowdray offered Carden a proportional share of proceeds if the land were sold at a profit within the next five years, having deducted the cost of the shares, and adding 6 percent interest compounded half-yearly (i.e., 12 percent per annum) from 1898. Carden declined the offer but recognised that he was not “in a position to pick and choose,” and declared that he regarded “the whole transaction as finally closed by the surrender of the shares without further liability on either side.”113 The point which emerges from this last set of correspondence with the embittered and irascible Carden is that Cowdray, unlike Carden, had never regarded their relationship as a business arrangement, but one which was based upon a series of personal favours. Those favours were certainly not based upon any deep personal affinity, since, as the correspondence shows, that was clearly not the case. They were, by contrast, a function of British class relations and etiquette between businessmen and diplomats which appeared to epitomise the underlying ethos of “gentlemanly capitalism.”114 As Body explained to Carden, “Lord Cowdray always considered that our connection with the affair was in the nature of a personal accommodation to yourself . . . never a purely business transaction.”115 However, this cannot disguise the fact that Cowdray was, technically at least, Carden’s creditor at the time of the latter’s appointment as British minister in 1913, a fact which could be—and in the eyes of his enemies (Carranza’s Constitutionalists, US diplomats, rival US oilmen, and US

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journalists) certainly was—construed as a conflict of interest.116 Whether this gave Cowdray a greater degree of influence over Carden is a matter of speculation, but that was not the central issue. Carden clearly needed no encouragement for his advocacy of British business interests, or his support for Huerta, and he and Cowdray shared the same opinion on both of these matters. But there is certainly no evidence that Cowdray engineered Carden’s appointment. In retrospect, Carden’s appointment as Mexican minister can best be seen, as Peter Calvert argues, as the last attempt by the Foreign Office to conduct a policy toward Mexico independent of Washington, as had been demonstrated by the controversial recognition of Huerta. Once it became clear after the events of October 1913 that the hostility of the Wilson administration toward Huerta was implacable, or, as Calvert has put it, that Washington had stepped up its campaign “for the elimination of Huerta, crushing Cowdray, and replacing Carden,” there was a slow but steady process of retrenchment by the British government and the Foreign Office, following the trend which had been established during the negotiations of the Murray Contract in Colombia.117 There had already been numerous indications of backpedalling, described in diplomatic language at the time as “clarifications” of the British position. Prime Minister Herbert Asquith used the occasion of the prime minister’s annual speech on foreign policy at the Guildhall in London to explain: A rumour has found credence in some quarters that, at a moment when the Government of the United States were taking a line of their own with regard to Mexico, we entered upon a new departure of policy deliberately, or at least if not deliberately, at any rate in effect, opposed to that of the United States, and calculated to thwart it. There is not the vestige of foundation for such a rumour.118

The following day, Foreign Secretary Sir Edward Grey asked Cowdray to confirm, as he duly did, that “neither S. Pearson & Son nor El Aguila were advancing funds to the Mexican Government at this time.”119 At the same time, while the British government refused to withdraw its recognition, Grey instructed Carden to make it clear to Huerta “that we cannot support him in any way against the United States.”120 Two months later, although Grey refused to bow to pressure to withdraw Carden, he informed the US ambassador in London, Walter H. Page, that Carden would be posted to Brazil in the near future.121 Whether the shift in British policy may be called a clarification or a climbdown, they had serious repercussions for the way in which Cowdray would have to conduct his business affairs in Mexico in the future.


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He was fully aware of the situation, as he explained to his representatives in Mexico: I find a complete understanding between the British and United States Governments. This, of course, means that the British Government recognises that the United States is free to act as it is so doing . . . that there will be no opposition thrown in its way of so doing—and if we agree no doubt the Germans and French will follow suit—and that, in consequence, the European nations will look to the American government for the protection of their properties.122

Cowdray’s first reaction to the confirmation of his growing marginalisation—if not isolation—was to take a more resolute and personal approach to the defence of his interests against the rising tide of hostile press reports, not only in Mexico and the United States, but those which had more recently appeared in the British, French, and German press. He issued a statement which refuted the allegations of collusion and corruption, and attempted to set the record straight regarding his relationship to the Huerta regime: In common with most of the Banks, and leading Houses in Mexico, my Firm and Allied Companies subscribed for a small proportion—less than three per cent—of the Government loan made through the National Bank of Mexico. Apart from this, neither I, my Firm, nor allied Companies have in any way, directly or indirectly, assisted in a financial manner the present Provisional Government, nor, let me in justice add, have we been asked to do so.123

At the same time, he showed his exasperation with Henry Clay Pierce, whom he memorably described as the “head-devil” behind the press campaign, and threatened that any further attacks would bring retaliation, and a resumption of the oil price war of 1909 and 1910; “it is absurd being friends at Clay Pierce’s suggestion when he maliciously attacks and misrepresents us elsewhere with the object of inflaming Mexican and American opinion against us.” If the campaign did not cease, “we will break the arrangement now existing—which was made at his request— and go for as much of the domestic trade as it is possible to obtain, regardless of the price we may obtain.”124 The first concrete example of the way in which the protection of Cowdray’s business interests in Mexico was now increasingly in the hands of the US government came in late November 1913. Following the incursion of Constitutionalist commander Cándido Aguilar into the Huasteca Veracruzana, Aguilar threatened to destroy El Aguila’s Potrero wells, if forced loans were not paid, and if El Aguila failed to cease supplying fuel to railways carrying federal troops loyal to Huerta. El Aguila’s properties in northern Veracruz were certainly not the only ones to be subjected to

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these threats. Body’s response was to telegram Carden with a request for British ships to be sent to protect El Aguila’s properties. A contingent of the Royal Navy’s squadron stationed in Barbados under the command of Rear Admiral Cradock arrived in Tampico at the end of November. At the same time, Cowdray had requested the Foreign Office’s intercession in requesting the assistance of US warships already stationed in the Gulf. US Rear Admiral Fletcher was, in fact, already stationed in Tampico and was able to force Aguilar’s troops to withdraw. Most significant, although Fletcher’s rank was beneath Cradock’s, the Admiralty ordered Cradock to allow Fletcher to take overall responsibility for the measures taken to protect the lives and property of both British and American inhabitants.125 While Cowdray understood the realpolitik which governed the role of the US government in the protection of his Mexican oil fields, it did not enable him to understand the policy of the Wilson government any better. As the authority of the Huerta government visibly waned during the early months of 1914, a broad range of armed factions not only proliferated but also became bolder in their challenges to the federal authorities. In April, a contingent of the loose coalition of Constitutionalist forces under the command of Venustiano Carranza effectively laid siege to Tampico, the centre of the export operations of the major oil companies, which prompted the dispatch of the USS Dolphin to Tampico to protect the oil fields. The landing and subsequent arrest of a contingent of US sailors was subsequently taken out of all proportion by demands for not only a full apology and a twenty-one-gun salute from the Huerta government, but also a (successful) petition from President Wilson to Congress to approve the military occupation of Veracruz to force the Mexican government “to enforce respect to the flag.” Cowdray’s reaction to this latest and most blatant intervention from Washington into Mexican internal affairs since the War of 1847–48 was a mixture of bemusement and frustration: I doubt if there has ever before arisen such a position that the US is now taking. They are determined not to intervene, at the same time they support demands for a salute which in fact would go a long way to recognising Huerta. It is this complication which prevents them having any real policy. . . . Wilson says too much and does too little. He will not grasp the nettle.126

The US occupation of Veracruz prompted a wave of nationalist reaction within Mexico—never far from the surface in US-Mexican relations127—and even gave a temporary boost to the authority of the Huerta administration as volunteers flocked to defend Mexico’s violated sovereignty. It was clear to most observers, however, that by the end of


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May 1914, Huerta’s demise was imminent, and that a Constitutionalist victory was the inevitable outcome.128 Cowdray’s early reaction, despite his clear personal preference for a Huerta government, was to pursue the strategy which he had consistently adopted since 1911—informal approaches to the political faction most likely to assume the reins of power. At the end of May 1914, Cowdray sent Body a copy of a telegram from Carranza’s representative in London, Miguel Covarrubias, to the selfstyled First Chief of the Revolution, which stated that “a careful enquiry has convinced me that Lord Cowdray has not helped Huerta, nor is he an enemy of the Constitutionalist cause.” Cowdray commented, “The telegram is rather more explicit than I should have wished, however, it will probably do no harm, and may result in more protection for our properties than we would otherwise receive.”129 The day after Huerta’s resignation following the fall of Zacatecas to the rebel forces led by Pancho Villa, Cowdray approved the draft of a telegram which El Aguila’s lawyer and representative in New York, Herbert Carr, proposed to send to Carranza on behalf of El Aguila to congratulate him on his victory. He advised a more cautious and less enthusiastic wording than Carr had adopted, repeating what would now become the party line on political interference: “As we avoid any political bias, cancel congratulation except as to bright prospect of settled conditions and peace.”130 At the same time, Cowdray was aware of the schism in the ranks of the Constitutionalist movement prior to the resignation of Huerta, and therefore he could not afford to ignore the possibility that the mercurial Pancho Villa might emerge triumphant from the internecine struggle. As he explained to Sir Ralph Padget at the Foreign Office in November 1914, “The present feeling . . . is that with the limination [sic] of Carranza, and the coming to the fore of Villa, the strong man, who has real able and strong men associated with him (whereas Carranza had nothing but useless ones) the outlook is decidedly better.”131 He was even more optimistic in a letter to Guillermo de Landa y Escandón in exile in Biarritz, explaining not only that Villa was clearly in the ascendancy but also that it might be possible to reach an accommodation with his faction, since “some of the principal men are recognising that the many tales that have been reported about us are untrue and are believing that we have not taken part in politics.”132 Cowdray would, therefore, in the future emphasise his now-familiar mantra of “strict nonintervention” into Mexican domestic politics, which was the line he would adopt with Huerta’s domestic adversaries after 1914. Given his close connections with the Huerta regime, from which he now attempted to extricate himself, it was the only feasible strategy to adopt. With the illusion of the close political relationship with the political

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elite—which he had enjoyed under the Díaz presidency and had hoped to enjoy with those of Madero and Huerta—now his own version of Limantour’s “oriental dream,” the best he could hope for was a pragmatic relationship with whoever was in power, with the purpose of allowing his business interests to function with the least disruption possible, until such time as he was able to negotiate a satisfactory exit from his extensive commitments.133

chapter seven

The Unravelling of Empire Civil War and World War, 1914–19

; The escalation of the military conflict at the end of 1913 which followed as a direct consequence of the rapid loss of authority of the Huerta government, exacerbated by the descent into civil war following Huerta’s resignation in July 1914, meant that the threat of military occupation of the Veracruz oil fields now became imminent. This chapter seeks to explore the reasons why the oil fields managed to retain an important degree of immunity from the bitter civil war which raged throughout Mexico between 1914 and 1920, and why levels of production were able not only to continue but also to increase. It also seeks to explain the broader context in which Cowdray came to withdraw from the direct management of his major Mexican interests—El Aguila and the Tehuantepec Railway. There are five main factors which determined the fate of Cowdray’s Mexican interests in these turbulent years. The first is the importance to the British war effort of maintaining supplies of Mexican oil after August 1914. Second, as a direct consequence of the first, the increasing deference by the British government toward US policy in Mexico, and, as the manager of Cowdray’s Mexican interests, John Body, described it, the decision to “follow the smoke of Washington.”1 This left Cowdray’s Mexican interests increasingly vulnerable and exposed, since they were no longer afforded protection or support by the British government, and, at the same time, they were considered by the US government as inimical to US interests. Third, the competing factions in the civil war which followed Huerta’s resignation in July 1914 all recognised the importance of allowing oil production to be maintained. This was because the revenue from the taxes imposed on oil was crucial to the maintenance of revolutionary mobilisation—whether as “booty” to be plundered when it was

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necessary to keep rebel mobilisations in the field, or whether as a form of direct or indirect taxation. All factions, in short, recognised that it was vital to avoid injuring, as Cowdray described it in characteristically prosaic fashion, “the goose that laid the golden egg.”2 Crucial to the goose’s survival and prosperity was the maintenance of a minimum level of stability in the precarious and volatile triangular relationship between the foreign oil companies, the pre-constitutional and Constitutionalist government of Venustiano Carranza, whose troops occupied the port of Tampico—and the local cacicazgo of Manuel Peláez in the Huasteca Veracruzana, where the oil camps were located. Fourth, in addition to the increased levels of taxation to which the foreign oil companies were subjected, there was renewed political pressure to extend the scope of taxation from that imposed on exports to new tariffs on licenses, leases, patents, and production, to extend the regulation, monitoring, and control of the industry, and to restructure the basis of the companies’ property rights. Finally, the ultimate fate of Cowdray’s oil interests depended on the protracted and (yet again) triangular negotiations with two major multinational oil companies, Standard Oil and Royal Dutch Shell, and with the British government. Together these factors provide the key to understanding the fate of Pearson’s business interests in Mexico in this period. The central paradox was that El Aguila’s operations not only did not suffer in this intense period of revolution and war, as perhaps might have been expected, but that they prospered in spectacular fashion. Cowdray reported to de Landa y Escandón in November 1914 that the prospects were very positive and that “we have every reason to be thankful that conditions are no worse with us than they are.” This was despite a dramatic drop in domestic sales in Mexico, and the fact that internal communications and the distribution of supplies were badly affected by the frequent interruptions to the railway network, and the regular confiscation by the government of the carriages in which oil was being transported. It was reported to the board of directors of El Aguila in January 1915 that domestic sales of all oil-based products had declined between 48 percent and 75 percent between December 1913 and December 1914.3 The situation did not improve over the next two years. In October 1916 Ryder reported that the “Sales Department’s operations are reduced to about 30% of normal . . . [while] other troubles have not diminished in the least.”4 The reason for Cowdray’s optimism was simple. Although domestic sales declined, exports boomed. His principal field at Potrero del Llano continued to provide 20,000 barrels of crude per day, and export prices continued to rise, especially as a result of wartime demand. He explained to British Minister Thomas Hohler in November 1916 that

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Potrero alone would yield 600 million barrels, which would, at the current price of 2 shillings per barrel, generate £60 million. But he also predicted that because of the war, prices would rise to 3 shillings a barrel, and therefore were likely to generate no less than £90 million.5 As he explained in December 1915 to Teodoro Dehesa, governor of Veracruz during the Díaz era, the Anglo Mexican Petroleum Products Company (a multinational company with its headquarters in London devoted to the marketing and transportation of El Aguila’s exports) was generating some £12,000,000 of actual cash (not goodwill, but money), represented by effective work, which by patience and perseverance through many difficulties finally achieved success after 15 years’ effort. It has paid 12% dividend on its ordinary share capital during the whole of the years [sic] it has been in existence.6

Cowdray confided to Limantour in the same month that “if it were not for the fact that the Admiralty have got half our fleet and consequently we are short of tonnage, we should be doing a very satisfactory business, and that quite apart from war prices.”7 So confident in the future of oil was he that he also explained to Limantour that, despite the difficulties he was having with the Carranza government in 1916, he planned to invest between £170,000 and £200,000 in improvements to the refineries at Minatitlán and Tampico.8 In spite of these manifestations of Cowdray’s serial optimism displayed in his public (and much of his private) correspondence, the threats to the future of El Aguila and that of all foreign oil companies in Mexico after 1914 were nevertheless real enough. First, there was the possibility that the oil fields would be taken over and destroyed, as an act of random revolutionary violence as retaliation for failure to pay “taxes” or ransoms demanded by local revolutionary caudillos; as part of a political attack on foreign ownership of a key national resource; or as a consequence of invasion by imperial gunboats, whether to protect existing oil interests (as in the case of Britain and/or the United States) or in pursuit of Germany’s imperial ambitions to invade the oil region as part of a broader plan to expand its sphere of influence in the Americas.9 Given the occupation of Veracruz by 3,000 US troops in July 1914, and the military expedition of 5,000 US troops into northern Mexico led by General John Pershing in pursuit of Pancho Villa in March 1916, the threat of foreign invasion was anything but idle.10 At the same time, the outbreak of war between Germany and the Allies in August 1914, and the entry of the United States into the war in April 1917, made military invasion of the oil region by US, British, or German troops not only more likely—as a means of protecting (or, in the case of Germany, of destroying) vital supplies of oil—but also, paradoxically, at

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the same time less feasible, given the existing military commitments of all parties in the European theatre. Second, the polarisation and radicalisation of Mexican politics raised the temperature of the debate over questions of economic sovereignty and the ownership of subsoil rights to a new height. It was apparent that whichever revolutionary faction emerged triumphant from the internecine struggle would be certain to raise new taxes and exercise greater regulatory control over the activities of the foreign oil companies. Most worrying of all to the foreign oil companies was that vociferous calls for the nationalisation of all subsoil deposits, including oil, were being heard with increasing frequency. In a speech in February 1915 widely reported in all newspapers in Mexico, General Alvaro Obregón, one of the two principal leaders of the Constitutionalist movement, launched a vitriolic attack on the nefarious role of foreign capital in seeking to exploit Mexico and convert it into “the mother of foreigners, and the stepmother of Mexicans,” a phrase which would have a sustained and profound resonance long after the fighting had ceased.11 Steering a path through these volatile and dangerous revolutionary waters would certainly not be easy. Cowdray, nevertheless, summed up his situation to his mentor-in-exile, former Mexican Minister of Finance José Yves Limantour, with characteristic and pragmatic bluntness: “Our interests are great and our troubles in Mexico are big, as outside the oil we have no revenue from our other interests.”12 mexican oil and world war i The most important single lifeline for El Aguila and other foreign-owned oil companies in Mexico was the importance of Mexican crude to the Allied war effort. This was not, however, because of the Royal Navy’s “fateful plunge” in 1912 to commission oil-fired battleships (referred to in Chapter Five), since these did not enter commission until toward the end of the conflict, but the fact that the principal source of power for the tanks, submarines, and ships which participated in the First World War was oil. As Lord Curzon famously remarked at the end of the war, “The Allies floated to victory on a sea of oil.”13 Although a number of previous accounts have pointed out that the crude from Pearson’s oil fields was deemed unsuitable for the requirements of the British Navy prior to the outbreak of the war, there is evidence to suggest that it was still of crucial importance to the Allied war effort.14 Given the control by the Central Powers of the Eastern European oil trade (roughly 20 percent of world production), supplies from the United States


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and Mexico provided the bulk of oil-based products to support the Allied campaign. Although the statistics show that the United States provided over 90 percent of oil products imported to Britain over the course of the war (and Mexico, correspondingly, an average of just less than 10 percent), the diplomatic correspondence from both Washington and London throughout the war emphasised that Mexican supplies were crucial, not simply as a strategic alternative to US supplies, but also because Mexican oil exports to the United States—which constituted never less than 95 percent of total oil imports to the United States, and which tripled between 1914 and 1918—enabled the United States to maintain sufficient reserves to allow exports to Britain to continue. At times of acute shortage of supplies, Mexican crude became even more vital.15 As Cowdray himself commented with his trademark directness to the British ambassador in Washington, Lord Reading, in October 1918, “Imagine the effect if US were robbed of Mexican supplies. The allied fleets would be at a standstill.”16 What was far more difficult for Washington and London to agree on was the best way to ensure that supplies of Mexican oil continued to flow, especially given the acute domestic political instability of the Revolutionary decade, and the strong differences of opinion and policy over the merits and demerits of military intervention to protect foreign interests. The key characteristic of this period was the increasing deference shown by London to Washington over Mexican policy, which had already been demonstrated during the final months of the Huerta regime, as we have seen, with the Foreign Office becoming engaged in a damage-limitation exercise by backtracking on its previous support for Huerta. This would have serious consequences for the will and the capacity of the British government to protect British interests in Mexico, especially those, like El Aguila, which were widely perceived in the eyes of the Wilson administration to be detrimental to US interests. Ultimately, British deference translated itself into a tacit agreement that the US government would take responsibility for the defence of the Veracruz oil fields, even if Cowdray (and many of the staff at the Foreign Office, although they were loathe to express their views in public) doubted the capacity of the Wilson administration to provide effective security to the oil companies.17 Differences of policy did not entirely disappear, nevertheless, and they surfaced again over the question of recognition of Venustiano Carranza’s self-styled “pre-constitutional government,” which replaced Huerta’s in 1915. While the Woodrow Wilson administration, in its desire to encourage the restoration of domestic stability, provided de facto recognition to Carranza in October 1915, Britain not only failed to follow the US lead, but also effectively downgraded their diplomatic representation in Mexico

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by withdrawing First Secretary Hohler in June 1916. Significantly, Hohler was reassigned to the British Embassy in Washington as chief adviser on Mexican affairs, which perfectly illustrated His Majesty’s Government’s priorities, and indicated where HMG considered Britain’s representative to Mexico ought to be based. His replacement, Consul General E. W. P. Thurstan, was withdrawn in February 1917, leaving Herbert Cummins, a boot salesman and former British consul in the border town of Ciudad Juárez, to serve as acting chargé d’affaires. The entry of the United States into WWI prompted Wilson to extend de jure recognition to Carranza. The British government again failed to follow suit, in what was less an attempt to challenge US policy than an exercise in vacillation, justified officially on the grounds that Carranza was “an open agent of the German Government.”18 Needless to say, Cowdray was extremely unhappy about what he considered the progressive abandonment of the British government’s responsibilities toward its citizens in Mexico in general, and toward his interests in particular. Initially antagonistic toward Venustiano Carranza, he came to advocate British recognition of the Constitutionalist government, because it would increase the level of protection (or, at least, would decrease the level of vulnerability) of those same interests.19 He was, nevertheless, increasingly unable to exert any influence over British policy, despite his strong political connections to the Liberal administrations of the day, even during his (brief) membership in Lloyd George’s coalition cabinet in 1917. His influence over Mexican policy decreased still further after the United States entered the war in April 1917. The stark implications were brought home to Cowdray as a result of a meeting in Washington between Body, Hohler, and British Ambassador Sir Cecil Spring-Rice precisely one week after President Wilson had taken the United States to war. Body reported Spring-Rice’s opinion that British Foreign Secretary Arthur Balfour did “not want to be bothered with Mexican affairs . . . [and is] . . . very much averse to doing anything contrary to the wishes of the State Department.” Body then asked “if this meant the abandonment of our British interests in Mexico” and was told “that this was so, as no risk could be incurred under present circumstances of interfering with any of the United States’ plans in connection with the European War.”20 It is interesting to note that one of the reasons given to Body by Spring-Rice for refusing to support Cowdray’s interests was the argument that the military significance of Mexican oil was minimal, and the belief that “the US could supply all of the needs of the Allies without the assistance of the Mexican production.” This has led some historians to argue that Mexican crude was less important, and even insignificant, to the Allied war effort.21 As already indicated, the evidence appears con-


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tradictory. At a meeting a month after his audience with Spring-Rice and Hohler, Body talked to A. C. Bedford, whose exclusive role in this period was to secure oil supplies for the Allied cause. Bedford was much more positive about the supplies from El Aguila since total dependence upon US supplies “would mean a serious disturbance of the operations of the various refineries.” Body reported that Bedford was “naturally hoping, therefore, that our oil supplies from Mexico will not be interfered with.”22 The Foreign Office’s official denial of the significance of Mexican crude was contradicted again by the signing of a new contract between El Aguila and the Admiralty in the same month for an additional 500,000 tons of crude.23 The supreme irony, not to say hypocrisy, of the British government’s position in relation to Cowdray and El Aguila was highlighted less than a year later, in October 1917, when the British government invoked the Defense of the Realm Act (DORA) to prevent “any British subject from transferring any ownership rights in any oilfield around the world to any but another British subject, without the approval of the Board of Trade.”24 This clause was specifically directed at preventing the sale of El Aguila to Standard Oil. The implication was that Mexican crude was so vital to the British war effort that it could not be taken out of British control—and yet, at the same time, as Cowdray repeatedly pointed out, the British government was not prepared to defend the lives, properties, and businesses of British citizens in Mexico by appointing a British minister to Mexico, under the pretext of the Carranza government’s pro-German sympathies. Under these circumstances, the relationship between Cowdray and the British government became distinctly strained. Cowdray met Foreign Secretary Arthur Balfour in June 1918 to explain the deteriorating political situation in Mexico and his decision, for the first time since the development of his oil business, not to pay with the latest “confiscatory” petroleum tax which “will cost us $1.5–2.5 m. pesos (gold).” Cowdray was also concerned by the escalation of “nationalist propaganda and hostilities” between Mexico and the United States, which, because of Britain’s close association with the United States, threatened to “expose all British properties to seizure, sale or destruction.” Cowdray urged Balfour to appoint a British minister “without further delay.” He explained that “it is not a question as to whether or not Great Britain accord recognition to an administration unworthy of the honour, but rather that the lives of British subjects and their extensive interests in this country demand the fullest measure of protection.”25 His plea went unheeded, and prompted a frustrated Body to comment to Cowdray that “it really is a crying shame the manner in which we are being treated in Mexico by our own Foreign Office.”26

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the clash with constitutionalism One issue on which London and Washington were consistently able to agree, prompted by the vigorous campaigning of the companies themselves, was that the taxation policy of the Constitutionalists was damaging to foreign oil interests in Mexico. At the end of January 1915 Carranza decreed that the levy on oil production would be raised from 0.20 centavos (5d per ton) per ton—which had been introduced by Madero in 1912—to 0.60 centavos, as well as reintroducing derechos de barra (an export tax of colonial origin on vessels clearing the harbour at Tampico) of 0.50 centavos per ton.27 At the same time, the Constitutionalist military commander in Veracruz, Cándido Aguilar, announced the introduction of an additional state tax of 0.07 centavos per ton. As the representatives of the foreign oil companies were quick to point out, this represented a threefold rise in the burden of existing taxation. These new tax impositions were made even more onerous by the insistence that payment should be made in gold, rather than in increasingly worthless paper script which circulated in number of different forms in Mexico in this period. Body calculated that the new taxes represented a additional burden to El Aguila of US$40,000 (£8,000 per month, and wrote in protest to His Majesty’s Government, reminding it that “on the faith of these contracts we and our friends have invested £12,000,000 sterling in the oil business, which now employs—outside Mexico 3–4,000 employees with a turnover of £100,000 per week.”28 The Constitutionalist authorities received protests from all of the foreign oil companies, but there was a marked difference in attitude between the hostility of the US companies and the pragmatism of El Aguila. When the protests produced no response from Carranza, Cowdray’s reaction was to advise Body that it was “prudent” to pay the increases, suggesting that “probably you will be able to arrange for the greater part, if not the whole of your tax being set against the monies the Government owe us for oil supplied.”29 Further concern was expressed by the foreign oil companies over Constitutionalist intentions to extend the scope of state regulation and control over the industry through the creation of government agencies (such as the Comisión Técnica de Petróleo in March 1915) and, subsequently, the creation of a formal Department of Petroleum in 1916, staffed by a growing phalanx of state bureaucrats.30 But the issue that concerned all foreign oil companies and their respective governments was the threat posed by the radical proposals of the new Constitution promulgated by Carranza in February 1917 and, in particular, those expressed in Article 27, which advocated the restoration of the principle enshrined in Spanish colonial


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law which claimed that all subsoil deposits belonged to the nation, and therefore could not be privately owned or exploited. Article 27 was an explicit statement that Porfirian legislation which had vested in the owner of the surface the rights to subsoil minerals and had granted free exploitation of those minerals without the need for government concession—in other words, the legal basis on which foreign oil companies such as El Aguila had obtained their property and drilling rights—were no longer valid. Furthermore, the nation would henceforth “retain under its dominion as much as may be necessary for social development, such as mines, petroleum, etc., not bestowing on private persons more than the exploitation of these properties which the respective laws authorize.” In order to emphasise the nationalistic tenor of the document, only Mexican citizens, as affirmed in its first clause, would in the future have “the right to acquire land . . . or to obtain concessions to exploit mines, waters or mineral fuels in the Mexican Republic.” In a concession to the role of foreign investment in national development, foreigners would be allowed to seek concessions and own land, but only if they renounced the protection of their governments—in other words, foreign investors would in the future be welcome to invest in Mexico, but on Mexico’s terms rather than their own.31 The recent historiography of the Revolution has sought to contextualise and even, in some cases, to downplay the significance of the debates which took place at the Constituent Congress at Querétaro between December 1916 and January 1917, and the constitutional document which emerged in February 1917.32 The fact that the delegates were selected exclusively from the ranks of Carranza’s supporters adds weight to this interpretation, and suggests that the Congress was essentially a window on internal debates between the different factions within the Constitutionalist movement.33 Nevertheless, the Querétaro debates can also be seen as an important opportunity to rehearse the discussions of the nature and process of postrevolutionary reconstruction and the “reinstitutionalisation” of the Mexican state which would take shape over the course of subsequent decades. One of the most prominent aspects of the debates would be the strengthening of the state’s role in forging national identity and promoting national development. For the management of El Aguila, the outcome of the debates at the Constituent Congress was important enough to warrant a concerted effort to influence its proceedings. El Aguila paid a substantial fee to one of the Congress’s more prominent delegates, the maverick anticlerical journalist and former maderista deputy, Félix Palavicini, to intervene in the debates on behalf of the company. There was nothing new, of course, in Cowdray’s strategy of attempting to influence political decision-making

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by paying retainers to prominent politicians. In fact, as has been argued throughout this book, it was one of the hallmarks of Cowdray’s modus operandi in Mexico. What was different in this case was the clandestine nature of the operation, which was not known to Palavicini’s fellow delegates at Querétaro, never sanctioned (at least not officially) by El Aguila’s board of directors, nor ever admitted by Palavicini throughout his lifetime.34 Palavicini’s career has always been shrouded in controversy, and has inspired radically different interpretations.35 Trained as an agricultural engineer, he had always been more inclined toward politics, journalism, and education. He had received through the agency of Porfirian Minister of Public Instruction Justo Sierra funds to study in Paris during the final years of the Díaz regime (although there is some doubt about whether he actually completed his studies). He was a prominent member of the Antireelectionist movement, and had joined Francisco Madero’s campaign in 1909, writing for the maderista newspaper El Antireeleccionista. He was given a post as director of the Industrial School for Orphans (Escuela Industrial para Huérfanos), subsequently became a deputy in the maderista Congress of 1911, and was arrested in October 1913 along with other maderista supporters by Victoriano Huerta.36 Having established his antiHuerta credentials, Venustiano Carranza appointed him Oficial Mayor in charge of the Education Ministry (Secretaria de Instrucción) in 1914, with direct responsibility for the fledgling National University.37 His links with El Aguila went back to 1910, when, on the recommendation of Governor of Veracruz Teodoro Dehesa, he was employed in the Tampico office, nominally as a designer, although internal company correspondence indicates that he was employed “for special reasons.”38 His influence with Carranza, which was both political and personal (he was rumoured to have been a good friend of Carranza’s private secretary, Gerzayn Ugarte), persuaded R. D. Huchison, secretary of the board of directors of El Aguila, to recommend that Palavicini be reemployed by the firm. This arrangement was still in operation when the convocatoria was issued for the Constituent Congress in December 1916, and may well have influenced his decision to seek “election” as a delegate. At the same time there is evidence to suggest that El Aguila provided direct and indirect support to Palavicini for the establishment of the conservative daily newspaper El Universal in 1915.39 Although his presence in Querétaro aroused the suspicions of some of his fellow delegates, to the extent that he had initial difficulty in establishing his Constitutionalist credentials, Palavicini was able to send regular, almost daily reports to Rodolfo Montes, El Aguila’s representative with the Carranza government.40 In the event, despite his assurances that


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he would be able to influence the final text of the Constitution, he was unable to exercise any influence at all over the contents of Article 27, which were of greatest concern to his paymasters at El Aguila. He made a last-ditch attempt to sabotage its approval by arguing that, given its importance and the short time available for debate, it should be deferred until the next meeting of Congress. His proposal was summarily rejected by the assembled delegates.41 Given its long-term implications for the fate of the foreign oil companies in Mexico, the importance of Article 27 should not be underestimated. In the short term, it led to an avalanche of memos and correspondence between the oil companies, their legal representatives, and their respective governments—much of it exalted in tone and content with considerable vitriol poured onto supposed manifestations of Mexican bolshevism. Emotions ran even higher when the spirit of Article 27 became translated into specific legislation, such as the decree of February 1918, which attempted to impose a rental fee on all oil properties and a 5 percent royalty tax on all oil lands in production.42 This incremental rise in regulation and taxation galvanised the oil companies into collective action to defend their interests, and in 1918 to the formation of the Association of Petroleum Producers of Mexico (APPM). The association not only coordinated the legal challenge in Mexico to the Carranza government’s legislation but also acted as an influential lobby in Washington with a decisive impact on US policy toward Mexico. Its fundamental success was to extract from the Carranza administration an understanding that the restrictions imposed on foreigners in Article 27 would not be implemented retrospectively, and that the rights acquired by the oil companies prior to the promulgation of the Constitution would be protected.43 In these volatile and polarised circumstances, however, the encounters between representatives of the oil companies and their counterparts in the Carranza government were frequently conducted in an atmosphere of considerable tension, mutual suspicion, hostility, and recrimination.44 El Aguila’s status as a Mexican company technically prevented it from joining the APPM, but Cowdray, through Body and Ryder, was careful to maintain communication with the group over questions of mutual interest—principally over taxation and legislation deemed contrary to the interests of all oil companies. It was also clear, however, that internal rivalries between the oil companies persisted, and that Cowdray and El Aguila had additional concerns which were distinct from those of the US oil companies. The personal dynamics were less than harmonious. Cowdray told Maurice de Bunsen at the Foreign Office in March 1918 that Doheny, chairman of APPM, “is a hot-headed Irish American, and what he agrees to today, he very likely will not carry out tomorrow, so it

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is impossible to work with him.”45 More important, as will be explained below, Cowdray was trying to keep his options open, as well as having to contend with the British government’s simultaneous interference in the future of his oil business. At the same time, it was also clear that opinion was divided within the Constitutionalist movement itself over the precise form which petroleum legislation should take. As a result, the legislation would have to wait until after the final battles of the Revolution had been fought. Although it is important to emphasise that there was nothing inevitable about the eventual nationalisation of the oil industry by the Mexican government, there is little doubt that the intense debates of this period resulted in the progressive erosion of the power and autonomy of the foreign oil companies operating in Mexico. Already by 1920, despite their concerted hostility and opposition to Constitutionalist regulation, they had been forced to concede to higher and more extensive taxation, and to the curtailment of their private property rights.46 manuel peláez and life in the faja de oro (golden lane) Throughout these volatile times, the main priority for all parties with a vested interest in oil was ensuring that levels of production and distribution in the oil fields continued without major disruption. The crucial factor in this context was the relationship between the oil companies and the autonomous political boss or cacique of the Huasteca Veracruzana, Manuel Peláez.47 As indicated in Chapter Five, the relationship dated back to the final decade of the Díaz regime, during the scramble for properties and drilling rights in the Tuxpan-Tampico region. However, Peláez’s personal, family, and kinship-clientalist relations in the Huasteca had more profound roots, which were equally vital to the degree of influence he was able to exert over regional affairs. Prior to the arrival of the agents of the foreign oil companies, the Peláez-Gorrochótegui family had formed part of a local elite of merchant-entrepreneurs, rancheros and hacendados who had taken advantage of the gradual extension of local trade in the latter half of the nineteenth century to consolidate their social and economic status. Significantly, members of the family had also established a reputation for the defence of local interests, especially the land rights of the indigenous inhabitants of Peláez’s native Temapache.48 As members of the local landowning elite, and, of course, because their properties were assessed as


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containing significant deposits of oil, the Peláez family was able to secure very favourable terms with the oil companies. It is also apparent that other, less prosperous communities (such as the ranchos and condueñazgos which were a common feature of landowning systems in the region) were also able to negotiate profitable, if less lucrative, terms with the oil companies.49 After 1911, once royalties on oil production had begun to be paid and new sources of employment were created in the region, Peláez’s status as a “classic” paternalist cacique extended beyond the representation of local landowners and rural communities to encompass the growing number of immigrants to northern Veracruz who gravitated to the region in response to the demand for labour from the nascent oil industry.50 These new sources of employment, combined with the fragmentation of national and state authority in the region in the wake of the revolutionary disturbances after the fall of the Díaz regime, served to enhance Peláez’s autonomy, and his role as an intermediary and power broker between local hacendados and rural communities, the oil companies, and their workers. After the fall of Huerta, as a result of alliances with other autonomous armed groups, Peláez was reputedly able to mobilise—and, most important, to pay in silver, rather than in discredited paper notes—a sizeable if disparate unit of local volunteers across the three Huastecas (i.e., the Huasteca regions of Veracruz, San Luis Potosí, and Tamaulipas), and thus to provide protection to both local hacendados, rural communities, and foreign oil companies.51 Because of the strategic importance of the area under his control, his role as a “stabilising force” was even recognised and endorsed by both the US and British governments, who at various times agreed to provide him with material support.52 Prior to the local “arrangements” with Peláez, the oil companies in Veracruz had attempted to negotiate the protection of the oil fields with the local garrison of Constitutionalists (under the command of Constitutionalist General Cándido Aguilar), but they had proved to be unreliable, inefficient, and corrupt. As a result, while the oil companies were certainly far from happy to have to pay Peláez for protection, they became resigned to it in order to be able to ensure that production in the oil fields remained relatively undisturbed. Peláez was not, therefore, as “official” postrevolutionary and proConstitutionalist historiography has tended to portray him, either the creation or exclusively an agent of foreign oil companies, but rather a combination of a traditional cacique with strong ties to local rural society and local political culture, and a more “modernising” political boss who was able to mediate between oil workers and their employers. What he was able to offer—at a price—to all of his varied and disparate

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clientele was protection against Constitutionalist military or political interference.53 Peláez has often been described and, indeed, often described himself as a “villista,” a supporter of Pancho Villa, but the evidence suggests more conservative political affiliations.54 Not surprisingly, as a conservative Catholic and member of the Veracruz landowning elite, Peláez first emerged during the Revolution as an opponent of Madero and a supporter of first Félix Díaz and then Victoriano Huerta. It was in support of the Huerta government that he first organised a small local independent militia which would become the basis of his power and authority throughout northern Veracruz. Following the overthrow of Huerta, Peláez retained a profound hostility toward Carranza, engendered by a combination of personal and political grievances.55 It was, therefore, his implacable resistance to Carranza which earned him the label of villista rather than his empathy with the villista movement. Throughout the period in question it is important to understand that the aspect of Peláez’s revolutionary participation most useful to the oil companies was not his political affiliations, but his political brokerage and autonomy. As national political instability increased after 1914, that autonomy grew in direct proportion, and provided him with greater freedom of manoeuvre. Already by the end of 1915 Peláez was receiving, in addition to the royalties on oil production on his properties, regular payments from El Aguila, the Huasteca Petroleum Company, and the Penn-Mex Oil Company. Cowdray informed the Foreign Office that El Aguila was budgeting Mex$30,000 every month to meet Peláez’s “costs.” In addition, there were irregular requests for substantial one-off payments, accompanied by threats that oil production in the camps would be interrupted if the money were not forthcoming.56 While these payments guaranteed protection in the oil camps, they had to be handled sensitively so as not to incur the wrath of the Constitutionalist military commander in Veracruz, Cándido Aguilar, who controlled the port of Tampico, where El Aguila’s central office in the region was located. In fact, the board of El Aguila was most insistent that Rodolfo Montes (described as “El Aguila’s representative with the Carranza government”) and Thomas Vaughan (El Aguila’s manager in Tampico) make efforts to contact Aguilar to refute the allegations made in the local press of collusion with Peláez.57 Montes was therefore entrusted with the task of using this evidence of these forced loans and threats made by Peláez in order to make a case (and a clearly dishonest one) to the Carranza administration that there was no collusion between El Aguila and el cacique huasteco.58 It could even be argued that the protection provided by Peláez—if not as deferential as the oil companies would have liked, and certainly not so


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comforting to the employees in the camps who were subjected to periodic occupations, threats to their persons and property, extortion, and even murder59—was nevertheless fundamentally reassuring to Cowdray. When in February 1916 reports reached Cowdray of another round of fighting between pelaecistas and carrancistas in and around the Potrero camp, he was remarkably sanguine. He noted in response that “if our oil properties were destroyed, Peláez himself would suffer, as the lease we have from him would not be developed, relatives of his would be deprived of the great royalties they are regularly receiving, and a source of employment to the natives would cease to exist.”60 The volatility of both domestic and international politics was also a vital factor in sustaining Peláez’s cacicazgo. In May 1917 Peláez launched a manifesto which confirmed his hostility to Carranza, and his desire to seek broader anti-Constitutionalist alliances by rejecting the new Constitution and making it clear that he supported the Allied war effort: “we do not abandon the interests which the belligerents have in the region that we dominate, and that these interests will be defended by us whoever may be their owners.” While this was reassuring to the oil companies and their respective governments, it was clear that Peláez’s control of the region was threatened by US recognition of Carranza, which might facilitate a Constitutionalist assault on the oil fields region. As a result, throughout 1917 and 1918 Peláez kept the pressure on the oil companies and their respective governments to sustain their support for his cacicazgo as the principal, and indeed only, guarantor of stability in the region. While Cowdray and the management of El Aguila continued to support Peláez throughout this period, they did so reluctantly, in the absence of a more reliable alternative. At the same time, they were utterly convinced of the need to avoid any kind of foreign intervention of the oil region in a misguided attempt to protect the supply of oil. For example, in May 1917 Cowdray warned the US government that the growing threat of foreign intervention to protect the oil companies would leave Peláez with no option but to withdraw his protection: “Peláez was guarding the oil properties, and he would do so until any foreign force appeared, when he would discreetly retire and leave the situation in their hands.”61 Body also argued that US recognition of Carranza also made Peláez more volatile and vulnerable to external pressure. He sent a cable to Cowdray in October 1917 (which Cowdray passed on to the Foreign Office) to report that Peláez had been approached by German agents, and that “if the US Government assists Carranza, rebels will be obliged to accept German money as matter is life and death to them.”62 Although it has been suggested that Cowdray’s support for Peláez cooled off following his “conversion” to the cause of recognising Carranza after 1917, it is equally

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possible to argue that Cowdray was, with characteristic pragmatism, keeping his options open and pursuing a dual strategy to protect production at the source (by supporting Peláez), as well as redressing the lack of representation at the government level (by formally recognising Carranza and nominating a British minister to represent British interests).63 In the event, Peláez’s strategy proved successful in maintaining his personal authority and political autonomy in the region. As Constitutionalism continued to face concerted regional resistance up to 1920, he was able also to strengthen his position nationally by seeking alliances with anti-Carranza rebel groups dispersed throughout central and southern Mexico—in Morelos, Oaxaca, southern Veracruz, and the Huasteca Potosina.64 His greatest asset to the foreign oil companies that operated within his jurisdiction was in providing physical protection to the oil camps, and in limiting the authority of the Constitutionalist government. He provided what his “clients”—the foreign oil companies, their governments, local landowners, and the mixed rural communities in northern Veracruz—most wanted, namely, freedom from outside interference, and a degree of stability which would allow oil production to continue with only limited interruption, providing continued profits for the oil companies, royalties for local landowners, and sources of employment in the oil industry for the local and immigrant populations. The forced loans he extracted from the oil companies—although they amounted to more than Mex$1.5 million between 1915 and 1920—were, in the final analysis, comparable to the taxes demanded by the Constitutionalists as a relatively small price to pay for allowing oil production to continue without major interruption.65 labour in the oil camps There was one further, vital service provided by Peláez to the oil companies and their operations in the Huasteca—not only supplying labour, but also keeping labour disputes to a minimum, especially in the rural areas under his direct control, which were where the majority of the oil camps were located. The available evidence suggests, surprisingly, that in the camps themselves, there were few, if any, labour disturbances of any sort.66 This is not to suggest, however, that labour disputes were absent from the oil zone throughout the Revolution, since this was clearly not the case. The conflicts between the oil companies and their workers were, in fact, frequent in a period characterised by labour mobilisations throughout Mexico,67 but they were concentrated above all in urban or industrial settings—principally in the refineries and the port of Tampico—where


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the characteristics of the labour force were fundamentally different from that of rural areas—including in the oil camps.68 Urban labour in the oil industry demonstrated all of the contradictions of the partial proletarianisation of the labour force in countries (such as Mexico) which experienced partial modernisation or “underdeveloped industrialisation” in this period—improved wages, but greater insecurity, and the marked persistence of hierarchy and patronage in industrial relations at all levels.69 Urban labour was more skilled, more organised (i.e., unionised), and certainly more militant.70 According to one source, the number of labour disputes which took place in Tampico between 1915 and 1919 (twenty-one out of a total of twenty-seven) was, in fact, far greater than elsewhere within the different sections of the oil industry.71 Yet the local management of El Aguila, through a range of pragmatic responses to workers’ grievances, nevertheless managed to continue to avoid major disruptions to oil production and transportation. Tampico was outside Peláez’s jurisdiction, and under the control of the Constitutionalists, whose pro-labour rhetoric often appeared to conflict with their anti-labour practices.72 Labour relations within the oil industry in this period were characterised by protests against wage differentials between Mexican and foreign workers, which occasionally extended into more politicised protests over foreign control of the industry, as well as manifesting more fundamental concerns over general terms and conditions of employment. But the most common causes of labour unrest were high levels of inflation and the persistent devaluation of paper currency, and the consequent demand for salary increases to compensate for the shortfall in purchasing power.73 Cowdray had always considered himself a fair-minded employer, and had been a moderate advocate of workers’ rights during his career as a Liberal politician.74 Nevertheless, when confronted with a strike by the “Syndicate of Employees of Commerce,” which threatened to disrupt production at the Minatitlán refinery in March 1916, he showed little enthusiasm for this particular manifestation of workers’ power. He lamented the “deplorable intelligence of those attempting to ‘blackmail’ the company,” and commented, “It is a thousand pities that irresponsible labour should attack a company that not only treats its employees fairly, but with real generosity.”75 Subsequent internal correspondence in July 1916 shows, however, that the manager of the Minatitlán refinery had responded to the union’s concerns and agreed to the workers’ demands, first, to pay the wages in infalsificables, the “unfalsifiable” notes issued by the Constitutionalist government in May 1916 with the vain hope of eradicating the twin evils of forgery and inflation, and, second, to pay them at the current official rate of exchange.76 However, this was a less

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than generous solution, since Ryder admitted that, even at the new rate, this meant a drop in real wages of 50 percent, since the market value of infalsificables was more like 10 or 12 pesos to the gold peso rather than 5 to 1.77 By the end of 1916, however, the infalsificables themselves, like all of the other paper money in circulation, had become valueless.78 Given the acceleration of profound economic dislocation within the Mexican economy after 1916, subsequent responses from the management of El Aguila to the demands of their workers were—and needed to be—measured, and above all, pragmatic. For example, on hearing of a strike of El Aguila’s workers in Tampico in December 1916 to demand the doubling of wages as a result of the decline in their purchasing power, Cowdray advised Body that “we cannot double wages, because they cannot subsequently be lowered when normal conditions return.” However, he then proposed that “the only way out would be to open a big store, supplying both food and clothing, not only at cost price, but probably at considerably smaller prices.”79 Body’s reply indicated that the company was already making concerted efforts to alleviate the problems facing their employees: “the Company is running messes at Tampico where food is obtainable by employees at the lowest prices: the refinery (at Minatitlán) has a general store, where they are selling articles of prime necessity at cost and under. The TNR is running commissariat cars attached to freight trains for supplying food to the men on the line at cost price. This has met with great success.”80 Despite these difficult economic and political circumstances, the protection provided in the oil camps by Peláez, and the pragmatic approach to labour disputes in the refineries and ports, ensured that oil production (and profits) continued to rise throughout this period. However, Cowdray’s other major business interest in Mexico, the Tehuantepec National Railway (TNR), was facing far greater difficulties, and had done so since 1914, in line with the rest of the domestic economy. the termination of the tehuantepec national railway contract, february 1918 The interruptions of domestic traffic caused by the descent into civil war during 1914, with ever more frequent embargoes, confiscations, and theft of goods and rolling stock, had made the running of the domestic railway network increasingly difficult. The problems facing the TNR were, however, more profound, and more broad-ranging. Given that the bulk of the TNR’s trade was international, the disruptions to international commerce


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caused by WWI, and the competition to the Mexican trans-isthmus route from the Panama Canal (opened in 1914), represented far greater threats. Although Cowdray publicly claimed that, with competent management, the TNR would have been able to survive the competition from the Panama Canal, it was clear that interoceanic freight dropped off significantly after 1914. Privately, however, Pearson estimated that in order to compete with the Panama Canal, the freight charges on the TNR would have to be reduced (by US$1 per ton), but he expressed the fear that his partner in the enterprise, the Mexican government, would not allow this to happen.81 A further blow was the decision by the American Hawaiian Steamship Company in April 1914 to abandon the Tehuantepec route in favour of the canal. For Cowdray, however, the war was the major obstacle to profitable business: “With the suspension of European traffic, we have only local and passenger traffic. We shall be losing money continuously until conditions change.”82 In fact, it is clear from the company’s internal correspondence that Cowdray had been looking for a way out of the TNR contract since the Madero Revolution of 1911. The major obstacle was simply that Cowdray continued to insist on the terms of indemnity which had been stipulated in the original contract. However, neither Madero nor Huerta had been sufficiently motivated to dissolve the partnership arrangement originally negotiated by Limantour in 1898 to pursue the termination of the contract, and neither had been prepared to meet Cowdray’s terms. As a result, the negotiations had failed to make any progress. Cowdray’s main concern was that any agreement should be binding on any future government, and that the termination of the contract should not be used as a pretext to undermine his oil business by questioning his acquisition of substantial concessions, properties, and drilling rights. He was also keen to make sure, given the anxieties associated with the application of the Monroe Doctrine which had brought forth strong criticism of the original contract of 1898, that the United States would not object to any new contractual arrangement.83 Ultimately, however, it was Carranza’s nationalist preoccupations, manifest in the broader project to nationalise the railway network, which determined that the contract be rescinded in 1918. A foretaste of the growing nationalist concerns which would bring the TNR back under the exclusive control of the Mexican government can be found in Madero’s decree of April 1912, which stipulated that only Mexican citizens were able to work as engineers on trains within the National Railways of Mexico network, and that all foreign employees of the railways should “make themselves efficient in the Spanish language as early as possible.”84 Although this might suggest that the Madero government

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harboured plans to rescind the partnership with S. Pearson and Son, there is little evidence of this. Negotiations over the future of the TNR certainly took place over the summer of 1912, but it appears that they took place on Cowdray’s initiative. The stumbling block was the terms of compensation demanded by Cowdray, which Madero was not prepared to meet. The matter was postponed for further discussion, after Finance Minister Ernesto Madero received assurances from Cowdray that he would remain in charge of the TNR until further notice.85 In fact, Cowdray himself not only acknowledged the nationalist arguments in favour of terminating the contract, but was also prepared to use them to his advantage in his negotiations. He explained in February 1914 to Body, who had informed him that the Huerta government was “desirous of acquiring our interest in the TNR,” “A partnership between a private firm and a government is not one easy of fulfilment.” Cowdray continued, “A Government that has nationalised the roads and is desirous of running the roads by its own natives is apt to become critical and impatient about foreign employees. Foreigners are apt to be looked upon as intruders.”86 However, the severe financial difficulties of the Huerta government (highlighted in the previous chapter) prevented the termination of the existing contract. By the end of 1916, the escalation of violence and anarchy on the Isthmus of Tehuantepec, and frequency of attacks on rolling stock and installations, meant that operations on the TNR were, as Body reported, “virtually suspended.” Every attempt was being made to avoid a complete shutdown of operations, in order to prevent military occupation of the entire line, and to avoid any grounds for litigation from the Carranza government over a possible breach of the firm’s contractual obligations to keep the line open.87 Body’s fears appeared to have been confirmed in April 1917 when he was informed by a “confidential source” from the headquarters of the Constitutionalist Railways that the government was “seriously considering confiscation of assets of TNR.” One week later Carranza made a statement to Congress confirming the rumour, and two days later Body received a formal request for the management of the TNR to be handed over to the government. The official reason given was the protection of Mexican neutrality in present war, although Body was of the opinion that the real reason was to protest US entry into the European war. Now that the United States had joined the Allied cause, antiAmerican hostility in Mexico, he argued, had been converted into hostility toward British interests.88 The de facto termination of the partnership between S. Pearson and Son and the Mexican government soon became de jure. Cowdray retained his characteristic sangfroid, safe in the knowledge that the Carranza gov-


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ernment had more immediate cause to terminate the contract than he did. As Body commented to Maurice de Bunsen at the Foreign Office, Carranza’s increasingly desperate need for revenue had concentrated his attention on releasing the share capital of the TNR. “The partnership,” explained Body, has over £1,000,000 in hand, after setting aside the monies that have to be paid to the German bondholders after the war, and, besides, owns shares representing 30% of the capital of the American-Hawaiian Steamship Company. The sale of these shares would bring the divisable assets up to such an amount as would give the Mexican Government some £2,000,000 in cash. Hence under their present financial situation they are naturally most anxious to complete the transaction.89

The matter was finally settled in February 1918, with Cowdray receiving £2 million in compensation, as befitting his status as equal partner according to the terms of the original agreement. Under the circumstances prevailing in Mexico, Cowdray was aware that this was probably more than he could have expected. In fact, he was less than impressed by the way in which Carranza handled the transaction. He even suggested that the First Chief ought to have received a larger share than he did. He told Maurice de Bunsen that “if we had been trying to, we could not have made a deal by which Carranza got less free cash. The distribution of the available assets between the two partners could have given him more. By dissolving the partnership, his proportion of the assets was reduced by the amount of compensation he had to pay us.”90 chronicle of a death foretold: the sale of el aguila, march 1919 If the termination of the TNR contract was far from a great loss to Cowdray and, in fact, appeared on the contrary to have been a considerable relief, the sale of a large proportion of his shares in El Aguila and the handing over of managerial control to the Shell Group in March 1919 left him with far more ambivalent feelings. As has been explained in the previous chapter, a key component of Cowdray’s business strategy in Mexico regarding El Aguila had been bluntly stated in January 1914 as a desire to “sell oil interests without financial loss.” This was a decision determined not only, nor even principally by the deteriorating political conditions in Mexico but rather by the structural limitations of his oil business. Although El Aguila and its sister companies (EOTC and AMPP) had developed an impressive and profitable worldwide infrastructure of

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production, sales, and distribution in this period, Cowdray was aware that El Aguila lacked the capital and material resources to compete with the oil multinationals, and that its future lay in a partnership arrangement or a takeover by the only two global oil companies who would be able to offer the deal he sought—Standard Oil and the Shell Corporation. This explains his clandestine approach to Standard Oil in 1912. Standard’s reluctance to approve the deal at the time confirmed that the negotiations depended ultimately upon the strategy adopted by El Aguila’s main suitors. Following the outbreak of war, however, any attempt to conclude the sale became enmeshed in the efforts of the British and US governments to guarantee and protect vital supplies of oil-based products to the Allied military campaigns until the war was over. There was one other alternative suitor whom Cowdray had also pursued since 1912 who could provide the necessary security and investment and make El Aguila’s position less vulnerable—His Majesty’s Government. The growing strategic importance of oil in Britain’s defence planning had been signalled by the historic speech made by First Lord of the Admiralty Winston Churchill in July 1913, which argued that oil-fired ships should and would take the place of coal-fired vessels. The search for secure supplies of oil, and a means by which dependence upon existing independent oil oligopolies (Standard Oil and Royal Dutch) could be avoided, henceforth became a major preoccupation for the British government. The search would culminate in the government’s purchase of a majority shareholding in the Anglo-Persian Oil Company (the forerunner of British Petroleum) in August 1914.91 Prior to the arrangement with Anglo-Persian, however, the Liberal government had been advised by the Admiralty to sign a contract with Cowdray’s El Aguila, which was already the largest British-owned oil corporation in the world. As part of the initial negotiations, Cowdray approached Chancellor of the Exchequer Lloyd George in December 1913 with the following proposition: “if the Government were prepared to put in £5,000,000 we would be prepared to undertake not to sell our interests and to give them such security for the money as would be a full quid pro quo for their assistance and would be satisfactory to the House of Commons.” In return, the bulk of El Aguila’s fuel oil would be supplied to the Admiralty, which as a result “would have all the oil they require for both peace or war.” Furthermore, “if it were desired that the control of the company should remain in British hands for, say, 7 years, this can be arranged. But it would mean that we would have to look to the Government for financial assistance instead of selling the Company’s securities to the Public.”92 Although Cowdray’s proposal was discussed at cabinet level, it was rejected for four fundamental reasons. First, because imperial and strate-


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gic interests determined that oil supplies from the Persian Gulf were far more significant to Britain than those from Mexico (hence the purchase of Anglo-Persian Oil). Second, because of the diplomatic schism which had developed between Britain and the United States over the recognition of Huerta, and US preoccupations over Cowdray’s attempt to extend his oil operations in Colombia, it was clear that the direct involvement of the British government in the Mexican oil business would be perceived as a threat to the principles of the Monroe Doctrine, and would be strongly opposed in Washington. Third, the Admiralty harboured reservations about the suitability of El Aguila’s fuel oil for its fleet, and preferred to retain its dependence on Texas crude for the bulk of its supplies.93 Finally, the proposed deal between Cowdray, a Liberal Peer, and the Liberal government prompted a hostile reaction, especially in the Conservative press, that this was another example of the corrupt collusion between leading businessmen and Liberal politicians.94 The fact that Lord Murray, the Liberal Chief Whip intimately implicated in the Marconi scandal, was now working for Cowdray, and that Chancellor Lloyd George’s son, and Churchill’s brother-in-law were also employees, was exposed in the national press, and only served to give rise to further speculation and innuendo. As a result, the Liberal government declined to sign a deal with El Aguila. As G. R. Searle concludes, “With the Opposition newspapers baying at their heels, it would have been politically suicidal for them to have done so.”95 If Cowdray’s long-term strategy was clear in his own mind, events after 1914 were nothing if not unpredictable, and conspired to undermine his plans. While he continued to be flexible and thoroughly pragmatic, his correspondence over this period denotes a degree of impatience and restlessness. In April 1916 he sought the advice of London banker Samuel B. Murray of the London City & Midland Bank—and realised that his options were limited. He noted current debts were “some £2m,” and that considerable investment capital would be required in the future (£3 million for El Aguila and AMOC, £2.5 million for the construction of nine steamers, and “many millions” for further oil explorations in Algeria, Britain, and Sakhalin). The fundamental and “ever-present” question was: whether I ought or ought not to reduce or broaden the base of my oil interests. At present there are many eggs in one basket. The basket is, in my judgement, strong and reliable, and certainly worthy of one’s whole attention. We have arrived at the sound position that it should readily find its own capital requirements without interfering with the distribution of big profits.96

There were several options to be considered: first “should I assume that I or my Estate is permanently going to retain all my oil interests as they

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are today? That is, to work for ourselves as much as possible and not for other shareholders. This means paying off our debts in 5 years, and also finding further capital requirements out of further income, which could not be done except by undue economy or possibly by restriction of our programmes.” Second, should he “follow a medium course by selling part of our oil securities so as to redeem our debts as soon as possible, but otherwise keep the oil business as a family business?” Or should he “form a Holding Company to take over the whole of our oil interests, as soon after the war as possible, and to create Preferential Capital—thereby to pay off our debts promptly? If we decided to do this we should be loathe to sell off any of our oil securities meanwhile.” Or, finally, should he “amalgamate our interests with some of our competitors, or with the Anglo-Persian and Burmah companies to create a very strong British Company—which would have the cordial and possibly active support of the Government. The disadvantage of this scheme would be that we get no cash relief, and that we should feel to have the responsibility of the Management of the combined Companies. Thus we should get no relief of any kind.” He concluded, “I should like to be free to adopt such one [sic] of the alternatives as I may desire to do when the war is over.” Because his preferred option, the sale of El Aguila to Standard Oil, was blocked by the war, he initially chose to resurrect the last of these options, which he referred to as the “patriotic option.” In April 1916 Cowdray proposed a bold solution to Britain’s essential vulnerability—the lack of direct control over petroleum resources, and the rising dependence upon US oil supplies, both of which had been exposed as a consequence of the war. The plan advocated the creation of a British oil monopoly (provisionally to be called the British Imperial Oil Company) based on a merger of the major oil companies then under British management, supported and protected by government investment, but which would nevertheless stop short of nationalisation.97 It would be a limited liability company, under single management, and would seek public investment. It would not only market oil-based products in Britain and throughout the Empire, but establish refineries in the UK and training programmes for technical staff to run them. The plan was considered by the Petroleum Products Committee of the House of Commons, but rejected as not only unworkable but potentially damaging to highly sensitive British-US relations. It was clear that Cowdray’s blunt and brusque manner (the director of naval contracts described him euphemistically as “a man of strong will”) did not endear him either to civil servants or to the Admiralty.98 In fact, Cowdray himself had strong reservations about the merger scheme, even though he saw that it would be to the long-term advantage of British interests. As a lifelong opponent


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of managerial capitalism—and an advocate of personal management by those who have a stake in the enterprise—he foresaw that the involvement of the state in the running of the proposed company would lead only to bureaucratic inertia and public and parliamentary scrutiny. Besides, he would lose his freedom of manoeuvre, and the Pearson group would be obliged to accept the long-term responsibility of management, which meant, as he put it, “the rope would be round their neck.” Although the formation of the company might be in British interests, Cowdray concluded that the plan should not be put into practice, since, as he somewhat cynically (and wearily) commented, “patriotism will be too onerous to be contemplated.”99 While plans for what Cowdray later described as the “all-British” option for the future of Mexican Eagle lapsed, negotiations resumed with Standard Oil in November 1916.100 Although this was Cowdray’s preferred option, he was certainly not going to sell his interests cheaply, and he demanded £18 million (sterling) for the three companies. As a matter of courtesy, and because of his political status as a new member of the wartime cabinet as president of the Air Board and a member of the Privy Council, Cowdray referred the matter to the Treasury and the Petroleum Products Committee as part of a process which he deemed to be merely a formality. To his surprise and consternation, the latter raised strong objections to the sale as detrimental to the national interest. Although Cowdray made no attempt to hide his initial anger at the committee’s interference, he nevertheless sought a compromise solution not dissimilar to the one he had proposed in 1913: a partnership between El Aguila and the British government to the end of the war, with the latter receiving 50 percent of the stock (and 50 percent of the risk) in return for £9,250,000 of investment capital. The offer was, once again, rejected. Undeterred, Cowdray offered the government a 50 percent stake in El Aguila through the issue of debenture bonds, and thus avoiding the government becoming a shareholder in the company and incurring the wrath of either the US or the Mexican governments. Once again, negotiations came to nothing. The denouement of the negotiations came in October 1917 with the British government invoking the Defense of the Realm Act, which prevented “any British subject from transferring any ownership rights in any oilfield around the world to any but another British subject, without the approval of the Board of Trade.” Relations between Cowdray and the British government had reached their lowest point. Cowdray complained publicly that these regulations were illegal, and that the government were “simply screening themselves behind the war in order to make regulations which were not actually required by war conditions.”101 To add insult to injury, three weeks later Cowdray discovered that Lloyd George

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had offered Lord Northcliffe the post of minister of the newly created Air Ministry, which was due to take over the work of the Air Board, of which Cowdray had been president since January 1917. He immediately offered his resignation.102 Relations did not improve over the coming months. The combination of the invocation of DORA with the continued refusal of the Foreign Office to provide diplomatic representation for British interests in Mexico prompted Sir Clarendon Hyde, the head of the firm’s legal department, to write to the Foreign Office “formally to give notice that should any damage arise through our inability to place Mexican Eagle in a position to claim protection from a friendly and allied nation, we shall hold the British Government responsible for any loss or damage we sustain.”103 Cowdray himself became increasingly exasperated with the Foreign Office’s position, which he described as simply “indefensible.”104 The end of the war, however, removed the most important impediment to the sale of El Aguila. In October 1918 Calouste Gulbenkian of Royal Dutch Shell offered an arrangement whereby the Shell Group would purchase the majority of shares, and thereby obtain managerial control of the company, with Cowdray retaining “such a number of shares that it would be of small moment to him what happened to that remaining holding.”105 This would, in Gulbenkian’s words, “leave Lord Cowdray with a perfect peace of mind.”106 The negotiations were concluded with unprecedented speed, and the final settlement was almost precisely the one which had been first proposed by Gulbenkian. According to the contract signed in March 1919, the Shell Group acquired 35 percent of the ordinary capital of El Aguila, and 50 percent of the total shares of Anglo Mexican, for a price of £7.7 million.107 Although the Shell Group were not majority shareholders, they were permitted to nominate sufficient directors to secure management control on the boards of both companies, an arrangement which was stipulated in the contract to last for twentyone years.108 Although the personal terms of the sale were immensely favourable to Cowdray, his subsequent correspondence with the British government reveals a degree of bitterness and recrimination which suggested that the deal had certainly not provided Cowdray with “perfect peace of mind.” With the ink barely dry on the contract, Cowdray complained to Sir John Cadman, the chair of the British government’s Petroleum Executive, that it is a cause of great regret to me that I had to dispose of the bulk of my interest in El Aguila, but clearly I had no alternative as I was not prepared to carry indefinitely, and single-handed, the financial burden of this huge business. I consistently endeavoured over a period of years to get the British Government to coop-


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erate with me in maintaining the “all-British” position of El Aguila, but my efforts were entirely fruitless, and, further, we have not had that consideration and support from various Departments that we were fairly entitled to expect.109

Cadman explained to Cowdray that his proposal that HMG should purchase a share of his interests had been considered “very carefully and sympathetically,” but also that “it was felt, however, and I cannot help thinking wisely, that it would have been most undesirable to invest a large sum of Government money in Mexico, primarily on account of the political conditions in that country but also because of the exception which would have been taken to such a step by the United States.”110 Cadman’s reply only irritated Cowdray even more. His reply was swift: We made the suggestion to His Majesty’s Government that it should take half the risk with us at a time when the El Aguila property was considered by every one conversant with the position to be gravely endangered, not only by the general unrest in Mexico but owing to the possibility of the Mexican Government coming to active loggerheads with the US. In the latter event it was the declared intention of members of the Mexican Government to at once destroy all the oil properties. Of course when it is conceded that the Government could not properly become interested in a business, owing to the great risks it would run, it follows that it was not a fit risk for any private firm to have; but the Government insisted on our running this risk as they refused to allow us to sell our El Aguila shares to the Standard Oil Co and that at a time when they were the only buyers.”111

As regards the risk of upsetting the US and Mexican governments, Cowdray was equally blunt: We had considered this possibility and provided against it by suggesting that the Government might take Debentures, thereby securing themselves to the utmost extent possible against loss. As Debenture holders, neither the US or the Mexican Government could have properly raised any protest. Further, the Government were to have the right whenever they wished, to exchange its Debentures for shares; when the risks were over they had the right to the more valuable security— whilst they would have had the position of being able to pass on their security to any English Company.

Despite his complaints, the offer from the Shell Group could not have come at a better time for Cowdray, since he had received a report from the board of directors of El Aguila in Mexico (ironically enough, on Christmas Eve, 1918) that El Aguila’s most productive well, Potrero del Llano No. 4, had begun to produce salt water and oil in equal quantities.112 He was, therefore, fully aware of the news from Potrero when he signed the contract with Gulbenkian. By 1922, only three years after Cowdray had sold his controlling interest, Potrero had ceased to produce oil altogether. The combination of the decline in production of the Mexican fields, and

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the continued wrangling over questions of taxation, labour laws, and sovereignty and between the Mexican government and the foreign oil companies throughout the next decade indicated that Shell had perhaps been given the raw end of the deal.113 The deal with Shell did not mean the end of Cowdray’s participation in the oil business. The proceeds from the sale of El Aguila provided the capital to develop new oil ventures. While his hopes for major discoveries in the UK, Egypt, Greece, Morocco, Portugal, India, and Tunisia proved groundless, he had far more success with the Amerada Corporation in the United States and Canada, set up in partnership with his former employees in El Aguila—Thomas Ryder as president and Everette Lee DeGolyer as vice president, with John Body and Herbert Carr as directors. Between 1920 and 1926 Amerada’s production rose from 240,000 barrels to over 5 million. But Cowdray’s involvement with Amerada was far less direct or personal than had been the case of El Aguila.114 It is perhaps fitting to end this chapter with the telegram which Cowdray sent in March 1919 to Mexico to be circulated to all of the employees of El Aguila. It, on the one hand, encapsulates Cowdray’s always idiosyncratic relationship with the English language, and, on the other, highlights both his lack of sentimentality and his management skills—especially, in the latter case, his ability to identify and praise the efforts of his staff and their contribution to the quite remarkable success of his Mexican oil business in the face of innumerable obstacles. It also highlights his natural tendency toward optimism, and his inclination always to put a positive gloss on the current situation. He intimated that current employees would not be made redundant as a result of the sale, a promise he could never hope to deliver now that the burden of management had been taken out of his hands: Before publicly announcing the completion of marketing arrangements and close association with Shell Royal Dutch Companies which has been brought about by the acquisition by those companies of a large proportion of my firm’s shares, I desire to convey my deep appreciation and heartfelt gratitude to one and all who have by their unstinted [sic] services made the El Aguila Co. the success it is. With this new alliance the El Aguila Company becomes a more powerful world factor in the Petroleum industry . . . it is the ardent wish of both myself and our new ally that no changes should take place in the present personnel of the Company. The management in Mexico will continue as at present.115

Whether this was an honest appraisal of the fate of El Aguila based upon his knowledge of the broader context of the future of the Mexican oil business in 1919—especially the news from Potrero—can only be a matter of speculation. What it perhaps showed was that, after thirty years


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of building and sustaining his Mexican business empire, he had lost his enthusiasm for sustaining it. As he confided in melancholy fashion to his friend and business associate Henry Osborne O’Hagan toward the end of his life, “I have succeeded in life to the limits of my ambition; but I have not had such a happy life as you who are interested in so much that lies outside your business, while I have devoted myself so closely to my work that I have but few outside interests.”116 The fate of the business empire he had built in Mexico was now in the hands of others.

Conclusions

; The central purpose of this book has been to explain the context, modus operandi, and character of the extraordinary business empire which British contractor and politician Weetman Pearson/Lord Cowdray (1856– 1927) constructed in Mexico over a period of three decades between 1889 and 1919. This final section will examine the significance of his career in Mexico and summarise the reasons for its success. The book starts out from the premise, first, that Pearson was without doubt the most influential British businessman in Mexico in this period. A strong case could also be made that he was the single most successful British businessman anywhere in Latin America in this era. A second proposition is that Pearson’s diverse business interests in Mexico constitute an ideal case study of British entrepreneurial agency in late nineteenth-century Latin America, and one which provides an ideal opportunity to question previous historiographical frameworks for the understanding of the role of overseas interests in this crucial phase of national development. The book therefore seeks to highlight the inadequacy of the structuralist/nationalist interpretations which for much of the latter half of the twentieth century were adopted to explain the character and impact of British enterprise overseas. There is certainly no evidence from Mexico that Britain was ever successfully able to use its financial or naval power, or the power of pressure, coercion, or intimidation, to force the Mexican political elite to conform to the interests of the City of London, to sublimate its political system to British constitutionalism, or, still less, to adopt the cultural values of Britain’s gentlemanly elite.1 In short, the evidence presented here challenges the argument that the success of British enterprise in Mexico can be understood in terms of “informal empire” or “honorary dominion.” By contrast, this study broadly supports a liberal/developmentalist analysis which highlights the expansion of international business enterprise in an

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era of unprecedented globalisation in the second half of the nineteenth century, and its relationship to state- and nation-building within Latin America. In the specific case of Mexico, access to capital and credits in international financial markets permitted an escape from the burden of accumulated debt and the negotiation of new loans which facilitated infrastructural development and the consolidation of central political authority. Fiscal and legislative reform created an environment more attractive to overseas entrepreneurs, increased levels of commerce and investment, and generated new sources of government revenue. Above all, this approach highlights the agency of local political elites, and their harnessing of overseas capital, technology, and expertise in the pursuit of domestic state- and nation-building. The strategy adopted in this period by the regime of Porfirio Díaz—however imperfectly executed—is much better understood as one of liberal economic nationalism, or of “defensive modernisation” which sought both to exploit and to regulate Mexico’s interactions with the international economy in the pursuit of a project of national development.2 One useful way of further addressing and assessing the competing claims of the liberal/developmentalist perspective favoured by the Mexican political elite (and by Pearson himself), and those of the dependency/nationalist paradigm favoured by structuralist and nationalist historians, is to pose a deceptively simple question: who benefitted most from Pearson’s business empire? Was it Pearson himself, his clientalist network of Mexican “cronies,” the Mexican state, Mexican society, or the Mexican economy? What were the direct benefits to Mexico of the direct injections of capital and equipment for Pearson’s various projects for local employment, or the stimulus to other forms of economic activity from the creation of such an infrastructure? Were there any indirect benefits or “spillover gains” to the host economy and society, such as the transfer of entrepreneurial skills, or other sustainable forms of economic activity? At a more general level, did living standards in Mexico improve during this period of intense infrastructural development and the drive toward modernisation during the Porfirian era? That Pearson and the more prominent members of his clientalist network in Mexico personally profited from his Mexican public works contracts is not in doubt. The evidence from Pearson’s first contract (the partial construction of the Gran Canal between 1889 and 1897) is somewhat ambiguous and inconclusive, especially since Pearson’s firm received no more payments during the last phases of construction. What is clear is that, while he was building up his clientalist network in Mexico, Pearson was prepared to negotiate if it meant that strategic conciliations to government demands would lead to further contracts. In this he was not

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only astute but correct: both the number and profitability of his government contracts increased on an exponential basis over the period 1889 to 1911. Furthermore, it is also clear that a substantial proportion of the payments made to Pearson—a reasonable estimate would be between a half and two-thirds—were repatriated to Britain to pay direct costs (wages and salaries paid in the UK, the cost of specialist machinery), indirect costs, and profits.3 After 1901, a significant (although difficult to quantify) proportion of profits was channelled into the infrastructure of his oil business—purchasing and leasing of land, and costs of exploration and transportation. In the case of El Aguila, while Pearson’s expenditure was significantly greater than his income between 1901 and 1910, the reverse was true after 1911, and especially after 1914. However, as explained in Chapter Seven, both the domestic and international circumstances in which the profits from oil were generated were radically different from those in which he had developed his business before 1910. But profits there most certainly were. During the decade after 1910, the year in which he made his first major oil strike, and especially after the outbreak of the First World War, which revolutionised demand and transformed the political importance of oil, Pearson was able to amass a considerable personal fortune, even before the sale of a significant proportion of his oil business to Royal Dutch Shell in 1919. By 1920, the income and assets of the Pearson Group were considerably higher than that of any other on a list of Britain’s leading industrial firms, and supports the argument that, contrary to the standard account of the decline in British enterprise by the end of the nineteenth century, the activities of the Group constituted clear proof that British entrepreneurial acumen was very far from extinct.4 By the same token, the members of Pearson’s clientalist network amongst the political and social elite of Porfirian Mexico—epitomised by the board of directors of El Aguila established in 1909—also profited handsomely from the “fees,” retainers, and shares Pearson provided them with. For example, members of the board received 200 preference shares in El Aguila, with a par value of US$1,000 each, providing a guaranteed US$16,000 per annum regardless of the performance of the company.5 There are many other examples provided throughout the book. However, when it comes to analysing the direct or indirect benefits to the Mexican state or society of Porfirian infrastructural investment, there is still, perhaps surprisingly, little solid statistical evidence on which to make the assessment. Although we now have the benefit of detailed empirical studies of a number of vital sectors of the Porfirian economy— railways, and specific industries such as textiles, are perhaps the best examples—as well as more reliable assessments of government revenue and

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expenditure, and more accurate data on prices, salaries, and foreign trade, there are still no reliable series of measurements (of GDP, for example) which would allow a comparative analysis of how the Mexican economy performed over the lifetime of the Díaz regime.6 Despite the significant advances in the historiography of the Porfiriato in the last three decades, it is nevertheless difficult to escape the conclusion that the general demonization of the Porfirian era throughout most of the twentieth century (and, more importantly, its consequent marginalization for many years within the academy) still casts a long shadow over Porfirian studies. This becomes even more apparent when the social consequences of Porfirian modernisation and material progress are placed under the microscope. For example, recent attempts have been made to measure well-being and quality of life in Porfirian Mexico, and the specific impact of urban public works on improving living conditions for the inhabitants of Porfirian cities, but these studies are only in their infancy.7 Evidence— especially hard evidence—of other indirect benefits or “spillover gains” to the host economy and society from Pearson’s prolonged presence in Mexico is equally scarce. The impact of Porfirian modernisation is much clearer for certain sectors than for others. What emerges, for example, from the reevaluation of the role of railways in Porfirian Mexico (including the Tehuantepec line, although, as Chapter Four highlights, this project was always a special case) challenges the idea that the network only served the interests of its foreign owners and the needs of the export economy, and instead has demonstrated how crucial railways were to the development of an internal market and the growth of the domestic economy.8 There is also some speculative evidence of the transfer of entrepreneurial skills and the influence of the model of Pearson’s contracting business in the evolution of the Mexican construction industry over the course of the twentieth century. There had been no tradition of state regulation of contracting prior to the Porfiriato. But Pearson’s model, subsequently adopted by Mexican contractors and engineers, came to define the nature of the modern construction industry in Mexico.9 Before examining the key factors which explain the extraordinary success of Pearson’s Mexican business empire, it is important to appreciate its distinct phases and one of its most distinctive characteristics. The foundations were laid after 1889 by Pearson’s role as contractor and employee of the Mexican government for the construction of a series of infrastructural projects which he neither initiated nor commissioned, but which were designed and financed by the Mexican government. The second phase, which overlapped with the first, began with the development of his oil business after 1901, where Pearson took on the characteristics of a private entrepreneur— with overall responsibility for all aspects of the business, from investment to

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strategy, from marketing to sales. The character of his oil business shifted again after 1911 with the dramatic change in Mexican domestic politics and the internationalisation of the politics of oil. What linked these two distinct phases was the extraordinary level of intimacy achieved between Pearson’s firm, his representatives in Mexico (John Body and Thomas Ryder), and the Mexican government of Porfirio Díaz, which is described throughout this book as exceptional and unprecedented, and extended far beyond the normal remit of a relationship between contractor and client. Its two leading protagonists—Finance Minister José Yves Limantour and Pearson himself—summed it up accurately when the former described the latter (in 1898) as “agent and representative” of the Mexican government, and the latter boasted (in 1914) that his firm was considered “one of the minor Departments of State” in Mexico.10 the reasons for success In sum, there are five factors of particular importance in explaining Pearson’s extraordinary success in Mexico: first, the favourable circumstances in the 1880s which presaged a revival and renewal of diplomatic, commercial, and financial relations between Britain and Mexico which had been in abeyance since 1867; second, the growing fears of the political elite that Mexico’s resources would come under the control of US interests as a consequence of the diligent and energetic pursuit of US strategic and commercial predominance in the Caribbean and Central America in this period; third, Pearson’s central role in the successful completion of major public works projects as key components of a strategy of Mexican national development pursued by the inner circle of the Mexican political elite; fourth, as highlighted above, Pearson’s technical expertise, business acumen, and personal agency, his appreciation of the importance of the link between politics and business, and his careful construction of a clientalist network within the Mexican social and political elite; and fifth, the rapid rise in the international demand for fuel oil as a consequence of global technological change and wartime necessity. The first two factors help to explain the conjuncture of favourable circumstances surrounding the award of Pearson’s first major contract— for the Gran Canal in 1889. His arrival had been preceded (in 1884) by the restoration of British-Mexican diplomatic relations, which had been suspended since 1867 following Britain’s support for the abortive French invasion of Mexico in 1862 which had temporarily placed the Emperor Maximilian on a reconstituted Mexican throne. More important, the simultaneous restoration of Mexican credit in European capital markets

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following the deal struck by Minister of Finance Manuel Dublán with the London and Convention Bondholders in 1886 (the Dublán Conversion) gave Mexico access to the London financial market and to vital sources of capital for national development after a hiatus of more than sixty years in which Mexican failure to honour its debt obligations had made it a pariah in the eyes of London brokers throughout most of the century. The restoration of diplomatic relations and the restoration of credit were mutually reinforcing. They gave both investors in London and contractors such as Pearson the reassurance that their investments and their contracts would be backed by diplomatic and government protection, however ineffective this might be in practice. Without these assurances, it is very unlikely that the municipal loan of 1889 which brought Pearson to Mexico—raised in London specifically to fund the Gran Canal project—would ever have been floated. From the Mexican perspective, at the same time as Mexico had strengthened its economic, commercial, and political relations with the United States after the schism with the European powers after 1867, there was broad consensus amongst the liberal political elite that it was vital to the protection of Mexico’s economic and political sovereignty to seek European capital as a counterweight to growing US commercial and economic influence. This nationalist, developmentalist, and protectionist discourse— already referred to as “defensive modernisation”—has been much more clearly identified as an important part of científico rhetoric and policy in the 1890s and 1900s, but its relevance to the rapprochement between Britain and Mexico in the 1880s has been underestimated.11 It was this particular combination of circumstances which meant that the opportunities for British businessmen in Mexico—especially those as ambitious and opportunistic as the young Weetman Pearson—were better in the late 1880s than they had been at any time since the 1820s. As alluded to above, it is also vitally important to stress the way in which the talents which Pearson applied to his engineering projects in Mexico suited the strategy of national development pursued by the Mexican political elite, especially under the direction of the éminence grise of the científicos, Finance Minister Limantour, the chief strategist of Mexico’s project of national development. Limantour was, as a consequence, the single most important facilitator of Pearson’s success in his Mexican enterprises, but he was far from being a lone voice. Here the central role in científico discourse afforded to overseas capital, markets, technology, and expertise was vital to Pearson’s success. The ultimate goal of the Díaz government—only imperfectly implemented in practice—was to build the infrastructure of a modern, progressive, and industrial Mexico. This was to be achieved through a partnership between overseas expertise, capital,

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and technology—as represented by Pearson—and a coherent domestic policy of fiscal reorganisation, the codification and regulation of commerce, and the construction of a national communication and transportation network. At the same time, the political implications for attempting to maintain a balance between enticing foreign technology and investment, while not undermining Mexico’s political or economic sovereignty, were also highly risky, since they threatened to undermine the very foundations upon which the fragile edifice of the nation was being constructed. During the last four years of the Díaz regime, much of that fragile edifice began to crumble. The drive toward industrialisation and the institutionalisation of “progress” were never more than partially and unequally implemented, and the whole project was hampered by the absence of political modernisation to complement its economic counterpart. After 1910 the edifice was toppled by the Mexican Revolution and a prolonged period of civil war. Its foundations were, however, left intact, and the task of state- and nation-building would be successfully resurrected over the course of the twentieth century, albeit in different circumstances and according to different rules. In the wake of “revolutionary” nationalism, far more strident than its nineteenth-century liberal counterpart, the regulation of foreign capital and enterprise would be subjected to far closer scrutiny. In the case of oil (and El Aguila), this significant shift in rhetoric and policy presaged the nationalisation of foreign oil companies in 1938. The factors behind Pearson’s success highlighted so far relate to the conjunctural and contextual advantages he enjoyed in the pursuit of his multiple Mexican enterprises. What has also been stressed throughout this book as a vital contributory factor has been the role of individual agency— Pearson’s strategic modus operandi, his overall competence and reliability, his business acumen, and his successful adaptation not only to Mexican liberal-caudillo politics and business etiquette but also to the nationalist aspirations of the Mexican political elite.12 Pearson was, in short, a very astute operator. Although at times a blunt Yorkshireman of (relatively) few words, he showed himself to be not only forthright and assertive, but also flexible and conciliatory in pursuit of his firm’s interests, always acutely sensitive to the government’s developmentalist strategy, and creative in finding solutions to the considerable logistical problems which hindered the completion of his contracts. As well as demonstrating impressive organisational, financial, and managerial skills, Pearson revealed a high degree of political and cultural sensitivity—assets he exploited fully in the establishment of a clientalist network, where the bulk of his social and political capital was invested.

Conclusions

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Pearson’s clientalist network can be seen to greatest effect in the extent of the Díaz government’s collusion in the development of his oil business in the decade preceding the Revolution. As already highlighted, and unlike his previous public works contracts, the establishment of Pearson’s oil interests had required the investment of his own resources. But he also made it clear that he would not have undertaken such an investment had he not had the explicit support of the Mexican government. Here, as with his other Mexican projects, he was prepared to support the Díaz government’s strategy—in this specific case, challenging the monopoly of Standard Oil in Mexico’s domestic market—provided, of course, there was a profit in it for him. In this regard, he was certainly not disappointed. There were, however, other disappointments. The Mexican Revolution of 1910 marked an important watershed for Pearson’s Mexican empire, and presented him with a series of challenges which severely tested his personal and political talents, his adaptability, and (on more than one occasion) his patience and his resolve. Despite his profound attachments to the Díaz regime, Pearson was able to establish a successful working relationship with the administration of Francisco Madero, but his dalliance with the regime of Victoriano Huerta after 1913, when Pearson broke his “golden rule” of successful business conduct—“noninterference” in politics—led to a virulent press campaign in both the United States and Mexico which accused him of corruption and collusion with counterrevolutionaries, accusations he was never successfully able to counter. He was further demoralised by a growing realisation that the British government would never support or protect his business interests if they were perceived to run contrary to the political or strategic interests articulated in Washington. As a result, he became ever more committed after 1911, and especially after 1914, to seeking a way out of his Mexican commitments. The operation of the Tehuantepec Railway had encountered serious problems as a result of revolutionary disturbances and, above all, of the disruption to the pattern of international trade caused by the First World War. His unique partnership with the Mexican government was terminated by the government of Venustiano Carranza in 1918. The Tehuantepec line subsequently entered a long period of decline, especially as a result of competition from the Panama Canal, which became fully operational in 1914. Of far greater significance to his business empire, and to his ultimate sense of personal frustration, was the protracted search for a solution to the many problems facing his oil business. In 1919, he took the decision to turn over managerial control of El Aguila, far and away his most profitable business, to a new partner, Royal Dutch Shell.

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Conclusions

The decline of Pearson’s Mexican enterprises by 1919 foreshadowed the decline of British trade and investment in Latin America in general over the course of the twentieth century. British–Latin American relations were profoundly affected by structural change, external shocks, the growth of economic nationalism, deglobalisation, and shifts in political priorities on both sides of the Atlantic.13 In retrospect, therefore, the three decades before 1914—which correspond precisely with what might be legitimately described as the “Pearson era” in Mexico—represented the zenith of British presence and influence in the region. In short, this book argues that, despite the extent and scope of Pearson’s international contracting business, the catalyst for the expansion of Pearson’s business empire was to be found in Mexico and that the bulk of his substantial fortune, which he was subsequently to invest in the diversification of the family business and the foundation of the global media empire which is now Pearson PLC, derived from his Mexican enterprises.14 As a result of the amount of time he spent in Mexico, and as a reflection of the importance of his Mexican enterprises, Pearson was known in the British House of Commons as the “Member for Mexico.” As a mark of his personal affection and respect for Mexico—and also undoubtedly as recognition of the vast fortune which derived from his Mexican enterprises—the Cowdray coat of arms displays a symbolic representation of a Mexican peon.15 Pearson has in recent years rightly attracted a good deal of interest from political, economic, and business historians in the United States and, above all, in Mexico over the past two decades (although he continues to be curiously and persistently anonymous in his native Britain). He continues to be a controversial figure, nevertheless, since he is inevitably judged in the context of what is still a heated polemic surrounding the role of overseas business within host economies—a role which is not only of historic significance but one which has profound contemporary resonance in an age of neo-liberalism. His Mexican activities have therefore been interpreted from two polarised perspectives. For British observers, most notably Pearson’s two British biographers, he is seen through rose-tinted spectacles as an example of a dynamic, swashbuckling entrepreneur from a golden era of empire when British business dominated the globe. At the other end of the historiographical spectrum, in Mexico he has been most frequently portrayed by nationalist historians in negative terms as a sinister agent of British imperialism whose most significant achievement was the exploitation of Mexico’s resources, and the distortion of Mexican development. Neither view, in my opinion, represents an accurate or convincing interpretation. This book argues instead that Pearson was far more an agent of Mexican national development than an agent of British imperialism.

Reference Matter

Appendix

S. Pearson and Son major construction contracts in Mexico 1889–1911

Name of contract

Date

Client

Nominal value in sterling

Value in Mexican pesos (c. $10 pesos to £ sterling)

Source of finance

Mexico City Gran Canal (Gran Canal del Desagüe del Valle de México)

1889–1900

Mexico City Town Council (Ayuntamiento)/ Board of Directors of the Valley of Mexico Canal Project (Junta Directiva del Desagüe del Valle de México)

£2 million

$20 million

55% external debt 8% internal debt 23% federal government (fiscal revenue) 14% Town Council (fiscal revenue)

Veracruz Harbour

1895–1903

Mexican (federal) government

£3 million

$30 million

internal debt (5% silver bonds)

Veracruz Drainage

1901–1903

Veracruz state government

£400,000

$4 million

state government bonds

Tehuantepec National Railway

1896–1906


£2.5 million

$25 million (estimated actual payments $53,690,000)

external debt (reconversion 1899/ Tehuantepec Railway Loan 1904) internal debt (5% silver bonds)

Coatzacoalcos (Puerto México) Port Works

1896–1909


£1.4 million

$14 million (estimated actual payments $21,750,000)

external debt (reconversion 1899/ Tehuantepec Railway Loan 1904) internal debt (5% silver bonds)

(Continued)

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Appendix

S. Pearson and Son major construction contracts in Mexico 1889–1911 (Continued)

Name of contract

Date

Client

Salina Cruz Port Works

1899–1907


Nominal value in sterling £3.3 million

Value in Mexican pesos (c. $10 pesos to £ sterling) $33 million (estimated actual payments $24,983,000)

Source of finance internal debt (5% silver bonds)

Sources: J. A. Spender Weetman Pearson: First Viscount Cowdray 1856–1927 London: Cassell, 1930, Appx I, pp. 286–90; P. Connolly “Pearson and Public Works Construction in Mexico 1890–1910” Business History 41:4, October 1999, pp. 48–71; A. Rojas Rosales El Ferrocarril Nacional de Tehuantepec ¿El Eje Comercial del Mundo? 1893–1913 Tesis de Doctorado, UAM, 2004.

Notes

introduction 1. Commissioned under the auspices of the Organizing Committee of the First Centenary of the Modernisation of the Artificial Port of Veracruz (Comité Organizador del Primer Centenario de la Modernización del Puerto Artificial de Veracruz 1902–2002). 2. Reforma, Mexico City, 22 February 2002. The fact that Prince Charles’s tour of the whole of Latin America was to last no more than one week is symptomatic of the low priority given to the region by the British Foreign Office at the beginning of the twenty-first century. This, in turn, reflects the relatively low levels of contemporary British investment in Latin America by comparison with the Pearson era a century before. 3. Cantinflas remains a popular icon of working-class resistance to authority in Mexico and has provided the Spanish language with the verb—cantinflear, meaning to babble. Outside Mexico, his reputation is rather different, and has arguably provided the world with one of the least endearing of Mexican stereotypes, the babbling and incompetent simpleton; for a more positive interpretation, see J. M. Pilcher Cantinflas and the Chaos of Mexican Modernity Wilmington, DE: Scholarly Resources, 2001. 4. Financial Times, London, 7/03/2002; the visit was to the sanctuary of the monarch butterfly (Mariposa monarca), and the FT reported dryly that these were the only monarchs the Prince would be encountering in Latin America; the statue to Díaz was never unveiled, and still remains hidden from public view. 5. There are other tantalising but largely unexplored connections between the Alemán family and Pearson; Enrique Krauze indicates that (grandfather) Alemán González was involved in an agrarian rebellion in 1906 protesting the adjudication of community lands in Veracruz to S. Pearson and Son; and (father and future president) Alemán Valdés worked for Pearson’s El Aguila Company in Coatzacoalcos in 1923, where, among other things, he learned to speak English. E. Krause La Presidencia Imperial: Ascenso y caída del sistema político mexicano (1940–1996) México: Tusquets, 1997, pp. 86–89. 6. For an analysis of the historiography of the Porfiriato, see P. Garner Porfirio Díaz: A Profile in Power Harlow: Longman, 2001 (Spanish edition Porfirio Díaz;

244

Notes to Introduction and Chapter One

Del héroe al dictador; una biografía política México: Editorial Planeta, 2003; 2a edición, 2010); see also T. Benjamin La Revolución: Mexico’s Great Revolution as Memory, Myth, and History Austin: University of Texas Press, 2000. 7. Pearson has already been the subject of two biographies in English; J. A. Spender Weetman Pearson: First Viscount Cowdray 1856–1927 London: Cassell, 1930; and D. Young Member for Mexico: A Biography of Weetman Pearson, First Viscount Cowdray London: Cassell, 1966, which draws very heavily on Spender’s original biography; see also R. Middlemas The Master Builders—Brassey, Aird, Cowdray, Norton-Griffiths London: Hutchinson, 1963. 8. After 1910 and his elevation to the House of Lords, Pearson always referred to himself and was publically known as Lord Cowdray (or, simply, as Cowdray). In the text that follows, therefore, I shall refer to him as Pearson during the period before 1910 (Chapters One through Five), and thereafter as Cowdray. chapter one 1. J. Gallagher and R. Robinson “The Imperialism of Free Trade” Economic History Review Vol 6, no. 1 (1953). 2. F. H. Cardoso and E. Faletto Dependency and Development in Latin America Berkeley: University of California Press, 1979; K. Pomeranz The Great Divergence: China, Europe, and the Making of the Modern World Economy Princeton, NJ: Princeton University Press, 2000. 3. D. C. M. Platt Finance, Trade and Politics in British Foreign Policy 1815– 1914 Oxford: Oxford University Press, 1968; D. C. M. Platt Latin America and British Trade 1806–1914 New York: Harper & Row, 1973; D. C. M. Platt (ed.) Business Imperialism 1840–1930: An Enquiry Based upon British Experience in Latin America Oxford: Oxford University Press, 1977. 4. S. Haber “Economic Growth and Latin American Economic Historiography” in S. Haber (ed.) How Latin America Fell Behind: Essays on the Economic Histories of Brazil and Mexico, 1800–1914 Stanford, CA: Stanford University Press, 1997, pp. 1–33. 5. R. Miller and C. Dávila (eds.) Business History in Latin America: The Experience of Seven Countries Liverpool: Liverpool University Press, 1999. The growth of the discipline in Latin America is one of the most notable of recent developments. There have been three editions of the leading journal in the field, the Business History Review (published by Harvard), devoted exclusively to the business history of Latin America (1965, 1985, and 2008). Whilst the topics covered indicate that the study of foreign enterprises rather than domestic businesses operating in the region still predominate, the most noticeable change over this period is that Latin American academics working in Latin American universities now share the platform on a more equal basis with their counterparts in the United States and Europe; M. I. Barbero “Business History in Latin America: A Historiographical Perspective” in Business History Review 82:3, 2008, pp. 555–75. 6. G. Jones “Multinational Strategies and Developing Countries in Historical Perspective” Working Paper 10-076, Harvard Business School, 2010. I am grateful to the author for granting me permission to cite this paper.

Notes to Chapter One

245

7. Ibid. 8. Ibid. 9. P. J. Cain and A. G. Hopkins British Imperialism 1688–2000 London: Longman, 1993 (2nd ed., 2001). 10. Significant because it is absent, and significant given the importance of Mexico (New Spain) as the jewel in the Spanish imperial crown. 11. P. J. Cain and A. G. Hopkins “Afterword: The Theory and Practice of British Imperialism” in R. E. Dumett (ed.) Gentlemanly Capitalism and British Imperialism: The New Debate on Empire Harlow: Longman, 1999, pp. 196–220. 12. P. Riguzzi “México, Estados Unidos, y Gran Bretaña, 1867–1910: Una difícil relación triangular” Historia Mexicana XLI:3, 1992, pp. 365–437. 13. Cain and Hopkins “Afterword,” pp. 196–220. 14. Cain and Hopkins British Imperialism 1688–2000, p. 39. 15. Quoted in ibid., p. 45. 16. H. C. G. Matthew The Liberal Imperialists: The Ideas and Politics of a Post-Gladstonian Elite Oxford: Oxford University Press, 1973. Pearson’s participation in British politics is examined in the next chapter. 17. V. M. Macías-González “The Mexican Aristocracy in the Porfirian Foreign Service” Unpublished paper, pp. 25–26; I am grateful to the author for permission to cite this paper. Pearson’s connections to the City brokers Greenwood, Henderson, and Company, and in particular to Alexander Henderson (Lord Faringdon), were also of vital importance in obtaining stock exchange quotations for the bonds which Pearson received as partial payment for his early Mexican contracts: see next chapter. 18. Cain and Hopkins British Imperialism 1688–2000, p. 56. 19. C. Hale The Transformation of Liberalism in Late Nineteenth-Century Mexico Princeton, NJ: Princeton University Press, 1989. 20. Díaz quoted in Garner Porfirio Díaz, p. 214. 21. Macías-González “The Mexican Aristocracy.” 22. Valadés quoted in Garner Porfirio Díaz, p. 98. 23. There was no doubt that some members of the Mexican elite were proud of their provisional acceptance into Britain’s aristocratic social networks. General Francisco Mena, Mexico’s former financial agent in London, wrote proudly to Finance Minister Limantour that he was “the first foreigner to have been admitted to the Warwickshire Hunt Club since its foundation in 1826.” Archivo José Yves Limantour (hereafter AJYL) 1a serie R9 Mena to Limantour 03/02/1892. 24. R. Miller Britain and Latin America in the Nineteenth and Twentieth Centuries Harlow: Longman, 1993; A. Knight “Britain and Latin America” in W. R. Louis (ed.) The Oxford History of the British Empire 5 vols, Oxford: Oxford University Press, 1999, Vol III, pp. 122–45. 25. R. Miller “British Trade with Latin America (1870–1950)” in P. Mathias and J. A. Davis (eds.) International Trade and British Economic Growth: From the Eighteenth Century to the Present Day Oxford: Blackwell, 1996, pp. 118–45.

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26. Leslie Bethell “Britain and Latin America in Historical Perspective” in V. Bulmer-Thomas (ed.) Britain and Latin America: A Changing Relationship London: Royal Institute of International Affairs, 1989, pp. 1–24. 27. Cain and Hopkins British Imperialism, p. 249. 28. This represented a thirteen-fold increase; I. Stone “British Direct and Portfolio Investment in Latin America Before 1914” JEcH Vol XXXVII 1977, pp. 690–722. 29. Stone “British Direct and Portfolio Investment” pp. 721–22; the importance of free-standing companies to British overseas entrepreneurship in this period is discussed in the next chapter. 30. I. L. D. Forbes “German Informal Imperialism in South America Before 1914” Economic History Review 2nd ser. XXXI, 1978. 31. Stone “British Direct and Portfolio Investment.” 32. Cain and Hopkins British Imperialism, p. 273. 33. Quoted in Bethell “Britain and Latin America,” p. 18. By the early 1980s, diplomatic, commercial, and financial relations had reached their nadir, whereby only 2 percent of Latin America’s imports came from Britain, and a similar level (2.2 percent) of British exports went to Latin America. And whereas British investment in Latin America had represented 25 percent of British overseas investment before 1930, by the 1980s it represented less than 6 percent; V. BulmerThomas British Trade with Latin America in the Nineteenth & Twentieth Centuries London, Institute of Latin American Studies, Occasional Papers No.19, 1998, p. 12 34. A. Tischendorf Great Britain and Mexico in the Era of Porfirio Díaz, Durham, NC, 1961, pp. 3–8. 35. H. J. Heath “British Merchant Houses in Mexico, 1820–60: Conforming Business Practice and Ethics” Hispanic American Historical Review 73:2, 1993, pp. 261–90. 36. I. Herrera Canales El comercio exterior de Mexico 1821–1875 Mexico: El Colegio de Mexico, 1977, p. 84. 37. Stone “British Direct and Portfolio Investment in Latin America,” p. 708. 38. C. Marichal A Century of Debt Crises in Latin America: From Independence to the Great Depression 1820–1930 Princeton, NJ: Princeton University Press, 1989, pp. 68–97. 39. It is interesting to note that such a confluence of interests also occurred in 1830 with the appointment of British consular officials in Mexico as the representatives of London bondholders in the renegotiations over defaulted debt. The negotiations were coordinated by Robert Manning of the principal British merchant house in Mexico City, Manning and Marshall; see B. A. Tenenbaum “Merchants, Money and Mischief: The British in Mexico 1821–1862” The Americas, Vol 35, 1979, pp. 317–39. 40. B. Hamnett Juárez Harlow: Longman, 1994. 41. B. A. Tenenbaum “Manuel Payno, Financial Reform and Foreign Intervention in Mexico 1855–1880” in V. C. Peloso and B. A. Tenenbaum (eds.) Liberals, Politics and Power: State Formation in Nineteenth-Century Latin America Athens: University of Georgia Press, 1996, pp. 212–34.


247

42. Riguzzi “México, Estados Unidos, y Gran Bretaña, 1867–1910.” GermanMexican trade also increased at a rapid rate in this period. One estimate suggests that German merchants had two-thirds of Mexico’s export trade under their control by 1878; F. Katz The Secret War in Mexico Chicago: Chicago University Press, 2 vols, 1982, Vol I, p. 72. 43. A. Tischendorf “The British Foreign Office and the Renewal of AngloMexican Diplomatic Relations 1867–84” Inter-American Economic Affairs Vol XI, 1957, pp. 37–58. 44. Council of Foreign Bondholders, Mexican Extracts, Guildhall Library, London (hereafter CFBME, followed by volume number) Vol VII, 14/11/1883. 45. Ibid., 14/8/1884. 46. M. Costeloe Bonds and Bondholders: British Investors and Mexico’s Foreign Debt 1824–1888 Westport, CT: Praeger, 2003, p. 190. 47. Tischendorf Great Britain and Mexico, p. 9. 48. Memorandum from the Association of Chambers of Commerce of the United Kingdom to the Foreign Office 12/3/1882 Public Record Office (PRO) Foreign Office Papers (FO), Series 50, Vol 443/4945/76. 49. Eighty-nine such contracts were negotiated between 1880 and 1884. S. Villegas Deuda y Diplomacia: la relación México–Gran Bretaña 1824–1884 México: UNAM, 2005, p. 234. 50. Viscount Lyons to Earl Granville 10/1/1882 PRO-FO, Series 50, Vol 440/4945/41. 51. Limantour cited in A. Hernández Chávez “Orígen y ocaso del ejército porfiriano” Historia Mexicana XXXVII, 1998 pp. 257–97. This theme is explored more fully in Chapter Three. 52. V. C. Dahl “Business Influence in the Anglo-Mexican Reconciliation of 1884” Inter-American Economic Affairs Vol 15, 1961–62, pp. 33–35. 53. Further details of Carden’s activities in Mexico, and of his relationship to Pearson, are to be found in Chapter Six. 54. CFBME Vol VII, The Bullionist 16/08/1884. The increase was attributed mainly to the export of railway materials. 55. Tischendorf Great Britain and Mexico in the Era of Porfirio Díaz, p. 22. 56. CFBME Vol VII, New York Herald 19/08/1884. 57. Villegas notes that the path toward the resumption of relations was smoothed by the fact that the election of González in 1880 had been regarded by the Foreign Office as legitimate and de jure, in contrast to the doubts as to the legitimacy of the first administration of Porfirio Díaz in 1876, which had emanated from a military coup; Villegas Deuda y Diplomacia, p. 234. 58. Ibid. pp. 243–46. 59. Tischendorf “The British Foreign Office and the Renewal of Anglo-Mexican Diplomatic Relations 1867–84,” pp. 37–58. 60. S. St. John to Earl Granville, 28/04/1884 PRO-FO 50, 445/5019/19: Britain’s insistence on the inclusion of a commitment to nondiscriminatory tariff policies is in keeping with what Cain and Hopkins describe as British policing the “rules of the (imperial) game” in the late nineteenth century—but it must be said

248

Notes to Chapters One and Two

that Mexico was agreeing to no more than had been previously agreed in commercial treaties with France, Germany, and the United States; see Cain and Hopkins “Afterword,” pp. 196–220. 61. A. Tischendorf “The Anglo-American Claims Commission 1884–1895” Hispanic American Historical Review Vol XXXVII, 1957, pp. 471–79; for the favourable reception of the commission in the London press, see CFBME Vol VIII, Times 6/3/1886. 62. Costeloe Bonds and Bondholders, pp. 221–37. 63. S. St. John to Earl Grenville 03/09/1884 PRO-FO 50/5109/84. 64. CFBME Vol VIII, Times 20/11/1884. 65. There had been strong reservations expressed in Mexico over the Noetzlin agreement, not only over the level of “doucers,” or commissions to be paid to the negotiators, but rumours that the deal was “part of an elaborate plan by French financiers to obtain control over the entire finances of Mexico and of her banking business”; CFBME Vol VIII, Standard 15/12/1884. For Jan Bazant, the controversies surrounding the Noetzlin project provoked “the greatest scandal which the debt problem had ever produced”; J. Bazant Historia de la deuda exterior de México 1823–1946 Mexico: El Colegio de México, 1968, p. 119. 66. Costeloe Bonds and Bondholders, pp. 221–37. 67. L. Ludlow “Manuel Dublán: La administración puente en la Hacienda Pública Porfiriana” in L. Ludlow (ed.) Los Secretarios de Hacienda y sus Proyectos México: UNAM, 2005, 2 vols, Vol II, pp. 141–74. 68. The German bank of Bleichroeder was the principal broker (62 percent) alongside the London Bank of Glynn Mills (20 percent); Ludlow, ibid., p. 167. 69. Bazant Historia de la deuda exterior, pp. 110–35; E. Turlington Mexico and Her Foreign Creditors New York, 1930, pp. 203–11. 70. L. N. D’Olwer “Las inversiones extranjeras” in D. Cosío Villegas (ed.) Historia Moderna de México, 10 vols, Mexico, 1955–72, Vol VII, 1965, p. 1158. 71. Tischendorf “The British Foreign Office and the Renewal of AngloMexican Diplomatic Relations 1867–84,” p. 37. 72. CFBME Vol XIII, Mexican Financier 07/09/1889. To support its argument, the Financier published statistics which showed that British capital invested in Mexico in the first nine months of 1889 (£130,243,000) was nearly double the figure for the twelve months of 1887 (£72,015,000). chapter two 1. M. Linder Projecting Capitalism: A History of the Internationalization of the Construction Industry Westport, CT: Greenwood Press, 1994, p. 6. 2. Middlemas The Master Builders; S. Pollard “The Dynamism of the British Economy in the Decades to 1914” in M. Mann (ed.) The Rise and Decline of the Nation State Oxford: Oxford University Press, 1990. 3. D. Kynaston The City of London: The Golden Years 1890–1914 London: Chatto & Windus, 1995.

Notes to Chapter Two

249

4. K. T. Hoppen The Mid-Victorian Generation 1846–1886 Oxford: Oxford University Press, 1998, pp. 275–315. 5. A. Godley and M. Casson “Britain, 1900–2000” in W. J. Baumol, D. S. Landes, and J. Mokyr (eds.) The Invention of Enterprise: Entrepreneurship from Mesopotamia to Modern Times Princeton, NJ: Princeton University Press, 2010, pp. 243–72. 6. See, for example, N. Ferguson Empire: How Britain Made the Modern World London: Allen Lane, 2003. 7. J. Parry The Rise and Fall of Liberal Government in Victorian Britain New Haven, CT: Yale University Press, 1993, p. 16. 8. Hoppen himself makes it clear that his very positive interpretation should not hide the disparities, contradictions, and bottlenecks in the development of the Victorian economy, which would eventually manifest themselves in rapid postwar industrial decline, when Britain “floated rippleless across a sea of opportunities missed”; The Mid-Victorian Generation, pp. 304–15. 9. It is important to note that it was partly the fear of industrial decline—and the concomitant fear that the promotion of science and industry at home was lagging that of Britain’s continental European rivals—that stimulated the drive by provincial elites in the industrial heartlands of the Midlands and the North to promote scientific research and education through the foundation and expansion of the emerging civic universities. This was the case of the Yorkshire College, based in Leeds, which subsequently received its Royal Charter as the University of Leeds in 1904, to which Pearson (as Lord Cowdray) made a bequest for a Chair of Spanish in 1916. In his bequest, Pearson expresses the hope that it would “further the educational and economic interests of the nation, and especially those of Yorkshire . . . and to foster a closer intimacy between the cultures of Spain, Latin South America and Great Britain.” 10. G. R. Searle Entrepreneurial Politics in Mid-Victorian Britain Oxford: Oxford University Press, 1993. 11. Whereas Britain produced 36 percent of the world’s steel in 1875, by 1900 it had declined to just over 10 percent; J. Camplin The Rise of the Plutocrats: Wealth and Power in Edwardian England London, 1978, p. 271. R. E. Dumett (ed.) Gentlemanly Capitalism and British Imperialism: The New Debate on Empire Harlow: Longman, 1999, pp. 196–220. 12. Searle Entrepreneurial Politics, p. 321. 13. Godley and Casson “Britain, 1900–2000.” 14. M. Wilkins “The Free-Standing Company 1870–1914: An Important Type of British Investment” Economic History Review 41:2, 1988, pp. 259–85. 15. G. Jones “Multinationals” in G. Jones and F. Amatori (eds.) Business History Around the World Cambridge: Cambridge University Press, 2003, pp. 353–71. 16. Godley and Casson “Britain, 1900–2000.” 17. R. Liehr and M. E. Torres Bautista “British Free-Standing Companies in Mexico, 1884–1911” in M. Wilkins and H. Schröter The Free-Standing Company in the World Economy Oxford: Oxford University Press, 1998, pp. 253–78;

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according to Liehr and Torres, 154 British free-standing companies were registered in Mexico between 1884 and 1910, but very few paid any dividends to their shareholders or made any significant profit. 18. “Lo que ha perdido el capitalismo extranjero en México, por malos negocios, es muy superior a lo que ha ganado en los buenos negocios.” F. Bulnes El verdadero Díaz y la Revolución Mexico, 1921, p. 163. 19. A. Briggs “Foreword” in K. Middlemas The Master Builders—Brassey, Aird, Cowdray, Norton-Griffiths London: Hutchinson, 1963, pp. 13–18. Although Pearson won numerous contracts over his career, he had bid for many others without success. As he explained, for example, to the manager of his first Mexican contract (the Gran Canal) in 1894: “We keep tendering but cannot get anything. We tried hard for the Manchester, Sheffield and Lincolnshire new line into London and thought we had received the London end . . . (but) when the Company tried to put us to alter (sic) some of the conditions of the contract without extra charge we delivered but Firbank (the rival contractor) agreed to further alterations costing some £30–40,000 and got the contract.” Science Museum Archive, Pearson Papers (hereafter SMA:PEA) Box A7 Pearson to Walsh 10/11/1894. 20. Spender Weetman Pearson; Young Member for Mexico; Middlemas The Master Builders. 21. D. Newsome The Victorian World Picture London: John Murray, 1997, p. 23. 22. The growth of industrial brickmaking—especially during the peak years of railway development—had been exponential. To cite one of the many less-thaninspiring statistics used to illustrate the material development of Victorian Britain, it has been estimated that in 1845 alone, 740 million bricks were used in the construction of stations, bridges, embankments, and viaducts. P. S. Bagwell The Transport Revolution from 1770 London: Batsford, 1974, pp. 116–18. 23. Spender Weetman Pearson, p. 7. 24. SMA:PEA Box A9 Diary of American Tour, 1875, 2 vols. 25. SMA:PEA Box C44 Cowdray to Gulbenkian 26/09/1921. I shall return to Pearson’s business philosophy later in this chapter. 26. SMA:PEA Box A1 King’s Lynn Docks. 27. Hence the appearance of the deep-sea diver on the Cowdray Coat of Arms, designed in 1910. 28. E. H. H. Green “The Influence of the City over British Economic Policy c1880–1960” in Y. Cassis (ed.) Finance and Financiers in European History 1880– 1960 Cambridge: Cambridge University Press, 1992, pp. 193–218. 29. In 1906 the firm moved again, this time to 47 Parliament Street, formerly the site of the Whitehall Club. Spender, Weetman Pearson, p. 13. 30. J. Darwin The Empire Project: The Rise and Fall of a British World System Cambridge: Cambridge University Press, 2009, pp. 70–74. 31. Spender, Weetman Pearson, pp. 16–19, 52–54. 32. Camplin The Rise of the Plutocrats, p. 271. Dumett (ed.) Gentlemanly Capitalism and British Imperialism, pp. 196–220. See previous chapter for a discussion of gentlemanly capitalism in relation to Pearson.


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33. Searle Entrepreneurial Politics. 34. G. R. Searle The Liberal Party Basingstoke: Palgrave, 2nd ed., 2001; Searle Entrepreneurial Politics. 35. S. J. Lee Aspects of British Political History 1815–1914 London: Routledge, 1994, pp. 160–78. 36. Parry Rise and Fall, p.16. 37. Lee British Political History, pp. 221–24. 38. In pursuit of his own business interests, his advocacy of “free and fair” trade would not always be so principled. In the order to establish his Mexican oil business, for example, he favoured open competition in the marketplace; at the same time, he sought legislative and political protection from the Mexican government in order to seek advantage over his main business rival. See Chapter Five. 39. Pearson does not appear to have been a heavy drinker, but he certainly enjoyed the occasional beer. He was, fundamentally, a man of regular habits and simple pleasures, describing his daily routine on his trips to Mexico as follows: “Each night I walk (over 2 miles) to the Restaurant, have 2 or 3 ham sandwiches, a bottle and a half of German beer, then walk back, take a bath, into bed, milk and bread, the evening paper, and asleep until morning”; SMA:PEA Box A9 Pearson to Lady Pearson 31/03/1909. 40. SMA:PEA Box 27 Press Cuttings: “Juvenal” in the Times, n.d. 41. Matthew The Liberal Imperialists, p. 55. 42. Spender Weetman Pearson, pp. 32–36; Pearson’s wife, Annie Cass (Lady Pearson), was a member of the Executive of Women’s Liberal Foundation after 1898, and later Honorary Treasurer Liberal Women’s Suffrage Union; A. L. Douglas (Private Secretary to Lady Cowdray 1920–32) The First Viscountess Cowdray and Her Connection with the Royal College of Nursing and the Cowdray Club London: A. & E. Walter, n.d., and “Lady Cowdray” in the Federation News, organ of the Women’s Liberal Foundation (WLF) Vol 10, December 1921. 43. Middlemas The Master Builders (p. 173) estimates that Pearson’s worldwide workforce reached 45,000 “at its peak” but fails to indicate when; J. Knoblauch Lord Cowdray’s Interests in Mexico 1889–1919 PhD dissertation, Arizona State University, 1985, estimates a total of 60,000 in 1904. Neither provides sources. 44. Pearson’s Rectorial Address is reprinted in full in Spender Weetman Pearson Appendix II, pp. 291–99. 45. B. Hamnett “The Party Struggle for Colchester in the Age of Weetman Pearson (Lord Cowdray) 1892–1910” Unpublished ms., p. 5. I am very grateful to the author for providing me with a copy of the manuscript. The relationship between Pearson and Paxman lasted for many years. In 1911, for example, Paxman wrote to Pearson to offer his services as an intermediary in the negotiations between Pearson and Standard Oil over the purchase of Pearson’s El Aguila; SMA:PEA Box A4 Paxman to Cowdray 04/02/1911 A4. For a fuller discussion of Pearson/ Cowdray’s strategy for his oil business, see Chapters Five and Six; Paxman’s letter is an early indication that Pearson was prepared to contemplate the sale of El Aguila even before the Díaz regime collapsed in May 1911.

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46. SMA:PEA Box A7 Pearson to T. L. Walsh 20/02/1895. There is also circumstantial evidence to suggest that the baronetcy he received in the same year was, in effect, a bribe (or a backroom fix) from party managers to persuade a reluctant Pearson to stand in the Colchester bye-election, given the close proximity between his election (19 February) and the announcement of the honour (1 July); Hamnett “The Party Struggle,” p. 12 fn14. 47. SMA:PEA Box A9 Pearson to Lady Pearson 25/02/1895. His solution to hearing “twaddle being shouted about me” in the House was to compose eulogies to his wife, and to reveal a side of his character only rarely, if ever, demonstrated in his business affairs. As he put it, in order to occupy his time in the House he would “recite some of the gifts which I enjoy that bind me more than life to my own better half. Grace that can always do the right thing at the right time and under all circumstances. Womanly tenderness that sweetens human nature and makes night into day. Tact that never fails. Courage that is equal to every call upon it and cheers one forward with irresistible force. Love that conquers all things. Commonsense, a supposed common attitude but so rarely met with, that when experienced ’tis invaluable. Beauty. Devotion to ones calls and ones family. A perfect mother and an adored and adorable wife. When I possess such treasures in a wife who can wonder that a stolid uninteresting slogger—having only one quality of mind, and that concentration—like myself should have reached the present position of competency of means, hereditary honours and MP within 15 years of obtaining that possession of priceless value. The only question is where one can stop when so inspired. Further flights mean greater efforts, less leisure, more wear and tear: I say we are entitled to a seat, to taste the joys of a country life, to take life more easily so that we have a hale and hearty old age. . . . I inscribe myself, Her adorer, her husband & her slave.” 48. Spender Weetman Pearson (p. 33) notes that he attended an average of one in twenty House of Commons divisions when MPs were required to vote. It was his Conservative opponent in the general election of 1906 who complained that Pearson had attended only 213 divisions out of 2,100 in the previous Parliament, and who was the first to give him the title of “Member for Mexico,” rather than Member for Colchester; Hamnett “The Party Struggle,” p. 22. 49. Archivo José Yves Limantour (hereafter AJYL) 2a serie R39 Pearson to Limantour 23/01/1906. 50. SMA:PEA Box A6 Pearson to Scurrage 05/10/1892. In 1919, long after he had ceased to represent Colchester as an MP, he donated £20,000 to the City Corporation for the purchase of Colchester Castle and the establishment of a public park, although by then he had long ceased to represent the constituency; ibid. Box 24. 51. Hamnett “The Party Struggle,” p. 24. 52. The Liberal government of Herbert Asquith (1908–15) became notorious for its political and financial scandals. Searle The Liberal Party, pp. 92–93. 53. G. R. Searle Corruption in British Politics 1895–1930 Oxford: Clarendon Press, 1987, p. 242. 54. Lee British Political History, p. 230.


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55. Fifteen peerages were created in 1910, twenty-two in 1911, and a further ten in 1912; the whiff of scandal surrounding these appointments was increased by the fact that their architect, Liberal Chief Whip and Party Fundraiser Lord Murray of Elibank, was subsequently involved in the Marconi Scandal and forced to resign in 1912; Pearson’s innocence was further compromised by the fact that he immediately offered Murray a position in the firm as a representative searching for oil contracts in South America; see Chapter Six. 56. SMA:PEA Box A9 Pearson to Lady Pearson WP-LP 04/06/1910. 57. There were initially only two directors—Pearson himself, and Clarendon G. Hyde, a barrister who had worked for the firm since 1888; H. Murray The Pearson Connection Leeds: Leeds Metropolitan University, 2007. 58. Searle Corruption, p. 42. 59. Pearson revealed this in a letter to the Capital and Counties Bank as part of a (successful) request to open a new account in January 1900; the bank was, no doubt, impressed by the extent of his political connections; Spender Weetman Pearson, p. 25. 60. Ibid., p. 125. The contract was worth £3,365,000 to Pearson. His most expensive contract (£9,184,000) for the British government was for a series of construction works, including a munitions factory in Gretna during WWI. 61. For details of the collection of stained-glass windows narrating the history of the firm designed by Geoffrey Fuller Webb and commissioned as decoration for the staircases at 47 Parliament Street, see Murray The Pearson Connection. The windows now adorn the Pearson Corridor at Queen Square Court at Leeds Metropolitan University, following a bequest by 3rd Viscount Cowdray in 1971. 62. Quoted in Searle Corruption, p. 106. 63. He described one of these social and political gatherings to Mexican Finance Minister Limantour: “Saturday was a perfect day at Paddockhurst! All the members of the late government (except Rosebery) lunched with us and in the afternoon we had 700 guests, many from long distances. Everything passed off without a hitch and the general enjoyment was, I am told, perfect.” AJYL 1a serie R11 Pearson to Limantour 18/07/1899. 64. See Conclusions for details. 65. In turning down an approach made by the offer from Edward Hoeflich in May 1910 to purchase the Mexico Daily Record, an English-language paper published in Mexico City with a circulation (or so Hoeflich claimed) of 1,200–1,500 readers, Pearson replied, perhaps ironically in the light of subsequent events, that “our experience of newspaper investments has not been a fortunate one, and we decided some years ago not to add to them.” SMA:PEA Box A4 Pearson Body 18/05/1910. The papers with which Pearson had been involved in his early career were the Weekly Sun and the Sunday Sun, neither of which had been a success in financial terms; Spender Weetman Pearson, p. 244. 66. This era came to an end over the course of the twentieth century as newspapers became more exclusively run as commercial ventures rather than as political organs or party mouthpieces; S. Koss The Rise and Fall of the Political Press in Britain: Vol 2: The Twentieth Century London: Hamish Hamilton, 1984, p. 1.

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67. Ibid., p. 9. 68. It was “absorbed” by the Daily News; Koss, Rise and Fall, pp. 471–72. 69. Spender Weetman Pearson, pp. 228–40. 70. Ibid., p. 245; Koss Rise and Fall, p. 8. 71. Pearson’s commitment to the use and effectiveness of propaganda can also be seen in the creation in 1909 of a new post of head of the Department of Propaganda within his Compañía Mexicana de Petróleo El Aguila, the company established to run his oil business in Mexico; see Chapter Seven. 72. SMA:PEA Box A4 Cowdray to Body 05/02/1913; it is clear that Cowdray agreed to participate in the syndicate not only to curry favour with the government, but also to put additional pressure on the Madero government to buy him out of the Tehuantepec Railway contract (see Chapters Four and Six). He told Body: “If the sale of the Tehuantepec Railway goes through we could afford to take one or two shares in the Syndicate, as Don Ernesto [Madero, Minister of Finance] might wish us to do, but, at the same time, we should not desire to have the slightest responsibility as to the conduct of the papers . . . if one abstained, the Government might consider it an unfriendly act . . . we ought to subscribe whether we like it or not—of course, the smaller the amount the better.” A further example of the attempt to use the press to mould public opinion in Mexico during the revolution was the financial support given to maverick politician Félix Palavicini, a former employee and agent of El Aguila, for the establishment of El Universal, a conservative daily newspaper in Mexico City in 1915. El Aguila provided advertising revenue, and the paper was published from premises rented from the firm; see Chapter Seven; to counter the attacks in the US press on his business interests in Mexico, which became more frequent during the Mexican Revolution, Pearson employed a “publicity man” to monitor press coverage and to issue denials; SMA:PEA Box A23 File R1/1. 73. T. P. O’Connor had been MP for Galway and Liverpool (1885–1900), and was a close associate of Lloyd George; he also knew Pearson in his capacity as editor of the Star and the Weekly Sun (in which Pearson was one of a syndicate of investors); Koss Rise and Fall, pp. 61, 213. 74. T. P. O’Connor “Lord Cowdray: A Study in Personality” Pall Mall Magazine, April 1913, pp. 353–57; SMA:PEA Box 24. 75. H. O. O’Hagan Leaves from My Life London: John Lane/Bodley Head, 2 vols., 1929, Vol II, pp. 147–65. 76. P. N. Furber I Took Chances: From Windjammers to Jets Leicester: Edgar Backus, 1954, p. 180. 77. For example, he advised his first representative in Mexico, Duff Morison, not to reveal too much about how the firm had obtained the contract. Morison had planned to address representatives of British business and investors during a forthcoming visit to London to highlight the opportunities available in Mexico. Pearson advised caution: “It is not desirable to advertise to all the world how we are doing the trick in Mexico. The knowledge is valuable, and without hoarding it unduly we do not want it to become too much the property of the public.” SMA:PEA Box A6 Pearson to Morison 08/06/1892.


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78. O’Connor “Lord Cowdray,” p. 357. 79. Spender Weetman Pearson, p. 278. 80. SMA:PEA Box A5 Pearson to Landa 21/03/1890. 81. SMA:PEA Box A5 Pearson to Walsh 13/09/1990. 82. Archivo Histórico de Petróleos Mexicanos (hereafter AHPM, followed by Box and File number) C3033 Exp. 78547 Pearson to Ryder. 83. SMA:PEA Box A7 Pearson to Glacier n.d. 1894. 84. SMA:PEA Box A9 Pearson to Lady Pearson 04/06/1910. 85. AHPM C39 Exp. 1024 f.94. Minutes of Board of Directors El Aguila 11/10/1910. 86. AHPM C2804 Exp. 737476. This generosity was also no doubt partly explained by the difficulties in recruiting management staff in Mexico, as subsequent chapters will illustrate. The photographs in the Pearson archive attest to the quality of accommodation provided for both workers and managers of the Tehuantepec project. 87. SMA:PEA Box A7 Pearson to Knox 26/01/1895; in 1903 Pearson set up the Aged Navvies Pension Fund (president and treasurer, Lady Pearson), which provided pensions for retired labourers until the introduction of the state pension a quarter of a century later; Spender Weetman Pearson, p. 49. 88. P. Connolly El contratista de don Porfirio: Obras públicas, deuda y desarrollo desigual Mexico: Fondo de Cultura Económica, 1997, pp. 187–90. 89. SMA:PEA Box 52/1. He also commented that, as a general rule, “three Mexicans were required for two Englishmen.” This casts an ironic light on his choice of a Mexican peon as the symbol for the Cowdray coat of arms. 90. SMA:PEA Box 53 Ryan to Body 19/10/1907; the discrimination did not stop there: on government orders (from the Consejo Superior de Salubridad), both Japanese and Chinese workers were forcibly housed in special barracks “so that they can be subjected to observation and quarantine.” Box 53A. 91. A. Rojas Rosales El Ferrocarril Nacional de Tehuantepec ¿El Eje del Comercial del Mundo? 1893–1913 Tesis de Doctorado, UAM, 2004; see Chapter Four. 92. SMA:PEA Box A4 Pearson to Body 25/07/1902. The photographs in the Pearson archive attest to the quality of accommodation provided for both workers and managers of the Tehuantepec project. 93. SMA:PEA Box A6 Pearson to S.P. & S. Management, Chesterfield n.d. 1892. 94. SMA:PEA Box C44 Cowdray to Gulbenkian 26/09/1921. 95. Spender Weetman Pearson, pp. 22–31. 96. AJYL 1a serie R11 Pearson to Limantour 08/05/1897. 97. Connolly El contratista, p. 126. 98. D. Wainwright Henderson: A History of the Life of Alexander Henderson, First Lord Faringdon, and of Henderson Administration London: Quiller Press, 1985. 99. SMA:PEA Box A6 Pearson to Brookfield 06/05/1891. Brookfield was a Canadian contractor, and the supervisor of the construction works of the dock at Halifax, Nova Scotia.

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Notes to Chapters Two and Three

100. Wainright Henderson, p. 65. 101. AJYL 1a serie R9 Mena to Limantour 11/01/1889. The same problem occurred in the case of the first Tehuantepec Loan of 1889: “the Bonds have arrived, but, because the people with whom [the contractor] Salvador Malo set up this business do not have capital or good contacts to find it with well-known houses: although they are working hard, they have achieved nothing so far.” chapter three 1. SMA:PEA Box A3 Memo 09/01/1914. 2. Rincón Gallardo to José Yves Limantour 24/12/1889 Archivo José Yves Limantour, Condumex, Mexico City (hereafter AJYL), 1a serie, Rollo (hereafter R) 12; In the account he gave to Spender, Pearson claimed that the Mexican government had “begged” him to consider the contract. Rincón Gallardo’s letter, however, makes it clear that Pearson had, via his agent Duff Morison, submitted a competitive tender to the canal board and that he had been summoned by the board to present his case. 3. P. Connolly “Pearson and Public Works Construction in Mexico 1890– 1910” Business History 41:4, October 1999, pp. 48–71. 4. Díaz’s first reelection in 1888, and his five subsequent reelections, required amendments to the Constitution; Garner Porfirio Díaz, pp. 98–136. 5. M. Perló Cohen El paradigma porfiriano: Historia del desagüe del Valle de México México: UNAM/Porrúa, 1999 (pp. 70–74) indicates that the government of Manuel González, who succeeded Diaz as president after the latter’s first term of office between 1880 and 1884, had virtually abandoned the project during his presidency. 6. SMA:PEA Box 16 Valley of Mexico Drainage Canal. 7. The population of Mexico City rose from 290,000 in 1885 to 471,000 by 1910, an increase of 62 percent; A. Rodríguez Kuri La experiencia olvidada: El Ayuntamiento de México: política y gobierno 1876–1912 Mexico: UAM/El Colegio de México, 1996, p. 82. 8. Humboldt cited in E. Lemoine Villicaña El desagüe del Valle de México durante la época independiente Mexico: UNAM 1978, p. 14. 9. L. Alamán Memoria que el Secretario del Estado y del Despacho de Relaciones Exteriores e Interiores presenta al Soberano Congreso Constituyente sobre los negocios de la Secretaria de su cargo, leída en la sesión de 8 de noviembre de 1823 cited in Lemoine Villicaña El Desagüe, p. 26. 10. Ibid., pp. 33–56. 11. The Díaz regime’s relationship to late nineteenth-century “modernity” has been fully and eloquently explored in M. Tenorio Trillo Mexico at the World’s Fairs: Crafting a Modern Nation Berkeley: University of California Press, 1996. 12. Díaz, who made regular visits to the project to inspect its progress, cited in Perló Cohen El paradigma porfiriano, pp. 59–84; the most comprehensive and detailed history of the construction of the Gran Canal is Connolly El contratista.

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13. R. E. King Tempest over Mexico: A Personal Chronicle Boston: Little, Brown & Co., 1936, p. 34. 14. One of the partners of the firm, Mr. Campbell, had formed the Mexican Prospecting and Finance Company in London in 1888 to raise a loan of £400,000 to finance the tunnel; Perló Cohen El paradigma porfiriano, p. 102. 15. Bucyrus had signed a contract with the junta in June 1887 and had commenced work in 1888; Perló Cohen El paradigma porfiriano, pp. 103–4. 16. The Gran Canal contract was one of the few projects which Pearson took on throughout his career on the basis of a “lump sum” contract—where the contractor assumed all the risk of completing the project, even if the design or costings proved to be inadequate or the project took longer to complete than originally envisaged. Nevertheless, he made sure in this case that (a) he received 90 percent of the contracted sum in advance of construction, and (b) the contract contained an indemnity clause which would compensate him if the contract were cancelled or altered. Generally, Pearson favoured the “measure and value” contract, whereby all of the components (labour, materials, etc.) were priced separately, and the tender for the overall project was based on the “bill of quantities,” the aggregate of the various components plus the contractor’s premium; Spender Weetman Pearson, pp. 38–39. 17. SMA:PEA Box A6 Pearson to Morison 17/06/1891. 18. Spender Weetman Pearson, pp. 85–86. Pearson’s statement that “from the day the contract was made no question ever arose between us as to its fair interpretation” is inaccurate, since, as Connolly shows, the original contract was altered in four subsequent modifications in order to settle specific problems (mostly regarding the amount and method of payment, and the actual date of completion) which arose during construction before the project was finally completed in 1897; Connolly El contratista, pp. 247–49. 19. Perló Cohen indicates that the junta had serious reservations over the competence of the Mexican engineer initially in charge of the project, Luis Espinosa; Perló Cohen El paradigma porfiriano, pp. 105–8. 20. Connolly rejects the idea that the award of the canal project to a British firm was an attempt to diversify the sources of investment and to reduce dependence on the United States on the grounds that Pearson was not a foreign investor, but a contractor; Connolly El contratista, p. 234. While this is true, it underestimates the significance of Limantour’s longer-term strategy of restoring Mexico’s credit in European financial markets in order to facilitate the management of existing and subsequent loans to finance the developmentalist strategy. As indicated in Chapter One, the strategy of diversifying the sources of foreign capital and investment and therefore creating rivalries between competing overseas interests between the “Great Powers” was also central to Limantour’s policy of protecting national sovereignty. 21. Nora Pérez-Rayón Elizundia Entre la tradición señorial y la modernidad: la familia Escandón Barrón y Escandón Arango Mexico: UAM (Azcapotzalco), 1995, pp. 184–85. 22. Manuel Perló Cohen also suggests that the rival bid from Pearson’s competitor, the US firm of Bucyrus, was in fact a “more attractive” offer, presumably in terms of cost; Perló Cohen El paradigma porfiriano, pp. 123–30.

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23. J. Wale, L. B. Freeman, and A. Godley “Weetman Pearson in Mexico and the Emergence of a British Oil Major 1901–1919” Business History Review Vol 84, Summer 2010, pp. 275–300. 24. E. Sánchez Santiró “El desempeño de la economía mexicana tras la independencia, 1821–70: nuevas evidencias e interpretaciones” Unpublished paper, Instituto Mora, 2008. I am grateful to the author for providing me with a copy of this paper. 25. A. Salmerón “Re-estructuración y Consolidación Hacendaria 1868–1911” in L. Ludlow (ed.) Los secretarios de Hacienda y sus proyectos (1821–1933) México: UNAM, 2002, Vol II, pp. 83–206. 26. Tenorio Trillo Mexico at the World’s Fairs. 27. For the significance of the Liberal Union, see Hale The Transformation of Liberalism, pp. 102–6. 28. Justo Sierra, quoted in R. Weiner Race, Nation & Market: Economic Culture in Porfirian Mexico Tucson: University of Arizona Press, 2004. 29. Stephen Haber’s recent depiction of Porfirian Mexico as a “canonical example of ‘crony capitalism,’” which he defines as “a system of alliances and coalitions between the executive power and the political and social elite of asset holders” underestimates the role and the development of the state in this period; S. Haber “The Commitment Problem and Mexican Economic History” in S. Haber and J. L. Bortz (eds.) The Mexican Economy, 1870–1930: Essays of the Economic History of Institutions, Revolution and Growth Stanford, CA: Stanford University Press, 2002, pp. 324–36. 30. AJYL 2a serie R2 Limantour to Macedo 23/06/1900. 31. Limantour to Núñez Ortega 28/06/1887, cited in Connolly El contratista, p. 226. 32. For example, in January 1906 Pearson approved Body’s suggestion that “we should loan Emilio Velasco [one of the lawyers acting on behalf of the firm for the Tehuantepec Railway contract] the amount he requires, say $15–20,000 (pesos) . . . of course, all these men know we helped Don Santiago [Méndez, SubSecretary in the Department of Public Works and Communications], and if we decline to help them they are naturally disposed to resent it.” SMA:PEA Box A4 Pearson to Body 26/01/1906. The financial “help” given to Méndez may well have been inspired by an attempt to influence him in favour of the firm, since he had been identified by de Landa y Escandón in 1901 as a possible obstacle to further contracts: “I am convinced that the firm will suffer as long as Mr. Méndez is in the Department [of Communications and Public Works].” SMA:PEA Box A4 Body to Landa 01/07/1901. 33. A. Musacchio and I. Read “Bankers, Industrialists, and Their Cliques: Elite Networks in Mexico and Brazil during Early Industrialization” Enterprise and Society Vol 8, 2007, pp. 842–80. 34. In Mexican political culture, the camarilla is best understood as a network (often informal) of individuals linked by patronage and loyalty to further the political ambitions of the group and its leadership; see R. A. Camp Politics in Mexico Oxford: Oxford University Press, 1993, pp. 103–7.


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35. L. Ludlow “El Banco Nacional Mexicano y el Banco Mercantil Mexicano: radiografía social de sus primeros accionistas 1881–82” Historia Mexicana 156, Vol XXXIX, abril–junio 1990, pp. 979–1028. 36. Rodríguez Kuri La experiencia olvidada, pp. 149–50. 37. W. Schell Integral Outsiders: The American Colony in Mexico City 1876– 1911 Wilmington, DE: Scholarly Resources, 2001. 38. AJYL 2a serie R5 Hampson to Limantour 05/03/1901. 39. John Hays Hammond, quoted in R. F. Smith The United States and Revolutionary Nationalism in Mexico 1916–32 Chicago: Chicago University Press, 1972, p. 1. 40. National Archives, Foreign Office Papers; FO 371/463 Tower to Grey 1908. 41. FO 371/480/29820 Tower to Grey 14/08/1908. 42. Garner Porfirio Díaz, pp. 107–10. 43. SMA:PEA Box A4 Body to Pearson 09/07/1905. 44. Ibid. 18/07/1906. 45. SMA:PEA Box A7 Pearson to Landa 20/11/1894. 46. Ibid. Pearson to Walsh 05/06/1895. Aside from the tender from the unnamed French firm, a rival tender for this contract had been submitted by the British firm of Sir John Jackson. 47. AJYL 1a serie R3 Camacho to Díaz 15/12/1894. The award of the Tehuantepec National Railway contract to Pearson will be dealt with in the next chapter. 48. In fact, the office of Mexico’s financial agency in London appears to have been a Camacho family fiefdom during Luis Camacho’s period of office, from 1894 until his death in 1909. Luis’s brother Enrique and his sister María were both employees of the agency (the latter since 1903). The new financial agent appointed after Luis’s death, Manuel Maria de Zamacona, discovered that there were “irregularities” and a “deficit of £14,000 in the Agency’s funds.” Despite their close association over many years, Limantour demanded an investigation, and Enrique’s resignation; AJYL 2a serie R60 Limantour to Angel and Dionisio Camacho 05/03/1910. 49. SMA:PEA Box A4 S.P.&S. Sucesores, Articles of Association 14/10/1909; The board of directors, who collectively would receive 25 percent of the company’s profits, to be shared out as follows: John Body (president): 300,000 shares, 10 percent profits; Sir Weetman Pearson: no shares, 1 percent profits; Fred Adams (civil engineer: agent for the Salina Cruz Harbour Work, and manager of the Tehuantepec National Railway, vice president): 140,000 shares, 5 percent profits; Guillermo de Landa y Escandón (governor of the Federal District, chairman): 100,000 shares, no profits; Colonel “Porfirito” Díaz (the president’s son): 50,000 shares, 2 percent profits; Lic Luis Riba (“Partner in Law Firm of Cancino & Riba; Director of El Aguila & the company’s chief lawyer in Mexico”): 20,000 shares, 1 percent profits. 50. J. Álvarez de la Borda “El inicio de la industrialización petrolera, 1900– 1910” Boletín del Archivo Histórico de Petróleos Mexicanos Vol 4, agosto 2004, pp. 45–66; the personal relationship between Pearson and the Díaz family was

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confirmed by the fact that Pearson looked after the president’s son Porfirito in England in 1896, for which Díaz senior was most grateful. He thanked Pearson personally for his “intelligent and paternal vigilance, as if he were your own son.” Quoted in C. Tello Díaz El exilio: Un retrato de familia Mexico: Cal y Arena, 1993, p. 197. 51. Pearson kept in touch with Limantour long after the latter had gone into exile in Paris. When, for example, Pearson was asked to assist in the negotiations over a foreign loan to stave off imminent bankruptcy of the Huerta government in 1913, his first reaction was to consult Limantour. See Chapter Six. 52. J. Y. Limantour Apuntes sobre mi vida pública (1892–1911) Mexico: Porrúa, 1965, p. 38. 53. Ludlow (ed.) Los secretarios de Hacienda y sus proyectos (1821–1933) Vol II, pp. 83–206. 54. Connolly El contratista, pp. 26, 132. 55. J. López-Portillo y Weber “Porfirio, el Desagüe, y Weetman Pearson” Memorias de la Real Academia de la Historia XXII: 3, julio–sept 1963, pp. 213–26; the two men were, of course, very similar in age, with Limantour (b. 1854) as Pearson’s senior (b. 1856) by less than two years. 56. SMA:PEA Box A4 Landa to Cowdray 20/07/1910. 57. O’Hagan Leaves from My Life, Vol II, p. 148. 58. SMA:PEA Box A9 Pearson to Lady Pearson 17/02/1908. 59. Relations became even more strained in February 1892 when Pearson’s tender for the additional works on the canal following the cancellation of Read & Campbell’s contract for the tunnel was roundly rejected by the Junta (now presided over by Limantour as president) on the grounds of excessive cost; Perló Cohen El paradigma porfiriano, pp. 152–53. 60. As Limantour commented, in another example of the authority of President Díaz at the apex of the political order, policy was never implemented without Díaz’s prior approval. “I have been careful in every case to give a detailed account to the President.” Limantour Apuntes, p. 46. 61. SMA:PEA A4 Pearson to Body 28/10/1901. 62. AJYL 1a serie R11 Pearson to Limantour 03/06/1893. 63. Ibid. 08/05/1897. 64. AJYL 2a serie R6 Chavero to Limantour 21/11/1901; the other bidder was the US firm of Astor Chandler. The difference between the two tenders was US$1 million. 65. AJYL 2a serie R1 Velasco to Pearson 12/05/1900. 66. See Chapter Six. 67. AJYL 1a serie R11 Pearson to Mena 01/04/1898. 68. Ibid. Limantour to Pearson 02/04/1898. 69. Ibid. Pearson to Limantour 08/04/1898. 70. AJYL 2a serie R60 Private Memo Re Negotiations with Mr. Clay Pierce 08/03/1909. 71. SMA:PEA Box A9 Pearson to Lady Pearson 04/04/1909. 72. AJYL 2a serie R39 Pearson to Limantour 23/01/1906.


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73. AJYL 3a serie Pearson to Limantour 24/05/1911. Limantour sent a telegram in return: “extremely obliged by very kind words” 24/05/1911. 74. AJYL 3a Serie Cowdray to Limantour 26/6/1917. 75. See Chapters Six and Seven. 76. AJYL 3a serie Body to Limantour 31/04/1915. 77. AJYL 3a serie Cowdray to Limantour 11/05/1916. 78. AJYL 3a serie Limantour to Body 12/10/1916. By this time, it had been determined that Limantour’s isthmus properties did not contain oil which could be easily exploited. See Chapter Six. Limantour also had a house in Tlapan which had been ransacked in 1915. It was not mentioned in this letter. The last communication on record was an affectionate letter to Limantour in his French exile in December 1919 in which Pearson sent “affectionate greetings for Christmas and the New Year, and our fervent hope that you may live to enjoy many years of Mexico’s full recognition of your unequalled work on behalf of that unfortunate country.” 79. Furber I Took Chances. 80. A. Molina Enríquez Los grandes problemas nacionales Mexico, 1909, p. 44. 81. Limantour Apuntes, p. 47; it is ironic in the light of Limantour’s diatribe against the evils of compadrazgo to note that Limantour and Porfirio Díaz were compadres, by dint of Limantour’s invitation to the president to be godfather (padrino) to Limantour’s daughter in 1880; A. Salmerón “Proyectos Heredados y Nuevos Retos: El Ministro José Yves Limantour (1893–1911)” in L. Ludlow (ed.) Los secretarios de Hacienda y sus proyectos (1821–1933) México: UNAM, 2002, Vol II, pp. 175–206. 82. SMA:PEA Box A3 Ryder to Pearson 02/02/1914. 83. SMA:PEA Box 16 Valley of Mexico Drainage Canal. Landa also received a commission of 5 percent on all of the sums received from the board of directors, up to a maximum of Mex$225,000; Genaro Raigosa, the lawyer who represented S.P.&S in the canal project, received US$80,000 for his services; he was also retained on a salary of $3,000 per annum for, as Pearson put it, “advice and attention required to keep us straight and have all in order with the Board”; the lawyer Joaquín Casasús, who represented Pearson in the negotiation for the prolongation of the contract in 1891, received US$30,000. 84. SMA:PEA Box A6 Pearson to Duff Morison 17/06/1891. Pearson also made personal loans to Carden. For details of the relationship between Pearson and Carden, see Chapter Six. 85. Spender Weetman Pearson, p. 27; Peimbert was subsequently employed by the firm when he ceased to work for the Mexican government; Rojas Rosales El Ferrocarril Nacional de Tehuantepec, p. 94. 86. See Chapter Six. 87. AJYL 1a serie R11 Limantour to Walsh 23/06/1893. The cut-glass dinner service was followed by a silver tea service, so that “when using it, Mrs. Limantour may occasionally remember her English friends.” AJYL 2a serie Pearson to Limantour 29/04/1900. This time Limantour did not offer to pay, but merely thanked Pearson for “your many and genteel attentions.”

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88. “You know that you have a house in England whenever you and your family come to avail yourselves of it”; AJYL 2a serie R1 Pearson to Limantour 29/04/1900. 89. “Thank you for making our trip to the United States so comfortable and agreeable”; AJYL 1a serie R11 Limantour to Pearson 25/09/1896; AJYL 2a serie R3 Limantour to Camacho 06/06/1900; on at least one occasion Limantour asked de Landa y Escandón directly whether he could “use Mr. Pearson’s carriage” for a trip to Orizaba “so that I can take our cook, and to avoid two or three bad nights in the hotels in Orizaba.” AJYL 1a serie R4 Limantour to Landa 05/10/1898; SMA:PEA Box A3 Pearson to John Body 13/1/1913. 90. Limantour was unaccustomed to moving in such exalted social circles, and requested advice from Miguel de Béistegui, whom Victor Macías-González describes as Mexico’s “resident aristocratic envoy” in London as to the appropriate dress, demeanour, and etiquette required for an audience with the monarch; Macías-González “The Mexican Aristocracy in the Porfirian Foreign Service,” pp. 25–26. 91. AJYL 3a serie Body to Limantour, September 1919. The detective found that the young man in question, Captain Ian Ross, “had very little of interest, either good or bad” in his past. 92. Limantour Apuntes, p. 41. 93. SMA:PEA Box A9 Diary of Pearson’s European Tour in 1878. 94. A. Knight Latin America: What Price the Past? Oxford: Clarendon Press, 1994, p. 4. 95. SMA:PEA Box A4 Body to Limantour 16/06/1915; for other contraventions of the “rule” of non-interference in domestic politics, see Chapters Six and Seven. 96. SMA:PEA Box A3 Memo on meeting with Page 09/01/1914. 97. T. B. Hohler Diplomatic Petrel London: John Murray, 1942, p. 173. 98. SMA:PEA Box A3 Memo 09/01/1914. 99. J. Buchenau In the Shadow of the Giant: The Making of Mexico’s Central America Policy, 1876–1930 Tuscaloosa: University of Alabama Press, 1996. 100. SMA:PEA Box A7 Pearson to Landa 13/02/1895. 101. Ibid. Landa-WP 18/02/1895. 102. Ibid. Pearson to Camacho 14/03/1895. 103. SMA:PEA Pearson to Grey; PRO/FO 371/89 f.40798. 104. Pearson’s direct role in assisting the Huerta government in its raising new funds in 1913 is covered in Chapter Six. 105. AJYL 1a serie R4 Camacho to Limantour 27/10/1897. There is no record of Pearson’s response, but Limantour’s comment that he knew Mason and that he was “a dangerous individual” (un individuo peligroso) suggests that the project never got off the ground. 106. AJYL 1a serie Camacho to Limantour 24/05/1897. Lobnitz’s firm had constructed all of the machinery for harbor and port works used in Pearson’s worldwide contracts, including specialist dredgers employed on the Gran Canal and port works in Mexico; Spender Weetman Pearson, p. 50.


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107. Limantour Apuntes, pp. 78–79. 108. AJYL 2a serie R3 Limantour to Camacho 06/06/1900. 109. AJYL 2a serie R46 Memo from S. Pearson and Son to Limantour 12/04/1907. S.P.&S would subscribe Mex$2,500 to the first edition, and the Mexican government Mex$5,000 on the understanding that, for future editions, the “leading Banks, Railways, and the more important business houses should be invited to co-operate by means of annual subscriptions.” 110. SMA:PEA Box A4 Pearson to Body 27/05/1910; Pearson was particularly concerned that these news reports had become prominent on the eve of the launch of the first issue of El Aguila shares on the London Stock Market in May 1910. The source of these stories was the publication of a series of articles on Mexican slavery by US journalist John Kenneth Turner which had been published originally in the United States in the American Magazine. They were later compiled into a book, Barbarous Mexico (1910), which became a best seller and one of the most powerful indictments of the Díaz regime; E. Meyer John Kenneth Turner: Periodista de México Mexico: Ediciones Era, 2005. 111. Limantour Apuntes, pp. 83–9. 112. Patricia Connolly’s exhaustive investigations (El contratista, pp. 256–72) have convinced her that Pearson, in fact, made a handsome profit on the Gran Canal contract (as much as Mex$1.8 million, after deducting costs from income); Perló Cohen, by contrast (El paradigma porfiriano, pp. 208–17), suggests that the assumptions of enormous profits are exaggerated, since the work to finish the project continued for a year after the last payments were received in 1896. 113. Always a political animal, Pearson named the first two dredgers Carmen (after the president’s wife) and Conchita (after his daughter); Spender Weetman Pearson, p. 94; Pearson raised his concerns with the manager of the project: “I know there must be some valid reason for the breakdowns you are having to such a fearful extent, breakdowns which raise your costs up to a terrible price and which reduce your output to such an extent that it will take 4 years to finish the work instead of two years. But for the life of me I cannot make out why you should have these breakdowns.” SMA:PEA Pearson to Walsh 18/01/1893, A subsequent letter to Walsh demonstrated not only Pearson’s exasperation but his love of cliché: “I note the difficulties you are having from hard material & consequent breakdown. This is not a bed of roses but most carefully bear in mind that the stitch in time saves nine.” Box A7 Pearson to Walsh 10/11/1894. 114. Pearson explained to Morison, “We were to receive a profit of 15% under the contract, then the balance to be divided, firstly 5% to you, and then equally between us. . . . We cannot change these arrangements . . . you know how particular the Junta is in these matters.” SMA:PEA Box A6 Pearson to Morison 17/06/1891. 115. Perló Cohen El paradigma porfiriano, pp. 160–61. 116. Ariel Rodríguez points out that the municipal loan of 1889 was paid for not by the Mexican government but by the Ayuntamiento (Mexico City Council). The payments over subsequent years (up to and during the Revolution) proved to be extremely onerous on the City Council’s budget, and accounted for between

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Notes to Chapters Three and Four

30 percent and 40 percent—in one year (1898), 52 percent—of their annual expenditure between 1889 and 1903. Even more surprising was that, despite the fact that the council was paying for the Gran Canal, they had no formal representation on the Junta de Desagüe, which took all the formal decisions over the execution of the works. Rodríguez argues that this lack of representation was symptomatic of the Ayuntamiento’s political emasculation in the later years of the Porfiriato; Rodríguez Kuri La experiencia olvidada, pp. 134, 146–50. 117. Limantour Apuntes, p. 34. 118. See Appendix. 119. SMA:PEA Box A6 Pearson to Landa 15/07/1893. 120. SMA:PEA Box A7 Pearson to Walsh 27/12/1894. This underlined once again the importance of making the small print of the contract as watertight as possible. 121. The funds would come from internal public debt and government income; Perló Cohen El paradigma porfiriano, p. 195. 122. For photographs of the ceremony, see A. Casasola Historia gráfica de la Revolución Mexico, 1940, Vol I, p. 12–13. 123. Quoted in Connolly El contratista, p. 192. 124. M. Tenorio Trillo “1910 Mexico City: Space and Nation in the City of the Centenario” Journal of Latin American Studies 28:3, 1996, pp. 75–105; M. J. Gonzales “Imagining Mexico in 1910: Visions of the Patria in the Centennial Celebration in Mexico City” Journal of Latin American Studies Vol 39, 2007, pp. 495–533. 125. For the full range of events, see G. García Crónica oficial de las fiestas del primer centenario de la independencia de México México: Talleres del Museo Nacional, 1911. chapter four 1. Quoted in Spender Weetman Pearson, p. 110. 2. E. Cárdenas “A Macroeconomic Interpretation of Nineteenth-Century Mexico” in S. Haber (ed.) How Latin America Fell Behind: Essays on the Economic Histories of Brazil and Mexico Stanford: Stanford University Press, 1997, p. 77. 3. An analysis which typifies the critical approach is E. Glick “The Tehuantepec Railroad: Mexico’s White Elephant” Pacific Historical Review, 1953, pp. 373–82. 4. Contemporary estimates, such as that made by one of the project’s severest critics, Francisco Bulnes, put the figure at as much as $182.5 million; Rojas Rosales El Ferrocarril Nacional de Tehuantepec, pp. 98–99. 5. Archivo José Yves Limantour (hereafter AJYL) 1a serie R3 Camacho to Díaz 15/12/1894. See previous chapter for the full text of Camacho’s letter. 6. “We are only prepared to finish this railway for cash, all work done being paid for under a schedule of prices or at cost price plus a percentage of say 12 1/2% as a minimum. This percentage to be divided, say 20% for our friends & 80% to us. Unless the government would enter into such a contract with us, we

Notes to Chapter Four

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should not care to have the work.” SMA:PEA Box A6 Pearson to Duff Morison 16/09/1891. 7. Rojas Rosales El Ferrocarril Nacional de Tehuantepec (pp. 98–99) has conducted a detailed trawl of the records in the National Archive; Spender Weetman Pearson, Appendix 1, pp. 287–88, suggests that Pearson received a total of £7.2 million for the three contracts. At a contemporary rate of Mex$10 to the pound sterling, this amounted to about Mex$72 million, significantly less, if Rojas’s estimates are correct, than the sums actually received. The discrepancy is most probably to be explained by the significant additional costs added during the course of construction, which were not envisaged in the original contracts. 8. It is estimated that Mexico had no more than 600 kilometres of track in the mid-1870s, as compared to approximately 7,000 in the rest of Latin America; S. Kuntz Ficker and P. Riguzzi (eds.) Ferrocarriles y vida económica en México (1850–1950) Mexico: UAM/El Colegio Mexiquense, 1996. 9. J. Coatsworth Growth Against Development: The Economic Impact of Railroads in Porfirian Mexico DeKalb: Northern Illinois University Press, 1981; F. Calderón “Los Ferrocarriles” in D. Cosío Villegas (ed.) Historia Moderna de México Vol VII, pp. 483–634; J. Winberry “Development of the Mexican Railroad System” Geoscience and Man Vol XXI, 1980, pp. 111–19. 10. Construction took place in only eight of these concessions, but even then, no more than 200 kilometres of track were laid; Kuntz Ficker and Riguzzi, Ferrocarriles. 11. Sandra Kuntz Ficker also notes the significant levels of British capital invested in these and other railways in the United States in this period; S. Kuntz “Los ferrocarriles y la formación del espacio económico en México, 1880–1910” in S. Kuntz and P. Connolly (coords.) Ferrocarriles y obras públicas México: Instituto Mora, 1999, pp. 105–37. 12. Turlington Mexico and Her Foreign Creditors, p. 235. 13. C. Marichal “La deuda externa y las políticas de desarrollo económico durante el Porfiriato: algunas hipótesis de trabajo in Pasado y Presente de la deuda externa de México” Mexico: Instituto Mora, 1988, pp. 85–101. 14. Coatsworth Growth Against Development, p. 46. 15. Tischendorf noted that British investors, for example, in particular were rarely satisfied with the return on their railway investments in Mexico; Tischendorf Great Britain and Mexico. 16. J. Y. Limantour “Política Ferroviaria” in Memoria de Hacienda y Crédito Público correspondiente al año económico del l de julio de 1906 al 30 de junio de 1907 México: Tipografía de la Oficina Impresora de Estampillas, 1909, pp. ix–xii. 17. S. Kuntz Ficker “Economic Backwardness and Firm Strategy: An American Railroad Corporation in Nineteenth-Century Mexico” Hispanic American Historical Review 80:2, May 2000, pp. 267–98. Given this recognition of increasing nationalist concerns within the later Díaz regime, it is perhaps ironic that the idea for the creation of a national railway system in Mexico by means of a holding company through which the government would obtain “absolute control of the lines”

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appears to have been an idea proposed by US banker James Speyer to Limantour in February 1906; AJYL 2a serie R39 Speyer to Limantour 24/02/1906. But, as Stephen Topik has shown, the concerns of bankers and financiers have never been constrained by national (or nationalist) allegiances or boundaries; S. Topik “When Mexico Had the Blues: A Transatlantic Tale of Bonds, Bankers, and Nationalists, 1862–1910” American Historical Review Vol 105, 2000, pp. 714–38. 18. AJYL 3a serie Limantour to de la Barra 17/02/1910. 19. Ibid. 10/03/1910. Limantour’s rhetoric and language became even more extreme after he had left office and gone into exile. He commented, for example, in 1913 on the failure of Woodrow Wilson’s administration to recognise the Huerta government in 1913 (of which de la Barra was a member): “It is time to stop this outlandish behaviour of the USA in which they are not embarrassed to behave as they please with you or the President. The Yankees believe that they are allowed to do as they wish . . . and it has been good to remind them of the principles by which relations between civilised peoples are governed, and to show them that Mexico still has enough dignity not to tolerate the way in which these gentlemen continue to treat us.” AJYL 3a serie Limantour to de la Barra 27/05/1913. 20. PRO-FO 341/480 File 25305 R. Tower to Sir E. Grey 3/7/1908; for confirmation from German and French diplomatic sources, see Katz Secret War Vol 1, pp. 40–46. 21. H. Bernstein Matías Romero 1837–1898 México: Fondo de Cultura Económica, 1973. Romero would later become Mexico’s first ambassador to the United States. 22. Colección Porfirio Díaz, Universidad Iberoamericana (hereafter CPD):L41:C 8 f.3 38: Díaz to Chávez 27/6/1890. 23. Rojas Rosales El Ferrocarril Nacional de Tehuantepec; see also the report on Díaz’s inauguration speech in January 1907 at Salina Cruz in El Tiempo Ilustrado, Mexico City, 13/2/1907. 24. Archivo General de la Nación (AGN): Archivo Histórico de la Secretaria de Comunicaciones y Obras Públicas (AHSCOP), Series 2 (FNT), file 238-1: “Apuntes para una breve reseña historica de la comunicación interoceánica por el Istmo de Tehuantepec.” 25. M. Covarrubias Mexico South: The Isthmus of Tehuantepec New York: Alfred Knopf, 1967, pp. 163–73. 26. Coatsworth Growth Against Development, p. 41. 27. This was the case of the concession offered to the agent of the bondholders of the London debt in 1870 for a commitment to the construction of the project in return for the cancellation of a large part of the debt. The offer had been rejected; Turlington Mexico and Her Foreign Creditors, p. 184. Similar schemes to convert Mexican Treasury bonds into railway bonds were proposed by President Lerdo de Tejada in 1876 and by Matías Romero in 1878, with equally disappointing results; Villegas Deuda y Diplomacia, pp. 187–88. 28. J. Bazant “From Independence to the Liberal Republic, 1821–67” in L. Bethell (ed.) Mexico Since Independence Cambridge: Cambridge University Press,


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1991; D. McCullough The Path Between the Seas: The Creation of the Panama Canal 1870–1914 New York: Simon & Schuster, 1977. 29. Rojas Rosales El Ferrocarril Nacional de Tehuantepec, p. 98; other estimates of the cost of the first completed line are US$20 million (Covarrubias Mexico South) and US$38 million (Spender Weetman Pearson). Connolly claims that the cost of the subsidy per kilometre on the Tehuantepec route reached as much as Mex$82,000 before 1892 and that the TNR alone absorbed one-fifth of total external debt devoted to railway financing during the course of the Porfiriato; Connolly El contratista, p. 84. 30. Marichal “La deuda externa,” pp. 85–101. 31. F. R. Calderón “Los Ferrocarriles” in D. Cosío Villegas (ed.) Historia Moderna de México Vol VII, pp. 483–634. 32. CPD L19 c1 f.91 Díaz to Romero 19/01/1894. 33. Turlington Mexico and Her Foreign Creditors, pp. 215–16. 34. Tischendorf Great Britain and Mexico, p. 66. 35. AGN:AHSCOP 1/631 1893–95. The photos of the Tehuantepec line taken by Pearson’s employees prior to reconstruction in 1900 and 1901 demonstrate the poor quality of the work and general neglect into which they had fallen; SMA:PEA Volume Q50. 36. CPD:L41:C8: f.354 Díaz to Huntingdon 03/08/1895. 37. AGN:AHSCOP 2/631-1. 38. SMA:PEA Box A7 Pearson to Camacho 18/09/1896. 39. SMA:PEA Box 52/1 Tehuantepec National Railway. 40. SMA:PEA: Box A9 Westminster Gazette 3/5/1901. 41. SMA:PEA Box A4 Body to Pearson 17/08/1901. 42. Ibid. 11/10/1901. 43. SMA:PEA Box A7 Pearson to Camacho 26/10/1896. 44. AJYL 1a serie R11 Pearson to Mena 01/04/1898. 45. AJYL 1a serie R4 Limantour to Camacho 11/07/1898. 46. FO/ZHCI/1721: report of Secretary M. Muller. 47. It is perhaps of note that, as a young man, Pearson had witnessed a similar partnership arrangement in Turkey during his tour of Europe and the Middle East in 1878, where he noted that Smyrna, under Ottoman rule, was “the first city we have seen in the East possessing tramways and a quay. They have been made by a French Company, who possess the exclusive right for 25 years when they become the property of that generous government of the Ottoman Empire”; SMA: PEA Box A9. 48. Glick “The Tehuantepec Railroad,” pp. 373–82. 49. AJYL 1a serie R11 Pearson to Limantour 17/07/1899. Limantour had passed on Corthell’s request to Pearson, who had replied that he saw no point in allowing Corthell to interfere. Corthell had long been interested in the Tehuantepec route, had written a lengthy report in favour of the Eads project in 1886, and had been a concessionary for part of the line constructed in 1893; Rojas Rosales El Ferrocarril Nacional de Tehuantepec, pp. 23, 40. 50. SMA:PEA Box A4 Body to Pearson 03/10/1902.

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51. AJYL 2a serie R39 Body to Limantour 10/11/1906. 52. Katz Secret War, p. 40; Garner Porfirio Díaz, pp. 137–62; Schell Integral Outsiders; the British minister in Mexico, Reginald Tower, commented in 1908, “that feelings inimical to the United States exist throughout the Mexican people is self-evident.” PRO-FO 371/480/25305. 53. Turlington Mexico and Her Foreign Creditors, pp. 215–16. 54. AJYL 1a serie R4 Limantour to Camacho 10/02/1899. 55. AJYL 1a serie R3 “Mexican Bonds” Financial Times 06/02/1897. 56. Ibid. Velasco to Pearson 08/05/1897. 57. AJYL 1a serie R3 Limantour to Camacho 25/05/1897. 58. Turlington Mexico and Her Foreign Creditors, p. 228. 59. Diario Oficial, Mexico City, 01/06/1899. 60. AJYL 1a serie R11 Pearson to Limantour 18/07/1899. 61. AJYL 2a serie R1 Emilio Velasco to Pearson 12/05/1900. “Should the project require any further injection of capital, this would be the responsibility of both partners to provide it”; AJYL 2a serie R6 Velasco to Limantour 04/12/1901. 62. AJYL 2a serie R5 J. H. Hampson to Limantour 05/03/1901. 63. Payments began in 1902, although expenditure soon exceeded the payments agreed to in 1900; the manager of the TNR, Fred Adams, told Body that payments from January 1903 would have to increase from $300,000 to $400,000 per month; AJYL 2a serie R12 Adams to Body 04/10/1902. 64. After one tour of inspection to the Isthmus in May 1903, Body described the progress on TNR as “unsatisfactory” and the works “in a general state of abandon”; SMA:PEA Body to Pearson 29/05/1903. 65. Rojas Rosales El Ferrocarril Nacional de Tehuantepec, p. 195–222. 66. Tischendorf Great Britain and Mexico, pp. 66–67. 67. SMA:PEA Box A4 Adams to Pearson 07/08/1902. 68. SMA:PEA Box A4 Adams to Body 03/11/1902. 69. Rojas Rosales El Ferrocarril Nacional de Tehuantepec, p. 279. 70. T. Van Hoy “La Marcha Violenta? Railroads and Land in NineteenthCentury Mexico” Bulletin of Latin American Research 19:1, 2000, pp. 33–61. 71. For the case of Yucatán, where local Maya resistance to the railway was fierce, see A. Wells Yucatán’s Gilded Age: Haciendas, Henequen and International Harvester 1860–1915 Albuquerque: University of New Mexico Press, 1985. 72. Rojas Rosales El Ferrocarril Nacional de Tehuantepec (p. 110) argues that both the process of construction of the TNR (1893–1907) and its brief period of profitable activity (1907–1913) constituted an important stimulus to the local economy of the isthmus; for confirmation of this process, but with rather different conclusions, emphasising instead the negative consequences of the TNR project, see F. Chassen From Liberal to Revolutionary Oaxaca: The View from the South, Mexico 1867–1911 University Park: Pennsylvania University Press, 2004. 73. Body reported to Pearson that Limantour had stated categorically that “whilst he was Minister he was not going to ask for any further loans for Tehuantepec, for he was sure if he went on as he had done in the past he would bring the


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country to ruin, and that he would resign rather than continue pledging the country’s credit”; Box A4 Body to Pearson 07/07/1905. 74. Pearson, for example, complained in January 1904 that no payments had been received for the Coatzacoalcos port works since the end of October 1903; AHYL 2a serie R27 Pearson to Limantour 06/01/1904. 75. SMA:PEA Box A3 Pearson to Body 05/11/1902. 76. For example, at a meeting in January 1906 Body claimed that a further Mex$34 million would be required to finish the harbour works, while Limantour claimed that he “would have trouble in borrowing this sum” and offered to find Mex$25 million instead. A4 Body to Pearson 28/10/1906. 77. AJYL 2a serie R27 Clarendon Hyde (vice president S.P.&S.) to Limantour 21/06/1904. 78. Ibid. Pearson to Limantour 23/09/1904. 79. Ibid. Limantour to Pearson 20/10/1904. 80. Ibid. Pearson to Limantour 28/11/1904; in keeping with the conventions of Mexican business etiquette, following the signing of the contract Pearson sent Limantour three crates of his favourite whisky and a “marble table with a red marble top from Venice similar to that we have in our garden at Paddockhurst. It is fairly [sic] antique.” 81. The party included Pearson, his wife, and his second son, Clive; President Díaz, his second wife, Carmelita, his son Porfirito, and his nephew Félix; Guillermo de Landa y Escandón and his family; Pearson’s proconsul, John Body, and his lawyer, Luis Riba; Minister of Communications and Public Works Leandro Fernández; and Roberto Nuñez, Limantour’s deputy at the Ministry of Finance. 82. SMA:PEA Box Q49 includes numerous photos of the expedition and the daily press reports published in the English-language Mexican Herald. What is most noticeable in the photos is the enthusiasm and the size of the crowds which turned out to greet the president at each stage of the journey through locations in Oaxaca and Veracruz regions, where he had strong personal and professional connections from his early career. 83. AJYL 2a serie R27 Pearson to Limantour 14/04/1905. The contract required the purchase of stock in the American Hawaiian, and there was a brief disagreement between Pearson and Limantour as to whether the capital for this should come from the social capital fund of the TNR (as favoured by Limantour) or from the proceeds of the Tehuantepec loan (as favoured by Pearson); on this rare occasion, Limantour conceded. AJYL 2a serie Limantour to Pearson 29/07/1905. As a result of an additional loan negotiated by Pearson with the London and Westminster Bank in 1908, the TNR acquired 30 percent of the shares in the American Hawaiian; AJYL 2a serie R53 Limantour to Pearson 10/07/1908. 84. Tischendorf Great Britain and Mexico, pp. 66–67; this concession also gave Pearson access to 123,000 hectares of subvention lands in southern Veracruz, Tabasco, and Chiapas to be explored for oil deposits; see next chapter. 85. SMA:PEA Box A4 Body to Pearson 09/07/1905. 86. Ibid. 12/10/1906. 87. Spender Weetman Pearson, p. 121.

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Notes to Chapters Four and Five

88. SMA:PEA Box 53A. 89. Ibid. El Tiempo Ilustrado 01/02/1907; Mexico’s most famous cigarette factory during the Porfiriato, El Buen Tono, used the occasion to launch a new brand of cigarette. 90. SMA:PEA Box A4 Pearson to Body 15/06/1909. 91. Spender Weetman Pearson, p. 119. 92. El Tiempo Ilustrado 20/01/1907. 93. See Chapter Seven for further details. chapter five 1. “Oil will soon replace coal and wood, and will become the only source of fuel. This new source of immense wealth discovered in this country has made those most entrepreneurial of speculators, based upon their understanding of the Republic’s geological structures, think that there must be richer veins in Mexico than those of Pennsylvania.” Matías Romero to Sebastían Lerdo de Tejada 05/04/1865 in J. Tamayo (comp.) Benito Juárez: Documentos, discursos y correspondencia Mexico, 1974, Vol IX, p. 791. 2. For details of Romero’s career, see Bernstein Matías Romero. 3. J. Álvarez de la Borda Los orígines de la industria petrolera en México 1900– 1925 México: Archivo Histórico de Petróleos Mexicanos, 2005, pp. 17–28. 4. J. Coatsworth “Obstacles to Economic Growth in Nineteenth-Century Mexico” American Historical Review Vol 83, 1978, pp. 80–100. 5. S. Haber, A. Razo, and N. Maurer The Politics of Property Rights: Political Instability, Credible Commitments, and Economic Growth in Mexico, 1876– 1929 Cambridge: Cambridge University Press, 2003, pp. 190–235. 6. J. Brown Oil and Revolution in Mexico Berkeley: University of California Press, 1993, pp. 16–25. 7. See, for example, the case of California oilman Edward Doheny, who would become one of Pearson’s greatest rivals; M. R. Ansell Oil Baron of the Southwest: Edward L. Doheny and the Development of the Petroleum Industry in California and Mexico Columbus: Ohio State University Press, 1998. 8. Furber I Took Chances, p. 91. Furber later used his connections as a Mason to secure the intervention of President Díaz (himself a prominent Mason) in 1897 in pursuit of a disputed claim to oil lands at El Cuguas in Veracruz which would form the base for his Oil Fields of Mexico Company (registered first in London in January 1898 and five years later, in 1903, in Delaware); see pp. 91–101; for the connections between Díaz and Freemasonry, see Garner Porfirio Díaz, pp. 28–29. 9. Furber I Took Chances, pp. 157–58. 10. Letter quoted in Young Member for Mexico, p. 119. 11. SMA:PEA Box A9 Pearson to Lady Pearson 24/02/1909; Pearson’s reference to his timidity in comparison with the “men of old” was a reflection, he admitted in the same letter, of his recent reading of the romantic fiction of Walter Scott. 12. AJYL 2a serie Pearson to Limantour 08/03/1909. 13. Haber, Razo, and Maurer The Politics of Property Rights, p. 198.

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14. SMA:PEA Box A1 J. Body “How We Went into Oil,” 1928. The most comprehensive account of the development of the Mexican oil industry in these years can be found in Brown Oil and Revolution, pp. 7–100; J. Brown “Domestic Politics and Foreign Investment: British Development of Mexican Petroleum 1889–1911” Business History Review 61:3, 1987, pp. 387–416; see also L. Meyer Su Majestad Británica contra la Revolución Mexicana: El fin de un imperio informal 1900–1950 México: El Colegio de México, 1991; and Alvarez de la Borda “El inicio de la industrialización petrolera.” 15. SMA:PEA Box A1 Body to Pearson 19/04/1901. 16. G. Jones The State and the Emergence of the British Oil Industry London: MacMillan, 1981, pp. 1–8. It is also highly likely that both Pearson and Body would have been aware—although I have found no specific reference to it—of the speculative exploration in the Tampico region in early 1901 of the American oilman Edward Doheny, who already had a successful track record in the California oil business. Doheny registered the Mexican Petroleum Company of California in December 1900 and struck oil five months later at El Ebano near Tampico in May 1901. Ansell Oil Baron, p. 56. 17. As we shall see in the next chapter, El Aguila was by this time on a much surer footing, and Pearson signed a contract with the Admiralty in January 1913 for an annual supply of 200,000 tons of fuel oil. Due to the increase in wartime demand, by the end of WWI, El Aguila had supplied more than three million tons of oil products to the British war effort. However, Pearson’s business relationship with the British government was adversely affected by the diplomatic difficulties which arose following the overthrow and murder of President Francisco Madero in 1913 in a counterrevolutionary coup led by General Victoriano Huerta. The Wilson administration was convinced that Britain’s subsequent recognition of Huerta, to which Wilson was strongly opposed, had been orchestrated by Pearson. This hostility, coupled with London’s increasing deference to Washington over policy toward Mexico, meant that Pearson’s oil interests were neither protected nor supported by the British government. This was one of the reasons why the Admiralty continued to buy its fuel oil from Texas, and signed a long-term contract with the Anglo-Persian Oil Company in May 1914 for six million tons over twenty years, rather than signing a more substantial contract with El Aguila; Jones The State, p. 155. 18. The degree of personal attention which Pearson paid to the oil business can be seen, for example, in the diary of his personal programme for 1912. This included a three-month stay in Mexico and the United States, with a three-week stay in New York, a three-week trip to the “Northern Fields and Tampico,” ten days at the “Refinery and Isthmus,” and ten days in Mexico City; SMA:PEA Box A2 “Chief’s Notebooks.” 19. Despite the huge outgoings El Aguila was having to undertake between 1908 and 1911, it is significant that only two bank loans were approved by its board of directors; the first was $700,000 from the Bank of London and Mexico, and the second $800,000 from the Canadian Bank of Commerce, both taken out in January 1911 to meet the urgent costs of building a pipeline between the gusher

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at Potrero del Llano and the port of Tuxpan; Archivo Histórico de Petróleos Mexicanos (hereafter AHPM) Caja (hereafter C)39 Expediente (hereafter Exp.) 1024 f.153 25/01/1911. This clearly suggests that funds for exploration were available from other sources. 20. SMA:PEA Box 1 C Reed History: The Mexican Eagle Oil Company, August 1928, p. 6. Spender Weetman Pearson (p. 151) reproduces Pearson’s own figures of between £1.5 million and £3.5 million of expenditure over income before 1910, and even speculates that the real figure was as much as £4.5million. 21. Pearson to Limantour AJYL 2nd series Roll 53 13/04/1909; the contemporary rate of exchange was approximately 10 pesos to the pound sterling; the total expenditure was therefore closer to £750,000. 22. J. Wale, L. B. Freeman, and A. Godley “Weetman Pearson in Mexico and the Emergence of a British Oil Major 1901–1919” Business History Review Vol 84, Summer 2010, pp. 275–300. 23. AHPM C3033 Exp.78547 Pearson to Ryder 06/03/1906. 24. SMA:PEA Box A4 Pearson to Body 3/12/1908. 25. This was the advice he gave to his protégé Everette Lee DeGolyer, when the latter was setting up his own oil company in the United States. DeGolyer was a young American geologist who was credited with the discovery of El Aguila’s most productive well, Potrero del Llano IV, in 1910. He subsequently became the chief geologist of El Aguila and later a business partner with Pearson during his entry into the oil business in the United States via the Amerada Corporation in 1919; L. Tinkle Mr. De: A Biography of Everette Lee DeGolyer Boston: Little, Brown, 1970, p. 155. 26. “The total maximum sum this office (London) must find for all Mexican purposes of every kind is £15,000 per month: as you receive £5,000 per month from the earnings of the Electric Companies, your net drafts will not exceed £10,000.” SMA:PEA Box A4 cable Chief–JBB 10/02/1910. 27. If we add Pearson’s figure of £286,000 for expenditure over income in 1908 to the sum of £200,000 committed by 1906, and assume that the budget imposed by Pearson was adhered to in 1909 and 1910, then the total of expenditure over income to 1910 would have been closer to £870,000. Given that to find a contemporary equivalent it is necessary to multiply these figures by a factor of at least fifty, this is still, by any account, a considerable sum. 28. SMA:PEA Box A1 Body to Pearson 19/04/1901. 29. In 1916, in the context of rumours that the Constitutionalist government of Venustiano Carranza was going to pledge to restore communal rights over any oil lands which had previously formed part of the communal lands of indigenous communities, the firm revealed that “we have several leases that we obtained by contract from communal bodies,” but went on to suggest that their loss would not constitute a significant blow to their interests, since these lands were “not highly valuable.” The firm was much more concerned about the fact that the decree might retrospectively cover land which formerly belonged to communities but had been recently divided up “within the memory of man” (i.e., according to the legislation passed by successive Liberal governments in Mexico since 1855), since it


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had many leases of this kind. AJYL 3a serie S. Pearson and Sonto the Foreign Office 18/02/1916. 30. AHPM C2806 Exp. 73464 Memo Huchison to Ryder 19/09/1911. 31. SMA:PEA Box A4 Memo from Body 28/04/1908. 32. The relationship between the Peláez clan and El Aguila will be explored in more detail in Chapter Seven. A condueñazgo was a joint-stock corporation which had evolved over the course of the nineteenth century in Veracruz in which land was co-owned by individuals who held one or several shares equivalent to plots of land; A. M. Serna Oil, Revolution and Agrarian Society in Northern Veracruz: Manuel Peláez and Rural Life in the “Golden Lane,” 1910–28 Doctoral thesis, University of Chicago, 2004, pp. 107–19. It is interesting to note that local landowners sometimes preferred outright sale to leasing; in the case of Peláez, Pearson’s preference was for leasing, whereas Peláez himself favoured outright purchase. 33. SMA:PEA Box A4 Body to Pearson 26/10/1905. 34. AJYL 3a serie Cowdray to Limantour 18/08/1910 and 24/08/1910; unfortunately for Limantour, when drilling eventually took place on his isthmus lands, no oil was discovered. As Pearson explained, “The pool near your boundary did not pass into your land, nor could the geologists find any indications on your land that justified time being spent upon making a geological survey.” Aware of the financial difficulties Limantour was experiencing in his Parisian exile after 1911, and as a way of compensating for the disappointment, Pearson invited the former finance minister “to call upon me for financial assistance whenever you need a friend to help you”; Limantour replied, with more than a hint of irony, if not disdain: “I am touched by your generous offer to be my banker. Fortunately I am still in position for some time more [sic] to pay my taxes”; AJYL Cowdray to Limantour 11/05/1916, reply Limantour Cowdray 15/05/1916. 35. SMA:PEA Box A1 Memo from Pearson to S. Pearson and Son Oil Fields Department 01/03/1906. 36. AHPM C2806 Exp. 73464 Memo Huchison to Ryder 15/09/1911. By 1918 there appears to have been a dramatic shift in the pattern of tenure of El Aguila’s oil lands, with the vast majority of holdings now leased rather than owned. El Aguila’s total holdings now amounted to 642,138 hectares (or 1,586,080 acres), 455,520 hectares of which (over 70 percent) were leased from individual owners or condueñazgos, with a further 139,707 hectares (over 20 percent) leased from other oil companies. The remaining 49,911 hectares (123,277 acres) were owned by El Aguila, but the vast majority of these lands (31,255 hectares, over 60 percent of the total) were leased to other oil companies. AHPM C2824 Exp. 73657 ff. 11–15, 1918. Part of the reduction in the amount of land owned directly by El Aguila between 1911 and 1918 is perhaps explained by the transfer in 1912 of properties owned by the firm to the Mexican Estates Company (Compañía Mexicana de Bienes Inmuebles, SA), which controlled over 500,000 acres/182,347 hectares (including the Romero Rubio lands, 134,702 hectares in Veracruz and the isthmus acquired for £50,000 in 1901; the Veracruz Land and Cattle Company, established in 1907; the Cia Agrícola y Colonizadora del Gavilán in Minatitlán, Veracruz, formerly owned by Emilio Rabasa; the Uspanapa

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Land Co.,18,588 hectares of baldíos in Chiapas formerly owned by former British Consul Sir Lionel Carden). The total value of the properties was estimated at £102,000 (approximately Mex$1 million). Ninety-five percent of the shares in the Mexican Estates Company were directly controlled by members of the Pearson family; SMA:PEA Box E3 Mexican Estates Company Ltd. 37. Spender Weetman Pearson, pp. 149–50. 38. AHPM C3033 E78597 1906. This explains the fact that, when placed under pressure by the successive increases in taxation on rentals and royalties introduced by the Constitutionalist government after 1915, Body was able to propose a dramatic reduction in the number of “dead” or unproductive leases by almost two-thirds, thus reducing the potential tax liability, without affecting levels of oil production; see AHPM c2824 Exp. 73657 1918 ff. 11–15 Body to Ryder 29/10/1918. It is also important to point out that, if the strategy was designed primarily to keep rivals out, then it was unsuccessful. By the end of 1901, Doheny’s Mexican Petroleum already claimed to have acquired as much as 600,000 acres in the Tampico area; Ansell Oil Baron, p. 58. 39. The strategy was explained by Everette Lee DeGolyer, El Aguila’s chief geologist: “The controlling theory of operation would be the leasing of apparently desirable lands directly from the owner and the sale, as soon as possible, of a block of leases large enough to return the working capital to the treasury of the company and yield a cash profit on the transaction”; Tinkle Mr. De, p. 139. 40. SMA:PEA Pearson to Body 28/10/1901. 41. AJYL 2a serie R53 Pearson to Limantour 16/03/1909. Limantour’s primary concern, according to Pearson, was that Mexican consumers should not be penalised by any deal agreed. 42. SMA:PEA Box A9 Pearson to Lady Pearson 24/03/1909. 43. Ibid. 27/03/1909. 44. When Doheny received concessions to search for oil in Mexico in 1901, President Díaz made him promise never to sell his holdings to Standard Oil without giving the Mexican government the first option to buy him out; Ansell Oil Baron, p. 59. 45. Interview with Doheny quoted in Ansell Oil Baron, p. 67 46. AJYL 2a serie Limantour to Pearson 14/08/1908. 47. SMA:PEA Box A4 JBB-WP 08/01/1906. 48. SMA:PEA Box A9 Pearson to Lady Pearson 04/04/1909. 49. SMA:PEA BoxA4 Memo Pearson to Body 28/07/1910. Keeping Limantour satisfied also meant showering him with gifts, luxury goods, and objets d’art of European manufacture, as well as the generous terms offered for oil exploration rights on the estates owned by Limantour and his brother Julio on the Isthmus of Tehuantepec, referred to earlier. Pearson even acted as an intermediary in procuring a succession of English governesses to educate the children of the Limantour family; Box A3 Pearson to John Body 13/1/1913. 50. SMA:PEA Box A9 Pearson to Lady Pearson 04/04/1909. 51. SMA:PEA Box A4 JBB–WP 04/11/1905. 52. Ibid. Body to Pearson 08/01/1906; AJYL Condumex 2a serie Rollo 53 Pearson to Limantour 16/3/1909.


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53. Pearson’s representatives in Mexico had been lobbying for this legislation for some time: Consejo de Administración (Board of Directors) CMPEA 26/10/1909; AHPM c39, Exp. 1024ff. 35–39. 54. AHPM C3031 Exp. 78560 1904. As indicated below, “Porfirito” would become one of the Directors of El Aguila in 1908. 55. AHPM C2806 Exp. 73464 Muñoz to Ryder 22/08/1911. The case stemmed from the fact that the owners, the Peláez-Gorrochotegui family, had, apparently under pressure from Doheny, signed two different contracts, one with Pearson, and one with Doheny. Even though the dispute over Cerro Viejo was still unresolved by the summer of 1911, Ryder nevertheless unilaterally cancelled the agreement with Muñoz, much to the latter’s consternation. It is possible to speculate that the reason why Muñoz was unceremoniously dumped in the summer of 1911 was the fact that the members of the Díaz family, following the president’s exile in May, were no longer of any value to Pearson’s interests; for further evidence, in the case of Porfirito Díaz, the president’s son, see Chapter Six. Litigation continued over Cerro Viejo throughout the Revolution, even though Doheny continued to extract large quantities of oil from the property (60,000 barrels per day); it was not until 1918, when the two rival companies (Doheny’s Huasteca Petroleum and Pearson’s El Aguila) agreed to cooperate and share production from Cerro Viejo in the face of increasing Carrancista pressure on foreign oil companies; Brown Oil and Revolution, pp. 138–39. In September 1922 Doheny was granted exclusive drilling rights, by which time it was increasingly clear that the spectacular levels of production witnessed in the Mexican oil fields since 1911 were in serious decline; Ansell Oil Baron, pp. 211–12. 56. “I believe we should select some outsider who would incur obligations and make payments that would be acceptable to us, we, however, not to be known in the negotiations, the contracts to be in the name of the person we might select, with the right to turn them over to anyone else”; AHPM C3033 Exp. 78597 ff. 74–76 Ryder to Pearson 07/04/1910. 57. AHPM C3013 Exp. 78096 contains the correspondence between Pearson, Ryder, and Courtland Lawrence (the agent) between 1910 and 1912; Lawrence was paid the not-inconsiderable sum of US$150 per month for his services “with the understanding that he will continue getting information about the petroleum industry and render us reports . . . in view of the considerable information that he has always given us.” 58. AHPM C2806 Exp. 73464 Government Concessions Owned by El Aguila 1911. El Aguila had fulfilled all of these drilling requirements by 1911, but by then had largely ignored the federal lands, and concentrated its explorations on rented lands in the isthmus and northern Veracruz. As a consequence, it appears that the government received little or no revenue from the federal concessions. 59. For one of many examples, see J. Silva Herzog Historia de la expropriación de las empresas petroleras México, 1964, pp. 27–33. 60. As a result, argues Myrna Santiago, “oil did not feature prominently in the Científico agenda”; M. Santiago The Ecology of Oil: Environment, Labor, and the Mexican Revolution Cambridge: Cambridge University Press, 2006, p. 63.

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61. According to Brown Oil and Revolution (p. 29), Doheny was convinced that neither Díaz nor his inner circle thought that his oil venture in Mexico would ever be successful. 62. R. Holden Mexico and the Survey of Public Lands: The Management of Modernisation 1876–1911 DeKalb: Northern Illinois University Press, 1993. 63. This is also the view of M. E. Ocasio Meléndez Capitalism and Development: Tampico, Mexico 1876–1924 New York: Peter Lang, 1998, p. 114. 64. Brown Oil and Revolution, p. 40. As Brown comments, it is also important to remember that Porfirian legislation regarding mining and oil was notoriously contradictory. 65. “The money we have spent and are spending on the fields is not a gamble but a business enterprise, and must be as carefully watched and taken care of as in any ordinary every day business”; AHPM C3033 Exp. 78547 Pearson to Ryder 27/08/1908. 66. See the correspondence between Ryder and W. T. Griswold, a geologist for the US Geological Survey, who was employed by the firm in 1906 to carry out a detailed survey of its oil properties; what is most noticeable in the correspondence is (a) the exploitation of political influence, demonstrated by the ease with which Ryder was able to get the minister of fomento (development) to write letters of introduction for Griswold to the governor of San Luis Potosí, and (b) further evidence of Ryder’s penchant for industrial espionage, instructing Griswold to spy on the Ebano field belonging to Doheny’s Mexican Petroleum Company, and to “make no mention of your connection with us”; AHPM C3011 Exp. 78022 1906. 67. These debates would resurface with renewed vigour, of course, during the revolution; Ansell Oil Baron, pp. 79–80. 68. SMA:PEA Box A3 J. Body “Mexican Political Index 1911–17.” The existence of this index itself is a clear indication of the importance of political contacts in the conduct of business. 69. SMA:PEA Box A4 Body to Pearson 09/11/1905; Pearson to Body 30/11/1905. 70. The San Cristóbal concession was located on land leased from the Romero Rubio family, who were President Díaz’s in-laws. The direct beneficiary was Carmelita Díaz de Romero, the president’s wife; SMA:PEA Box 4 Body to Pearson 31/01/06. 71. The costs of refinery were estimated at the time to be £500,000. In 1908 an additional pipeline was constructed to connect the refinery directly to Puerto México; SMA:PEA Box 1C Reed Mexican Eagle, pp. 2–5. 72. SMA:PEA Box 4 Memo from Pearson 1906. 73. AHPM C2905 Exp. 75663ff. 5–6 Ryder to Pearson 05/10/1906; the negotiations with the railway companies in 1906 set the tone for the tactics El Aguila would use in the subsequent price war with WPOC. For example, Ryder explained to Thomas Milan, president of the Veracruz and Pacific Railway, that “we are in a position to do equally as good by you as our competitors: in fact, you are likely to get better conditions from us than from them. Kindly treat this as confidential, as


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we are trying to steal a march on the enemy. I know you will give us preference”; Ryder to Milan 19/12/1908.The contract with the Mexican Railway was signed in November 1908 but soon ran into serious difficulties (see below). 74. The first shipment of refined oil to the UK was made in August 1908; SMA:PEA Box 1C Reed Mexican Eagle, p. 5. 75. Ryder politely but firmly informed the Chief that the predictions he had made were totally unrealistic: “As to our having illuminating oil for sale by the end of March 1907, I regret very much to have to say that in my opinion this is absolutely out of the question. I consider it is necessary to be perfectly frank in this connection, and it is my opinion that we shall not have any oil for sale until the end of June 1907 or perhaps later.” AHPM C3033 Exp. 78547 Ryder to Pearson 13/11/1906. 76. AHPM C2902 Exp. 75569ff. 44–47 Ryder to S.P.&S. London 29/03/1906. 77. As Furber pointed out in his autobiography, because Standard Oil was also interested in his Oil Fields of Mexico Company, Pearson was obliged to make a more generous offer to secure the deal. Furber was very pleased with the arrangement, since it “not only provided us with a ready-made market, but solved our greatest problem, the transportation of crude to the refineries.” This was a problem which would also affect El Aguila after 1911. Furber I Took Chances, p. 142. The pipelines laid between Furbero and Tuxpan were ahead of their time. Given the difficulties of providing access for the tankers in the port itself, the pipelines were laid a mile out in the Gulf of Mexico, attached to buoys to which the tankers tied up to load their cargo directly. The first cargo to be loaded by this method took place in May 1910. SMA:PEA Box 1C Reed Mexican Eagle, p. 6. 78. This debacle resulted in multiple lawsuits from local residents, and substantial losses to the firm from payments for compensation (estimated at over £1 million); SMA:PEA Box 1C Reed Mexican Eagle, p. 4. J. Portillo y Rosas argued that Pearson’s staff failed to use existing technology and failed to isolate boilers (calderas); El aspecto técnico del conflicto petrolero en México México: Pemex, 1979. As a further demonstration of the Mexican government’s support for Pearson’s oil business, it is worth noting that 200 Army sappers were sent to Dos Bocas to help control the blaze; Brown Oil and Revolution, p. 61; the most detailed and graphic account, which also outlines the devastating ecological impact, is Santiago The Ecology of Oil, pp. 134–44. 79. SMA:PEA Box A9 Pearson to Lady Pearson 17/02/1908. In 1910 El Aguila acquired the refinery and the isthmus lands. 80. The board of directors was made up of Body, Ryder, and W. E. Sayer; the share capital of the company was increased to Mex$1 million in October. Pearson personally held all of the shares in the new company; Álvarez de la Borda “El inicio de la industrialización petrolera,” p. 57. 81. AHPM C39 Exp. 1024 ff. 54–56 25/01/1910. 82. This was not the first time that Pearson had met with representatives of WPOC; an informal approach had been made by Eben Richards, a close associate of Clay Pierce, in September 1906 in order, according to Ryder, to “ascertain the strength of the position of a possible competitor.” Ryder, as a former employee of

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Clay Pierce, knew him well, and recommended that Pearson not make any agreement but instead persist with the strategy which the Oil Fields Department had been pursuing since 1906, namely that “with Mr. Furber’s business in our hands, and long contracts made by us with principal consumers throughout the Republic, we would be able to permanently disable the Waters Pierce Oil Company.” AHPM C3033 Exp. 78547 Ryder to Pearson 09/09/1906. 83. Brown Oil and Revolution, pp. 61–63. 84. It is interesting to note Pearson’s estimate that the combined oil business in Mexico would generate annual profits of Mex$5.8 million; AJYL 2a serie R53 Pearson to Limantour 16/03/1909. 85. Knoblauch Lord Cowdray’s Interests in Mexico, p. 65. 86. In the event the proposed agreement with Doheny also failed to materialise. AHPM C3012 Exp. 78068 Body to Pearson 12/05/1910. There was certainly no love lost either between Clay Pierce and Doheny, since the latter blamed the former for denying him the contract to supply fuel oil to the Mexican Central Railway in 1901 when Clay Pierce was chairman of the Mexican Railway. Doheny claimed that he had been promised the contract in 1900, and that had been the reason he had come to Mexico in the first place; Ansell Oil Baron, pp. 56–57. 87. Clay Pierce was clearly a difficult man to negotiate with. He was described by Ryder, who was a former employee of his, as a man “who is accustomed to driving very hard bargains.” Perhaps the truth was that, in Clay Pierce, Pearson had met his match. After the failure of the first round of negotiations Pearson confided to Limantour that he had been “foolish to rely on his adhering to verbal agreements and thus allowing many months of valuable time to be wasted. However, I shall know better next time”; AJYL 2a serie R53 Pearson to Limantour 23/07/1908. 88. The new arrangements applied to Pearson’s oil interests which lay north of an imaginary line drawn between Puerto Angel on the Pacific coast and Veracruz on the Gulf of Mexico. This meant that all lands in the oil-rich Faja de Oro in the Huasteca Veracruzana came under this new jurisdiction, and that all properties in the isthmus (including the refinery at Minatitlán) were retained by S. Pearson and Son. The capital value of the company was initially set at Mex$30 million; it would eventually rise, according to an internal memo from Thomas Ryder written in 1926, to Mex$250 million; SMA:PEA Box 1 Ryder Brief History of Aguila Company 1926. 89. SMA:PEA Box A9 Pearson to Lady Pearson 06/03/1909. 90. Pearson soon recognised that “it may be impossible to get any appreciable amount of Mexican capital” but argued that it was still important to form the Mexican company because “in time the securities will be saleable”; Box A9 Pearson to Lady Pearson 09/03/1909. 91. Nevertheless, it was clear where the real power and controlling influence over El Aguila’s affairs was to be found. At the board of directors meeting in May 1910, the number of directors was increased from ten to eleven, not simply to accommodate Sir Weetman, but to grant him “full powers of representation of


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the Company in all of its business affairs within the Republic and beyond it.” AHPM C39 Exp. 1023 f. 14 07/05/1910. 92. SMA:PEA Box A9 20/04/1909. In a characteristic move by Pearson in his capacity to spot not only talent but also potential business advantage, Hayes was subsequently poached by Pearson and became El Aguila’s chief geologist and vice president. 93. Wale, Freeman, and Godley “Weetman Pearson in Mexico”; before the Companies Act of 1929 companies in the UK were not obliged to publish an annual profit and loss account. 94. According to Merril Rippy (Oil and the Mexican Revolution Leiden, 1992), members of the board received 200 preference shares, with a par value of US$1,000 each, providing a guaranteed US$16,000 per annum regardless of the performance of the company; Álvarez de la Borda “El inicio de la industrialización petrolera,” pp. 45–66; AHPM C39 Exp. 1023 ff. 9–11 Actas del Consejo de Administración, Compañía Mexicana de Petróleo El Aguila 18/06/1909. Despite his official designation, Porfirito’s highly symbolic but purely decorative function in El Aguila’s activities is emphasised by the fact that he attended only two of the monthly meetings of the board held between June 1909 and May 1911 (the month in which he accompanied his father into his Parisian exile); SMA:PEA Box A10 Report to Directors 1909. 95. AHPM C2909 Exp. 75781 ff. 62–64 Ryder to Landa 25/01/1910. 96. SMA:PEA A4 12/03/1910 Landa to Pearson. Ryder confirmed that El Aguila had already signed sixteen “important” contracts with major mining companies (from the Monterrey, San Vicente, and Cinco Señores Mining Corporations to the Mazapil Copper Company), manufacturing industries (from the Monterrey Iron and Steel Company, Compañía Fundidora de Fierro y Acero de Monterrey, to “all the principal textile factories in Puebla”), railways (the Mexican Railway, and other small lines—Montealto to Tlalnepantla, Coahuila to Zacatecas), town councils (Ayuntamiento de Coatzacoalcos), and even to what must have been one of the first taxi companies to operate in Mexico City (Autotaxímetros Mexicanos). 97. AHPM C39 Exp. 1024 ff. 22–26, 88–94. It is interesting to note that in the first detailed report to El Aguila’s board on the details of the major strike at Potero del Llano in January 1911 (see below), the board’s first priority was to dispatch 40,000 barrels of fuel oil to Veracruz to the Mexican Railway in fulfilment of the original contract. 98. The post was given to Luis Muñiz, with an initial budget of $23,700 at his disposal. It is not clear whether the Department of Propaganda was responsible for a pamphlet which was distributed by El Aguila’s agency in Acámbaro, Michoacán, in 1911 which adopted the slogan “Even the Pope Has Decreed That Only Aguila Oil Be Used” (Hasta el Papa Ordena Que Se Use Solo Petróleo del Aguila); AHPM C3089 Exp. 79505.The title of the company paper was El Vuelo del Aguila (The Flight of the Eagle), a title rather ironically (and surely unwittingly) resurrected in 1994 by Televisa in Mexico as the title of a historical soap opera on the life of Porfirio Díaz, which ran to over 100 episodes; AHPM C39 Exp. 1024 ff. 22–26, 35–39.

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99. “He [Clay Pierce] must be losing his balance and becoming irresponsible for his acts” SMA:PEA Box A4 Pearson to Landa 30/07/1909. The detailed exchanges between Ryder and Pearson in AHPM demonstrate not only that Pearson took a very close interest in the minutiae of the price war, but also that he was personally responsible for its strategy. The following exchange is typical: “I shall be glad to be kept closely posted as to the cost of distribution, and also the places where your sales are showing the best and the worst net results. You will no doubt be most carefully watching the markets that give the best results. Wherever you are working at a disadvantage with your competitors you will of course sell as little as you can so long as you make the competition at those points as keen as it is elsewhere; and where you are on equal terms you will of course see that you get at least half the trade”; AHPM C3033 Exp. 78597 Pearson to Ryder 17/09/1909. 100. AHPM C39 Exp.1024 ff. 45–48 28/12/1909. 101. AHPM C39 Exp. 1024 ff. 102–109 22/11/1910. The Mex$2,826,978 which El Aguila received from the share issue allowed the board to approve further investment (US$70,000) in the expansion of the productive capacity of Furber’s Oil Fields of Mexico Company, still El Aguila’s main source of domestic crude. The general improvement in El Aguila’s finances also allowed the acquisition of the Mexican properties controlled by other smaller oil companies, which were valuable to El Aguila mainly because of their drilling rights: such as the Pennsylvania Oil Company in December 1909, and the Gulf Oil Company in December 1910. 102. AHPM C39 Exp. 1024 f. 94 11/10/1910. 103. The strike was first reported to the board of directors in December 1910, but the first detailed report was made by Pearson himself in January 1911, who had travelled with Body to Veracruz as soon as he had received the news. The well was producing 75,000 barrels every day, and, most important, it was composed of 63 percent fuel oil, and 25 percent illuminating oil, both highly marketable, which would allow El Aguila not only to fulfill the terms of existing contracts (which had caused so much anxiety since 1906), but aggressively to seek new clients. The first preoccupation, however, was to construct adequate storage for such large quantities of oil, and adequate means of transportation. Plans were immediately launched to construct a new pipeline from Potrero to Tuxpan to add to the existing line to Tampico at a cost of Mex$700,000. Pearson also immediately purchased a 5,000ton tanker, San Bernardo, for Mex$230,000 and began the search for a second tanker of the same capacity; AHPM C39 Exp. 1024 ff. 119–25 ff. 126–37. 104. The fact that the crude from Potrero was much lighter than that previously found on the isthmus, and contained the components of gasoline and kerosene, was of distinct commercial advantage; Brown Oil and Revolution, pp. 67–69. 105. E. DeGolyer “The Oil Industry of Mexico” Petroleum Review, London, 25/04/1914. 106. Álvarez de la Borda “El inicio de la industrialización petrolera,” pp. 65– 66. The expansion and internationalisation of El Aguila’s activities developed at an astonishing pace—as will be discussed in the next chapter.

Notes to Chapter Six

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chapter six 1. For an analysis of “official” postrevolutionary history, see Benjamin La Revolución; for the cultural and political impact of 1968 in Mexico, see A. Aguilar Camín and L. Meyer In the Shadow of the Mexican Revolution: Contemporary Mexican History Austin: University of Texas Press, 1993, pp. 186–87. 2. M. Tenorio Trillo and A. Gómez Galvarriato El Porfiriato: Herramientas para la Historia México: Fondo de Cultura Económica, 2006, p. 21. 3. In these last two chapters I shall refer to Pearson as Cowdray, as he himself did after his elevation to the House of Lords, first as Baron (1910), and subsequently as Viscount (1917) Cowdray. 4. L. Hall Oil, Banks and Politics: The USA and Post-Revolutionary Mexico 1917–24 Austin: University of Texas Press, 1995. 5. Quoted, inter alia, in Middlemas The Master Builders, p. 223, and Young Member for Mexico, p. 5. 6. Estimates of taxes on oil production received by the Mexican government rose from Mex$1,232,930 in 1914 to Mex$45,479,168 in 1920; Álvarez de la Borda Los orígenes, p. 34. 7. SMA:PEA Box A4 Cowdray to Body 15/04/1912. 8. Brown Oil and Revolution, p. 251. 9. Archivo José Yves Limantour (hereafter AJYL) 2a serie R12 Limantour to de Landa y Escandón 25/11/1902. 10. SMA:PEA Clarendon Hyde to Grey 27/10/1910. 11. García Crónica oficial, p. 94. 12. Álvarez de la Borda Los orígines, pp. 66, 71–73. 13. SMA:PEA Box A3 Memo on Interview with Mr. Balfour 18/06/1918. The specific circumstances are discussed in the next chapter. 14. SMA:PEA Box A3 Memo re: Mexico 9/1/1914. 15. The Mexican Treasury (Hacienda) under Madero calculated a budget deficit of Mex$9.4 million in 1912: Álvarez de la Borda Los orígines, p. 92; Body reported in September 1912 that “government finances are running low. . . . I know that under the present conditions it is very difficult for them to make satisfactory loans”; SMA:PEA Box A4 Body to Cowdray 21/09/1912. 16. Body accepted these terms so as to be in a good position to negotiate further contracts. This had been the strategy adopted by Pearson and Body since their early days in Mexico. Body put an optimistic gloss on the outcome: “We will derive a great benefit from the contract in that we know so much better how to negotiate such matters, and this will help us in getting the more important contracts”; SMA:PEA Box A4 Body to Cowdray 14/12/1912. 17. SMA:PEA Box 69 S.P.&S. Sucesores. 18. The first approach to El Aguila was made as early as 1911 by two smaller US oil companies operating in Mexico, Texas, and Gulf Refining, but the proposal for an amalgamation fell foul of the antitrust laws in operation in Texas. Jones The State, pp. 217–18.

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19. AHPM C2806 Exp. 73765 Cowdray to Hayes. 20. SMA:PEA Box A4 Memo by John B. Body 29/08/1911. 21. The rapid collapse of the Díaz regime took everyone by surprise, even those who were members of the inner circle of the Porfirian political elite. Guillermo de Landa y Escandón wrote to Pearson in July 1910 that President Díaz was “as fine as ever, and there is no doubt that we shall have not the least trouble for the Elections of the Vice-President, who will be Corral”; SMA:PEA Box A4 de Landa y Escandón to Pearson 20/07/1910. The secretary of the British Legation in Mexico City reported to the Foreign Office in February 1910 that in Mexico “there was never the remotest danger of a revolution”; FO371/1149/1574T. B. Hohler to Sir Edward Grey. 22. The letter to Zamacona indicates that Cowdray was acting with at least the tacit support of the government in his approach to Taft; SMA:PEA Box A3 Cowdray to Zamacona 26/04/1911. 23. The secretary to the British Legation in Mexico City, Thomas B. Hohler, was also involved in organising Díaz’s departure; Hohler Diplomatic Petrel, p. 142. The arrangements had been so secret that apparently not even Limantour, who had been Díaz’s principal adviser for nearly two decades, was aware of them; P. Calvert The Mexican Revolution 1910–14: The Diplomacy of AngloAmerican Conflict Cambridge: Cambridge University Press, 1968, p. 72. 24. SMA:PEA Box A3 27/05/1911. For some unexplained reason, Cowdray’s generosity did not extend to paying for the delivery of milk to Paddockhurst. As a former head of state, and unable to accept such an offer from a private citizen, Díaz politely declined the offer, citing the inclement weather in England as the reason he could not accept. 25. SMA:PEA Box A4 Cowdray to Body 15/04/1912. 26. Ever sensitive to political questions, the board meeting of El Aguila in June 1911 proposed the appointment of a new director who “would be affiliated with the new political party”; SMA:PEA Box A4 Body to Cowdray 28/06/1911. 27. Rafael Hernández “was on a mining board with me some time ago”; Ernesto Madero, minister of finance, “has been very friendly to our company, and long ago directed his many interests to contract their supplies from us in preference to buying from our competitors”; SMA:PEA Body to Cowdray 28/06/1911. This prompted Cowdray to send the minister a gift, a custom long established with his predecessor Limantour. The gift was, however, less than inspired. He sent The Official Year Book of the Commonwealth of Australia, which Madero graciously accepted as an unlikely model for a solution to Mexico’s agrarian problems, “which as you readily know is of great importance at the present moment”; Ernesto Madero to Cowdray 26/09/1911. Always anxious to maintain a “friendly” relationship with Ernesto Madero, and always aware of the benefit of having an influence over the press, Cowdray tacitly approved taking “an interest” (i.e., buying shares) in the Mexico City dailies Imparcial, Diario, El País, and the Englishlanguage Mexican Herald, of which the Madero government was seeking to acquire control in order “to stop sensational news being so widely disseminated.” But Cowdray did so only to keep “Don Ernesto” onside and to put pressure on


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the Madero government to buy him out of the TNR contract. He told Body, “If the sale of the Tehuantepec Railway goes through we could afford to take one or two shares in the Syndicate, as Don Ernesto might wish us to do, but, at the same time, we should not desire to have the slightest responsibility as to the conduct of the papers . . . if one abstained, the Government might consider it an unfriendly act . . . we ought to subscribe whether we like it or not—of course, the smaller the amount the better.” SMA:PEA Box A4 Cowdray to Body 05/02/1913. Less than a week later, on 9 February 1913, a coup was launched to remove Madero from the presidency. 28. “Riba has secured the Brother-in-Law of the President for us”; SMA:PEA Box A4 Body to Cowdray 10/08/1912. 29. De la Barra had been appointed interim president to oversee the conduct of presidential elections and to manage the transition between the resignation of Díaz and the inauguration of a new president; see P. V. N. Henderson In the Absence of Don Porfirio: Francisco León de la Barra and the Mexican Revolution Wilmington, DE: Scholarly Resources, 2000. 30. It is clear that Madero shared the same fears as Díaz and Limantour over the threat posed by Standard Oil. The complicity of Standard Oil in financing Madero’s revolution received extensive coverage in the contemporary press in Mexico and the United States, and has been investigated extensively by journalists and historians ever since. For a cogent summary and analysis of the arguments, see Brown Oil and Revolution, pp. 94–99, who concludes that Standard Oil had no reason or need to seek oil concessions in Mexico in 1911. 31. Reports over the following years in newspapers in Mexico City and across the United States, but most notably in New York (in the New York Times, the New York Herald, the New York Tribune, and the New York Evening News), would accuse him of conspiracies in favour of Huerta, in favour of Pancho Villa, and against Carranza. The Intelligence Department of Cowdray’s Anglo-Mexican Petroleum Products Company closely monitored these attacks, some of which were decidedly bizarre: for example, a report in the New York Sun in November 1913 which claimed that the “British Government was behind Pearson’s in an attempt to gain control of the Caribbean Sea by obtaining oilfields and ports in Mexico and Colombia”; or in the New York American in March 1914 to the effect that “Lord Cowdray was endeavouring to force Washington to recognise Huerta, and was in collusion with the Japanese for 30,000 armed Japs [sic] to guard the West Coast of Mexico; SMA:PEA Box A4 File R.1/2 03/03/1915. 32. Enrique Creel told Body in April 1912 that “our present biggest competitor had been involved in an intrigue with the object of embarrassing our interests”; SMA:PEA Box A4 Body to Cowdray 15/04/1912. 33. If there had been any doubt as to their authorship, it was confirmed in a copy of a letter from the American lawyer Sherbourne Hopkins, during an investigation into Mexican affairs by the US Senate in 1919, that “in June 1911 Mr Pierce engaged me as a Consulting Attorney, in order to attack the científicos, and I accepted his offer, exposing the public acts and hostilising [sic] them by all possible means. This was the beginning of my well-known antagonism against the

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firm of Pearsons, and for this service, as I remember, Mr. Pierce paid me $2,000 gold.” Cowdray received the letter, originally sent by Hopkins to Venustiano Carranza (dated 11/01/1914) in 1919; SMA:PEA Box A3 19/06/1919. 34. SMA:PEA Box 3 Memo from Body 29/08/1911. 35. The principle appears to have been accepted by the management of El Aguila, but the details of its implementation led to weeks of triangular wrangling between El Aguila’s lawyers and state and federal governments, and was, it appears, never implemented; SMA:PEA Box A4 Body to Cowdray 15/06/1912, 22/06/1912. 36. Ibid. 03/01/1913. 37. SMA:PEA Box A3 Body to Cowdray 02/02/1914. 38. The most famous of which was that launched by Emiliano Zapata in Morelos in November 1911; J. Womak Zapata and the Mexican Revolution Harmondsworth: Penguin, 1969. 39. The intermediary in this further example of Cowdray’s direct interventions into Mexican politics was the president’s brother, the lawyer Henry Taft, a partner in the firm of Cadwalader, Wickersham and Taft, who had represented S. Pearson and Son in the United States. SMA:PEA Box A4 Creel to Cowdray 20/03/1912; A3 Creel to Ryder 20/03/1912. 40. SMA:PEA Box A3 Cowdray to de Landa y Escandón 27/10/1912. 41. For the career of Félix Díaz, see P. V. N. Henderson Félix Díaz, the Porfirians, and the Mexican Revolution Lincoln: University of Nebraska Press, 1981. 42. In stark contrast to the growth in exports, domestic sales had begun to be interrupted because of revolutionary disturbances by the middle of 1911; AHPM C40 Exp. 1032 Minutes of the Board of Directors meeting on 27/06/1911. The general sense of nervousness at the time is reflected in the decision to acquire and distribute firearms to El Aguila employees, and to the creation of a defence committee to protect the British community in Mexico City; Brown Oil and Revolution, pp. 179–80. 43. AHPM C2806 Exp. 73464 Cowdray to P. Díaz 25/11/1911. Banker Enrique Tron was removed at the same time. In compensation, Cowdray offered Porfirito his own director’s fee. This was less generous than it sounded, since, as Cowdray then cannily went on to explain, “until the Company has got money to spare it is not paying the Directors’ fees, they are simply being entered as a book debt due by the Company to the Directors.” Whether any such fee was ever paid to Porfirito is unclear, but given the dividends subsequently paid to El Aguila’s shareholders after 1914, the shares originally allocated to Díaz when he became a director in 1909, assuming he had retained them, would have been a valuable asset. Rippy claimed that the preference shares in El Aguila awarded to directors in 1909 guaranteed an income of US$16,000 per annum regardless of the performance of the company; Rippy Oil and the Mexican Revolution. 44. AHPM C39 Exp. 1025 ff. 7–11 Board of Directors 24/02/1914; ff. 63–64 27/07/1915. 45. AHPM C39 Exp. 1023. 46. SMA:PEA Box 1C Reed Mexican Eagle, pp. 6–8; SMA:PEA Box 1 Ryder Brief History of Aguila Company 1926, p. 2.


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47. Brown Oil and Revolution, p. 150. 48. Cowdray reported in August 1912 that the export trade was making him £2 million a year; Brown Oil and Revolution, p. 148. 49. Jones describes AMPPCo as “the model of a well-run oil company.” It was certainly not a small enterprise, since “its fine London headquarters contained a staff of 800.” In August 1913 AMPPCo acquired a majority interest (51 percent) in the London distributor C. T. Bowring, with whom Pearson had signed a contract in 1906; Jones The State, pp. 69–70. 50. SMA:PEA Box C47; the first issue of 6 percent preference shares in EOTC was made in August 1913. 51. Following the Supreme Court ruling, Henry Clay Pierce entered a lengthy legal battle with Standard Oil and its chief executive, John D. Rockefeller, over the fate of the Waters-Pierce Oil Company, which culminated in Clay Pierce taking sole control in November 1912; Knoblauch Lord Cowdray’s Interests in Mexico, pp. 102–4. 52. SMA:PEA Box C44 Cowdray to Creel 13/03/1912. 53. Brown Oil and Revolution, p. 149 and passim. It is clear that a number of other factors determined the failure to secure the deal; Cowdray’s price was too high, and the negative public image of Jersey Standard following the widespread rumours that they had financed Madero for their own ends was certainly not an incentive for them to become directly involved in Mexico. It is also interesting to note that the agreement by which El Aguila would not compete in the US market was made not through a written contract but, according to Brown, on the basis of a “gentleman’s agreement.” Cowdray nevertheless saw this as binding, and waited until he had sold a majority of his interests in El Aguila in 1919 before entering the US market through his investment in the Amerada Oil Corporation; Amerada’s president was El Aguila’s former chief geologist, Everette Lee DeGolyer; Tinkle Mr. De, p. 155. 54. Young Member for Mexico, p. 136; not surprisingly, the deal was reported inaccurately in the Mexican press as a takeover of El Aguila by Jersey Standard; ‘Un Nuevo Peligro Para la Nación’ El Diario 04/06/1912. This perhaps explains why Cowdray was so anxious to keep the negotiations secret. 55. AHPM C2806 Exp. 73765 ff. 19–20 Lane to Bernard. 56. Ibid. Cowdray to Hayes 21/03/1912. 57. SMA:PEA Box 1C Reed Mexican Eagle, p. 11. In an interesting postscript to these early negotiations, Bénard was invited onto the board of directors of El Aguila in December 1913, which is a clear indication that Cowdray was keen to keep open the lines of communication with Royal Dutch Shell; AHPM C39 Exp. 1023 ff. 25–30 19/12/1913. 58. Brown Oil and Revolution, p. 163–4. There were at least 225 foreign oil companies registered in Mexico by 1917; Knoblauch Lord Cowdray’s Interests in Mexico, pp. 49–50. 59. According to Reed, “Further talks with the Royal Dutch, which were initiated with Mr. C. S. Gulbenkian of Paris, took place in February and March 1913, but nothing came of them.” SMA:PEA Box 1C Reed Mexican Eagle, p. 11.

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60. Following the award of a government contract to the Marconi Company to supply wireless telegraph stations, it was discovered that Attorney General Sir Rufus Isaacs had bought 10,000 Marconi shares, which he then resold to prominent Liberals (including 1,000 shares each to Ministers Lloyd George and Murray). Shareholders in Marconi stood to gain significantly once news of the contract had been released. There were also rumours that the funds used to buy Murray’s shares had come from those businessmen who had made donations to the Liberal Party in return for the award of peerages. Cowdray was never directly implicated in these scandals, but the very fact that Murray had chosen to work for another Liberal “grandee” such as Cowdray after retiring from the Commons raised further comment in the British press about the “corrupt” links between the Liberal Party and prominent businessmen; Searle The Liberal Party, pp. 92–93. 61. Cowdray had prior dealings with the Colombian government of President Carlos Restrepo in 1908 when he completed the Dorado Railway extension between 1905 and 1908; Spender Weetman Pearson, Appendix I. 62. Quoted in P. Calvert “The Murray Contract: An Episode in International Finance & Diplomacy” Pacific Historical Review XXXV, 1966, pp. 203–44. 63. SMA:PEA Box A4 Murray–US Ambassador Page 18/06/1915. Murray gave further details of the unscrupulous tactics employed by US lawyers Chester Thompson and Charles Otis in Colombia, who were acting, unofficially, on behalf of the US government: “After I had been in Bogotá for some time, and the purpose of my mission well known, Thompson and Otis suddenly appeared on the scene with large sums of money to spend.” 64. Quoted in Calvert “The Murray Contract,” pp. 220–21. 65. Jones The State, pp. 76–77. 66. Katz Secret War, p. 157. 67. SMA:PEA Box A3 Confidential Memo re: Mexico 09/1/1914. 68. The significance of these local arrangements will be discussed further in the next chapter. 69. An anecdote from British oilman Percy Furber demonstrates Wilson’s implacable conviction that Huerta was the assassin of Madero. Furber had been told by Francisco de la Barra (the brother of one of Furber’s former business partners) that Madero’s murder was unpremeditated and not ordered by Huerta. He had been contacted by British Ambassador in Washington Cecil Spring-Rice in April 1913 and asked to meet Wilson “to see if I could influence the President to change his attitude towards Huerta.” The ensuing meeting was both bad-tempered and singularly unsuccessful. Furber I Took Chances, pp. 170–71. 70. Diplomatic sources are, of course, not only copious, articulate, and eminently quotable, they are also notoriously speculative and prejudiced. For the “benign” view, in addition to the biographies of Spender and Young, see Calvert Mexican Revolution, and Knoblauch Lord Cowdray’s Interests in Mexico; for the negative view, see, inter alia, Meyer Su Majestad Británica; because Huerta shares (along with Iturbide, Santa Anna, and Porfirio Díaz) the dubious honour of being


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one of the most demonised figures in Mexican national history, Cowdray was never likely to emerge unscathed by the association; Katz The Secret War provides a balanced assessment. 71. SMA:PEA Box A3 Memo on meeting with Ambassador Page 09/01/1914. 72. SMA:PEA Box A4 Body to Cowdray 13/05/1913. 73. The pact was so called because it was brokered by US Ambassador Henry Lane Wilson, whose memoirs reveal not only his bombastic arrogance but also his overt complicity in the overthrow of Madero, whom he described as “a person of unsound intellect, of imperfect education and vision”; H. L. Wilson Diplomatic Episodes in Mexico, Belgium and Chile London: William Heinemann, 1927, p. 287. 74. SMA:PEA Box A4 Body to Cowdray 22/02/1913. 75. Ibid. 26/02/1913. 76. Ibid. 06/03/1913. 77. Katz Secret War, p. 164. The secretary to the British Legation, T. B. Hohler, was less than complimentary of Stronge’s qualities as a statesman, and indicates that he was less than resolute when placed under pressure: “Poor old Stronge came in for the most violent criticisms by the British colony and indeed he must have been a quaint spectacle in the midst of the firing, walking about with his head as usual through the middle of a white poncho and his vile parrot perched on his shoulder dropping its excrement and nibbling his ear. His hesitating manner was unfortunate at such a crisis”; Hohler Diplomatic Petrel, p. 184. 78. Quoted in Calvert Mexican Revolution, p. 164. 79. K. Robbins Sir Edward Grey: A Biography of Earl Grey of Fallodon London: Cassell, 1971, p. 275. 80. Ibid., p. 276; it is also perhaps significant that Cowdray and Grey were close political associates, not only as Liberals, but also as strong supporters of the Imperial Liberal Council; see Chapter Two; Matthew The Liberal Imperialists, p. 59. 81. SMA:PEA Box A4 Cowdray to Body 28/03/1913. 82. Ibid. AMPPCo Intelligence Department File R 1/2 03/03/1915. 83. Haff quoted in Katz Secret War, p. 160. 84. Turlington Mexico and Her Foreign Creditors, p. 247. 85. At a meeting in late June 1913 between Huerta and US Ambassador Henry Lane Wilson, the importance of British support was underlined. Huerta told Wilson: “On the question of recognition the President said it had been a matter of vital importance at one time, because of the difficulties raised by the bankers who were making the loan to Mexico; but now that these difficulties had all been overcome and Mexico has sufficient financial resources to prosecute the war vigorously, recognition [i.e., US recognition], while it would of course be welcomed gladly, was not essential”; Wilson Diplomatic Episodes, p. 305. 86. AJYL 3a serie Mexican Office to Body 28/03/1913. Esquivel Obregón’s first plan had clearly not been fully worked out, because Body wrote less than two weeks later to inform Cowdray that “the Minister does not now wish us to subscribe $1,000,000 Mex. at par.”

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87. The creation of bespoke banks to promote agriculture and irrigation had been the brainchild of Limantour, who had launched similar schemes in 1908; Turlington Mexico and Her Foreign Creditors, p. 242. 88. AJYL 3a serie Cowdray to Limantour10/04/1913. 89. SMA:PEA Box A4 Body to Cowdray 10/04/1913; this letter is also in the Limantour archive. 90. AJYL 3a serie Cowdray to Body 10/04/1913. 91. Ibid. Cowdray to Limantour 10/04/1913. 92. Ibid. 93. AJYL 3a serie Limantour to Cowdray 11/04/1913. 94. SMA:PEA Box A4 Cowdray to Limantour 15/04/1913. 95. Turlington Mexico and Her Foreign Creditors, p. 249–50. The banks involved included the Banque de Paris y des Pays-Bas; Banque de l’Union Parisienne; A. Spitzer and Company; S. Bleichroeder; the Deutsche Bank; the Dresdner Bank; Morgan Grenfell and Company; J. P. Morgan and Company; and Kuhn, Loeb, and Company. The interest rate of 6 percent compared unfavourably with the 4 percent negotiated by Limantour prior to the collapse of the Díaz government, and shows how confidence in Mexico’s domestic political stability had deteriorated since 1911. Security for the loan was the 38 percent of export and import duties not already pledged to service the loans negotiated by Limantour in 1899 and 1910. 96. Ibid., p. 253–56. By the end of November the Huerta government was unable to secure further loans of any kind, and in December was forced to suspend payments of interest on the government’s existing debts, the first time Mexico had defaulted since 1861 under the presidency of Benito Juárez. 97. This represented no more than 3 percent of the loan; SMA:PEA Box A3 Body to Ryder 04/10/1913; also quoted in Calvert Mexican Revolution, p. 231. 98. SMA:PEA Box A3 Ernesto Madero to Cowdray 25/10/1913; Carden to Cowdray 3/11/1913. 99. Cowdray’s priority, following the signing of a contract in July 1913 to supply the Admiralty with 200,000 tons of fuel oil, was clearly to bolster the stability of the incumbent government; Jones The State, p. 69. The contract no doubt also inspired him to buy a lavish wedding gift for Huerta’s daughter; Calvert Mexican Revolution, p. 230. 100. SMA:PEA Box A4 Summary of Press Attacks AMPPCo Intelligence Department File R1/2 03/03/1915. These reports were also of concern to the Foreign Office; in response to a request from Foreign Secretary Lord Grey, Cowdray declared that “we made no contract or obtained no concession from Huerta”; Box A3 23/12/1915. This contradicts Katz Secret War, pp. 200–201, who claims, based on the testimony of Admiral Paul Von Hintze, the German minister to Mexico, that Cowdray had received important concessions from Huerta, although he does not specify what they were. 101. According to Peter Calvert, Lind neither spoke any Spanish nor possessed any diplomatic experience; Calvert Mexican Revolution, p. 229.


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102. See Chapter One; Carden had also been consul general in Cuba during the Spanish-American War of 1898–1902; Calvert Mexican Revolution, pp. 218–19. 103. Quoted in Knoblauch Lord Cowdray’s Interests in Mexico, p. 161. 104. Calvert Mexican Revolution, pp. 216–53. 105. There is even evidence to the contrary. El Aguila’s lawyer Luis Riba had asked Cowdray to persuade FO to retain Stronge as minister until the situation in Mexico had become less volatile; there is, however, no record of Cowdray’s reply, or evidence that he did anything about it. SMA:PEA Box A3 Riba to Cowdray 27/7/1913. 106. Following the restoration of British-Mexican commercial and diplomatic relations in 1884, Carden had prepared a detailed report on the land programme of the Díaz government and outlined the opportunities for British capital; Tischendorf Great Britain and Mexico, p. 99. 107. An old Etonian, Carden was described by Edith O’Shaughnessy, the wife of Nelson O’Shaughnessy, appointed the First Secretary to the American Embassy in August 1913, as “the handsome, perfectly groomed, tall, fresh-complexioned, white-mustached, unmistakable Briton”; E. O’Shaughnessy A Diplomat’s Wife in Mexico New York: Harper & Brothers, 1916, p. 15. He appears to have been an exceedingly vain man, writing to Limantour in 1894 to ask why President Díaz was ignoring him: “the absolute indifference of the ruler of the country is, to say the least, not encouraging . . . and must, I fear, be attributed to his being for some reason prejudiced against me”; AJYL 1a serie R4 Carden to Limantour 16/01/1894. Body was certainly less than impressed, commenting to Harold Pearson that Carden “has never done a thing except when he expected to get something for it”; SMA:PEA Box E5 02/02/15. 108. SMA:PEA Box A6 Pearson to Duff Morison 16/09/1891. As a further example of the need to keep Carden as a friend rather than an enemy, Pearson ordered a carriage (a “Coupe Brougham”) to be manufactured in England and shipped to Mexico as a gift for Mrs. Carden; SMA:PEA Box A6 Pearson to Walsh 14/10/1891. 109. Calvert Mexican Revolution, p. 218; it is clear from Carden’s correspondence with Limantour in this period that he continued to seek land for private colonisation schemes; AJYL 1a serie R4 Carden to Limantour 04/04/1895. 110. In fact, contrary to Carden’s optimistic assessment, his isthmus lands were entirely unsuitable for agricultural purposes: The firm (Balfour Allen & North) employed by Carden in 1913 to survey the lands reported that they were “inherently defective.” Mahogany had been exploited on a small scale, but what remained was very costly to exploit; regular floods on “miasmatic and unhealthy” low-lying land meant they were unsuitable for cultivation, and “absolutely unfitted for coffee, cocoa, or bananas”; fierce “northerners” (cold north winds) were frequent, there was no resident population, and nothing to attract labour; SMA:PEA Box E5 Balfour Allen & North-SPS 18/06/1913. 111. The Uspanapa Land Company held over 40,000 acres in 1899; one year afterward (1899) only half of the loan had been repaid; SMA:PEA Box E5/7 and 10.

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112. SMA:PEA Box E5 Carden to Cowdray 16/12/1912. The report from Sir Daniel Morris, former government director of agriculture in the West Indies, was “unable to recommend the Project in its present form”; File E5/10. 113. SMA:PEA Box E5 Body to Carden 26/02/1915; Carden to Body 10/03/1915. Carden died six months after this correspondence. 114. Cain and Hopkins British Imperialism. 115. SMA:PEA Box E5 Body to Carden 11/02/15. 116. For example, the New York Tribune reported in October 1913 that “Sir Lionel Carden has been appointed by Lord Cowdray with whom he is closely connected”; SMA:PEA Box A4 Summary of Press Attacks AMPPCo Intelligence Department File R1/2 03/03/1915. 117. Calvert Mexican Revolution, p. 253. 118. Ibid., pp. 265–66. This speech has an eerie resonance of the Guildhall speech of November 2007 delivered by PM Gordon Brown, this time in the context of divergences between US and British policy over Iraq. 119. SMA:PEA Box A3 Body to Cowdray 11/11/1913. 120. Cited in Calvert Mexican Revolution, p. 267. 121. Carden was temporarily withdrawn “to report to London” in January 1914, while Hohler took over his duties in Mexico; Hohler Diplomatic Petrel, p.188; Carden was sent back to Mexico again in the summer of 1914, and finally withdrawn in August 1914. 122. SMA:PEA Box A3 Memo to Dr. Hayes and Mr. Ryder 25/11/1913. 123. SMA:PEA Box A3 Statement to Press 12/11/1913, subsequently published in the Times; letters were then sent to all London daily newspapers, to the Frankfurt Gaz, and to the leading newspapers in Paris (Le Temps, Le Matin, Le Journal, Le Figaro); ibid. Box A3 17/12/1913. 124. Cowdray also identified Sherbourne Hopkins and José Vasconcelos as his principal detractors in the United States and Mexico; SMA:PEA Box A3 Cowdray to Ryder 22/11/1913, Memo to Dr. Hayes and Mr. Ryder 25/11/1913. 125. This appeared to be an exercise in splitting diplomatic hairs. The Foreign Office, according to Calvert, subsequently denied that it had allowed the American officer to take full command, and wanted “only” to ensure that Fletcher took on the full responsibility in the event of a landing of US troops on Mexican soil. Ambassador Page in London, however, was certainly under the impression that the Admiralty had ceded the right to command to Fletcher; Calvert Mexican Revolution, p. 282. Cowdray was certainly happy with the way in which Cradock had assisted his staff in Tampico, and wrote to First Lord of the Admiralty Winston Churchill to praise the “simply magnificent manner in which Cradock & officers have handled the situation in Mexico”; SMA:PEA Box A3 Cowdray to Churchill 06/08/1914. 126. Ibid. Cowdray to Body 21/04/1914. 127. W. Dirk Raat Mexico and the United States: Ambivalent Vistas Athens: University of Georgia Press, 1992. 128. The operations of the TNR were one of the first casualties of the backlash. Traffic was halted, and the TNR’s American employees taken hostage. They were


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only freed after Carden had made representations to the Huerta administration; SMA:PEA Box A3 Body to Carden 03/05/1914. In the oil fields in the Faja de Oro, a number of US citizens fled in the wake of anti-US hostility. This prompted a request from the British ambassador in Washington for an undertaking from Cowdray that he would not take advantage of the forced exile of US oilmen to acquire new properties, which might sour British-American relations. Cowdray replied, “Whatever newspaper articles may say to the contrary, you may absolutely rely upon the Mexican Eagle doing nothing but what would be perfectly consistent for a British firm with the very highest repute to do. It is not fishing in troubled waters, nor is it acquiring developed or partially-developed properties”; SMA:PEA Cowdray to Spring Rice 26/05/1914. Although he kept his word with regard to acquisitions of oil properties belonging to US citizens, he took the opportunity the following month to acquire the Oil Fields of Mexico Company from Percy Furber, who, according to his own account, suddenly got cold feet over the oil business with the looming prospect of a world “in flames”; Furber I Took Chances, p. 179. This was the last major oil acquisition Cowdray would make in Mexico; AHPM C39 Exp. 1023 ff. 64–69. 129. SMA:PEA Box A3 Cowdray to Body 26/05/1914. Cowdray’s hopes proved to be overly optimistic, since El Aguila’s properties were subjected to frequent raids, confiscations, and lootings between June and October 1914. 130. SMA:PEA Box A3 Carr to Cowdray 16/07/1914. 131. Ibid. Cowdray to Padget 02/11/1914; for the internal schism between Carranza and Villa, see F. Katz The Life and Times of Pancho Villa Stanford, CA: Stanford University Press, 1998, pp. 433–87. Cowdray’s representatives were even careful to leave open the possibility of an understanding with agrarian revolutionary Emiliano Zapata, praising the discipline of the zapatistas during the occupation of Mexico City in January 1915 in comparison with the indiscriminate looting practised by the carranzistas; SMA:PEA Box A4 Fred Adams (manager of the TNR) to Body 11/01/1915. 132. SMA:PEA Box A3 Cowdray to de Landa y Escandón in Biarritz 10/11/1914. In the same letter, Cowdray indicated that he had learnt some of the lessons of his flirtation with those who had favoured a return to Porfirian practices under Huerta. He told de Landa y Escandón that he had rejected a request for him to provide “cash sympathy in favour of our old friend Felix Díaz.” “Of course,” he continued, predictably, “we have had to reply that it is quite impossible for us to become partisans of any faction.” 133. Perhaps in this spirit, or perhaps for more straightforward humanitarian reasons, the board of El Aguila, at Ryder’s suggestion, gave Mex$20,000 to Alvaro Obregón’s Revolutionary Relief Committee to “help the suffering of the poor.” In the view of the British Minister Hohler, this was an “error of judgement . . . the poor will receive nothing, and the money will get into the hands of transient blackguards”; SMA:PEA Box A3 Hohler to Body 27/02/1915.

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Notes to Chapter Seven chapter seven

1. SMA:PEA Box A3 Confidential memo from Body on a meeting with Sir Maurice de Bunsen 13/09/1915. 2. SMA:PEA Box A3 Cowdray to T. Bowring, director of CT Bowring, oil distributors in GB, acquired by AMPPCo in 1913 26/12/1914. 3. AHPM C39 Exp. 1025 ff. 45–48; the only exception to this was drop of only 18 percent in sales of gasoline, and rise in sales (179 percent) of cotton-seed oil; the board also pointed out that the figures were distorted by the fact that, again due to the interruptions of internal communications, almost two-thirds (109) of the 169 agencies which distributed El Aguila products throughout Mexico had not been able to send in their reports. 4. AHPM 38 C2806 Exp. 73475 f. 37 Ryder to Body 11/10/1916. 5. SMA:PEA Box A3 Cowdray to Hohler 09/11/1916. 6. SMA:PEA Box A4 Cowdray to Dehesa 23/12/1915. 7. SMA:PEA Box A3 Cowdray to Limantour 23/12/1915. Of the twenty tankers belonging to the Eagle Oil Transport Company (seventeen of which were owned outright, with three others on long-term charter), ten had been requisitioned by 1915, and fifteen by 1917; Knoblauch Lord Cowdray’s Interests in Mexico, p. 295. 8. Archivo José Yves Limantour (hereafter AJYL) 3a serie Cowdray to Limantour 19/01/1916. 9. For a detailed account of German aspirations and conspiratorial activities, including the offer made in the infamous Zimmerman Telegram to the Carranza government in February 1917 to restore the territory taken from Mexico by the United States in 1848 if Mexico became an ally of Germany against the United States, thus precipitating US entry into WWI, see Katz Secret War, pp. 350–67. According to his own account, the telegram was intercepted partly through the agency of the British minister in Mexico, Thomas Hohler; Hohler Diplomatic Petrel, p. 244. As anti-German paranoia intensified in Britain and the United States, Cowdray agreed to the use of a tug belonging to El Aguila, but flying the Mexican flag, to search—without success—for a reported German submarine base off the coast of Tamaulipas in the summer of 1918. R. Gerhardt “Inglaterra y el petróleo mexicano durante la Primera Guerra Mundial” Historia Mexicana XXV:1, julio– sep 1975, pp. 118–42. 10. Katz Pancho Villa, pp. 566–70. 11. AHPM C2214 Exp. 59763. 12. AJYL 3a serie Cowdray to Limantour 25/02/1916. 13. A. Sampson The Seven Sisters: The Great Oil Companies and the World They Made London: Hodder & Staughton, 1975, p. 60. 14. Meyer Su Majestad Británica, pp. 81–91. 15. There is also evidence that some US exports of crude to the UK were Mexican in origin; E. Durán “El Petróleo Mexicano en la Primera Guerra Mundial” in M. S. Wionczek (ed.) Energía en México: Ensayos sobre el pasado y el presente México: El Colegio de México, 1981, pp. 53–75. Cowdray himself estimated a total of 10 percent of oil supplies to Britain during the war came from his fields; SMA:PEA Box A23 R1/12.

Notes to Chapter Seven

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16. SMA:PEA Lord Cowdray: Deputation to Lord Reading 08/09/1918. 17. Durán “El Petróleo Mexicano,” p. 72. 18. SMA:PEA Box A3 Memo on meeting with Maurice De Bunsen, London 23/03/1918. 19. Brown argues that, as a holder of Mexican bonds, Cowdray was also keen to use the medium of diplomatic pressure to establish a timetable for the repayment of existing debt obligations; Brown Oil and Revolution, p. 246. 20. SMA:PEA Box A4 Body to Cowdray 18/05/1917. 21. Meyer Su Majestad Británica, pp. 81–91. 22. SMA:PEA Box A4 Body to Cowdray 22/05/1917. 23. SMA:PEA Box C49/2. 24. SMA:PEA Box 1C Reed Mexican Eagle, p. 10. 25. SMA:PEA Box A3 Memo on Interview with Mr. Balfour 18/06/1918. 26. Ibid. Body to Cowdray 16/09/1918. 27. As Durán points out, Carranza was unable to collect production taxes, since he did not control the oil fields, which meant that he was only able to benefit from the imposition of export taxes, since he controlled the port of Tampico; Durán “El Petróleo Mexicano,” pp. 53–75. 28. SMA:PEA Box A3 Body to the Secretary of State for Foreign Affairs 03/02/1915. 29. SMA:PEA Cowdray to Body 29/12/1916. Ryder was less sanguine, explaining that Carranza was now demanding direct rather than indirect payment of taxes amounting to “up to $179,000 oro Mex. every two months.” “We are,” Ryder declared, “at our wits ends”; AHPM C2806 Exp. 73475 Ryder to Body 23/11/1916. Haber, Razo, and Maurer The Politics of Property Rights, however, point out that when compared to the overall profits generated by oil exports, the tax demands represented little more than pocket change to the oil companies. This would also help to explain Cowdray’s willingness to negotiate. 30. Brown Oil and Revolution, pp. 219–23. 31. E. V. Niemeyer Revolution at Querétaro: The Mexican Constitutional Convention of 1916–17 Austin: University of Texas Press, 1974, pp. 134–65. 32. A. Knight The Mexican Revolution Cambridge: Cambridge University Press, 2 vols., 1986, suggests that the Querétaro debates were the equivalent of the Putney Debates during the English Civil War, at the same time emphasising that they were largely irrelevant to the outcome of the internecine struggles which were taking place outside the debating chamber. 33. It was also clear that many of the delegates had never even visited the constituencies they purported to represent. 34. F. Palavicini Mi vida revolucionaria México: Ediciones Botas, 1937. His fee was US$500 per month. I am grateful to Eduardo Clavé Almeida for providing information on Palavicini’s career as an agent for El Aguila. 35. See, for example, M. Becerra Palavicini desde alla abajo . . . historia del hombre pedagogo, político, ladrón, diplomático México, 1924. 36. Palavicini Mi vida revolucionaria, pp. 25–35. 37. J. Garciadiego Rudos contra Científicos: La Universidad Nacional durante la Revolución mexicana México: El Colegio de México, 1996, p. 272.

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38. It is also clear that El Aguila’s manager in Tampico, T. H. Vaughan, was very unhappy with Palavicini, who “was placed in my office only to kill time,” and he was dismissed in August 1911; AHPM Exp. 73557. 39. El Aguila provided advertising revenue, and the paper was published from premises rented from the firm; AHPM Exp. 52455. This would perhaps help to explain the character of the paper, in Palavicini’s own words, as nonpartisan and “independiente,” and El Universal’s support for the Allied cause during WWI; Palavicini Mi vida revolucionaria, pp. 367–69; for Cowdray’s relationship with the press, see Chapter Two, above. 40. AHPM Exp. 73542. Palavicini’s contract lasted until May 1917. For the defence of his “revolutionary” credentials at Querétaro, which demonstrated his considerable oratorical skills and powers of persuasion, see Niemeyer Revolution at Querétaro, pp. 47–50. 41. Niemeyer, Revolution at Querétaro, p. 143. 42. Brown Oil and Revolution, p. 231. 43. Hall Oil, Banks and Politics, p. 14–22. 44. Not all encounters were conducted through the APPM; in September 1918, for example, Carranza’s finance minister, Luis Cabrera, called an informal meeting in New York of lawyers representing the major oil companies (Luis Riba represented El Aguila) to gauge the reception of recent legislation passed by the Mexican government, especially those measures introduced in September 1918 which sought to tax not only production and exports, but also rents and royalties, and to introduce a new stamp tax on all property deeds. Cabrera met with a barrage of hostile abuse, especially from Doheny’s lawyer F. R. Kellog, who summarised his views as follows: “the only solution of the situation created by the Constitution of 1917 and subsequent decrees was that the said Constitution and decrees should be abrogated, and that it was entirely useless to continue the discussions on any different basis and with different purposes”; AHPM C2824 Exp. 73657 Riba to Ryder 19/09/1918. 45. SMA:PEA Memo on meeting with de Bunsen 25/03/1918. 46. Brown Oil and Revolution, pp. 229–38. 47. Brown (ibid., pp. 253–306) provides a detailed analysis of Peláez’s role and significance in these years. 48. Veracruz was a state which also witnessed numerous agrarian rebellions in the nineteenth century; for example, a report from the British vice consul in Coatzacoalcos in October 1906 identified “200–500 revolutionaries from Acayucán, Chinameca and Minatitlán . . . there can be little doubt that the disorders arose out of land matters, the Indians being dissatisfied with the treatment they received which they regarded as spoilation,” although whether this was directly related to the land fever associated with the oil boom remains unclear; PRO-FO 371/89 d.36405. The leadership and underlying structures of agrarian disputes, as the Mexican Revolution would demonstrate in myriad form, were a principal source of sustenance for the maintenance of caciquismo and caudillismo; see D. Brading (ed.) Caudillo and Peasant in the Mexican Revolution Cambridge: Cambridge University Press, 1980, and A. Knight and W. Pansters (eds.) Caciquismo


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in Twentieth-Century Mexico London: Institute for the Study of the Americas, 2005. 49. Serna Oil, Revolution and Agrarian Society, pp. 90–101. 50. During the fevered construction of new pipelines following the discovery of extensive deposits in 1911, Peláez became the most important labour contractor in the region; Brown Oil and Revolution, p. 257. 51. Durán “El Petróleo Mexicano,” p. 71 suggests that the number of Peláez’s supporters was 30,000, which is most probably exaggerated. Cowdray reckoned that Peláez was able to call upon between 3,000 and 5,000 local troops; SMA:PEA Box A3 Cowdray to de Bunsen 15/3/1916. Serna Oil, Revolution and Agrarian Society (p. 195) suggests between 3,000 and 10,000. 52. Brown Oil and Revolution, pp. 278–92. 53. Myrna Santiago The Ecology of Oil (p. 97) sees Peláez’s role primarily as the leader of an anti-Constitutionalist hacendado revolt who colluded with (and exploited) the oil companies in pursuit of the “commodification of the rainforest.” 54. Katz Pancho Villa, pp. 671–72. 55. Peláez also had strong personal reasons for his hostility to Carranza: his family’s properties were confiscated in 1914 and he was temporarily unable to receive royalty payments on oil produced on his lands; Serna Oil, Revolution and Agrarian Society, p. 191. According to El Aguila’s figures, annual royalty payments on production for 1916 in the Faja de Oro varied from Mex$85 (Tierra Amarilla) to Mex$14,257 (Potrero); SMA:PEA Box 45/6. 56. In December 1914 Peláez occupied the camp at Potrero and demanded Mex$100,000. SMA:PEA Box A3 Memo on meeting with de Bunsen 15/03/1916. When told there was only Mex$8,000 in the company safe, Peláez proceeded to take $7,500 and, thoughtfully, provided a receipt; AHPM C2800 Exp. 73307. 57. AHPM C39 Exp. 1023 ff. 45–49 Board of directors meeting on 30/08/1915. 58. AHPM C2800 Exp. 73307 Montes to Ryder, 07/05/1915. Montes did not, of course, mention the regular payments made to Peláez. At the same time, Aguilar was regularly imposing fines on El Aguila for contaminating local rivers and threatening local agriculture (US$50,000), and inventing new forms of taxation on production (Mex$450,000), both in January 1915; ibid., Wm. J. Pulford, Tampico, to T. B. Hohler 07/01/1915. 59. Three of El Aguila’s employees (two British, camp superintendent Hugh Buckingham and treasurer Edward Campbell-Bannerman, one Mexican, Tirso Cruz) were attacked and murdered in March 1917, following an attack by “hombres armados” on the Nanchital camp in southern Veracruz. The report did not specify who the culprits were. In fact, violence and theft was just as likely to have been committed by Constitutionalist troops, who had a poor reputation amongst the foreign oil companies, and who were often referred to as con-sus-uñas-listas (with their claws at the ready); AHPM C39 Exp. 1025 Minutes of the board of directors meeting 27/03/1917. 60. SMA:PEA Box A3 PM Bennett (Electrical Engineer for El Aguila, Tampico) to Body 09/02/1916; memo from Lord Cowdray 15/03/1916.

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61. SMA:PEA Box A4 Notes Re Mr Body’s visit to Washington, May 1917. As an example of growing lawlessness, Body gave an account of his recent experiences of a raid on the Tampico–Mexico City railway, which left thirty passengers dead. 62. SMA:PEA Box A3 Body to Cowdray 22/10/1917. Body also reported that in order to prevent evidence of El Aguila’s links to Peláez falling into wrong hands, “all the financial papers showing costs and profits on the contract I personally destroyed during my last visit.” 63. Katz Secret War; Brown Oil and Revolution, p. 280. 64. See the essays in M. Wasserman and T. Benjamin (eds.) Provinces of the Revolution: Essays on Regional Mexican History Albuquerque: University of New Mexico Press, 1990. 65. Brown Oil and Revolution, p. 303. Peláez remained a significant actor in the politics of Veracruz after the Revolution, until the reconstruction of central authority eventually undermined his cacicazgo. This was a process repeated throughout Mexico in the 1920s and 1930s; see, for example, K. Brewster Militarism, Ethnicity and Politics in the Sierra Norte de Puebla, 1917–30 Tucson: University of Arizona Press, 2003. 66. Serna Oil, Revolution and Agrarian Society (pp. 226–27) contends that there is no record of disputes of any kind in the area under Peláez’s control. 67. The Madero government had not been a great advocate of pro-labour policies, but, crucially, it had given workers the freedom to organize; B. Carr El movimiento obrero y la política en México 1910–29 Mexico: Ed. Era, 1979. 68. For a detailed description of working conditions and an analysis of the racial and social segregation practised in the camps, see Santiago Ecology of Oil, pp. 148–78. 69. Brown Oil and Revolution, pp. 307–65; S. Haber Industry and Underdevelopment: The Industrialisation of Mexico 1890–1907 Stanford, CA: University of California Press, 1989. 70. Santiago Ecology of Oil, pp. 231–48. 71. Of the thirty labour conflicts which took place in this period within the Mexican oil industry (camps, docks, refineries, workshops, transport), half were in the refineries; A. Rendón Corona Los conflictos laborales en la industria petrolera México: Universidad Autónoma Metropolitana, 1996, p. 239, cited in Serna Oil, Revolution and Agrarian Society, pp. 226–27. 72. The most well-known example was the suppression of the Casa del Obrero Mundial in July 1916; Carr Movimiento obrero. 73. Following the publication of a report in El Universal in November 1916 on the rise in prices of basic staples between 1912 and 1916, El Aguila Director Thomas Ryder asked the Order Department to investigate. Staff found that the prices quoted in El Universal were broadly accurate; beans (frijoles), rice, and sugar had tripled in price, while corn (maíz) had quadrupled; AHPM C2806 Exp. 73475 ff. 141–42. 74. See Chapter Two. 75. SMA:PEA Box A4 Cowdray to Body 24/03/1916.


297

76. The official exchange rate of infalsificables to the gold peso was 5 to 1, so the agreed wages would now be 7.5 pesos; AHPM C2902 Exp. 73475 Ryder to Body 24/07/1916. 77. There also appears to have been a double standard in operation by the management of El Aguila. While they were prepared to pay wages in infalsificables, the sales manager in Mexico City (W. B. Stephens) was issuing instructions to its salaried agents throughout Mexico that payments to the company in paper money, including infalsificables, would no longer be accepted and should be made only in either gold or silver; AHPM C2902 Exp. 7345 Stephens to Ryder 24/11/1916. 78. Knight Mexican Revolution Vol 2, p. 409. 79. SMA:PEA Box A4 Cowdray to Body 29/12/1916. 80. Ibid. Body to Cowdray 20/01/1917. 81. SMA:PEA Box 55 TNR/5; Cowdray’s notes 29/07/1913. 82. SMA:PEA Box A3 Cowdray to Body 1914. 83. A private communication to Cowdray from US Ambassador Page in March 1914 assured Cowdray that the United States would positively welcome the termination of the contract; SMA:PEA Cowdray to Clive Pearson 13/03/1914. 84. SMA:PEA Box A4 Body to Cowdray 08/06/1912. 85. SMA:PEA Box A3 E. Madero to Cowdray 02/07/1912. 86. Ibid. Cowdray to Body 07/02/1914. 87. Ibid. Body to Cowdray 21/11/1916. 88. SMA:PEA Box A3 Body to Cowdray 29/04/1917. In his reply Cowdray acknowledged, and appeared to accept, the strategic justifications for the embargo: “connecting the two oceans with fine port facilities might, in Mexican opinion, render seizure necessary.” 89. SMA:PEA Box A3 Memo from Body to M. de Bunsen 12/11/1917. 90. Ibid. Memo from Lord Cowdray re: meeting with de Bunsen 25/03/1918. 91. Sampson The Seven Sisters, pp. 51–57. 92. SMA:PEA Box 1C Reed Mexican Eagle, p. 9. 93. Katz Secret War, pp. 178–9; Ansell Oil Baron, p. 128. 94. Searle Corruption in British Politics, pp. 212–17. 95. Ibid., p. 217. 96. SMA:PEA Box A11 Cowdray to Murray 04/04/1916. 97. The companies involved would be British Imperial Oil Co., Anglo-Persian Oil Co., Burmah Oil Co., Trinidad Oil Co, and Mexican Eagle; SMA:PEA Box A10. 98. Jones The State, pp. 190–92. 99. SMA:PEA Box A10 Notebook 6 “Review of Problems,” p. 25. 100. Cowdray had in the meantime begun to explore extensively for oil in the British Isles; Jones The State, p. 208. 101. SMA:PEA Box 1C Reed Mexican Eagle, p. 10. 102. SMA:PEA Box A9 Lord Cowdray’s Retirement from the Air Ministry: Letter to the Times 16/11/1917; see Chapter Two for further details. 103. Knoblauch Lord Cowdray’s Interests in Mexico, p. 345.

298

Notes to Chapter Seven and Conclusions

104. SMA:PEA Box A3 Memo Interview with Mr. Balfour 18/06/1918. 105. SMA:PEA Box C44 Agreement SPS with Royal Dutch and Shell 26/03/1919. The British government could not object or invoke DORA, given the close connections it had fostered with the Shell Group during 1918; Jones The State, pp. 201–4. 106. Document quoted in SMA:PEA Box 1C Reed Mexican Eagle, p. 11. 107. SMA:PEA Box44 File3; the equivalent of some $388 million in contemporary terms. 108. The contract obliged the parent and subsidiary companies to adjudicate all management disputes solely in British courts. Shell also had an option to purchase further 125,000 shares, which was taken up in January 1920 (Box 11 Cowdray to Clive Pearson 15/01/1920), as a result of which both S. Pearson and Son, and RD-Shell held approximately 600,000 shares each. It is worth noting that the contract also allowed the firm to cull files from its Intelligence Department to remove all “sensitive” material; Box C44/3 Agreement of SPS w/RD Co & Shell 26/03/1919. 109. SMA:PEA Box C44 Cowdray to Cadman 27/03/1919. 110. Ibid. Cadman to Cowdray 15/05/1919. 111. Ibid. Cowdray to Cadman 22/05/1919. Cowdray also complained that Anglo Mexican had been unfairly discriminated against, having been excluded from the development of Mesopotamian oil fields in the postwar settlement imposed upon the Ottoman Empire. 112. AHPM C39 Exp. 1025 ff. 167–70 24/12/1918. 113. Oil production in Mexico peaked in 1920, but by 1930 it had dropped to only 20 percent of the 1920 figure, and Mexico had dropped from its position of second-largest producer in the world to seventh place. This weakened the autonomy of the privately owned oil companies and strengthened the hand of the state in its attempts to regulate and control the industry. At the same time, after years of mixed internal division and political conflict with the state, the labour unions consolidated their internal organisation into one (the Sindicato de Trabajadores Petroleros de la República Mexicana, or STPRM, formed in 1935) and cemented their alliance with the administration of President Lázaro Cárdenas (1934–40). The oil companies’ repudiation of a Supreme Court ruling in March 1938 in favour of STPRM demands, supported by Cárdenas, led directly to the nationalisation of the oil industry; J. Brown and A. Knight (eds.) The Mexican Petroleum Industry in the Twentieth Century Austin: University of Texas Press, 1992. 114. Tinkle Mr. De, pp. 141–56. 115. SMA:PEA Box C44/3 Telegram to El Aguila in Mexico from Lord Cowdray, n.d. 116. O’Hagan Leaves from My Life, p. 165. conclusions 1. Cain and Hopkins “Afterword,” pp. 196–220.

Notes to Conclusions

299

2. P. Riguzzi “From Globalisation to Revolution: The Porfirian Political Economy: An Essay on Issues and Interpretations” Journal of Latin American Studies 41:2, 2009, pp. 347–68. 3. Connolly “Pearson and Public Works Construction,” pp. 48–71. 4. One very recent assessment of the market valuation and net assets of the Pearson Group in 1919 suggests that they had reached an astronomical £79.1 million (a sum which should be multiplied by at least a factor of 50 to give a contemporary equivalent). Wale, Freeman, and Godley “Weetman Pearson in Mexico.” 5. Rippy Oil and the Mexican Revolution. 6. Riguzzi “From Globalisation to Revolution,” p. 361. 7. For example, the pioneering study by Moramay López-Alonso analysing the changing height of recruits to the rural and federal militia between 1850 and 1950 suggests that there is little evidence of a positive impact on working-class Mexicans, but a positive correlation in the case of recruits from an elite background; “Growth with Inequality: Living Standards in Mexico, 1850–1950” Journal of Latin American Studies 39:1, 2007, pp. 81–105. 8. Kuntz Ficker “Los ferrocarriles y la formación del espacio económico en México, 1880–1910,” pp. 105–37. Chapter Four argues, however, that the Tehuantepec Railway was a special case. 9. Connolly “Pearson and Public Works Construction,” p. 64. 10. As indicated in Chapter Three, the fact that Pearson received as much as 44 percent of total Mexican internal public debt (and 16 percent of external public debt) between 1885 and 1909 is eloquent testimony of the latter; Connolly “Pearson and Public Works Construction,” p. 60. 11. Weiner Race, Nation & Market; P. Riguzzi ¿Reciprosidad imposible?La política del comercio entre México y Estados Unidos 1857–1938 México: El Colegio Mexiquense/Instituto Mora, 2003. 12. For an analysis of Porfirian politics and the contradictory traditions of liberalism and authoritarianism (epitomised by caudillismo), see Garner Porfirio Díaz, pp. 18–47. 13. Miller “British Trade with Latin America (1870–1950),” pp. 118–45. 14. S. Pearson and Son had moved out of contracting before Weetman’s death in 1927, and moved into corporate finance and investment through the Whitehall Trust and the acquisition of Lazard Brothers merchant bank. After the 1960s Pearson diversified its portfolio of investments to include Chateau Latour, Madame Tussauds, and Royal Doulton, as well as the Financial Times and the Economist. The late 1990s saw a significant restructuring of the Pearson Group in order to concentrate on what are now its core businesses—publishing, media, and television production, including Thames Television, the Financial Times, the Economist, Penguin, Longman (UK), the Gredos publishing group (Spain), and educational publishers Addison-Wesley and Simon & Schuster (United States). 15. The Cowdray coat of arms, with its characteristically Victorian motto “Do It with Thy Might,” can be found in SMA:PEA Boxes A22–24, and in Burke’s Peerage.

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Index

Page numbers in italic indicate images and tables. Adams, Fred, 111, 259n49 El Aguila. See Mexican Eagle Oil Company Aguilar, Cándido, 197–198, 208, 214 Aird, John, 32 Air Ministry, 49–50, 168, 226 Alamán, Lucas, 63 Alemán family, 243n5 Alemán Gonzalez, Miguel, 1, 243n5 Alemán Valdés, Miguel, 2, 243n5 Alemán Velasco, Miguel, 1–2 Amerada Corporation, 228, 285n53 American Hawaiian Steamship Company, 114, 219, 269n83 Anderson, A. D., 177 Anglo-Mexican Claims Commission, 27 Anglo-Mexican Petroleum Products Company (AMPPCo), 178, 179, 203, 221–222, 285n49 Anglo-Persian Oil Company, 222, 223, 224, 271n17 Archibold, John D., 179, 181 aristocracy, Mexican, 14–15. See also clientalist network Asquith, Herbert, 13, 42, 43, 196 Association of Petroleum Producers of Mexico (APPM), 211–212 Association of the Chambers of Commerce of the United Kingdom, 23–24 Balfour, Arthur, 13, 170, 206, 207 Ballardie, J. de C., 177 Banco Nacional de México, 28 Bedford, A. C., 207 Belize, border disputes with, 87–88

Bénard, Georges, 177, 180, 285n57 Bird, R. McDonald, 152 Body, John: Amerada Corporation and, 228; Association of Petroleum Producers of Mexico and, 211; on British-American relations, 201; business etiquette and, 84, 85, 86; on Caja de Préstamos para Obras de Irrigación, 189, 192; on Carden, 289n107; clientalist network and, 70, 71, 72–73; on deal with Mexican Petroleum Company, 159; Gran Canal and, 259n49; on Huerta regime, 185–186; on labour disputes, 218; Limantour and, 78, 81–82; Madero and, 174; Mexican Eagle Oil Company and, 145–146; Mexico City newspapers and, 50; oil industry and, 142; oil land acquisitions and, 146, 148; oil legislation and, 155; oil politics and, 150, 151; Pearson’s relationship with, 54, 234; Porfirio Díaz and, 123, 173; on TNR contract, 105, 108, 112, 220, 221; on TNR funding, 114, 124; Veracruz dry dock contract and, 79; WWI oil supply and, 206–207 bonds. See Mexican government bonds border disputes, 87–88 Bowring, C. T., 156, 157 Bradford, England, 37 Brassey, Thomas, 32 Briggs, Asa, 37 Britain. See Great Britain British Imperialism (Cain and Hopkins), 10–11, 13

312

Index

British Imperial Oil Company, 224–225 British–Latin American relations, 16–21, 238, 246n33 British-Mexican relations: conclusions on, 30; Huerta regime and, 192–194, 196–197; Mexican Revolution and, 168–169; in nineteenth century, 19–21; restoration of diplomatic relations, 21–27, 234–235, 247n57; World War I and, 204–206. See also English debt Brown, Gordon, 290n118 Brown, Jonathan, 159, 178, 181 Bryan, William Jennings, 181–182 Buckingham, Hugh, 295n59 Bucyrus Construction Company (Ohio), 65, 257n15, 257n22 Bulnes, Francisco, 37 business etiquette, 73, 82–86, 144 Cabrera, Luis, 294n44 Cadman, Sir John, 226–227 Cain, Peter, 10–11, 13, 18 Caja de Préstamos para Obras de Irrigación, 188–192 Calvert, Peter, 196 Camacho, Dionisio, 74 Camacho, Enrique, 259n48 Camacho, Luis, 73, 74, 88–89, 95, 104, 105, 106, 109, 259n48 Camacho, María, 259n48 Camacho, Sebastián, 71 camarilla, 70–71, 258n34 Campbell-Bannerman, Edward, 42, 295n59 Canning, George, 19 Cantinflas, Mario Moreno, 243n3 Carden, Lionel, 26–27, 84, 192–196, 289nn106–110, 290n121 Cárdenas, Enrique, 94 Cárdenas, Lázaro, 5, 298n113 Carr, Herbert, 199, 228 Carranza, Venustiano: Huerta and, 188, 198–199; oil industry and, 202; overview of, 167; Peláez and, 214–215; recognition of, regime, 205–206; restoration of indigenous rights and, 272n29; taxation under, 208; TNR and, 219, 220–221 Casasús, Joaquín, 261n83 Casiano No.7, 163 Cass, Annie, 124, 251n42, 252n47, 255n87

Casson, Mark, 35, 36 Cerdán, Agustín, 73 Cerro Viejo, 152, 159, 275n55 Charles, Prince of Wales, 1, 243n2, 243n4 Chávez, Gregorio, 101 Churchill, Winston, 143, 222, 290n125 científicos, 67–71, 139, 161, 235–236 Clay Pierce, Henry: competition between El Aguila and, 162; defames Pearson, 167, 175, 179, 187, 197, 283n33; Doheny and, 278n86; negotiations with, 80, 149–151, 158–159, 278n87; Standard Oil and, 285n51. See also Waters-Pierce Oil Company clientalist network: Carden and, 193–196; with Madero regime, 172–176, 282n27; Mexican Revolution and, 166, 170–171; oil politics and, 149–153; overview of, 70–75; profits of, 231–232; as success factor, 9, 234, 237 CMB (Committee of Mexican Bondholders), 22–23, 28, 29 Coatsworth, John, 98, 101–102 Coatzacoalcos harbour, 107, 109–112, 130, 241 Código de Minería (1884), 153 Colchester, England, 44–45 Colombia, 181–183 Comisión Técnica de Petróleo, 208 Committee of Mexican Bondholders (CMB), 22–23, 28, 29 Compañía Mexicana de Petróleo El Aguila. See Mexican Eagle Oil Company Conchita, 119 condueñazgo, 147, 213, 273n32 Connolly, Patricia, 55, 77 Constituent Congress (1917), 209–211 Constitutionalism, 167, 198–199, 208–216 contracting: secrets of success in, 52–54; S. Pearson and Son and, 12; in Victorian Britain, 32, 37 Contractors Act (1782), 47 Corporation of Foreign Bondholders, 28 Corthell, E. L., 107, 267n49 Covarrubias, Miguel, 199 Cowdray, Viscount. See Pearson, Weetman Cradock, Rear Admiral, 198, 290n125 Creel, Enrique, 160–161, 175, 176, 177

Index Cruz, Tirso, 295n59 Cummins, Herbert, 206 Curzon, Lord, 204 de Béistegui, Miguel, 262n90 de Bunsen, Maurice, 211, 221 de C. Ballardie, J., 177 Defense of the Realm Act (1917), 207, 225–226 DeGolyer, Everette Lee, 132, 228, 272n25, 274n39 Dehesa, Teodoro, 72–73, 203, 210 de la Barra, Francisco, 99–100, 174, 186, 286n69 de la Barra, Luis León, 191 de Landa y Escandón, Guillermo: border disputes and, 87; British foreign policy and, 168; on collapse of Díaz regime, 282n21; El Aguila and, 75, 160–161, 177; financial crisis and, 90–91; gifts given to, 84; Gran Canal and, 71, 259n49, 261n83; Mexican civil war and, 202; overview of, 65–66; on Pearson and Limantour, 77–78; TNR inauguration and, 115 Department of Development, 63, 98 Department of Petroleum, 208 Deuda Consolidada Exterior Mexicana, 29 Díaz, Félix, 176, 185, 214 Díaz, Porfirio: advancements and profits under, 232–233; British-Mexican relations and, 26, 28–29; clientalist network and, 9, 71–73; consolidation of authority, 62; El Aguila and, 177, 279n94; gifts given to, 84; Gran Canal and, 64, 65–66, 92; with John Body, 123; Limantour and, 261n81; Mexican national development and, 11, 14; Mexican Revolution and, 165–166; oil industry and, 139–140, 151–152, 154; Pearson’s relationship with, 86; railway policy under, 94, 96–100; resignation and exile of, 172–174, 282n21, 282n23; statue commemorating, 1–2; TNR and, 95–96, 101, 103, 114; TNR inauguration and, 115–116, 124, 127; US relations and, 99–100, 108 Díaz, “Porfirito,” 75, 152, 161, 177, 259n49, 284n43 Díaz de Romero, Carmelita, 124, 147, 276n70

313

Dickenson, Jacob, 173 Diez Barroso, Francisco, 177 Doheny, Edward: business activities of, 271n16; Cerro Viejo and, 275n55; Clay Pierce and, 159, 278n86; Limantour and, 149–150; Pearson on, 211–212; Petroleum Laws and, 153–154. See also Mexican Petroleum Company Dos Bocas strike, 157–158 Dresdner Bank, 112–113 Dublán, Manuel, 29, 235 Dublán Conversion, 29, 103, 235 Eads, James, 103 Eagle Oil Transport Company, 145, 178, 221–222, 292n7 economic nationalism, 99–100, 167, 231, 236, 266n17 Edward VII, 168 El Aguila. See Mexican Eagle Oil Company Elguero, Luis, 161 Elizaga, Lorenzo, 155 English Debt: British-Mexican relations and, 26–27; conclusions on, 30; impact of, 20; settlement of, 19, 28–29; suspension of payments on, 22–23 entrepreneurs: competition between overseas and local, 8–9; in Victorian Britain, 33–37 Escandón, Pablo, 64 Esquivel Obregón, Toribio, 186, 188–189, 190–191 Faja de Oro (Golden Lane), 152, 212–216, 290n128 Faringdon, Lord. See Henderson, Alexander Fernández, Leandro, 115 Ferrocarriles Nacionales de México, 98, 160 Ficker, Sandra Kuntz, 99 Fiestas del Centenario, 92, 168–169 Fletcher, Rear Admiral, 198, 290n125 Fomento, 63, 98 foreign debt, Mexican: British-Mexican relations and, 26–27; impact of, 20; settlement of, 28–29; suspension of payments on, 19, 22–23 foreign investment: American, in Mexico, 24–25; British, in Latin America, 16–17; British, in Mexico,

314

Index

foreign investment: (continued) 20, 21, 22, 230–231; under Carranza regime, 209; under Díaz regime, 71–72; Gran Canal contract and, 66–69; under Huerta regime, 187–192; Mexican civil war and, 203–204; in oil, 139–140; in railway expansion, 97; by Victorian Britain, 34, 35–36 Fox, Vicente, 1 France: imperialism and, 21; Mexican national development and, 11; occupies Mexican ports, 19; relations with Mexico, 25 free-standing companies, 36, 250n17 Furber, Percy, 52, 82, 139–140, 270n8, 277n77, 286n69. See also Oil Fields of Mexico Company General Railway Law (1899), 98 gentlemanly capitalism, 10–15, 193–196 Germany: relations with Mexico, 24; trade with Latin America, 17 Glacier, J. B., 54 Gladstonian Liberalism, 42 globalisation, 7–10, 34, 230–231 Godley, Andrew, 35, 36 Gómez Farías, Benito, 59, 66 González, Manuel, 24, 26, 28, 97, 247n57, 256n5 Gonzalo Escobar, General, 2 Gran Canal: additional services in, 87–90; business etiquette and, 82–86; clientalist network and, 70–75; completion of, 90–93; construction of, 119; contract for, 64–70, 241, 257n16, 257n18, 257n20, 259n49; introduction to, 61–64; Limantour and, 75–82; municipal loan for, 263n116; overview of, 4; profits from, 231–232, 261n83, 263n112, 263n114 Granville, Earl, 25 Great Britain: El Aguila sale and, 222–225, 227; imperialism and, 7–10; Mexican national development and, 10–15; relations with Latin America, 19–21, 238, 246n33. See also British-Mexican relations Grey, Sir Edward, 88, 182, 186, 192, 196, 288n100 Griswold, W. T., 276n66 Guatemala, border disputes with, 87–88 Gulbenkian, Calouste, 52–53, 57, 226, 227

Haff, Delbert, 187 Haskins, De Witt, 40 Hayes, C. W., 160, 171, 177, 180 Henderson, Alexander, 59, 245n17 Hernández, Rafael, 174, 282n27 Hintz, Paul Von, 288n100 His Majesty’s Government, 222–225, 227. See also Great Britain Hoeflich, Edward, 253n65 Hohler, Thomas B., 86, 202–203, 206, 287n77, 291n133 Hopkins, Anthony, 10–11, 13, 18 Hopkins, Sherbourne, 283n33, 290n124 Hoppen, Theodore, 34, 249n8 House of Commons, 12–13, 45 House of Lords, 13, 46–47 Huasteca Petroleum Company, 159, 163 Huchison, R. D., 146–147, 210 Huddersfield, England, 37 Huerta, Victoriano: gifts given to, 84; Madero and, 286n69; Pearson’s relationship with, 172, 237, 283n31; Peláez and, 214; public works contracts under, 171; regime of, 183–200; resignation of, 201; TNR and, 219, 220; Wilson and, 287n85 Huidobro de Azúa, Miguel, 174 Huntingdon, C. P., 104 Hyde, Sir Clarendon, 113, 169, 226 imperialism, 7–10, 230–231 industrialisation, 34–35, 138–139 infalsificables, 217–218, 297nn76–77 informal empire, 7–10 investment. See foreign investment Ireland, 43 Isaacs, Sir Rufus, 286n60 Japanese workers, 55 Jersey Standard, 179, 183, 285n53. See also Standard Oil Johnson, Eric, 18 Jones, Geoffrey, 8, 9, 143 Juárez, Benito, 19, 21 Junta Consultiva de Crédito Público, 29 Kellog, F. R., 294n44 kerosene, 143 Kimberly, Lord, 87 King, Rosa, 64 Knight, Alan, 85

Index knighthood, 13, 46–47 Koss, Stephen, 48, 49, 50 Krauze, Enrique, 243n5 labour: disputes, 157–158, 216–218, 280n103, 296n71; under Madero regime, 296n67; management and, 55; pay and training for, 55–56; Pearson’s views on, 44, 255n87–90; for TNR construction, 111–112 Labour Party (UK), 49 Latin America: British imperialism and, 7–10; development in, 10–15; relations with Britain, 16–21, 238, 246n33 Lawrence, Courtland, 275n57 Leeds, England, 37, 249n9 Ley de Petróleo (1901), 153–154 Ley de Petróleo (1906), 153–154 Ley Minera (1892), 153 Liberal Party, 13, 41, 44–50 Limantour, José Yves: border disputes and, 87; on British foreign policy, 168; Caja de Préstamos para Obras de Irrigación and, 189–191; clientalist network and, 72; culture of friendship and, 83; financial measures under, 67, 75–77; on foreign investment, 26; General Railway Law and, 98; gifts given to, 84–86, 269n80, 274n49; Gran Canal and, 90–91; Interoceanic Railway and, 89; on Mexican-American relations, 266n19; Mexican civil war and, 203, 204; on mexicanisation of railway expansion, 99; Mexican securities and, 57–58; national development and, 68–69; Navy contracts and, 89; oil industry and, 141; oil land acquisitions and, 147–148; oil legislation and, 154; oil politics and, 149–151; Pearson’s relationship with, 13, 61–62, 77–82, 260n51, 273n34; Porfirio Díaz and, 261n81; as success factor, 235–236; TNR and, 88, 96, 106–115; on US ambitions in Mexico, 99–100 Limantour, Julio, 85 Lind, John, 193 Lloyd George, David: coalition cabinet of, 168, 222; El Aguila sale and, 145, 225–226; Marconi Company and, 286n60; Pearson’s relationship with, 49–50; rejection of war budget, 46

315

Lobnitz, Frederick, 88–89 Lobnitz of Renfrew, 88–89, 90, 119, 263n106 London, England: S. Pearson and Son relocated to, 40; Victorian commerce and, 32–33 London Stock Exchange, 160, 162, 181, 263n110 López-Portillo y Weber, José, 77 Lucas, Anthony F., 154 Lyons, Viscount, 25 Macedo, Pablo, 68, 160–161, 177 Macías-Gonzalez, Victor, 262n90 Madero, Ernesto, 50, 174–176, 192, 220, 254n72, 282n27 Madero, Francisco: death of, 286n69; Huerta and, 84; journalism and, 50–51; labour under, 296n67; overthrow of, 183; Pearson’s relationship with, 237; regime of, 172–176; Standard Oil and, 283n30; TNR and, 219–220 Mallet, Sir Louis, 186 management: labour and, 55; responsibilities of, 52–54 Manning, Robert, 246n39 Marconi Company, 181, 223, 253n55, 286n60 Mariscal, Ignacio, 27, 194 Mason, Ricardo, 88, 262n105 Maximilian, Emperor, 21, 29, 64, 234 Mena, Francisco, 29, 59, 245n23 Méndez, Santiago, 258n32 Mexican business etiquette, 73, 82–86, 144 Mexican civil war, 201–204, 236 Mexican Daily Record, 253n65 Mexican Eagle Oil Company: agency in Veracruz, 135; Association of Petroleum Producers of Mexico and, 211–212; bank loans for, 271n19; board of, 74–75, 279n94; conclusions on, 163–164; Constituent Congress and, 209–211; contract with Admiralty, 271n17; difficulties of, 143; domestic politics and, 149–153; exploration and production in, 155–157; formation of, 157–163; as free-standing company, 36; growth and success of, 141–142; importance of agency to, 143–144; investment and risk in, 144–146; investments of,

316

Index

Mexican Eagle Oil Company (continued) 280n101; labour disputes in, 217–218; land and lease acquisitions, 146–149, 273n36, 274nn38–39; legislative support for, 153–155; Limantour and, 80; Madero and, 172–176; Mexican civil war and, 202–203; Mexican Revolution and, 166–170; offices at Tampico, 137; overview of, 4–5; Peláez and, 214–215, 273n32; profit from, 232; restoration of indigenous rights and, 272n29; restructuring of, 177–181; sale of, 170, 171, 221–229, 298n108; storage tanks, 136; tank car, 134; tax increase and, 208; threat to properties of, 197–198 Mexican Financier, 30 Mexican government bonds, 57–59, 109–110, 112–113, 188–192 Mexican Herald, 115 Mexican Navy, 88–89 Mexican Petroleum Company, 141, 152–153, 159, 175, 187, 271n16 Mexican Railway, 156, 161–162 Mexican Revolution: El Aguila restructuring and, 177–181; Huerta regime and, 183–200; impact of, 5, 236, 237; introduction to, 165–172; journalism and, 50–51; Madero and, 172–176 Mexican workers, 55–56, 111–112, 120, 121 Mexico: British enterprise in, 230–231; flooding in, 63; industrial development in, 138–139; national development of, 10–15, 66–69, 94–95; Pearson’s additional services in, 87–90. See also British-Mexican relations Mexico City, flooding in, 63 Milan, Thomas, 276n73 Minatitlán refinery, 156, 158, 217–218 Mining Code (1884), 155 Ministry of Finance, Limantour’s strategies for, 67, 75–77 Molina, Olegario, 72 Molina Enríquez, Andrés, 82–83 Money, 22 Monroe Doctrine, 88, 99, 181–182, 219, 223 Montes, Rodolfo, 210, 214 Mora, José María Luis, 63 Morcom, Walter, 177

Morison, Duff, 65, 90, 96, 194, 254n77, 256n2 Municipal Loan (1889), 66 Muñiz, Luis, 279n98 Muñoz, Ingeniero Ignacio, 152, 275n55 Murray, Samuel B., 223 Murray of Elibank, Lord, 181–183, 223, 253n55, 286n60, 286n63 Napoleon III, 21 nationalism: economic, 99–100, 167, 231, 236; TNR and, 219–220, 266n17 National Railways of Mexico, 98 Navy, 88–89 Noetzlin, Edward, 28, 248n65 Northcliffe, Lord, 49, 50, 226 Norton-Griffiths, John, 32 Obregón, Alvaro, 204, 291n133 O’Connor, T. P., 51, 52, 254n73 “Official Year Book,” 89 O’Hagan, Henry Osborne, 51–52, 78, 229 Oil Fields of Mexico Company, 148, 157, 270n8, 277n77, 290n128 oil industry: Constitutionalism and, 208–212; domestic politics in, 149–153; exploration and production in, 155–157; Huerta regime and, 184; labour disputes in, 216–218; Mexican civil war and, 201–204; Mexican Revolution and, 166–170; overview of, 4–5, 138–142; Pearson’s start in, 142–146; Peláez and, 212–216; production in, 298n113; storage tanks, 136; TNR and, 117; World War I and, 204–207. See also Mexican Eagle Oil Company Orozco, Pascual, 176 O’Shaughnessy, Edith, 289n107 O’Shaughnessy, Nelson, 289n107 Otis, Charles, 286n63 Pacheco, Carlos, 97 Padget, Sir Ralph, 199 Page, Walter, 61, 87, 183, 196, 290n125 Palavicini, Félix, 209–211, 294n38 Panama Canal, 116, 219, 237 Parliament, 12–13 Partido Revolucionario Institucional (PRI), 2

Index Paxman, James, 44, 251n45 Payno, Manuel, 21 Pearson, Clive, 140, 178, 179 Pearson, George, 38 Pearson, Harold, 289n107 Pearson, Samuel, 37–38, 39 Pearson, Weetman: actions in House of Commons, 252nn47–48; business activities of, 30–33, 230–234; character and personality of, 51–52, 251n39, 252n47; education of, 38–39; Liberal Party and, 44–48; noninterference in politics of, 171–172, 186–187, 199–200, 237; origin of empire, 37–41; peerage, 13, 46–47; portrait of, 118; political views and career of, 30–33, 41–44; political press and, 48–51; secrets of success, 52–54; statue commemorating, 1; strategy and modus operandi in business activities, 51–60; success of business ventures, 234–238; at TNR inauguration, 124; views on wages, 44 Pearson Group: assets of, 5, 232, 299n4; El Aguila sale and, 225; journalism and, 48; restructuring of, 299n14; TNR payments to, 96 Peimbert, Angel, 84 Peláez, Ignacio, 147 Peláez, Manuel, 147, 202, 216–217, 273n32, 295nn50–57, 296n65 peones, 55–56, 111–112, 120, 121 Peraza, Humberto, 1 Perló Cohen, Manuel, 70 Pershing, John, 203 Petroleum Laws (1901, 1906), 153–154 philanthropy, 45 Pimentel y Fagoaga, Fernando, 160–161 Pino Suárez, José, 183 political elite, 9, 10–15, 166. See also clientalist network Porfiriato, 165 Portes Gil, Emilio, 2 portfolio investment, 17 Potrero del Llano, 131, 133, 178, 197, 202–203 Potrero del Llano No.4, 132, 163, 227, 280n103 profitability, of Pearson’s empire, 231–233 propaganda, 50–51, 89, 254nn71–72, 279n98

317

Rabasa, Emilio, 86 Raigosa, Genaro, 261n83 railways: economic nationalism and, 266n17; expansion of, 94; under Madero regime, 219–220; Porfirian policies for, 96–100. See also Tehuantepec National Railway Ramón Corral, 128 Reading, Lord, 205 Reyes, Rodolfo, 186 Riba, Luis, 161, 185, 259n49, 289n105, 294n44 Richards, Eben, 277n82 Rincón Gallardo, Pedro, 61, 84, 256n2 Riva Palacio, Vicente, 97 Rockefeller, John D., 285n51 Rodríguez Kuri, Ariel, 70, 263n116 Romero, Matías, 76, 90, 101, 103, 138, 270n1 Romero Rubio, Agustina C. vuida de Manuel, 147 Romero Rubio, Manuel, 68 Rosebery, Prime Minister, 13, 43, 46, 88 Royal Dutch and Shell, 52–53, 171, 180–181, 202 Ryder, Thomas: Amerada Corporation and, 228; Association of Petroleum Producers of Mexico and, 211; Caja de Préstamos para Obras de Irrigación and, 192; Cerro Viejo and, 275n55; clientalist network and, 70; El Aguila and, 145, 161, 162–163, 177, 202; on labour disputes, 218; on Mexican business etiquette, 83; oil land acquisitions and, 148–149, 152; oil legislation and, 154; oil production and, 156–157; Pearson’s relationship with, 54, 234 Salina Cruz harbour, 107–113, 120, 122, 128, 129, 242 San Cristóbal, 155–156 Schell, William, 71 Scott, Walter, 270n11 Searle, G. R., 46, 223 Secretaria de Comunicaciones y Obras Públicas, 98 securities markets, 57–59 Shell Group, 170, 171, 221–229, 298n108 Sierra, Justo, 210 Spain, 19

318

Index

S. Pearson and Son: as contracting business, 12, 299n14; growth of, 47; major construction contracts of, 241–242; origins of, 37–38; Pearson’s role in, 38–39; Pearson’s success in, 4; projects completed by, 39–41 S. Pearson and Son Sucesores, 74 Spender, J. A., 39, 50, 57, 86, 116 Speyer, James, 266n17 Spring-Rice, Sir Cecil, 206, 286n69 Standard Oil: Clay Pierce and, 285n51; contract with, 179; Defense of the Realm Act and, 207; El Aguila sale and, 202, 222, 224, 225; “gentlemen’s agreement” with, 181–183; Madero regime and, 174, 283n30; WPOC negotiations and, 159. See also Jersey Standard Stanhope, Chandos, 96, 103 Stephens, W. B., 297n77 St. John, Sir Spencer, 27, 28 strikes, 157–158, 280n103 Stronge, Sir Francis, 186, 287n77, 289n105 subsoil deposits, ownership of, 208–209 “Syndicate of Employees of Commerce,” 217–218 Taft, Henry, 284n39 Taft, William H., 173, 176 taxation, 175–176, 202, 208, 293n29, 294n44 Tehuantepec National Railway: challenges faced by, 237; conclusions on, 116–117; contract for, 104–108, 170–171, 218–221, 241; cost of, 267n29; economic nationalism and, 266n17; final negotiations over, 79–80; financing for, 74, 88; history and construction of, 100–104; inauguration of, 115–116, 124, 126, 127; introduction to, 4, 94–96; oil industry and, 142–143, 156; Pearson as agent of, 90; Porfirian railway policy and, 96–100; profits from, 265n6, 265n7; railway bridge, 125; reconstruction and financing of, 108–114; sale of, 254n72; US occupation of Veracruz and, 290n128 Tehuantepec Railway Company, 106–107, 114, 116 Tehuantepec Railway Loan, 112–113, 114

Tenorio Trillo, Mauricio, 66–68 Thompson, Chester, 286n63 Thurstan, E. W. P., 206 El Tiempo Ilustrado, 115–116 Times (London), 22 Tischendorf, Alfred, 27, 103–104, 111 Tower, Reginald, 72, 100, 268n52 trade: between Britain and Latin America, 16–18, 20–21, 33–34, 238, 246n33; British-Mexican relations and, 23–24; El Aguila and, 178–179; Mexican Revolution and, 169–170; railway expansion and, 95 Treaty of Reciprocity, 24 Tron, Enrique, 160–161, 284n43 Trustees, Executors and Securities Insurance Corporation (London), 66 Turner, John Kenneth, 263n110 Ugarte, Gerzayn, 210 United States: Carranza regime and, 215; Colombian oil development and, 181–183; Huerta regime and, 192–193, 196–199; investment in Latin America, 17; Limantour on, 266n19; Mexican civil war and, 203; Mexican Revolution and, 173; oil industry and, 142, 149–151; Pearson tours, 38–39; railway expansion and, 98; relations with Mexico, 24–25; TNR and, 96; as threat to Mexican sovereignty, 99–100, 104–105, 107–108, 234, 235–236; World War I and, 205–206 Urquidi, José, 174 Uspanapa Land Company, 194–195 Valadés, Jose, 15 Van Humboldt, Alexander, 63 Vasconcelos, José, 290n124 Vaughan, Thomas, 214, 294n38 Velasco, Emilio, 25, 258n32 Veracruz: agrarian rebellion in, 294n48; major contracts in, 241; Peláez and, 296n65; US occupation of, 198–199, 290n128 Veracruz oil fields, 201, 213 Veracruz Pacific Railway, 156 Veracruz port, 73–74, 79, 113 Vera Cruz Railway Limited, 114 Villa, Pancho, 199, 203, 214, 283n31 Villegas, Silvestre, 24

Index Von Hintze, Paul, 288n100 El Vuelo del Aguila, 279n98 Walsh, T. L., 53–54, 90, 91–92 Waters-Pierce Oil Company: competition between El Aguila and, 162; Limantour and, 80, 149–152; monopoly of, 139, 141; negotiations with, 158–160, 277n82; Standard Oil and, 285n51. See also Clay Pierce, Henry Webb, Geoffrey Fuller, 253n61 Westminster Gazette, 13, 48–50

319

Wickersham, George, 173 Wilson, Henry Lane, 100, 173, 287n73, 287n85 Wilson, Woodrow, 183–184, 187, 192–193, 198, 205–206, 266n19 World War I, 49–50, 168, 171, 203–207, 219, 237 Yorkshire College, 249n9 Zamacona, Manuel, 173, 259n48 Zapata, Emiliano, 284n38, 291n131

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