German Intrigue in Mexico

Eversbusch's Attempts to Stop the Allies' Petroleum Supply
at Tampico—Von Eckardt's Schemes to Keep Mexico at
Least Neutral, So That the Germans May Have
A Spy Base and a Refuge There

By George MacAdam

[The World's Work, September 1918]

German intrigue in Mexico is now concentrating at two main points of attack: (1) at Tampico, where Eversbusch, the German Consul, is trying to stop the indispensable supply of oil to the Allies; and (2) at Mexico City where Von Eckardt, the German Minister, is trying at least to maintain the neutrality of Mexico—the only remaining relay station for information on American movements.

First, consider the oil situation: There are just seven big sources of petroleum supply in the world. To rank them by amount of production, they are: the United States, Russia, Mexico, the Dutch East Indies, Rumania, India, and Galicia. The Dutch East Indies and India are on the other side of the world; the voyage is long; U-boats are plentiful; and tank-steamers are scarce. The oil fields of Russia, Rumania, and Galicia are in the hands of the enemy. All of which means that the Allies must depend for their supply of petroleum upon the United States and Mexico.

To meet the demand, the United States jumped its 1917 production more than 40,000,000 barrels above its 1916 production, a record jump in oil history in the United States. In the same period, Mexico jumped its production more than 20,000,000 barrels, an increase in national production of more than 50 per cent, a world record.

But despite these tremendous increases, the Allies' supply is falling behind their demand. The oil reserves of the United States are already being drawn upon England has prohibited, with drastic penalties, the use of gasolene for pleasure vehicles. The United States would have already followed the same policy were it not that this country, unlike England, is a producer and refiner, that the greatest demand is for fuel oil, and that in the manufacture of this the explosive gasolene must be removed. Thus gasolene at the present time in this country is a by-product. The greater the demand for fuel oil, the greater the supply of gasolene.

The oil fields of Mexico are in the hollow of the hand of Manuel Pelaez, a brigand or a rebel according to one's point-of-view on Mexican politics, to whom the oil companies must each month pay "protection money" of princely proportions. The only outlets for Mexican petroleum are through the seaports of Tampico and Tuxpam, both under the jurisdiction of Carranza whose fast-maturing policy of "nationalization" would automatically make the oil of a neutral Mexico contraband-of-war which no belligerent could obtain. Between Carranza's territory and Pelaez's territory there is a No Man's Land where outlawry and disorder prevail. This is crossed by great pipe-lines carrying the precious oil from the wells to the seaports. And at Tampico is Eversbusch, one of the most energetic and clever agents of Germany, working under the cloak of his office as consul.

The richest oil wells in the world are in territory controlled by Pelaez. Only once in the last three years has there been a successful, though small and short, invasion by Carranza forces. Pelaez exacts from the oil companies $30,000 a month "protection money," but he gives protection. His bargain is explicit—no disorder and absolute exclusion of Germans and Austrians; and thus far he has lived up to his agreement like a gentleman.

How long will the agreement hold?

Pelaez is a shrewd Indian: he realizes that so long as he can hold the oil fields, the companies will be steady contributors to his strong box and that this may go on for years. So an offer against their interests, to prove attractive to Pelaez, would have to be fatter than it is probable that Herr Eversbusch, the German Consul at Tampico, could make it in these days when gold from the Fatherland must come by the underground route, and must compensate Pelaez & Co, for the loss to their own lands which, they are sure, destruction of present wells would cause. For they are all owners of oil lands.

This does not mean, however, that intrigue has not reached out for the Indian chieftain, or, more accurately, for the oil fields under his sway. Of the many attempts that in all probability have been made to "reach" him, two have come to light.

Last fall there was an election for the governorship of the State of Tamaulipas of which Tampico is the principal city. Governor Caballero, who ran for reelection, secretly offered to form an alliance with Pelaez, which would have brought the great oil port and the great oil fields in the neighboring state of Vera Cruz under their united jurisdiction. The election ended as elections usually end in Mexico—each side accusing the other of fraud and claiming to have received the majority of votes, Carranza, having amply justified suspicions of Caballero, stepped in and appointed Nafaratte provisional governor. Thereupon, ex-Governor Caballero, who, true to the necessities of Mexican political life, is also a general, retired with his following to Victoria where, according to last authentic reports, he is in open rebellion against Carranza.

The other underground effort to make a bargain with Pelaez, had as middleman General Dieguez, Governor of the State of Jalisco, who, because he is a loyal Carranzista, was taken from his duties on the western coast to tend to this task—so vital to the Carranza treasury—on the eastern coast. General Dieguez was given two cards to play in his game with Pelaez: one was a military force numbering something under a thousand men, the other was an offer that if Pelaez would surrender military control he would be given stewardship of the entire oil country including Tampico. General in Chief Pelaez believes that one bird in an armed hand is better than two in an unarmed hand. He is still in control of the oil fields.

But even with this state of affairs existing, Carranza does not fare so badly. Having in his grip the two commercial outlets for oil, Tampico and Tuxpam, he holds a strategic position which he makes the most of in the way of taxes. The oil may gush at a record-breaking rate out in the territory of Pelaez, but the Carranza imposts must be paid before it can flow into the tankers. His chief imposition is an export tax. As his treasury has gone down, this tax has gone up. The oil companies say that it promises soon to touch the confiscatory point, and both the American and the British Governments have filed protests to this effect in Mexico City. In addition to this, each oil company is obliged to pay Carranza a monthly license tax. The companies are also made to pay for a Carranza inspector in Tampico, who has long-range but autocratic powers, regarding the oil wells which he cannot inspect. Then there is the Captain of the Port, not to mention other minor officials who can bother, hinder, and "collect."

Needless to say, from the viewpoint of Herr Eversbusch, the German Consul at Tampico, this makes a fertile field to be tilled for the benefit of the Fatherland. His greatest harvest would be a negative crop—no oil for the Allies. To reap this harvest, he is sowing German propaganda with a lavish hand, the same brand that Minister von Eckardt is sowing in Mexico City and throughout the country.

Meantime, the German policy is to hinder as much as possible the production and transportation of oil. To help them accomplish this, there is a handy tool. It is known as the "Casa del Obrero Mundial," It is a local variety of I. W. W. or Bolsheviki. The principles of this organization are thoroughly interwoven in the political and industrial tangle that constitutes the present-day Mexican problem. Of its national bearings, more will be said later. Just now we will stick to the Tampico combination of oil, Eversbusch, and I. W. W.

Ever since the European war began and oil supplies became vital, there has been a particularly active-industrial fermentation going on in Tampico and vicinity. It is Eversbusch who has supplied the yeast. There are recurring strikes and threats of strikes among the workers connected with the oil industry. The strikes are well financed. The agitators have a constant supply of funds. Some of these labor outbreaks have reached serious proportions. The funds were supplied to the German consul through the notorious Hamburg-American group of plotters, formerly operating in New York but now residing in internment camp or Federal prison. Payments at the rate of $10,000 a day have been traced from Carl Heynen in Manhattan to Eversbusch in Tampico. The supply of Tampico yeast, however, has only been hindered; it has not been checked; the industrial ferment in the Mexican oil region is still going on.

To judge the potentialities of Herr Eversbusch, a few additional facts should be given. He has a private wharf with ample docking facilities for sea-going craft; he has the only supply of bunker coal in Tampico; he has a large warehouse, the "Agenda Commercial y Maritima." This warehouse is well stocked with American goods. They were bought ostensibly for American consignees, and then someone "swapped checks" to pay for them.

As an instance of how strings may be pulled, a series of orders by the Captain of the Port of Tampico may be instanced. To form a true estimate of the crippling results of these orders, it must be realized that the only means of communication between the seaport and the oil fields is by launch and barge. These go up the Panuco River to the Topila and Panuco fields, or down the Panuco River a short distance to a canal which leads into Tamiahua Lagoon, a jungle-bordered stretch of water running parallel with the Gulf of Mexico, some eighty or more miles to another canal which connects it with Tuxpam River. There are various landings on the lagoon from which the supplies are hauled through the jungle to the oil wells to the west. San Geronimo is the only landing that boasts a railway terminal. From this place a narrow-gauge road runs back thirty-five miles to Cerro Azul.

The Captain of the Port formerly required the companies to hire a Mexican pilot and engineer in addition to the American engineer or captain on each boat. So long as these enforced additions to the crew were merely decorative, so long as their wages were merely a beneficent tax for individualized Mexican labor, the companies did not complain. But in January there came an order that the navigation of each boat was exclusively in the hands of the Mexican pilot. Now like every good and true half breed these pilots put their faith in "Mañana." Back in the oil fields, drilling-crews might be waiting for machinery, pumping stations might be waiting for fuel, camps for food, but the Mexican pilot would none-the-less tie up when and where it suited him.


Discharge the pilot? Yes, a company could do that if it were willing to pay the penalty imposed by the foresighted Captain of the Port—give the victim of Gringo business methods three months' wages. And then the company could hire another Mexican pilot whose faith in "Mañana" and whose relish for a three-months' vacation on full pay were no less than that of his predecessor.

The Captain of the Port has followed this by still another order. It is to the effect that the boat crews must be made up exclusively of Mexicans. The American Consul has protested, but with what success is not as yet known in New York.

But this ingenious official is not the only one who issues orders regulating boat traffic to and from the oil fields. There are also officers of the army and of the customs who exercise equally autocratic power.

The Tampico officials issued an order requiring the companies to state when a launch is to carry money and the amount. Within a space of three months, a total booty of 175,000 pesos was taken from pay launches. The most serious of these hold-ups took place on February 21. The launch Thendara having been fired on while navigating the canal a few days previous, three bullets going clear through her cabin, it was decided that as a protective measure, the companies would send their paymasters' boats out together. But when the little squadron was passing south through the canal, the shore suddenly began to spit bullets. More than two hundred shots were fired. The launches were riddled. The paymaster on the Houp-la was badly wounded, three bullets hitting him; a bullet went through the shoulder of the company surgeon on the same craft; two struck its pilot; and one a sailor. Aboard the Thendara, the pilot was also hit by two bullets, and a company official received a slight wound.


The launches stopped and were boarded by the "brigands." All the money was handed over except by the paymaster on the Aleck. He gave up his silver, whereupon a demand was made for the four thousand gold pesos that he had aboard. This was the exact amount on the payroll; it had been declared, according to regulations, to the customs officials; and, without a "leak," they were the only ones who knew the amount. The American paymaster, Edgar House, of the Texas Company, of the Aleck, turned over the gold and was then shot and killed in cold blood. The booty totalled about fifty thousand pesos.

An American has made affidavit that he saw a Mexican officer (name unknown) and a German (name known) removing from a Tampico hotel to the railroad station, sacks that looked like the identical money sacks stolen from the launches. The Constitutionalist officers in Tampico spent the next day exchanging money.

The Associated Press reports that on June 29th, at the terminal of the Gulf Refining Company, which is only two miles from Tampico, and in undisputed Constitutionalist territory, four American employees were murdered in cold blood, after armed men on horses had taken from them the money with which they were paying laborers. The armed men carried Mexican army rifles and bandoliers. They were government soldiers or had been government soldiers within a few days; for carriage of arms in that territory is forbidden to any but soldiers, Eversbusch, or his friends.

Carranza's two big problems are a large army and a poverty-stricken treasury. He must keep the army to retain his power; and he must fill the treasury to retain the army. The great temptation which Von Eckardt constantly dangles before his eyes is that he fill his treasury at the expense of the foreign investors—and the foreign investors are chiefly British, American, and French. This solution is doubly alluring because it fits exactly into Carranza's theories of political economy, which found concrete expression in that remarkable document—the most "advanced" official embodiment of radicalism—the Constitution signed at Queretaro on January 31, 1917, and now the basic law of Mexico. A cardinal principle of this Constitution is that Mexico is for the Mexicans only.


Keeping in mind that it has been foreign capital, largely American, that has developed the mines and oil fields of Mexico, that large amounts of the same capital are invested in ranches, rubber, cotton, and coffee plantations, let us glance at Article 27 of the new Constitution. Among other things, it provides:

In the Nation is vested direct ownership of all minerals—solid, liquid, or gaseous.

Only Mexicans by birth or naturalization and Mexican companies have the right to acquire ownership in lands, waters, and their appurtenances, or to obtain concessions to develop mines, waters, or mineral fuels in the Republic of Mexico. The Nation may grant the same right to foreigners, provided they agree before the Department of Foreign Affairs to be considered Mexicans in respect to such property, and accordingly not to invoke the protection of their Governments in respect to the same, under penalty, in case of breach, of forfeiture to the Nation of property so acquired. Within a zone of 100 kilometers from the frontiers, and of 50 kilometers from the seacoast no foreigner shall under any conditions acquire direct ownership of lands and waters.

Commercial stock companies may not acquire, hold, or administer rural properties.

No one can dispute the right of Mexicans to decree ''Mexico for the Mexicans" except in so far as foreigners have been induced by former administrations to invest their money in Mexico. To take mining alone, an estimate of the money invested in it at the time of the outbreak of the revolution was about $650,000,000, of which $500,000,000 was American, $88,000,000 British, $10,000,000 French, and $30,000,000 Mexican. It is said that the new Constitution is not retroactive. But Carranza has already taken steps to "nationalize" the great petroleum fields, and the American Government is making strenuous diplomatic protest. The Carranza authorities are gradually stretching the new constitutional provisions out in various other directions.

To meet his Treasury deficit, Carranza fell back of a system of defaulting in his debts and taking over certain handy, paying properties. He has paid no interest on the bonds (chiefly American owned) representing the national debt. He has seized the National Railways of Mexico (chiefly American owned), a system that extends from the northern to the southern frontier, the main line branches including 6,797 miles of track. No interest has been paid to the bond-holders or the stock-holders. Likewise he has seized the Mexican Railway, the Interoceanic Railway, the Railways of Yucatan, the Mexican Navigation Company, the Tramways of Mexico City, the Mexican Telephone and Telegraph Company, and the Wells-Fargo Express Company; and likewise he has paid no interest to their bond-holders, and stock holders—chiefly American, British, and French citizens. The earnings in excess of operating expenses go to the Government entire.

The present year found the taxes on all products of foreign corporations screwed up almost to the last notch. The tax, for instance, on gold and silver, that used to be considered high at 2½ per cent, is now about 10 per cent. The tax on petroleum is almost at the confiscatory point. By "valuation," basis of the "10 per cent tax," the tax is 23 cents per barrel on oil that sells at 43 cents in Tampico, after a 90 mile pipe-line transport.

But in spite of all this, Mexico—a country with unsurpassed sources of natural wealth that only need capital and industry encouraged by sane laws sanely administered, to be converted into vast sources of legitimate taxation—Mexico is staggering along toward bankruptcy.

Only one thing can keep Mexico going on the financial road that it is now travelling, and that one thing is a wider policy of seizure and confiscation. The "nationalization" of the oil fields is a policy that Carranza is endeavoring to push on to-maturity. His new constitution—if the other nations allow its provisions to be enforced—is the greatest document for the expropriation of foreign-owned property, without opportunity of judicial recourse but with ample opportunity for the confiscatory deflation of values, that a civilized state has ever devised.

Here is a fact of far-reaching significance: Practically all of the holders of bonds and stocks of the properties that Carranza has seized or threatens with seizure, are citizens of the Allied nations. The Americans come first, then the British, and then the French. The American investment alone would run far beyond the billion-dollar mark. The German investment in Mexico (with the exception of the corporation with the misnomer, the American Metals Company) is exclusively in hardware and drug stores and goods.

And right there is the crux of the German temptation.


Carranza has been able to stave off bankruptcy only by his policy of continued defaults and seizures. The Allies have not called him to account for the simple reason that they had their hands full in Europe. When the Allies win, not only will Carranza be made to square with his foreign creditors, but he will also be awakened from his dream of' expropriation foreshadowed in the Querétaro Constitution.

But if the Germans should win, Carranza not only could take undisputed possession, in the name of Mexico, of railways, steamship lines, and public utilities, built and financed by Allied nationals, but he could also repudiate the national debt, largely owing to the same sources, and his vast dream of expropriation could materialize into a cash-paying fact.

There can be no doubt that this is the golden bait that von Eckardt, the German Minister at Mexico City, is dangling before the eyes of Carranza. Germany wants a careless, predatory, "neutral" Mexico, for Mexico is the last remaining source of information of American activities, and the sole asylum for German subjects and propagandists in North America. Neutral Mexico, owning the oil measures, would cut off the vital supply of petroleum from the Allied navies, and, after the war is over, Mexico, so rich in raw materials, would be a much-needed source of supply for German factories.

Remember the Zimmerman note proposing an alliance and the making of war upon the United States: "We shall make war together and together make peace. We shall give general financial support and it is understood that Mexico is to reconquer the lost territory in New Mexico, Texas, and Arizona."

That surely was golden bait!

And remember that the Zimmerman note was dated January 19, 1917 (it was made public on March 1, 1917, by the State Department at Washington into whose hands it had come through, underground channels). And also remember that between these two dates—February 11—Carranza addressed to the United States and other neutrals a note suggesting that " the neutral countries…take the necessary measures to reduce the conflagration to its narrowest limit by fusing any kind of implements to the belligerents and suspending commercial relations with the warring nations until the said conflagration shall have been smothered."

Germany's commerce had long since been swept from the seas. The proposal was solely a blow aimed at the Allies. Mexico's contribution of "implements to the belligerents" was oil. Carranza was nibbling at the German bait.

But he has not yet been able to pick the winner in the mighty contest, and that is why he wobbles—now congratulating Emperor William on the celebration of the anniversary of his birthday "with justified rejoicing," and a month later assuring the Belgian minister that Belgium "has realized the most heroic act of modern times"; now and again issuing declarations of strict neutrality, but all the while permitting the German legation in Mexico City to be the ample well-head of underground propaganda. This propaganda is the same compound of corruption and subtlety that has made German diplomacy wherever it has been brought to the surface, stink in all parts of the world.

German money has bought or subsidized a chain of Mexican newspapers; German money has been used to stir up provocative disorder along the Rio Grande; the charge, openly made by El Universal, that German money has corrupted members of the Mexican Congress, is being investigated by the Republic's Attorney General and a legislative committee; German hardware firms have been allowed to get possession, through false manifests, of a large amount of ammunition; German reservists, acting under orders from Berlin, have been allowed to gather in Mexico from all parts of the western hemisphere; German reservists have been taken into the Mexican army; more than a year ago, Maximilian Klos, a German reservist, was placed in charge of all Carranzista ordnance and ammunition matters, including the Government munitions plant near Mexico City; Mexico's wireless stations installed and being installed by German mechanics, that used to be tuned to the Marconi system as are those in all the Allied countries, have been tuned since Carranza came into authority, to the Telefunken system, the one used by the wireless stations of the Central Powers; Carranza has taken over the British-owned railroad that crosses the Isthmus of Tehuantepec, with its splendidly equipped harbors with huge lifting crane's capable, it is said, of lifting a small submarine, on both the Gulf of Mexico and the Pacific Ocean.

Carranza has nibbled at the German bait. He is still nibbling. Will impending bankruptcy finally cause him to swallow it?

© J. Fred MacDonald, 2013

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