D-1.1 6-62 Sulfer INTER-OFFICE CORRESPONDENCE Date: April 27, 1965 To: WESTON BOURRET From: FRANK G. SCHLEGEL Sub: Taxes Mexico Ref: Your request. In response to your question regarding the Mexican production tax on sulphur and the Mexican export tax on sulfur, I had Arthur Andersen & Co. TWX their Mexico correspondents to determine the current rates imposed. I'm sure you appreciate the constant flux of the tax situation in Mexico and any information other than the very latest is not trust-worthy. The information which they received as of this date is as follows: Production tax on sulfur 3 per cent of the official price of 2. 89 pesos per metric ton. Exportation tax on sulfur 20 per cent of 275 pesos per metric ton. It is obvious that the exportation tax imposes a considerable burden on sulphur shipped outside Mexico. It should be pointed out that there is a 50 per cent reduction in these rates for companies which satisfy the required degree of "Mexicanization". In the case of sulphur, this requirement is not the typical 51 per cent, but rather 66 per cent. For memorandum purposes only: Pesos = $ .08 Metric ton = 2204.62 pounds Please let me know if there is any further information which you desire. FGS RECEIVED APR 27 1965 FGS/ja Reference: Tax files Mr. Harding --- AA&Co. D-l.l 6-62 Sulfer Mexico INTER-OFFICE CORRESPONDENCE Date: April 29, 1965 To: WESTON BOURRET From:F. G. SCHLEGEL Sub: Taxes Mexico Ref: My letter dated April 27, 1965 After receiving the April 27, 1965, information from Arthur Andersen & Co. , I telephoned them back to insure that my understanding of the data was accurate since the official price of 2. 89 pesos per metric ton with respect to the production tax on sulfur confused me. They assured me that it was correct. Apparently, however, the seed of doubt was sown and today they received a confirming TWX to the effect that the official price should have read 289 pesos per metric ton (rather than 2.89). I trust that your judgment was sufficiently astute to detect the error. FGS. FSG/ja RECEIVED APR 29 1965 WALL STREET JOURNAL April 27, 1965 Mexico Sets Ceiling On Exports of Sulphur In Cryptic Statement Limit Is Put at 10% of Producers' Total Reserves; One Industry Man Sees This as Annual Rate Special to THE WALL STREET JOURNAL MEXICO CITY The Mexican government anounced new restrictions on the export of sulphur mined in this country. The meaning of the new policy was unclear last night. The press office of President Gustavo Diaz Ordaz released a statement that exports of sulphur producers would be limited to "10% of their total reserves," but officials declined to elaborate. An industry source interpreted this to mean 10% a year of reserves each producer had on hand. If this is correct, the source said, the chief effect would be to stimulate sulphur exploration activities. President Diaz Ordaz said the action was taken because of his government's concern over depletion of Mexico's sulphur reserves from increased exportation without offsetting exploration. Mexico is the world's second largest producer of sulphur after the U.S., and, until now, has never limited sulphur exports. Marlin E. Sandlin, chairman of Pan American Sulphur Co., Houston, met with Mexican government officials here late last night. A spokesman said in Houston that the company would probably release clarifying information today. Pan American Sulphur and Gulf Sulphur Co., also of Houston, mine all their sulphur at concessions in Mexico, and their operations accounted for nearly all the 1.8 million long tons exported from Mexico last year. Robert H. Allen, Gulf Sulphur president, couldn't be reached for comment last night. President Diaz Ordaz said in his statement that if the recent rate of increase in exports continued without more exploration, Mexico's known sulphur reserves would be depleted within five years. A sulphur industry spokes-man disputed this, however. The Mexican president said concessions granted Pan American Sulphur and Gulf Sul-phur would be "respected," but that Mexico will invite other foreign companies to explore for sulphur. He added that companies would be given "preference" on concessions if their output was mostly consumed by Mexico's fer-tilizer and chemical industries. The Mexican government has for some time been studying new conservation policies for all that country's natural resources. Sulphur de-mand in recent months has been outrunning world production, and this has resulted in par- ticularly heavy exports from Mexico.