I was visited on February 28th by the new Director-General of Civil Aviation of the Mexican government, General Salinas Carranza, who is prepared to proceed with the negotiation of a bilateral agreement. His suggestion was that Canadian officials should go to Mexico in April for informal and exploratory talks with a view to reaching agreement in principle, particularly on routes and traffic points; and that this meeting should be followed later by further official work to complete the details of the document and a final meeting for signature in Montreal or Ottawa.

While General Salinas was not prepared to go into specific details he appeared anxious to have a bilateral agreement and to see direct air service between Canada and Mexico. I am inclined to feel from his conversation that it may well be possible to get their agreement to an eastern route for TCA although it was not clear whether if we get both an eastern and a western route for Canada, Mexico would also expect an eastern and a western route (which we would be prepared to give), or would prefer to have something in the way of additional concessions on a single eastern route to offset our two routes. This could only be determined in actual negotiation.

One point was stressed which I think may be fundamental to solution of the issue. General Salinas indicated that the Mexicans are extremely anxious to have direct air communication provided at once because of present demand for service. He asked if in this connection we would be prepared to allow KLM⁵ to carry traffic between Montreal and Mexico for the period only until either a Canadian or a Mexican airline established service between eastern Canada and Mexico, KLM rights to be cancelled at that time. While I am worried over anything that looks like the "foot in the door" principle, it seems that the Mexicans place great importance on this. There would be no particular objection to letting KLM carry this traffic at present since it would not injure any Canadian aviation interest, so long as we are prepared to insert a firm condition in any such permission cancelling it automatically as soon as a Canadian or Mexican airline starts service, and so long as we are prepared to stick to our guns in this cancellation rather than change our minds at a later date.

I have also spoken to Gordon McGregor⁶ who I believe would agree that there is no particular objection to KLM carrying the traffic at present so long as we are prepared to withdraw this right from KLM when TCA or a Mexican airline starts service and are not prepared to give in to the further pressure that would undoubtedly come from. KLM at that time to be allowed to continue.

We might take the line with Mexico that we are prepared to negotiate with them at as early a date as possible and would try to send someone there in April or shortly thereafter; that if we could reach agreement in principle either at that time (or even in advance of that through diplomatic channels) on inclusion in the bilateral agreement of a route for TCA from eastern Canada and can get a written Mexican commitment to this principle, we might state that we would allow KLM to carry traffic on an interim basis only after this agreement in principle is reached; this to be on the understanding that KLM rights would automatically cease on the introduction of Canadian or Mexican service and that they would not be continued regardless of the pressure which may come from the Netherlands government in this regard.

For your direction, please.

J.R. BALDWIN