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The Mexican oil expropriation () was the nationalization of all petroleum reserves, facilities, and foreign oil companies in
Mexico Mexico, officially the United Mexican States, is a country in North America. It is the northernmost country in Latin America, and borders the United States to the north, and Guatemala and Belize to the southeast; while having maritime boundar ...
on March 18, 1938. In accordance with Article 27 of the Constitution of 1917,
President President most commonly refers to: *President (corporate title) * President (education), a leader of a college or university *President (government title) President may also refer to: Arts and entertainment Film and television *'' Præsident ...
Lázaro Cárdenas Lázaro Cárdenas del Río (; 21 May 1895 – 19 October 1970) was a Mexican army officer and politician who served as president of Mexico from 1934 to 1940. Previously, he served as a general in the Constitutional Army during the Mexican Revo ...
declared that all mineral and oil reserves found within Mexico belong to the nation. The Mexican government established a
state-owned State ownership, also called public ownership or government ownership, is the ownership of an industry, asset, property, or enterprise by the national government of a country or state, or a public body representing a community, as opposed to ...
petroleum company, Petróleos Mexicanos, or
PEMEX Pemex (a portmanteau of Petróleos Mexicanos, which translates to ''Mexican Petroleum'' in English; ) is the Mexico, Mexican State ownership, state-owned Petroleum industry, petroleum corporation managed and operated by the government of Mexico, ...
. For a short period, this measure caused an international
boycott A boycott is an act of nonviolent resistance, nonviolent, voluntary abstention from a product, person, organisation, or country as an expression of protest. It is usually for Morality, moral, society, social, politics, political, or Environmenta ...
of Mexican products in the following years, especially by the
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, the
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, and the
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, but with the outbreak of
World War II World War II or the Second World War (1 September 1939 – 2 September 1945) was a World war, global conflict between two coalitions: the Allies of World War II, Allies and the Axis powers. World War II by country, Nearly all of the wo ...
and the alliance between Mexico and the Allies, the disputes with private companies over compensation were resolved. The anniversary, March 18, is now a Mexican civic holiday.


Background

On August 16, 1935, the Petroleum Workers Union of Mexico (''Sindicato de Trabajadores Petroleros de la República Mexicana'') was formed and one of the first actions was the writing of a lengthy draft contract transmitted to the petroleum companies demanding a 40-hour working week, a full salary paid in the event of sickness, and the payment of 65 million pesos towards benefits and wages. The foreign oil companies refused to sign the agreement, and counter offered with a payment of 14 million pesos toward wages and benefits. On November 3, 1937, the union demanded that the companies sign the
collective agreement A collective agreement, collective labour agreement (CLA) or collective bargaining agreement (CBA) is a written contract negotiated through collective bargaining for employees by one or more trade unions with the management of a company (or with a ...
and on May 17, the union summoned a
strike Strike may refer to: People *Strike (surname) * Hobart Huson, author of several drug related books Physical confrontation or removal *Strike (attack), attack with an inanimate object or a part of the human body intended to cause harm * Airstrike, ...
in case their demands were not met. On May 28 the strike became effective throughout the country. The petroleum workers' struggle was well regarded by the President and the population despite problems caused by the petroleum shortage. Due to these problems, the union accepted a lift of the strike on June 9, after the president urged them to present their case before the General Arbitration and Conciliation Board (''Junta General de Conciliación y Arbitraje''). In July, as instructed by the arbitration board, a commission of financial experts was formed that investigated the petroleum companies' finances, concluding that their profits easily permitted them to cover the demands of the workers. The report stated that just one company (El Aguila) had received annual profits of over 55 million pesos. The arbitration board concluded that the oil companies should pay 26 million pesos for wages and benefits to the workers. The companies, however, insisted the demands would cripple production and bankrupt them, and refused to pay. The president once again intervened to mediate between the parties, and met with oil company representatives at the National Palace on September 2. In this meeting, one of the El Aguila representatives took issue with the description of it being a foreign company, and stated that El Aguila was a Mexican company. In response, Jesus Silva Herzog (present in the meeting) responded with a financial newspaper from
London London is the Capital city, capital and List of urban areas in the United Kingdom, largest city of both England and the United Kingdom, with a population of in . London metropolitan area, Its wider metropolitan area is the largest in Wester ...
that cited a report from the
Royal Dutch Shell Shell plc is a British multinational oil and gas company, headquartered in London, England. Shell is a public limited company with a primary listing on the London Stock Exchange (LSE) and secondary listings on Euronext Amsterdam and the New ...
of 1928: "Our Mexican subsidiary, Oil Company El Aguila, has obtained good returns during the last fiscal cycle." It was also explained that El Aguila de Mexico would set the price of an oil barrel at 1.96 when sold to The Eagle Shipping company. This price was below the market value of US$3.19 per barrel. This way profits would be hidden to the Mexican treasury, and taxes were saved. But, on December 8, the companies hired other unemployed workers and had not responded to the
arbitration Arbitration is a formal method of dispute resolution involving a third party neutral who makes a binding decision. The third party neutral (the 'arbitrator', 'arbiter' or 'arbitral tribunal') renders the decision in the form of an 'arbitrati ...
board. On December 18, 1937, the board gave a verdict in favor of the union by means of a " laudo" (binding judgment in arbitration) which demanded that the companies fulfil the requirements of the petitions and pay 26 million pesos in lost salaries. The petroleum companies initiated a
lawsuit A lawsuit is a proceeding by one or more parties (the plaintiff or claimant) against one or more parties (the defendant) in a civil court of law. The archaic term "suit in law" is found in only a small number of laws still in effect today ...
on January 2, 1938, before the Mexican Supreme Court to protect their property from the labor union and arbitration board, which denied the request. Consequently, the foreign companies rebelled against the imposed contract, and the maximum Judicial Authority responded by rendering a decision on March 1, giving the companies until March 7 to pay the 26 million pesos penalty. In 1935, all companies in the business of extraction, processing, and exporting of oil in Mexico were foreign companies with foreign capital. These companies attempted to block the creation of
labor unions A trade union (British English) or labor union (American English), often simply referred to as a union, is an organization of workers whose purpose is to maintain or improve the conditions of their employment, such as attaining better wages ...
and used legal and illegal tactics to do so. However, the creation of individual unions within each company was made possible, but work conditions differed from one another. On December 27, 1935, the Sindicato Único de Trabajadores Petroleros was created, despite the legal opposition in the
states State most commonly refers to: * State (polity), a centralized political organization that regulates law and society within a territory **Sovereign state, a sovereign polity in international law, commonly referred to as a country **Nation state, a ...
of
Tamaulipas Tamaulipas, officially the Free and Sovereign State of Tamaulipas, is a state in Mexico; one of the 31 states which, along with Mexico City, comprise the 32 federal entities of Mexico. It is divided into 43 municipalities. It is located in nor ...
and
Veracruz Veracruz, formally Veracruz de Ignacio de la Llave, officially the Free and Sovereign State of Veracruz de Ignacio de la Llave, is one of the 31 states which, along with Mexico City, comprise the 32 Political divisions of Mexico, Federal Entit ...
. On January 29, 1936, this union joined the Comité de Defensa Proletaria ("Committee of Proletarian Defense") which would become in February the Confederation of Mexican Workers (CTM). On July 20, the union celebrated its first convention, in which it was proposed a project of general contracts for each oil company and it was decided on a strike to push towards an agreement.
Lázaro Cárdenas Lázaro Cárdenas del Río (; 21 May 1895 – 19 October 1970) was a Mexican army officer and politician who served as president of Mexico from 1934 to 1940. Previously, he served as a general in the Constitutional Army during the Mexican Revo ...
intervened between the union and the oil companies in order to force an agreement on the contract. The strike was delayed for six months, but the companies never agreed to the contract and on May 28, the strike took place. The entire country was paralyzed for 12 days, with consumers unable to buy gasoline. Cárdenas convinced the union to end the strike until a decision by the companies could be made. However, the companies declared themselves unable to meet the demands because of financial problems. Cárdenas ordered an investigation and on August 3, and the findings were that the Mexican oil industry produced higher returns than the U.S. oil industry.


Legal conflicts

After the publication of the findings, the oil companies threatened to leave Mexico and take all of their capital with them. The government entity in charge of the conflict between these companies and the union, the Junta Federal de Conciliación y Arbitraje (Federal Conciliation and Arbitration Board), was not able to make a decision quickly and the union declared a 24-hour strike in protest on December 8. On December 18, the Arbitration Board declared in favor of the union. The oil companies had to pay 26 million
peso The peso is the monetary unit of several Hispanophone, Spanish-speaking countries in Latin America, as well as the Philippines. Originating in the Spanish Empire, the word translates to "weight". In most countries of the Americas, the symbol com ...
s of wages lost because of the strike, but they appealed to the
Supreme Court In most legal jurisdictions, a supreme court, also known as a court of last resort, apex court, high (or final) court of appeal, and court of final appeal, is the highest court within the hierarchy of courts. Broadly speaking, the decisions of ...
. The Supreme Court then rejected the appeal and ordered them to raise salaries and improve working conditions for the union members. The oil companies protested this decision and President Cárdenas mediated a compromise; the union would accept 26 million pesos. Cárdenas offered to end the strike if the oil companies paid the sum. According to witnesses of this meeting, representatives of the oil companies asked the President "''Who can guarantee that the strike will be over''", to which the President replied "I, the President of the Republic." After the businessmen asked with sarcasm "You?" President Cárdenas ended the meeting saying "Sirs, we are finished!". Cárdenas moved to expropriate the oil industry and create a national oil company, PEMEX.


Oil Expropriation Day, March 18, 1938

On March 18, 1938, President Cárdenas embarked on the expropriation of all oil resources and facilities by the state, nationalizing the
U.S. The United States of America (USA), also known as the United States (U.S.) or America, is a country primarily located in North America. It is a federal republic of 50 states and a federal capital district, Washington, D.C. The 48 contiguous ...
and Anglo- Dutch (
Mexican Eagle Petroleum Company Compañía Mexicana de Petróleo El Águila SA, (''El Águila'' for short, called in English the Mexican Eagle Oil Company or Mexican Eagle Petroleum Corporation, was a Mexican petroleum industry, oil company in the 20th century. The company, esta ...
) operating companies. Two hours before informing his cabinet of his decision, he made the announcement on the radio to the rest of the country. Five days later, a crowd of 200,000 (according to the press) rallied in the zócalo in support of Cárdenas's action. On April 12, 1938, a crowd of thousands of all classes gathered in front of the
Palacio de Bellas Artes The Palacio de Bellas Artes (Palace of Fine Arts) is a prominent cultural center in Mexico City. It hosts performing arts events, literature events and plastic arts galleries and exhibitions (including important permanent Mexican murals). "Bella ...
to make donations to pay the debt to foreign companies. Donations varied from
chicken The chicken (''Gallus gallus domesticus'') is a domesticated subspecies of the red junglefowl (''Gallus gallus''), originally native to Southeast Asia. It was first domesticated around 8,000 years ago and is now one of the most common and w ...
s to
jewelry Jewellery (or jewelry in American English) consists of decorative items worn for personal adornment such as brooches, ring (jewellery), rings, necklaces, earrings, pendants, bracelets, and cufflinks. Jewellery may be attached to the body or the ...
. (se
photo
. On June 7, 1938, President Cárdenas issued a decree creating Petróleos Mexicanos (PEMEX), with exclusive rights over exploration, extraction, refining, and
commercialization Commercialisation or commercialization is the process of introducing a new product or production method into commerce—making it available on the market. The term often connotes especially entry into the mass market (as opposed to entry into e ...
of oil in Mexico. On June 20, PEMEX started operations.


Opposition


International

In retaliation, the oil companies initiated a
public relations Public relations (PR) is the practice of managing and disseminating information from an individual or an organization (such as a business, government agency, or a nonprofit organization) to the public in order to influence their perception. Pu ...
campaign against Mexico, urging people to stop buying Mexican goods and
lobbying Lobbying is a form of advocacy, which lawfully attempts to directly influence legislators or government officials, such as regulatory agency, regulatory agencies or judiciary. Lobbying involves direct, face-to-face contact and is carried out by va ...
to embargo U.S. technology to Mexico. Many foreign governments closed their markets to Mexican oil, hoping that PEMEX would drown in its own oil. However, the U.S. government of
Franklin Delano Roosevelt Franklin Delano Roosevelt (January 30, 1882April 12, 1945), also known as FDR, was the 32nd president of the United States, serving from 1933 until his death in 1945. He is the longest-serving U.S. president, and the only one to have served ...
had issued the Good Neighbor Policy, aiming to recalibrate U.S.-Latin American relations; the U.S. government did not intervene to aid U.S. oil companies affected by the Mexican expropriation. Mexican finances suffered due to the boycott, the Mexican peso was devalued, and an immediate 20% increase in prices was suffered by the Mexican population. In a trip to New York to negotiate with oil companies, Mexican treasury minister, Suarez, serendipitously met an American intermediate, William Rhodes Davis from Davis Oil Company, who had a refinery in Europe, and asked for a collaboration. Davis mediated between Mexico and Germany to a barter agreement where Mexico would give crude oil to Davis, who then would provide refined oil products to Germany in exchange for machinery to Mexico. By 1940, Mexico had an agreement with the American Sinclair Oil Corporation to sell crude oil to the U.S., and the full-scale war in Europe guaranteed that Mexican oil would have international customers. PEMEX developed into one of the largest
oil companies The following is a list of notable companies in the petroleum industry that are engaged in petroleum exploration and production. The list is in alphabetical order by continent and then by country. This list does not include companies only involved ...
in the world and helped Mexico become the world's seventh-largest oil exporter.


Domestic

Saturnino Cedillo, a ''
cacique A cacique, sometimes spelled as cazique (; ; feminine form: ), was a tribal chieftain of the Taíno people, who were the Indigenous inhabitants of the Bahamas, the Greater Antilles, and the northern Lesser Antilles at the time of European cont ...
'' from
San Luis Potosí San Luis Potosí, officially the Free and Sovereign State of San Luis Potosí, is one of the 32 states which compose the Federal Entities of Mexico. It is divided in 59 municipalities and is named after its capital city, San Luis Potosí. It ...
and former Secretary of Agriculture, showed the strongest opposition to Cárdenas's measures. Cedillo had in the past supported Cárdenas in a conflict with ex-President
Plutarco Elías Calles Plutarco Elías Calles (born Francisco Plutarco Elías Campuzano; 25 September 1877 – 19 October 1945) was a Mexican politician and military officer who served as the 47th President of Mexico from 1924 to 1928. After the assassination of Ál ...
, but disagreed with his plan of reforms. On May 15 of the same year, the state congress of
San Luis Potosí San Luis Potosí, officially the Free and Sovereign State of San Luis Potosí, is one of the 32 states which compose the Federal Entities of Mexico. It is divided in 59 municipalities and is named after its capital city, San Luis Potosí. It ...
issued a decree where it refused to recognize Cárdenas as president and declared that the ''expropiación petrolera'' did not benefit the economy of Mexico. Cárdenas did not consider this a serious threat and minimized efforts to suppress the rebellion, instead choosing persuasion. The US government did not support the rebellion because it was more concerned that fascist and
communist Communism () is a sociopolitical, philosophical, and economic ideology within the socialist movement, whose goal is the creation of a communist society, a socioeconomic order centered on common ownership of the means of production, di ...
movements from
Europe Europe is a continent located entirely in the Northern Hemisphere and mostly in the Eastern Hemisphere. It is bordered by the Arctic Ocean to the north, the Atlantic Ocean to the west, the Mediterranean Sea to the south, and Asia to the east ...
would spread to Mexico. The key to the success of the measures taken by Cárdenas was not just to control the opposition, but to develop and train qualified domestic personnel who could keep afloat an industry that had been maintained thus far by foreign management. The government relied on the Sindicato de Trabajadores Petroleros de la República Mexicana (STPRM, or the Union of Oil Workers of the Mexican Republic) to resolve disagreements over the management of oil resources, and deal with threats of
strike Strike may refer to: People *Strike (surname) * Hobart Huson, author of several drug related books Physical confrontation or removal *Strike (attack), attack with an inanimate object or a part of the human body intended to cause harm * Airstrike, ...
s and
sabotage Sabotage is a deliberate action aimed at weakening a polity, government, effort, or organization through subversion, obstruction, demoralization (warfare), demoralization, destabilization, divide and rule, division, social disruption, disrupti ...
. In spite of technical challenges, the local workers who replaced the foreign technicians succeeded in making the new nationalized oil industry work.
Josephus Daniels Josephus Daniels (May 18, 1862 – January 15, 1948) was a newspaper editor, Secretary of the Navy under President Woodrow Wilson, and U.S. Ambassador to Mexico under President Franklin D. Roosevelt. He managed ''The News & Observer'' in R ...
, U.S.
ambassador An ambassador is an official envoy, especially a high-ranking diplomat who represents a state and is usually accredited to another sovereign state or to an international organization as the resident representative of their own government or so ...
to Mexico, explained to
President President most commonly refers to: *President (corporate title) * President (education), a leader of a college or university *President (government title) President may also refer to: Arts and entertainment Film and television *'' Præsident ...
Franklin D. Roosevelt Franklin Delano Roosevelt (January 30, 1882April 12, 1945), also known as FDR, was the 32nd president of the United States, serving from 1933 until his death in 1945. He is the longest-serving U.S. president, and the only one to have served ...
and Secretary of State
Cordell Hull Cordell Hull (October 2, 1871July 23, 1955) was an American politician from Tennessee and the longest-serving U.S. Secretary of State, holding the position for 11 years (1933–1944) in the administration of President Franklin Delano Roosevel ...
that Cárdenas' reforms could not be undone, since his position as president and the position of PEMEX were secure. PEMEX was and remains a source of collective national pride, and is an international symbol of Mexico. Critics of the expropriation argue that since PEMEX took control of the nation's petroleum, it has suffered from corruption in administrations since that of Cárdenas, and point to its political use by PRI ( Partido Revolucionario Institucional) and the PAN ( Partido Accion Nacional). In addition, the ''casus belli'' of the expropriation was a wage hike of 26 million pesos. In fact, in the short run following nationalization, not only was the promised wage hike postponed indefinitely, wages were actually cut.Daniel Yergin, (2009). "The Prize, the Epic Quest for Oil, Money & Power". Free Press A tug of war continues between capitalist strategists who favor privatization and popular support for PEMEX as a nationalization success and the backbone of Mexico's economic independence from manipulation by foreign owners and investors. In 2013 a series of privatization measures were undertaken by the President Peña Nieto; in 2019 attempts to walk back such measures and regain Mexican national control over PEMEX were begun by the populist left government of López Obrador.


See also

*
Nationalization of oil supplies The nationalization of oil supplies refers to the process of confiscation of oil production operations and their property, generally for the purpose of obtaining more revenue from oil for the governments of oil-producing countries. This process, ...
*
Economic nationalism Economic nationalism or nationalist economics is an ideology that prioritizes state intervention in the economy, including policies like domestic control and the use of tariffs and restrictions on labor, goods, and capital movement. The core bel ...
* Petroleum industry in Mexico


References


Further reading

* Brown, Jonathan C. ''Oil and Revolution in Mexico''. Berkeley: University of California Press 1993. * Brown, Jonathan C. and Alan Knight, eds. ''The Mexican Petroleum Industry in the Twentieth Century''. Austin: University of Texas Press 1992. * Gordon, Wendell. ''The Expropriation of Foreign-Owned Property in Mexico'' (1941) * Hall, Linda B. ''Oil, Banks, and Politics: the United States and Postrevolutionary Mexico, 1917-1924''. Austin: University of Texas Press 1995. * Jayne, Catherine E. ''Oil, war, and Anglo-American relations: American and British reactions to Mexico's expropriation of foreign oil properties, 1937-1941'' (Praeger, 2001) * Maurer, Noel. "The empire struck back: sanctions and compensation in the Mexican oil expropriation of 1938." ''Journal of Economic History'' 71.03 (2011): 590–615
online
* Meyer, Lorenzo. ''Mexico and the United States in the oil controversy, 1917–1942'' (University of Texas Press, 2014) * Rippy, Merrill. ''Oil and the Mexican Revolution''. Leiden: Brill 1972. * Wirth, John D., ed. ''Latin American Oil Companies and the Politics of Energy''. Lincoln: University of Nebraska Press 1985. {{Authority control 1938 in Mexico Fiestas Patrias (Mexico) Petroleum industry in Mexico Economic history of Mexico Nationalization Good Neighbor policy