Mexican Oil Expropriation

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MEXICAN OILEXPROPRIATION


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The Mexican oil expropriation (also petroleum expropriation, petroleumnationalization, etc.) was the expropriation of all oil reserves, facilities, and foil companies in Mexico on March 18, 1938. It took place when President a

General Lázaro Cárdenas declared that all mineral and oil reserves found Mexico belong to the nation.


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It is one of the Fiestas Patrias of Mexico, celebrating the date when the PreGeneral Lázaro Cárdenas, declared that all oil reserves found in Mexican belonged to the nation, following the principle stated in the Article 27 ofthe Constitution of 1917. This measure caused an international boycott of

products in the following years, especially by the United States, the Unitedand the Netherlands.


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BACKGROUND OF THE MEXICAN OILEXPROPRIATION

On November 3, 1937, the union demanded that the companies sign the

collective agreement and on May 17, the union summoned a strike in casetheir demands were not met. In the early days of June, the union sued thecompanies before the General Arbitration and Conciliation Board (JuntaGeneral de Conciliacion y Arbitraje). The aforementioned strike started ona limited basis on May 31 and fully burst open on June 9.

But, on December 8, the companies hired other unemployed workers andhad not responded to the arbitration 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 fulfill therequirements of the petitions and pay 26 million pesos in lost salaries. Thepetroleum companies initiated a lawsuit on January 2, 1938 before theMexican Supreme Court to protect their property from the labor union andarbitration board, which denied the request.


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Consequently, the foreign companies rebelled against the imposed contraand the maximum Judicial Authority responded by rendering a decision oMarch 1, giving the companies until March 7 to pay the 26 million pesos pe

In 1935, all companies in the business of extraction, processing, and exportoil in Mexico were foreign companies with foreign capital. These compani

attempted to block the creation of labor unions and used legal and illegatactics to do so. However, the creation of individual unions within eachcompany was made possible, but work conditions differed from one anot

Lázaro Cárdenas intervened between the union and the oil companies in to force an agreement on the contract. The strike was delayed for six monbut the companies never agreed to the contract and on May 28, the strike

place. The entire country was paralyzed for 12 days, with consumers unabbuy gasoline. Cárdenas convinced the union to end the strike until a decisthe companies could be made. However, the companies declared themsunable to meet the demands because of financial problems. Cárdenas oran investigation and on August 3, the findings were that the Mexican oil inproduced higher returns than the U.S. oil industry.


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LEGAL CONFLICTSAfter the publication of the findings, the oil companies threatened to leaveMexico and take all of their capital with them. The government entity incharge of the conflict between these companies and the union, the Junta

Federal de Conciliación y Arbitraje (Federal Conciliation and ArbitrationBoard), was not able to make a decision quickly and the union declared a 2hour strike in protest on December 8.

On December 18, the Arbitration Board declared in favor of the union. The ocompanies had to pay 26 million pesos of wages lost because of the strike,but they appealed to the Supreme Court. The Supreme Court then rejectedthe appeal and ordered them to raise salaries and improve workingconditions for the union members. The oil companies protested this decisionand President Cárdenas mediated a compromise; the union would accept 2million. Cárdenas offered to end the strike if the oil companies paid the sum.According to witnesses of this meeting, representatives of the oil companiesasked the President "Who can guarantee that the strike will be over ", to whichthe President replied "I, the President of the Republic." After the businessmenasked with sarcasm "You?" President Cárdenas ended the meeting saying"Sirs, we are finished!".

As a result, Cárdenas decided to expropriate the oil industry and create anational oil company.


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DAY OF THE OIL EXPROPRIATIONOn March 18, 1938 President Cárdenas embarked on the expropriationof all oil resources and facilities by the state, nationalizingthe U.S. and Anglo-Dutch (Mexican Eagle Petroleum Company)

operating companies. Two hours before informing his cabinet of hisdecision, he made the announcement on the radio to the rest of thecountry. Five days later, a crowd of 100,000 (according to the press)rallied in support of Cárdenas.

On April 12, 1938, a crowd of thousands of women gathered in front ofthe Palacio de Bellas Artes to make donations to pay the debt toforeign companies. Donations varied from chickens to jewelry, since

the women encompassed all social classes.On June 7, 1938, President Cárdenas issued a decreecreating Petróleos Mexicanos (PEMEX), with exclusive rights overexploration, extraction, refining, and commercialization of oil in Mexico.On June 20, PEMEX started operations.


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OPPOSITION

International

In retaliation, the oil companies initiated a public relations campaign agaMexico, urging people to stop buying Mexican goods, and lobbying toembargo US technology to Mexico. Many foreign governments closed thmarkets to Mexican oil, hoping that PEMEX would drown in its own oil.Between 1938 and 1939, PEMEX survived by trading oil for money andmachinery to European countries with fascist governments. In spite of theboycott, PEMEX developed into one of the largest oil companies in the w

and helped Mexico become the world's fifth largest oil exporter.During World War II, American and British governments blocked Mexican exports to their allies and dependencies. The US stopped buyingMexican silver for the Treasury.


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Local

Saturnino Cedillo, a cacique from San Luis Potosí and former Secretary ofAgriculture, showed the strongest opposition to Cárdenas's measures. Cedillohad in the past supported Cárdenas in a conflict with ex-President Plutarco ElíCalles, but disagreed with his plan of reforms. On May 15 of the same year, thstate congress of San Luis Potosí issued a decree where it refused to recognizeCárdenas as President and declared that the expropiación petrolera did notbenefit the economy of Mexico. Cárdenas did not consider this a serious threaand minimized efforts to suppress the rebellion, instead choosing persuasion. TUS government did not support the rebellion because it was more concernedthat fascist and communist movements from Europe would spread to Mexico.

Critics of the expropriation point out that since Pemex took control of the natio

petroleum, the company has been rife with corruption through everyadministration since that of Cárdenas, including both the PRI (PartidoRevolucionario Institucional) and the PAN (Partido Accion Nacional). A recenbook, Camisas Azules, Manos Negras (Blue Shirts, Black Hands), details themassive corruption that continues to this day. In addition, the casus belli of theexpropriation was a wage hike of 26 million pesos. In fact, in the aftermath, noonly was the promised wage hike postponed indefinitely, wages were actuallcut.


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Documents

Mexican Oil Expropriation