Expropiación petrolera
Encyclopedia
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
of all oil reserves, facilities, and foreign oil companies in Mexico in 1938.
It took place when President
President of Mexico
The President of the United Mexican States is the head of state and government of Mexico. Under the Constitution, the president is also the Supreme Commander of the Mexican armed forces...
and General Lázaro Cárdenas
Lázaro Cárdenas
Lázaro Cárdenas del Río was President of Mexico from 1934 to 1940.-Early life:Lázaro Cárdenas was born on May 21, 1895 in a lower-middle class family in the village of Jiquilpan, Michoacán. He supported his family from age 16 after the death of his father...
declared that all mineral and oil reserves found within Mexico belong to the government.
It is one of the Fiestas Patrias of Mexico
Mexico
The United Mexican States , commonly known as Mexico , is a federal constitutional republic in North America. It is bordered on the north by the United States; on the south and west by the Pacific Ocean; on the southeast by Guatemala, Belize, and the Caribbean Sea; and on the east by the Gulf of...
, celebrating the date when the President
President of Mexico
The President of the United Mexican States is the head of state and government of Mexico. Under the Constitution, the president is also the Supreme Commander of the Mexican armed forces...
, General Lázaro Cárdenas
Lázaro Cárdenas
Lázaro Cárdenas del Río was President of Mexico from 1934 to 1940.-Early life:Lázaro Cárdenas was born on May 21, 1895 in a lower-middle class family in the village of Jiquilpan, Michoacán. He supported his family from age 16 after the death of his father...
, declared that all oil reserves found in Mexican soil belonged to the nation, following the principle stated in the Article 27 of the Constitution of 1917.
This measure caused an international boycott
Boycott
A boycott is an act of voluntarily abstaining from using, buying, or dealing with a person, organization, or country as an expression of protest, usually for political reasons...
of Mexican products in the following years, especially by the United States, the United Kingdom and the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
.
Background
The political support of labor unions and the founding of Petromex (before PemexPemex
Petróleos Mexicanos or Pemex is a Mexican state-owned petroleum company. As of 2010, with a total asset worth of $415.75 billion, it is the second non-publicly listed largest company in the world by total market value, and Latin America's second largest enterprise by annual revenue as of 2009...
) immediately after taking power by President Lazaro Cardenas, were the proximate events closest to the Petroleum Expropriation.
In 1924, after several failed strike efforts and break-ups by the Mexican Army
Mexican Army
The Mexican Army is the combined land and air branch and largest of the Mexican Military services; it also is known as the National Defense Army. It is famous for having been the first army to adopt and use an automatic rifle, , in 1899, and the first to issue automatic weapons as standard issue...
, a strike began in Tampico
Tampico
Tampico is a city and port in the state of Tamaulipas, in the country of Mexico. It is located in the southeastern part of the state, directly north across the border from Veracruz. Tampico is the third largest city in Tamaulipas, and counts with a population of 309,003. The Metropolitan area of...
against the refinery “El Aguila”, in which workers emerged triumphant and achieved recognition from the management for the labor union and reached a collective bargaining agreement.
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 complete paid salary in the event of virtually unlimited time off for personal or family sickness, and claimed to replace the distinct collective contracts governing labor relations. On November 3, 1937, the union demanded that the companies sign the collective agreement and on May 17, the union summoned a strike in case their demands were not met. In the early days of June, the union sued the companies before the General Arbitration and Conciliation Board (Junta General de Conciliacion y Arbitraje). The aforementioned strike started on a limited basis on May 31 and fully burst open on June 9.
The petroleum workers struggle was well regarded by the President and the population despite problems caused by the petroleum shortage. 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 companies, however, insisted the demands would cripple production and bankrupt them.
But, on December 8, the companies hired other unemployed workers and had 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 the requirements of the petitions and pay 26 million pesos in lost salaries. The petroleum companies initiated a lawsuit 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 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 of Tamaulipas
Tamaulipas
Tamaulipas officially Estado Libre y Soberano de Tamaulipas is one of the 31 states which, with the Federal District, comprise the 32 Federal Entities of Mexico. It is divided in 43 municipalities and its capital city is Ciudad Victoria. The capital city was named after Guadalupe Victoria, the...
and Veracruz
Veracruz
Veracruz, formally Veracruz de Ignacio de la Llave officially Estado Libre y Soberano de Veracruz de Ignacio de la Llave , is one of the 31 states that, along with the Federal District, comprise the 32 federative entities of Mexico. It is divided in 212 municipalities and its capital city is...
. 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 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, 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
Mexican peso
The peso is the currency of Mexico. Modern peso and dollar currencies have a common origin in the 15th–19th century Spanish dollar, most continuing to use its sign, "$". The Mexican peso is the 12th most traded currency in the world, the third most traded in the Americas, and by far the most...
s of wages lost because of the strike, but they appealed to the Supreme Court. 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. 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!".
As a result, Cárdenas decided to expropriate
Nationalization
Nationalisation, also spelled nationalization, is the process of taking an industry or assets into government ownership by a national government or state. Nationalization usually refers to private assets, but may also mean assets owned by lower levels of government, such as municipalities, being...
the oil industry and create a national oil company.
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.United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
and Anglo
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
-Dutch
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...
(Mexican Eagle Petroleum Company
Mexican Eagle Petroleum Company
Compañía Mexicana de Petróleo El Aguila SA, , called in English the Mexican Eagle Oil Company or Mexican Eagle Petroleum Corporation, was a Mexican oil company in the 20th century.-History:Sir Weetman Pearson, Bart...
) operating companies. Two hours before informing his cabinet
Cabinet (government)
A Cabinet is a body of high ranking government officials, typically representing the executive branch. It can also sometimes be referred to as the Council of Ministers, an Executive Council, or an Executive Committee.- Overview :...
of his decision, he made the announcement on the radio to the rest of the country. Five days later, a crowd of 100,000 (according to the press) rallied in support of Cárdenas (see photo).
On April 12, 1938, a crowd of thousands of women gathered in front of the Palacio de Bellas Artes
Palacio de Bellas Artes
The Palacio de Bellas Artes is the most important cultural center in Mexico City as well as the rest of the country of Mexico...
to make donations to pay the debt to foreign companies. Donations varied from chicken
Chicken
The chicken is a domesticated fowl, a subspecies of the Red Junglefowl. As one of the most common and widespread domestic animals, and with a population of more than 24 billion in 2003, there are more chickens in the world than any other species of bird...
s to jewelry, since the women encompassed all social class
Social class
Social classes are economic or cultural arrangements of groups in society. Class is an essential object of analysis for sociologists, political scientists, economists, anthropologists and social historians. In the social sciences, social class is often discussed in terms of 'social stratification'...
es.
On June 7, 1938, President Cárdenas issued a decree creating Petróleos Mexicanos
Pemex
Petróleos Mexicanos or Pemex is a Mexican state-owned petroleum company. As of 2010, with a total asset worth of $415.75 billion, it is the second non-publicly listed largest company in the world by total market value, and Latin America's second largest enterprise by annual revenue as of 2009...
(PEMEX), with exclusive rights over exploration, extraction, refining, and commercialization of oil in Mexico. On June 20, PEMEX started operations.
International
In retaliation, the oil companies initiated a public relationsPublic relations
Public relations is the actions of a corporation, store, government, individual, etc., in promoting goodwill between itself and the public, the community, employees, customers, etc....
campaign against Mexico, urging people to stop buying Mexican goods, and lobbying
Lobbying
Lobbying is the act of attempting to influence decisions made by officials in the government, most often legislators or members of regulatory agencies. Lobbying is done by various people or groups, from private-sector individuals or corporations, fellow legislators or government officials, or...
to embargo US technology to Mexico. Many foreign governments closed their markets to Mexican oil, hoping that PEMEX would drown in its own oil. Between 1938 and 1939, PEMEX survived by trading oil for money and machinery to European countries with fascist
Fascism
Fascism is a radical authoritarian nationalist political ideology. Fascists seek to rejuvenate their nation based on commitment to the national community as an organic entity, in which individuals are bound together in national identity by suprapersonal connections of ancestry, culture, and blood...
governments. In spite of the boycott, PEMEX developed into one of the largest oil companies in the world and helped Mexico become the world's fifth largest oil exporter.
During World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...
, American and British governments blocked Mexican oil exports to their allies and dependencies. The US stopped buying Mexican silver
Silver
Silver is a metallic chemical element with the chemical symbol Ag and atomic number 47. A soft, white, lustrous transition metal, it has the highest electrical conductivity of any element and the highest thermal conductivity of any metal...
for the Treasury.