A Brief Review of the Oil Expropriation in Mexico

The "Oil Expropriation in Mexico" was a series of events that resulted in the nationalization of the oil industry, carried out in 1938, based on the enforcement of the Expropriation Law, enacted in 1936 and Article 27 of the Mexican Constitution of the United Mexican States.

A Brief Review of the Oil Expropriation in Mexico
Massive demonstration in the Zócalo, on the anniversary of the oil expropriation. Photo: INAH

In the scenario of the Oil Expropriation in Mexico, one reality stands out: the exploitation of the workers who worked for this industry, who lacked many rights and benefits, such as coverage of expenses for accidents or illnesses; in addition, there were no fixed working hours and the payment of salaries was meager, meager and not always punctual.

These shortcomings were exposed by the oil industry workers, who went on strike and paralyzed all activities in the oil sector. However, the companies maintained a firm stance in order not to accede to these demands. For this reason, in 1938, President Lázaro Cárdenas issued the direct application of the Expropriation Law.

A Brief Review of the Oil Expropriation in Mexico

With the outbreak of the Mexican Revolution in November 1910, important legal and administrative changes took place, which resulted from the promulgation of the constitutional text of 1917.

The new Magna Carta not only included the recognition, respect, and protection of social rights, such as education and labor but also established the power of the Mexican State to take control of the various natural resources of the national territory, which was not included in the drafting or subsequent amendments to the Constitution of 1857.

Thus, the Constituent Congress of 1916-1917, which met in the city of Querétaro, contemplated in Article 27 of the current Magna Carta, the original ownership of the Mexican State over the seas, lands, subsoil, and other resources located in the national territory, where the State itself would be the only one to transfer the domain of these resources to private individuals for the constitution of private property. Paragraph IV of the same constitutional provision refers to the following:

The Nation has direct control of all minerals or substances that in veins, mantles, masses, or deposits, constitute deposits whose nature is different from the components of the land, such as minerals from which metals and metalloids used in industry are extracted; deposits of precious stones, rock salt, and salt mines formed directly by marine waters. The products derived from the decomposition of rocks, when their exploitation requires subway works; phosphates susceptible to being used as fertilizers; solid mineral fuels; petroleum and all solid, liquid, or gaseous hydrogen carbides.

The approval of this section of the constitutional text in February 1917 caused constant friction between the governments after the Mexican Revolution and the foreign oil companies that came to our country to make large investments to exploit the so-called black gold, which claimed to have acquired rights long before the new Magna Carta was approved. Although tensions were present for more than a decade, it was not until the government of General Lázaro Cárdenas that they materialized.

In 1936, the oil workers decided to unite to form the Sindicato de Trabajadores Petroleros de la República Mexicana, demanding the creation and signing of a collective bargaining agreement. The parties involved entered into a dialogue to reach an agreement, but due to the companies' refusal to satisfy the demands presented by the union, a general strike broke out in 1937.

The position of the companies hardened against not only the new oil union but also against the government of Lázaro Cárdenas. Throughout that year, foreign companies undertook an intense communication effort abroad through the press, negotiating with the governments of their countries to protect their interests; with this, they tried to hit Mexico economically by suspending their credit products and withdrawing their deposits from the country's banks, to take those resources abroad; the immediate consequence was that the national monetary reserve dropped considerably.

On December 18, 1937, after the government had advised the workers to abandon the strike, due to the serious economic situation that was provoked, and after seeking a solution through the intervention of the Federal Conciliation and Arbitration Board, the latter issued an award condemning the companies to pay wage increases that amounted to up to 26 million pesos.

In summary, the impact of this political, economic, and social movement is of great relevance to the development of the country. At present and thanks to it, the oil sector has a more specific regulations to provide workers with optimal working conditions, as well as a better development in the oil industry.

On December 30, the U.S. Undersecretary of State asked the Mexican Ambassador and the Mexican Secretary of the Treasury that the Mexican government leave in the hands of the Supreme Court of Justice the case of the claims of the oil workers union against the oil companies, which had already filed an injunction in this instance; in addition, it was expressly requested that the companies not be obligated to immediately pay the salary increase requested by the workers and granted by the Conciliation Board.

The Supreme Court of Justice of the Nation denied the injunction to the oil companies, which were obliged to abide by the award issued by the Federal Conciliation and Arbitration Board; the companies responded with an outright refusal. On March 8, 1938, the President of the Republic, Lázaro Cárdenas, meeting with his cabinet, began to analyze the measures that the Mexican government could adopt given the attitude shown by the foreign companies.

On March 9, the head of the Executive spoke with the former constituent deputy Francisco J. Múgica about the possibility of expropriating the oil industry, based on paragraph IV of Article 27 of the Constitution and, the following day, he asked him to draft a manifesto to the nation, to explain the eventual expropriation decree.

Because of the attitude assumed by the companies, on March 18, the decree expropriating the assets of the oil companies was published. At 8:00 p.m. that day, the President of the Republic informed the Cabinet of the application of the Expropriation Law as a consequence of the rebellious attitude of the companies; at 10:00 p.m., the whole nation was informed, through a radio message, of the government's decision to defend national sovereignty, assuming the tutelage and control over the oil wealth which had fallen into the hands of imperialist capital, keeping the country in a condition of subjugation.

The decree was signed by President Lázaro Cárdenas in the National Palace, on March 19 at 03:00 hours.