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Insulted, Lazaro Cardenas Cut Foreign Oil Adrift in Mexico.

Updated on October 27, 2009

Pemex. Born from one ill-advised comment

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Mexican strongman, Lazaro Cardenas.  Not a man to call a liar.Mexico has found huge new fields of oil and gas in recent years.Pemex' towering, 44 floor office block in Mexico City,  had 15-foot sway in 1985 earthquake!The familiar logo of Royal Dutch Shell Petroleum.  Hardest hit by Cardena's expropriation.Pemex today.  Mexico's Salamanca refinery
Mexican strongman, Lazaro Cardenas.  Not a man to call a liar.
Mexican strongman, Lazaro Cardenas. Not a man to call a liar.
Mexico has found huge new fields of oil and gas in recent years.
Mexico has found huge new fields of oil and gas in recent years.
Pemex' towering, 44 floor office block in Mexico City,  had 15-foot sway in 1985 earthquake!
Pemex' towering, 44 floor office block in Mexico City, had 15-foot sway in 1985 earthquake!
The familiar logo of Royal Dutch Shell Petroleum.  Hardest hit by Cardena's expropriation.
The familiar logo of Royal Dutch Shell Petroleum. Hardest hit by Cardena's expropriation.
Pemex today.  Mexico's Salamanca refinery
Pemex today. Mexico's Salamanca refinery

All was lost due to an ill advised comment

Latest News:  In October, 2009, Mexico's President Calderon tried to push a bill through allowing foreign oil back in due to Pemex' falling output and revenue, but it was defeated by left-wingers in Congress.

Gaffe Seals Foreigner’s Loss of Mexican Oil

American, Dutch and British petroleum industries had enjoyed a long honeymoon in Mexico. Not content with exploiting the country’s natural resources, actually forbidden by the constitution, some of the companies, principally Shell, Standard Oil, Hearst and Doheny, had used their influence to affect the election of presidents and administration favourable to their ends. But they had misjudged the influence and integrity of Mexico’s President, Lazaro Cardenas, elected in November, 1934, replacing the dictator, Calles, who had backed Cardenas thinking he could continue to run the country behind the scenes. Cardenas quickly put paid to this plan by rounding up Calles and some 20 of his cronies and deporting them to Texas! We can easily see the United States must have had a more relaxed attitude towards immigration back then as they were often asked to accept Mexico’s political undesirables.

This move had the whole country behind Cardenas, to a man. He was a strong and dictatorial leader, to be sure, but he was benevolent and good, he did not curry favour with the rich; he used no secret police to spy on perceived enemies, neither did he seek to gag the press, rather he encouraged it to gauge the opinion of the nation.

The picture history paints of the man is a lone figure in a large sombrero standing on a rural train platform after a solo visit to some outlying Indian village where he had been to discuss their problems with tribal leaders; places where no other Mexican president had been before and few would go again.

These were the years - 1936/7 - that US President FDR turned his “Good Neighbour” policy on Latin America. One of its agreements was that it pledged non-interference in the internal affairs of any Latin American republic. Roosevelt was not to know as he signed this policy that its mandates would soon be strained to its utmost and it is much to FDR’s credit, that he stuck to his word despite extreme pressure from business leaders in his own country.

By 1937, trouble was seething in the oil business between workers who wanted better conditions and salary, and the foreign interests who were holding out against providing them, despite being ordered to do so by the successive government mediation boards. Not only had these huge consortiums refused to provide better conditions for their Mexican employees for years, they had also denied Mexicans executive positions and arranged things so that Mexico was paying more for its own oil that any country she exported to!

All this was fuelling a fury in pro-labour Cardenas that would cost the oil companies any future they had in Mexico. Not only were these foreign fat-cats refusing to budge on their position with his beloved workers, they were branding Cardenas himself a communist for sending arms to Spain’s loyalists - the side backed by Russia - and for him offering asylum to Franco’s dissidents.

This all came to a head when Cardenas held last minute talks with oil company representatives at the national palace. Anxious to compromise, the president promised to end the current, 24-hour strike if the companies agreed to pay the approximately 26 million pesos ($7 million) needed to meet the proposed wage hike, which the foreign interests had worried might come to much more. Cardenas is reporting as having said, "You are unduly disturbed, gentlemen, the sum won't be more because my experts tell me that it will not, I guarantee that you won't have any more problems." An oil executive sealed all of their fates by saying “Mr President, these are very fine words, but who guarantees you? This was a stupendously ill- advised way to address any nation's leader, especially in front of the eyes of the world, as it was tantamount to calling Lazaro Cardenas a liar, and in a situation obviously most delicate: in an icy rage, Cardenas ended the meeting.

(The actual words spoken during this exchange have various interpretations. What was probably more the deciding factor was the fact the oil companies had refused the government arbitration and appealed to the Mexican Supreme Court and Cardenas would brook no further delay in changing the conditions of the workers).

But it was surely stupidity and another diplomatic gaffe of huge proportions - Americans have often misjudged Latin pride and machismo in these types of exchanges - and allowed the Mexican president an excuse he secretly desired to immediately act.

On March 18, he issued warrants for the seizure of 17 companies engaged in the production and distribution of Mexico’s oil. There can be little doubt that were not Roosevelt bound by his word to the Latin republics and concerned with affairs in Europe where Hitler was preparing for war, this huge expropriation would have caused armed conflict between the United States and Mexico.

Cardenas was seen as the liberator of Mexico, which had not fully thrown off foreign occupation, one way or another, since 1521 when Cortez conquered the Aztecs. But if Mexicans had seen the trouble ahead with their newly nationalized industry, soon to be named Pemex, their celebrations would have been surely much more muted. For a start, the foreign companies received huge amounts to be paid off in compensation. America and the other nations with oil holdings, boycotted Mexican oil. Cardenas was saved by another adroit political manoeuvre by agreeing to sell Mexico’s oil production to the Axis powers. In truth, he had no option as the country was practically afloat on a sea of stored oil! Britain and US hurriedly lifted their boycotts and bought Mexican oil again.

Mexican oil was now owned by the Republic. But the workers received not penny one wage increase by the new organization; instead, top executives became millionaires and Pemex has meant mammoth problems for successive administrations right up to modern times. And the country which threw its foreign oil men out has been back to them, hat in hand, time and time again. for advice and equipment. It would be nearly 40 years later before Mexico equaled the height of production under the foreign leasees in 1921. Then, Lois Portillo became president and Pemex finally came of age, a subject for another article.

(The author of this hub had family working at Pemex for many years)


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