Sticking It To the Oil Man - 1938 Mexico Edition

The Great Depression was still withering the economies of the world in 1938. Standard Oil of New Jersey (now ExxonMobil) and Royal Dutch/Shell owned all of the oil production in Mexico. Mexico supplied over one-fifth of the oil used in the United States. The companies had been using every union busting tactic they knew to prevent Mexician workers from organizing. The workers had struck the previous year.

Bolivia's President Evo Morales has signed a decree placing his country's energy industry under state control. ~ BBC, May 2, 2006

Mexico's President, Lázaro Cárdenas, tried to negotiate but the oil companies were intransigent, claiming they couldn't afford to pay their workers a living wage. The Mexican government performed an audit where, as the story was told to me, the oil companies low-balled the value of their assets to support their claims to poverty. The audit showed the oil companies had been bleeding Mexico for their profits.

The tax paid by foreign oil companies operating in Venezuela will be almost doubled, says President Hugo Chavez. ~ BBC, May 8, 2006

The government and later the Mexico Supreme Court ruled in favor of the workers. The oil companies threatened to take their assets and leave Mexico. They engaged in a propaganda campaign to smear Cárdenas. On March 18, 1938, Mexico nationalized the oil industry in their country. There was a spontaneous six-hour parade to celebrate.

The US says it is cancelling free-trade negotiations with Ecuador, after the South American country seized the assets of a US oil company. ~ BBC, May 17, 2006

The companies squealed like stuck pigs (an apt metaphor). The British government led an economic boycott against Mexico. The country lacked key technical knowledge. Cárdenas organized Mexico's top scientists to discover the necessary chemical to convert their oil to gasoline. The thirty scientists mysteriously died (were murdered) before finishing their task. A second group of scientists succeeded. The boycott ended with the start of World War II. Mexico paid compensation for the seized assets. According to how I first heard the story, they used the low-ball figures the oil companies had given to the government to calculate the compensation.

My thanks to Hecate for stimulating my memory of this story. There is a movement in South America to take back their national resources from the foreign firms that have been exploiting them. It is not a fad but an opportunity to take back what is theirs. It is good to remember that Lázaro Cárdenas is still revered in Mexico.

The photo is of the Tijuana border crossing in 1938.
Additional sources: Deirdre Griswold, Wikipedia, Carlos - my friend from 20 years ago who first told me this story
tag: oil, mexico