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The compilation of data for this document aims to answer the causes and motives behind Lбzaro Cбrdenas' decision to nationalize the oil industry in Mйxico. The paper also explores the paradoxical position of the government -its repercussions and long-term benefits. During the research of primary sources for this paper I was able to understand the mood of the oil companies and the tactics they engage when their interests are threatened.

OIL RICH MЙXICO

Mexico had a history of an oil rich territory long prior to the expropriation. The original inhabitants utilized the oil and bitumen for waterproofing their boats, as glue, for medicinal purposes, for burning as incense to their gods, and for sundry purposes long before the advent of the Spaniards in 1519.

Before the 1800's, private interests had not challenged the oil and mining industry, in part because there were several ordinances of mining in New Spain (Mexico) in place at the time. Theses ordinances promulgated by Carlos III in Aranjuez in 1783 made all mineral and subsoil resources property of the Spanish Crown no matter who owned the lands.

Multiple attempts to capitalize on the oil industry in Mexico date back to the mid to late 19th century. In the year 1869 on the hacienda known today as "Furbero" near Papantla in the State of Veracruz, pioneering explorations for oil fields were underway, just ten years after completion of the "Drake" well in the United States, near Titusville, Pennsylvania. In 1876 an unidentified American sea captain is said to have found oil at Tuxpan, refined it and sold the product for brief period as kerosene.

Before Mexico's independence, which ended with the revolution of 1810, the Spanish Crown directly controlled all soil and subsoil resources. However, the Spanish were not completely defeated and they failed to recognize Mexico's Independence until 1822. It was not until December 22, 1936 that The Treaty of Peace and Amity was signed between Spain and Mexico that the Spanish crown ceased to keep control of the soil and subsoil resources. Spain agreed to transfer the rights to the Mexican State. But the battle over mineral and oil resources did not stop there. Landowners claimed that the minerals extracted from their land belonged to them and not to the state. This tension between the new government and the landowners came to a conclusion when Archduke Maximilian of Austria came to Power in Mexico. He issued an Imperial decree on July 6, 1865, stating that no person may exploit bitumen or petroleum without prior express and formal concession. *

As oil demand started to increase in the industrialized nations, private interest and foreign investments began to exert pressure on the Mexican government to reform the mining code. The product of intense lobbying was a decree to reform the Constitution and adhere a mining code on January 14, 1883, by General Manuel Gonzalez. The Mining Code issued (under authority of Fraction X of Article 72 of the Constitution of 1857) was to be mandatory throughout the entire nation. The code stated that all petroleum and gaseous springs are the exclusive property of the surface owner who may exploit and utilize them without the necessity of a denouncement or of special adjudication. The Mining Code of 1884 opened the doors to new investors and gave them the legal power to exploit the lands.

The Petroleum Law of 1901 consolidated all the power needed in the Federal branch to grant concessions in zones belonging to the state to companies which might be established in the country. This law favored private companies such as the Doheny Group and Messers Pearson and allowed them to operate on vast vacant and public lands. Following The Petroleum Law of 1901 was The Mining Law of November 25, 1909 in which reiterated petroleum as solely property of the surface owner, who until then were possessors of simple exclusive rights to exploration and not property rights, to be regularized and legalized. This law made the surface owner of lands into the sole proprietor of all subsurface deposits of mineral fuels and bituminous substances. It would also become the basic argument among oil companies that fiercely opposed the nationalization of subsoil.

The practices of the major oil companies became ruthless and fraudulent. The companies owed no loyalty to the nation and they obsessed with outrageous profits without giving fare share to the state. The monopoly like structure of the oil companies was considered unconstitutional according to the 1857 Constitution. The feeling that these companies were depriving the nation of its natural wealth woke up the civic spirit in many Mexicans and it just added to the pressure to oust dictator Diaz.

OIL AND THE MEXICAN REVOLUTION

In November 1910, the Mexican revolution broke out and Porfirio Diaz was overthrown. Major foreign oil companies thought the political instability of the country was an excellent distraction for those fighting against the private interest groups and foreign exploitations of the state's resources. Buying political power was a common practice during the revolution and the oil companies decided to get involved to receive preferential treatment. Not long after, British companies started to invest heavily in oil refineries and explorations of new oil fields. Until 1910, the oil industry in Mexico was relatively small producing on average 10,000 barrels a day compared with 575,000 barrels a day in the U.S. *

During the first two decades after the Mexican Revolution of 1910, oil exports increased steadily. From 1913 to 1918, United States imported from Mйxico over 95% of the oil it consumed. But the constant battle between the revolutionary leaders and foreign investments created a tense and unpredictable environment. The new wave of nationalism inspired by social justice and equality became a powerful driving force in reclaiming natural resources from private hands.

As the dust of the revolution settled after a long period of chaos and political instability, social and economic reform became the platform for the next administration. General Lбzaro Cбrdenas became president on December 1, 1934. General Cбrdenas inherited a state that yearned for economic prosperity. Unions emerged gradually and by the mid 1930's all laborers who worked in the oil fields belonged to one. Not long after the CTM (Confederacion de Trabajadores de Mйxico) was created as a central labor organization, The Sindicato de Trabajadores Petrуleos de la Repъblica Mexicana was created. The latter united all petroleum industry workers including production, transportation, refining, distribution and sales.