Mexican Oil Expropriation - Background

Background

The political support of labor unions and the founding of Petromex (now called Pemex) 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, a strike began in Tampico 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 and Veracruz. 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.