The Mexican Petroleum Industry, 1938–1950

Abstract

On March 18, 1938, the Mexican government “ with shocking suddenness ” told between fifteen and twenty of the largest petroleum companies, including all those considered to represent pernicious “ foreign economic imperialism ”, that all their property and equipment being used to exploit, transport, refine or sell petroleum or its products had been expropriated. The shock did not arise because there had been no preliminary steps leading to the expropriation or no handwriting on the wall; the shock for the oil companies lay in the fact that they little dreamed that Mexico would have the fortitude or the audacity to attempt to operate the industry without the aid of foreigners. “ Nearly forty years of oil activity in Mexico had instilled into the companies a sense of vested interest in the country, an acceptance of their status as the fountains of energy for prime movers and perhaps a feeling that they were the torchbearers of civilisation in a benighted land. At least from the time when the first great deposits of oil were discovered, the companies represented themselves as one of God's gifts to the Mexican people … The Mexicans wished to convince the world and themselves that they constituted a sovereign nation … ” This is a familiar story to students of the contemporary Middle East. Mutatis mutandis, these words might well have been written of Anglo-Iranian's state of mind before 1950, or applied to the glossy brochures of Aramco. But Mr. Powell is not concerned with the psychological atmosphere underlying the Mexican government's decision to nationalise the national oil resources, but rather with the effects of the decision. He is concerned to examine the success or failure of the Mexican experiment in running her own petroleum industry. The task leads him into a lengthy study of all aspects of the industry-administration, production, exploration, distribution, consumption, international sales, labour relations and finance. His conclusions have an interest beyond the limits of purely Mexican affairs. In his view, closer regulation of the oil industry would have effected all the economic aims of expropriation without the deleterious effects of drawing away capital, diminishing exploration, and incurring the punitive effects of the blockade of Mexican oil on the world markets introduced by the international oil companies. Moreover, he believes expropriation limited the supplies of capital since domestic capital was scarce, thus limiting the growth of national income and making correction of the extremely inequitable pattern of income distribution more difficult. But he realises that expropriation was not inspired by purely economic considerations but by the desire to assert national economic independence. Mexico forwent economic satisfactions in the form of a more rapid growth in the standard of living in return for fewer economic satisfactions and more independence. It is true that hopes of more rapid economic progress were among the motives for the act of expropriation, hopes which proved mistaken. But after twelve years of nationalisation, Mexican opinion felt these disappointments to be outweighed by the non-economic advantages of controlling their own destinies.