Oil Expropriation Day: History and Importance of the day in Mexico

Oil Expropriation Day expropiacion petrolera in Mexico

The Mexicans annually celebrate the Anniversary of the Oil Expropriation (expropiación petrolera) on March 18. Oil Expropriation Day celebrates the oil expropriation by President Lázaro Cárdenas in 1938.

The Mexican oil expropriation was the nationalization of all petroleum reserves, facilities, and foreign oil organizations in Mexico on March 18, 1938.

As per Article 27 of the Constitution of 1917, President Lázaro Cárdenas proclaimed that all mineral and oil reserves found within Mexico belong to “the nation”, i.e., the federal government.

The Mexican government set up a state-owned petroleum organization, Petróleos Mexicanos, or PEMEX. For a short period, this action caused an international boycott of Mexican products in the following years, particularly by the United States, the United Kingdom, and the Netherlands, yet with the outbreak of World War II and the union between Mexico and the Allied powers, the debates with private companies over remuneration were resolved. The anniversary, March 18, is currently a Mexican civic holiday.

On March 18, 1938, President Cárdenas embarked on the expropriation of all oil resources and facilities by the state, nationalizing the U.S. and Anglo-Dutch (Mexican Eagle Petroleum Company) working organizations. Two hours before informing his cabinet of his decision, he made the declaration on the radio to the rest of the country.

After five days, a crowd of 200,000 (as indicated by the press) rallied in the zócalo on the side of Cárdenas’ activity. On April 12, 1938, a crowd of thousands of all classes assembled before the Palacio de Bellas Artes to make donations to pay the debt to foreign organizations. Donations shifted from chickens to jewelry.

On June 7, 1938, President Cárdenas gave a declaration making Petróleos Mexicanos (PEMEX), with exclusive rights over exploration, extraction, refining, and commercialization of oil in Mexico. On June 20, PEMEX began activities.

Until 1938 oil was penetrated in Mexico by foreign organizations. In any case, the oil fields began to decay after 1923, and much of the U.S. investments went to Venezuela. President Lázaro Cárdenas needed to take serious efforts to raise the economy of Mexico. One of the significant advances was oil expropriation. All Mexico petroleum reserves were nationalized and the equipment of foreign oil organizations in Mexico was expropriated.

The enactment for nationalization gave financial compensation to the expropriated assets, yet Cárdenas’ activities incensed the international business community. Before leaving, oil organizations ensured, that they don’t leave anything important, expecting to make Cárdenas take their conditions. Simultaneously Cárdenas stressed, that his country couldn’t run the refiners because of the absence of information.

In any case, Mexico had the option to restart oil production and refinement, yet it didn’t ascend to the per-nationalization level till 1942. The USA sent technical counselors to Mexico to guarantee that oil production could support the Allied.

Lázaro Cárdenas established the petroleum organization Pemex (Petróleos Mexicanos), which is a model for different countries, that look for more prominent authority over their oil and petroleum gas resources.