Lázaro Cárdenas, The Oil Expropriation, 1938

Mexico’s expropriation of the properties of foreign oil companies challenged U.S. power and tested
the implementation of the Good Neighbor Policy. This excerpt comes from Mexican President
Lázaro Cárdenas’ speech announcing his government’s decision.

In refusing to comply with the mandates of the Nation’s judicial institutions which, through the supreme
Court, condemned them on every count to pay their workers the judgment in the economic suit which
they themselves brought before the judicial tribunals by reason of their inconformity with the resolutions
of the Labor Tribunal, the oil companies have adopted a position which obliges the Executive of the
Union to seek among the recourses of our legislation an efficacious means of definitely preventing, now
and in the future, the annulment or the attempted annulment of judicial decisions at the simple will of one
or both of the parties to a dispute by means of a declaration of insolvency, as is being attempted in the
present case, with the result that the dispute is brought back to the very question that has already been
judicially decided. It must be realized that such action would destroy the social norms governing the
equilibrium of all the inhabitants of a nation, as well as that of their activities, and would establish a
precedent for future proceedings to which industries of any description established in Mexico, and which
might become involved in disputes with their workers, could resort, were they free to maneuver with
impunity to evade their obligations or reparation of the wrongs occasioned by their methods and their
obstinacy.

Furthermore, notwithstanding the Government’s serenity and the considerations shown them, the oil
companies have persisted in carrying on, inside and outside the boundaries of the country, an adroit
undercover campaign with which the Federal Executive two months ago taxed one of the managers of the
said companies and which he did not deny; this campaign has now been productive of the results they
sought: serious injury to the Nation’s economic interests, with the purpose of annulling by these means
the legal pronouncements of the Mexican authorities.

Under these circumstances, merely to carry out the procedure of the execution of the judgment stipulated
by our laws would not be sufficient to reduce the oil companies to obedience, for the withdrawal of their
funds in anticipation of the verdict of the High Tribunal that sentenced them prevents this procedure from
being either practical or efficacious; moreover, to place attachments on oil production, or on plant and
equipment, or even on oil fields, would imply interminable legal proceedings that would only prolong a
situation which decorum demands be immediately settled, and would also imply the necessity of
overcoming the obstacles which the companies would certainly raise in the path of the normal productive
process and of the immediate sale of the oil produced, and which would render difficult the coexistence of
the part of the industry affected with the part that would undoubtedly remain free and in the hands of the
companies themselves.

In this situation, of itself sufficiently delicate, the Public Power would find itself beset by the social
interest of the Nation, which would be severely affected, for a fuel production insufficient for the various
activities of the country, among which must be considered some as important as transportation, or a total
absence of production, or even an oil production made more expensive by the difficulties, would within a
short time necessarily give rise to a crisis incompatible not only with the progress but with the peace itself
of the Nation; it would paralyze banking activity and commercial interchange in many of its chief aspects;
public works, or general interest to the country, would become little short of impossible; and the existence
of the Government itself would be gravely endangered, for with the loss of the State’s economic power,
its political power would also be lost and chaos would ensue.
It is thus evident that the problem placed before the Executive Power of the Nation by the refusal of the
oil companies to comply with the verdict of the highest Judicial Tribunal is not merely a simple case of
execution of judgment, but a concrete situation demanding urgent solution. It is demanded by the interests
of the working class in all the industries of the country; it is demanded by the public interest of all
Mexicans, as well as of the foreigners residing in the Republic, who require peace and the fuel which is
the life-blood of their activities; and it is demanded by the very sovereignty of the Nation, which would
otherwise be left at the mercy of the maneuvers of foreign capitalists who, forgetful of the fact that they
had previously organized themselves into Mexican companies, in accordance with Mexican laws, are now
attempting to evade the mandates and responsibilities imposed upon them by the country’s authorities.

This is a clear and evident case obliging the Government to apply the existing Expropriation Act, not
merely for the purpose of bringing the oil companies to obedience and submission, but because, in view
of the rupture of the contracts between the companies and their workers pursuant to a decision of the labor
authorities, an immediate paralysis of the oil industry is imminent, implying incalculable damage to all
other industry and to the general economy of the country…

The Government has already taken suitable steps to maintain the constructive activities now going
forward throughout the Republic, and for that purpose it asks the people only for its full confidence and
backing in whatever dispositions the Government may be obliged to adopt.

Nevertheless, we shall, if necessary, sacrifice all the constructive projects on which the Nation has
embarked during the term of this Administration in order to cope with the financial obligations imposed
upon us by the application of the Expropriation Act to such vast interests; and although the subsoil of the
country will give us considerable economic resources with which to meet the obligation of indemnization
which we have contracted, we must be prepared for the possibility of our individual economy also
suffering the indispensable readjustments, even to the point, should the Bank of Mexico deem it
necessary, of modifying the present exchange rate of our currency, so that the whole country may be able
to count on sufficient currency and resources with which to consolidate this act of profound and essential
economic liberation of Mexico…

And, finally, as the fear may arise among the interests now in bitter conflict in the field of international
affairs that a deviation of raw materials fundamentally necessary to the struggle in which the most
powerful nations are engaged might result from the consummation of this act of national sovereignty and
dignity, we wish to state that our petroleum operations will not depart a single inch from the moral
solidarity maintained by Mexico with the democratic nations, whom we wish to assure that the
expropriation now decreed has as its only purpose the elimination of obstacles erected by groups who do
not understand the evolutionary needs of all peoples and who would themselves have no compunction in
selling Mexican oil to the highest bidder, without taking into account the consequences of such action to
the popular masses and the nations in conflict.

Lázaro Cárdenas, “The President’s Message to the Nation,” March 18, 1938, Mexico’s Oil: A
Compilation of Official Documents in the Conflict of Economic Order in the Petroleum Industry, with an
Introduction Summarizing its Causes and Consequences (Mexico City: Government of Mexico, 1940).