News Article

The Cardenas Contribution to Mexican History

Wed, 01/25/2012 - 12:31

Mexico’s political class and Pemex have long shared close relations with one another, but one interesting aspect of this relationship is the extent to which certain families have worked throughout the 20th and 21st centuries to influence the trajectory of the industry. The most famous example is the Cárdenas family.

Lázaro Cárdenas was the President responsible for the 1938 oil expropriation and the creation of Pemex, and in many ways for charting the future course of the Mexican oil and gas industry.

In 1935, all oil producers in Mexico were foreign companies whose labour practices oered poor benefits to their Mexican workers. Ultimately, social unrest led to a strike in 1937, as the foreign companies did not agree to the worker’s demands. Before the legal proceedings involving the companies, the Government and the Supreme Court came to an end, President Lázaro Cárdenas intervened by expropriating the international companies and nationalizing the oil and gas industry.

Lázaro Cárdenas declared the oil expropriation on Mexican radio in 1938, instantly making him a national hero and isolating Mexico from numerous political allies. International reaction was, at first, an embargo on Mexican oil by foreign companies, so that Mexico was forced to export to the few countries where its products were not banned, including Nazi Germany. The American position changed when the US entered World War II, and an agreement was signed between the US and Mexico in 1942, agreeing on compensation for American companies previously expelled from Mexico. British companies agreed on a settlement only in 1947. To date, no constitutional or legal reform has taken place that would allow foreign companies to take ownership of Mexican hydrocarbon reserves.

Two subsequent generations of the Cárdenas family have continued to shape the industry over the years. Lázaro Cárdenas’ son, Cuauhtémoc Cárdenas, was also an important political figure. He eventually broke away from the PRI, which won every presidential election between 1929 and 2000, and posed the first serious threat to the PRI presidency in the 1988 elections as the candidate for a coalition of leftist parties. He went on to found the PRD.

Cuauhtémoc Cárdenas has staunchly defended the continued policy of protectionism in the oil and gas industry. Indeed, the recent 2008 Energy Reform faced strong criticism from the PRD because of its aim to encourage international companies to participate in the industry, which the left-leaning party claimed was an attempt to privatize the industry.

The third generation of the Cárdenas family appears to be more welcoming to foreign investment. Lázaro Cárdenas Batel, governor of Michoacán state from 2002-2008, broke party lines in 2002 to state that the energy sector needs investment in order to modernize. Quoted in an article from El Universal newspaper, he said that defence of the national energy sector does not imply eliminating private national or foreign investment opportunities.