On March 18, 1938, Lazaro Cardenas, President of Mexico, proclaimed to his people that the government of Mexico had nationalized the holdings of most major foreign oil companies then operating in Mexico (Williams, 1979, p. 6). A week later, crowds paraded by torchlight through Mexico City to mark the occasion, which is still celebrated in Mexico. Mexican newspapers editorialized that
... for the first time since the fall of Tinochtitlan, the Aztec capital, in 1521, Mexico was in the hands of its people (Grayson, 1980, p. xv).
The oil industry reacted swiftly and harshly. Oil companies withdrew their technical personnel from Mexico, crippling many of the operations of the industry. They attempted to establish an economic embargo against Mexico, seizing Mexican cargoes on the grounds that their oil holdings had been stolen (Grayson, 1980 p. 16). The Atlantic Monthly magazine, perhaps subsidized by oil companies, published a brutally racist special issue about Mexico's problems and shortcomings, real or imagined (Grayson, 1980 p. 17).
In the aftermath, the Mexican oil industry suffered severe operational problems. Workers in the oil industry found themselves in political and ideological conflict with other sections of the Mexican labor movement. Stripped of most of their technical experts, the facilities were mishandled. Yet, gradually, Mexican managers and specialists took effective hold over the operations of the industry. The expropriated company holdings were combined into a national company, Petroleos Mexicanos (commonly abbreviated to PEMEX). By 1946, the New York Times reported that the Mexican oil industry was operated with what it characterized as a "fair degree of efficiency" (Grayson, 1980 p. 22).
Mexico's expropriation of foreign holdings, a generation before the OPEC revolution of 1973, was a pivotal moment both in the history of the international oil industry and in the history of the developi...