1939: Mexico

Presidential Campaign.

The campaign for the presidential elections scheduled for July 1940 has been under way since early in the year. General Manuel Avila Camacho, former Secretary of National Defense, was unanimously nominated candidate of the Party of the Mexican Revolution (the PRM, formerly the National Revolutionary Party) in November, but his endorsement by the Confederation of Mexican Workers (CTM) in February, and his support by the powerful labor leader, Vicente Toledano, made this a long expected move. The leading opponent, General Juan Andreu Almazán, who heads a coalition of conservatives, has the support of the conservative Mexican Regional Confederation of Labor (CROM), the rival but relatively weak labor organization. Both Almazán and Camacho are, politically, to the right of President Cárdenas, and the platforms of the two candidates are not very different. General Francisco J. Mújica, a more enthusiastic supporter of Cárdenas even than Camacho, and a radical who played a leading role at the Querétaro Constitutional Convention of 1917, withdrew his candidacy under pressure from Toledano. Other aspirants for the presidency are General Sánzhez Tapia, a personal friend of Cárdenas, who is running independently, and Enrique Flores Magón, a pioneer of the Mexican Revolution, who is making a bid for support against 'the dictatorship that the official parties are trying to impose on the Mexican people.' It is clear that the 1940 election will not be a one-party affair, as recent Mexican elections have been. It is also clear that the campaign centers on personalities, not issues. Active campaigning grew intense during the summer, leading to serious clashes between the rival groups, but following the PRM convention in November, it subsided.

The platform adopted at this convention, by a full vote of about 2,700,000, was moderate in tone. The preamble declared the object of the party to be to attain 'a regime of integral democracy' and to make secure Mexico's economic independence as the only possible foundation for political independence. To this end it proposed that the oil industry be 'totally and definitively' nationalized and that land be further partitioned among the peasants — thus registering an intent to carry out the Cárdenas program. On the other hand, 'due respect to the incentives of private benefit' was promised, and the rights of labor were guaranteed without 'private business finding in them any hampering or hostility.' A second six-year program was drawn up covering woman's suffrage, compulsory military service, agricultural reform, increased irrigation, and 'effective incorporation of Indians into the national community.'

Oil Controversy.

The oil controversy growing out of the expropriation decree of March 18, 1938, dragged through a series of fruitless attempts at negotiation by diplomats, government officials and representatives of the oil companies. In March conversations between President Cárdenas and Donald R. Richberg, former counsel of the National Recovery Administration, representing the companies, ended in a deadlock. Early in the summer a tentative agreement was reached providing for the development of the oil properties, under a long-term contract, by a Mexican corporation to be established by each group of foreign investors, the majority of the directors to be Mexican, and assuring revenues for the Mexican Government through a fixed percentage of the petroleum produced. But this proposal came to naught. In August the controversy reached a new phase when Under-Secretary of State, Sumner Welles, took the first official step towards intervention in urging both sides to accept as basis for further discussion a recent proposal, which he revealed had originated with the State Department, to place the properties under the temporary administration of a board of nine directors, three to represent the Mexican Government, three the companies, and three to be 'neutral' (i.e., not Mexican, North American, British or Dutch), chosen from a panel agreed upon by the United States and Mexican Governments. This plan was rejected flatly by the companies, which 'intransigent' attitude led the Mexican Ambassador to declare that negotiations had broken down.

On Dec. 2 the Mexican Supreme Court, which has been completely reconstituted during the Cárdenas administration, rendered a unanimous opinion sustaining the constitutionality of the expropriation decree. The decision ruled that the companies had no legal claim to compensation for unextracted petroleum (the subsoil, in other words), but only for capital legitimately invested in the exploitation of oil lands. The Court decided, too, that payment of compensation might be deferred for ten years. After the verdict the Court unanimously refused to allow the companies an appeal. The battle between the companies and the Mexican Government now enters a distinctly new phase, since all recourse to Mexican law is exhausted. The United States Department of State has maintained a position of unwillingness to intervene as long as legal recourse remained. On Dec. 4 Secretary Hull stated that the Department would hold a conference of representatives of the oil companies. It seems certain that whatever action may be taken will not be hasty and will be within the framework of the Good Neighbor policy.

In a review of the negotiations Mr. Richberg hinted that arbitration of the issues might be the next step. That the Mexican Government is unwilling to yield on any vital point in the dispute is clear from the President's opening address to Congress in September, when he said, 'the government, in the performance of its firm intention, has from the beginning reserved 20 per cent of the value of petroleum products exported towards payment of the indemnification.' As the decision of the Supreme Court suggests, there remains a wide difference of opinion between the companies and the Mexican Government as to what constitutes indemnification. The oil issue is, of course, an internal political issue of major importance. (See also UNITED STATES: Foreign Relations.)

Economic Problems Arising from the Oil Expropriation.

The State Petroleum Board, a state monopoly which now operates and distributes the products of the expropriated oil companies, is faced with serious problems of marketing and storage. The boycott instituted by the former North American and British owners forced Mexico to turn to Italy and Germany for an outlet. Three barter deals with the former country provided for the exchange of rayon yarn and three tankers for petroleum, and deliveries in 1939 have accounted, on an average, for 400,000 barrels monthly out of a total production of approximately 4,500,000 barrels. The loss of the German petroleum market since the outbreak of war in Europe has been a serious economic blow, since oil exports to the Reich amounted to almost one-half of the total shipments abroad. Moreover, Germany had been importing Mexican oil faster than she had been exporting manufactured goods in payment, so that up to the imposition of the British blockade, the Reich stood $5,000,000 in Mexico's debt. The decline in oil exports since September is causing unsold petroleum to pile up at a rate of over 1,000,000 barrels a month, creating another serious problem, since storage capacity is limited to 3,000,000 barrels. A deal reported with Brazil, by which that country would buy about 5,500,000 barrels annually, or over one-third of the amount exported in 1938, and rumors, in November, of a contract with one or more North American firms for the disposal of the exportable surplus, may if these reports materialize, do something to ease this situation. The shift in management after expropriation, entailing a probable loss in efficiency, and the contraction of the export market for Mexican petroleum have caused a notable decline in output and a serious loss in revenue to the Mexican Government. Mexican crude oil production dropped 18 per cent in 1938. In January 1939 the number of producing wells was less by 300 than in the previous January, and output for the month was 32 per cent lower than in January 1938. New drilling has practically ceased. Shipments abroad declined 41 per cent in volume in 1938; in value, petroleum exports dropped from 18 per cent to 9½ per cent of total exports. A liquidation of the controversy on a basis which oil companies might consider equitable would unquestionably reopen British and North American markets now closed to Mexican oil. On the other hand, the underlying philosophy of the Cárdenas régime and the immediate internal political situation are both inextricably bound up with this issue. This is, probably, the most serious dilemma confronting President Lázaro Cárdenas.

Relations with United States.

Silver continues to be of primary importance to Mexico's national economy, since in 1938 it comprised 20.4 per cent of the total value of Mexican exports and since, by export and production taxes, it accounts for over one-half of the country's total revenues. The ban on further foreign silver purchases voted by the United States Senate in June would have had very severe political and economic repercussions in Mexico. In fact, the threat of losing the United States market for Mexican silver, which takes 98.5 per cent of the value exported, caused an alarming currency depreciation in the summer, the peso falling to a record low of 16.38 in United States currency. The removal of the scare, when President Roosevelt succeeded in persuading Congress in special session to reconsider this measure, and the European war, which stimulated silver hoarding in Europe, caused the price of silver to rally and the peso to rise somewhat. Although the United States will continue to buy Mexican silver in the open market, the Treasury in the summer reduced the price from 43 to 35 cents an ounce. On the basis of an exportation last year of 81,000 ounces, the loss to the silver industry on this drop in price amounts to about $6,500,000. On Aug. 16 the Mexican Government abolished the 12 per cent export duty on this metal, representing a relief of $1,700,000 and a net loss of income for the industry, therefore, of almost $5,000,000. The same decree revised the export duties on gold, copper and zinc, reducing the arbitrary official valuation according to which the tax is levied. The tax on lead ore was repealed. (See also INTERNATIONAL BANKING AND FINANCE; WORLD ECONOMICS.)

These changes are of interest to the United States since it is from the revenue from this export tax that in 1939 payments began on agricultural properties of North Americans expropriated since 1927. A joint claims commission to evaluate the agrarian claims, according to the land settlement of last year, was in conference in Washington from May to November. A determination to continue the program of land distribution, according to which 37,000,000 acres have been partitioned under President Cárdenas in partial fulfillment of the promise to provide each peasant throughout the country with twenty hectares, may be found in the expropriation last February of over 50,000 acres of American-owned sugar lands in Sinaloa, properties of the United Sugar Company or its subsidiaries, one of the largest growers of cane in Mexico.

Excavations in Mexico.

See ARCHAEOLOGY.