Mexican Economic Nationalism: 1930's

The Cardenista Utopia: 1934-1940

 

When Lázaro Cárdenas was nominated as presidential candidate by the PNR he already was one of the most important commanders of the army. He also was an expert in politics. He had been the governor of Michoacán and president of the PNR.

 

He was not, however, a member of the original group of revolutionary leaders as he was younger and belonged to the post-revolutionary leadership. He had been a loyal subordinate of Calles without being his unconditional follower.

 

Cárdenas came to the presidency in 1934 with more factors in his favor than his predecessors, but most observers felt he could not escape the suffocating influence of Calles.

 

Many foresaw him similar to Ortiz Rubio, that his he would be simply a puppet of Cardenas. And the political dice were loaded against him. Many members of his cabinet were die-hard Callistas. In fact, Cardenistas were the minority in his cabinet and the same was true in the PNR, the congress, and the governorship.

 

Tensions in the new government appeared from the beginning and finally exploded due to the wave of strikes that took place after Cardenas took power. As president Cárdenas reacted very mildly to the strikes.

 

In December of 1934 Calles broke his silence and denounced the strikes as unnecessary agitation.

 

Cárdenas acted speedily by exerting the military powers of the presidency. He also capitalized on the anti-Calles sentiment of many member of the ruling elite and the public. He also sought the support of the labor organizations opposed to Calles. He even sent personal envoys to the state governors and generals asking them whether they supported Calles or him. The all responded that they supported president Cárdenas. He then published a list of all those who supported Cárdenas and it was a reply to Calles.

 

Cardenas then asked for the resignation of all Callistas in the party, government and cabinet.

 

These surprising actions produced the desired results: and thousands of telegrams of support arrived at the National Palace. The left wing of the congress immediately became stronger and Calles left the capital and for a time was exiled from the country.

With the disappearance of Calles and his group from the political scene, political life returned to normal and the presidency full assumed the directing role that it would have in the decades to follow.

 

The cabinet appointed by the president was really his. Though there were strong men such as Saturnino Cedillo who interests separated him from the Cardenistas.

 

Portes Gil was appointed the head of the PNR and he began the purge and of congressmen and governors who were disloyal to the president.

 

THE NEW ALLIANCE

 

The revolutionary regime defined itself, in contrast with the Porfiriato an entirely open to popular participation. But when the PNR was formed it did not fully and directly incorporate the new political actors, such as workers, peasants, and middle class.

 

This was a step backward in comparison to the immediate past in which the CROM had represented the effort to keep government and the organized masses united. Cardenas could have followed the elitism and patron/clientelism of Calles, but did not. This would have left him still subordinate to Calles.

 

When Cardenas got rid of the Jefe Maximo he had to strengthen his presidency by finding support in popular organizations. The narrow political circle before 1934 was destroyed and the representatives of mass organizations joined the political world.

 

The support given to Cardenas by the CCM and Lombardo Toledano's workers confederation was accepted and appreciated.

 

Up to 1934, large landowners had maintained a privileged situation, not because of their own power but because of the tolerance of the government. This tolerance ended with Cárdenas.

 

The alliance of vast peasant groups with Cardenas had to be rewarded, and this could only be done at the expense of the hacienda system.

 

Land reform was accelerated markedly after 1935 and the new land distribution affected not only the periphery but the very core of commercial agriculture. Notable land distributions took place in La Laguna were cotton was grown commercially, in Yucatan which was the center of hemp production, and Michoacán where commercially grown grain was produced.

 

After Cardenismo, Mexican agriculture would never be the same: The large estates inherited from colonial times and strengthened in the 19th century were attacked.

 

By the end of Cardenismo the ejido represented almost half of the cultivated land in Mexico. In exchange for these distributed 500 million acres the government counted on the support of more than 800,000 peasants. When combined with other land reform beneficiaries over 1.5 million campesinos supported the government.

 

As many as 200,000 of them had been given arms by the government to defend their ejidos. By January of 1936 the peasants had formed a rural militia of 60,000. This was a rural army of campesinos that was as large as the federal army.

 

This agrarista army and the feds finished off the last of the cristeros. In 1938 the agraristas refused to support a rebellion led by Cedillo. In late 1938 the peasants were all organized in the National Peasant Confederation and became the most solid supporters of the regime.

 

The alliance between the worker and the government became stronger after the conflict between Calles and the president. The Jefe Maximo had directly accused Lombardo Toledano of being responsible for the tense situation in the country.

 

The response was direct. Morones and the CROM sided with Calles. Lombardo and the CGOCM became the core of the National Proletarian Defense Committee supported Cardenas. The committee organized large demonstrations in favor of Cardenas.

 

Once this battle was won, Cardenas accelerated the process of labor unification until the Confederation of Mexican Workers (CTM) was created.

 

The reward for the renewed alliance was made at the expense of large industrial enterprises controlled mostly by foreign capital.

 

THE CARDENISTA UTOPIA

 

Cárdenas had his predecessors were mostly concerned with the economic development of the country. Cárdenas observed what was happening around the world in the 1930's and thought that he had to choose between two options. Either emulate the US and the other white, industrialized countries or another option.

 

Cardenas decided to attempt a different approach that would combine economic growth and the creation of a more integrated and just society. The Cardenista utopia tried to beyond Keynsianism or fascism, without falling into the Soviet orbit.

 

Between 1935 and 1940, the GNP grew 27%, a global record over these years. But between 1938 and 1940 the economy almost became stagnant. The sudden economic deterioration in 1938 was a direct result of the oil crisis. When Mexico expropriated foreign owned oil fields led to an embargo on Mexican exports of minerals, manufacturing and national oil. Investments also stopped.

 

The Cárdenas regime carried out an extensive land reform, but the destruction of large estates had an immediate effect and commercial agricultural production became stagnant in 1937. The same thing happened to cattle production.

 

Thus, the traditional bases of the Mexican economy, agriculture,minerals and oil was seriously tested. But the beginnings of modern Mexico nevertheless started to develop.

 

Manufacturing production increased 53% in the six years of the Cardenas presidency, which was more than twice that of the total economy.

 

The country also saw the beginnings of ISI and state-led development. Industrial production for internal consumption also increased. But so too did state expenditures. Government expenses increased 4000%.

 

SOCIAL PROSPERITY AND POLITICAL ECONOMIC REALITIES

 

During the Cárdenas administration there was a reduction in the value of agricultural production due to the land distribution. The Pacific North Coast where the most ejidos were distributed had the lowest production growth.

 

This was natural and foreseeable. One problem was that the ejidatario had less financing than the private owner. For another the ejidatario grew crops for domestic consumption, while the old agri-business that had its lands turned into ejidos grew cash crops for the international market.

 

This decline in the monetary value did not necessarily mean that the campesinos' situation had grown worse, it just meant that less of the production was exchanged on the market for cash. In reality the consumption of food by peasants increased substantially for the first time.

 

The individual ejidos had few inputs such as capital, fertilizers and irrigation. But the ejidatarios did use the available resources of land and labor more intensively and this led to a decrease in rural employment.

 

To effect all this, president Cárdenas was the firs to use public expenditure to encourage the economic and social development of the country. Cardenas believed in the "active state" where the state would take the lead in the development of the economic sectors of the country and not wait for the so called "free-market" to guide investment.

 

This meant that the government had left behind the conservative idea of a strict balance between income and spending. There were problems with deficits, but it did maintain the rhythm of economic growth and the development of manufacturing.

 

The Cardenista active state continued widening the institutional structure. The National Financial Institution was created in1934 and its original role was to administer properties that had been foreclosed on. Under Cárdenas the NAFINSA started to act as the government's development bank.

 

As we have said earlier, the Great Depression hit Mexico's foreign trade very hard by closing markets to some of its raw materials. But by 1934 foreign trade had greatly recovered.

 

CARDENISTA MODERNIZATION:

 

Industrialization was a synonym for modernization and it is one of the objectives sought by all Mexican governments since the Porfiriato. The Cardenas administration tried to modify this scheme.

 

Mexico had found itself in an ideal position. It could benefit from the experience of industrialization in advanced capitalist countries in order to avoid their mistakes, and their tremendous social costs.

 

The Mexican ideal was to create conscientious industrialization through the construction of a Mexico made up of ejidos and small industrial communities. Industry would serve the needs of an agrarian society and not the other way around.

 

The main objective would not be industrialization, but the development of an agricultural economy based on the ejido. The larger Latin American countries such as Brazil and Argentina had subordinated almost everything to the development of industry and ISI.

 

Mexico, under Cárdenas, aimed at more balanced change, whose goal would be the integral development of the individual and society and not solely the growth of productive output.

 

Beginning with his presidential campaign, Cárdenas took a very clear position in relation to the labor movement. He supported collective bargaining and labor in general. His dream was to create an industrial plant basically composed of cooperative in order for the worker to be at the same time owners of the means of production.

 

Cárdenas' plan and his tolerance of strikes led Vicente Toledano and CGOCM in 1935 to head a labor bloc that would support the president. The National Committee for Proletarian Defense was created (CNDP) out of 9 labor confederations.

 

Lombardo Toledano clearly emerged as the new unifying leader although rival organizations attacked him and his radical positions. In December of 1935 after a serious clash between the CGOCM and a pro-fascist Callista group, Cárdenas insisted that it would not be necessary to exile Calles.

 

But in April of 1936, Cárdenas changed his mind and the former Jefe Maximo and Luis Morones were taken from their homes and sent into exile. The anti-Lombardo labor front had collapsed and the CGOCM would rule labor without serious opposition.

 

The response of the labor movement was immediate. Lombardo inaugurated the Congress that would start the central trade union organization. Out of this congress came the Confederation of Mexican Workers (CTM) that would take the place of the CGOCM and other labor organizations.

 

The by-laws of the CTM affirmed the principle of class struggle and the eventual transformation of the capitalist society in a socialist one. But they were not planning to overthrow the capitalist order, but something more compatible with government policy.

 

This would be the liberation of Mexico from imperialist control and the complete enforcement of article 123. The real fight would be for better salaries, working hours, social benefits and the right to strike. The long term struggle would be for the abolition of private property and the attainment of a socialist society.

 

Cárdenas supported these ideals of the CTM and the CTM took advantage of this favorable political climate to move quickly. Cárdenas proposed that wages should not be fixed by the free-market and supply and demand, but rather in accordance with the ability of each enterprise to keep working without a loss.

 

This criterion intensified labor conflicts and strikes became more numerous. There had been 202 strikes in 1934, 642 in 1935, and 674 in 1936.

 

RURAL DEVELOPMENT

 

The six year plan of Cárdenas emphasized the need to provide land and water to all. This even included the peons. This went against Calles wishes. For the Cardenista plan considered that the engine of agrarian production had to be the ejido and it was essential to support the ejido with credit and infrastructure.

 

In order to give peasants ejidos, they had to be organized. In May of 1934 Cárdenas stated that an important part of this organization was to arm the peasants and create self-defense units that would enable them to defend their rights against the attacks of hacendados and their henchmen.

 

The idea was to make the structural change in the countryside irreversible. The new rural society would revolve around the ejido, especially collective ejidos. Urban and industrial society would become secondary to the need of agricultural economy, which would employ the largest number of workers.

 

During the regime of Cárdenas, a average of 8.2 million acres were distributed yearly for a total of almost 50 million acres during his presidency. The land was distributed to 772,000 peasant families grouped in 11,347 ejidos. Each beneficiary received 63.7 acres.

 

When Cárdenas assumed the presidency the collective ejido was the exception, but he would change that. He gave primacy and the majority of support to the collective ejido.

 

These collective ejidos became easier to develop when the expropriated land was fertile and irrigated, its production had commercial value (cash crop), and there already existed labor organizations requesting the land.

 

The collective ejido was considered the only way to prevent important agricultural regions from becoming areas that grew only subsistence crops, thus harming the national agricultural economy.

 

To strengthen the collective ejido, the National Ejido Credit Bank as created and its purpose was to provide the necessary capital to start and maintain these large projects of commercial agriculture in the form of the collective ejido.

 

The first important ejido was established in 1936 in La Laguna, between Coahuila and Durango. The conflict between peasant and landlord was long-standing and became political with a series of strikes by the peasant unions in 1935 and 1936. Cárdenas decreed the expropriation of a third of the area some 361,000 acres.

 

The second great expropriation took place in 1937 in Yucatan when 904,000 acres of hemp were distributed to a group of collective ejidos. The Third major expropriation took place in the Yaqui Valley and involved land owned by a gringo.

 

Here Cárdenas decreed the expropriation of 131,000 acres of irrigated lands mostly owned by foreigners.

 

It is not surprising then that one of the more active supporters of Cárdenas had been the Mexican Peasant Confederation (CCM). Although the CTM also wanted to incorporate the peasants, Cardenas decided that if somebody was going to concentrate the power of the peasantry it should be the president.

 

The goal of the CNC was nothing less than the socialization of the land. To achieve this the CNC had to make the ejido the basic production unit in the countryside. It also had to finish off the latifundio, identify with the workers and support the socialist education of the masses.

 

Given the new relationship between the state and organized masses, Cardenas thought it necessary to transform the party system and reorganize the official party. The PNR was replaced by the PRM or the Party of the Mexican Revolution. The PRM was to have four sectors of representation: The army, the workers, the peasantry, and popular organizations.

 

NATIONALIZATION OF THE OIL INDUSTRY

 

The conflict between the Cardenas government and foreign oil companies was old. Porfirio Diaz at the beginning of the 20th century granted foreign oil companies special subsoil rights of ownership in order to stimulate foreign investment in oil and develop the industry.

 

By 1909 a law decreed that oil deposits became the property of the owner of the land and oil entrepreneurs who were almost all foreigners. They were also granted special tax concessions which was a stamp tax on only 1% of what they produced.

 

This situation changed drastically during the revolution and the government realized, for the first time, the great potential of oil in Mexico.

 

By 1910 the Mexican market was too small to absorb domestic oil production and Mexico was forced to export most of its oil. By 1921 99% of Mexican oil was exported and a record 193 million barrels was produced.

 

The various revolutionary governments tried to modify the situation where large foreign oil companies exported almost all of a non-renewable resource and paid nothing to Mexico.

 

Mexican nationalism vis a vis the oil problem grew after the Diaz administrations and was due to the magnitude of the industry and the need to find new monies to pay for the costs of the revolution.

 

Mexico, which by the 1920's had become, by far, the largest oil exporter in the world saw oil as a means to enhance government revenues. The foreign companies opposed any idea of profit sharing or higher taxation by Mexico.

 

The US companies were able to put maximum pressure on governments that seemed nationalist in regards to the oil problem and its ultimate ownership. Madero had to face the prospect that all US support for his government would be withdrawn after he imposed a general tax of 20 cents per ton of oil.

 

The conflict between the government and the companies became more acute from 1917 on. Paragraph 4 of article 27 declared the oil fields to be the property of the nation. For over the next decade the issue revolved around whether or not the law of the 1917 constitution could be applied retroactively. The question was whether or not the law applied to oil fields acquired by foreigners before 1917.

 

Under Calles this problem was more or less solved with the Calles-Morrow agreement singed in 1928 which recognized the principle of non-retroactivity.

 

After 1922, Mexican oil production began to decrease, and very soon after the country lost its status as a major oil producer. The great companies began to expand into Iran, Venezuela, and Colombia.

 

At the beginnings of the 1930's, Mexico was a marginal producer, but this would change with the discovery the Poza Rica fields in 1930.

 

British oil execs were anxious to exploit these new fields, but were wary of the nationalism of the Cardenas regime and were willing to make concessions.

 

In 1935 over the protests of the Americans, the British oil company El Aguila and the Mexican government came to an understanding in regard to the exploitation of Poza Rica.

 

In exchange for the rights to exploit these fields, the British company recognized the original property rights of Mexico of all oil fields and agreed to pay the government oil royalties in an amount that would vary between 15 and 35% of production.

 

This was a gigantic step towards Mexican economic nationalism and national control of oil, for even before the 1917 constitution El Aguila owned the Poza Rica fields. American companies were getting worried.

 

These negotiations between the British and the Mexicans were not the only cause for worry for US oil men. They were equally alarmed by the Expropriation Law approved by congress in 1936. With this law Mexico could nationalize any property and pay for it at lower than market prices, ten years after the expropriation.

 

To calm the American oil men Cardenas assured them that he would not use the law against large oil or mining firms. But the companies were still worried, for they knew that Cardenas had no sympathy for foreign corporations.

 

At the same time, the government was delaying the confirmation of deed, that according to the 1928 law had to be given for properties acquired before 1917. The government was late in the confirmation for it was trying to find some fault with them in order to annul them.

 

THE CONFLICT: OIL FIELD EXPROPRIATION

 

However, the historical clash between the government and the oil companies did originate over the subsoil rights, but rather in a confrontation between the companies and Mexican workers.

 

Mexican oil trade unions from the very start had been wildcat, and very aggressive and because of this oil field workers were the best paid workers in the country. In the middle 1930's the oil workers managed to create the Mexican Oil Workers Trade Union (STPRM) which immediately affiliated itself with the CTM.

 

It then began to negotiate its first collective contract with the companies. From the beginning the negotiations were difficult. The companies rejected the raise requested by the union and offered 1/5th the amount. In 1937 the STPRM announced a strike.

 

After a short strike period the government announced that it was disrupting the domestic supply of oil and ordered the strikers back to work. Nevertheless the government through arbitration would determine whether or not the companies could give the workers a more just raise.

 

From this moment on, what had been a labor conflict had become a political conflict. The government appointed committee produced a 2700 page study that condemned the oil companies and said that the companies could afford giving the workers 1/3 the raise they asked for. The companies challenged the study and the matter went to labor courts.

 

In December of 1937 the court decided that the committees estimates were accurate and the companies could and should pay the assigned amount. The companies then appealed to the Supreme Court and it agreed with the committee.

 

Meanwhile in order to put pressure on the government foreigners began taking their savings and investments out of Mexico and the companies refused the order of the Mexican supreme court. The government would have to do something decisive and quickly.

 

On March 18, 1938, Cardenas announced on all radio transmitters that Mexico would expropriate the oil companies, since he could not allow foreign corporations to ignore the decision of the highest court of Mexico. If Mexico had not expropriated them Mexican independence and sovereignty would be at risk.

Of course, he added that the expropriated properties would be paid for. In one fell swoop Mexico had done what no other country had ever dared to do, except for the USSR, and that was to expropriate the holdings of foreign corporations.

 

On March 19, the nation through articles and mass demonstrations supported the president's decision. Mexico was unanimous in its support of expropriations.

 

Diplomatic relations between Mexico and Britain were broken and this was received with wild enthusiasm by Mexicans. IN April bonds were created to pay for the expropriated land and thousands of Mexican donated their jewelry, watches, and money to pay foreign creditors.

 

Cardenas had such widespread support that the US ambassador informed the state department that there was such unquestionable popular support that it was unlikely that Cardenas could back down now, even if he wanted to.

 

The official opposition of Britain , whose investment in 1938 was larger than that of the US, did not worry Mexico too much. With the US the problem was more delicate.

 

The US did recognize the right of Mexico to nationalize foreign owned businesses in Mexico provided that there was fair and just compensation. And this is where US and Mexican positions differed.

 

Mexico, from the start had agreed to pay for what it had taken, not immediately, but in 10 years as required by law. For the US this was too long. Ten years was not expropriation, but rather confiscation. The other issue was should the value of the oil still underground be compensated for by the Mexican government?

 

It was clear that Mexico could not pay the half billion dollars that the oilmen demanded for the expropriated properties. Cardenas suggested that they negotiate a fair settlement and that the amount be paid in oil.

 

The companies rejected this and suggested that the only fair solution was for Cardenas to return the properties back to them and Cardenas rejected this outright.

 

The companies then unleased in 1938 a tremendous propaganda and public relations campaign against Mexico. They urged people to boycott Mexican goods, to embargo US technology to Mexico, and to close down US markets to PEMEX so that Mexico could drown in its own oil.

 

PEMEX had a very rough time between 1938 and 1939, but it managed to survive by trading oil for money and machinery to the fascist countries.

 

When World War II was declared, these European markets disappeared and Mexico became a very minor oil exporter between 1940 and 1976.

 

The American and British government blocked the export of Mexican oil to their allies and dependencies. But internal demand was increasing fast. Because Mexico, due to the depression and the global wartime economy was cut off from imported industrial goods, it began a process of ISI which needed much energy.

 

By 1940, the most dynamic sector of the Mexican economy had ceased to be an enclave owned and controlled by foreigners.

 

But to put added pressure on Mexico, the US stopped by buying Mexican silver for the US treasury, but Mexico would not back down. Meanwhile the US oil companies relentlessly lobbied the US government to use military force and invade Mexico.

 

But FDR was trying to implement what he called "The Good Neighbor Policy" to solidify an inter-American alliance against fascism. And when WW II started the US desperately needed Mexican cooperation. It would be the tensions of the international context of WW II that probably saved Mexico from being invaded by the US so that it could protect a handful of US oil companies and their profits.

 

In 1940 Cárdenas finally reached an agreement with Sinclair oil and continued to negotiate with Standard Oil. The deal with Sinclair was a diplomatic coup for its showed that if Mexico could not reach an agreement with Standard Oil it was not because of Mexico, but rather because of the greed of Standard Oil.

 

By the end of the Cardenas regime settlements still had not been reached with most of the foreign companies. But it was clear that these companies would not return to Mexico. Mexican oil would be controlled by, and to the benefit of Mexicans.

 

THE CONSERVATIVE CHANGE

 

The high point of Cardenismo was the nationalization of the oil fields in March of 1938. From that point on Cardenas regime would be wracked by problems. There was a decrease in land distribution, the boycott decreed by oil corporations, international pressure due to the oil problem, and attacks by the right wing of the revolutionary family on Cardenismo all occurred between 1938 and 1940.

 

Veteran politicians within the revolutionary family after 1938 started to fight for their own interests. Within the official party and other government organizations anti-Cardenas factions were developing.

 

In fact from 1937 on inside the PRM there was an explosion of futurism where sector leaders began decided who would be the next president three years before Cardenas' term would expire.

 

After 1938, a more civilian, but equally conservative party was created called the National Action Party (PAN) and it was the only one that survives to this day.

 

Late in 1938, two years before Cardenas' term was to expire two of his main secretaries resigned, one who was Manuel Avila Camacho to that they could work for their respective candidates. In fact, after 1938 there would be a mass wave of resignations of key cabinet members of the Cardenas administration.

 

In November of 1939, the PRM announced that its candidate for the 1940 to1946 term would be the ex-secretary of war Manuel Avila Camacho.

 

This did not prevent numerous groups of workers, army officers, and peasants from supporting Juan Andrew Almazán who was very much an opponent of Cardenas reforms.

 

Political passions were unleashed across the whole country. Of all the groups opposing Cardenas and the official candidate Camacho, the most effective and dangerous was that of General Almazan. Almazan was right of the official candidate.

 

Almazan started his campaign in mid-1939 with a very vague political slogan that had widespread appeal: "work, cooperation and respect for the law".

 

Avila Camacho started his campaign in April stating that he would advance the march of revolution. But both candidates searched for a middle ground. This was a clear indication that the Cardenista utopia would not be continued.

 

In spite of this search for moderation on issues, the presidential campaign of 1939-40 was anything but orderly and calm. There were frequent and violent clashes between the followers of Avila Camacho and Almazan.

 

More and more people were killed in clashes. On July 7, election day, there were gun battles in the street and bottle throwing clashes, and assaults on voting booths. Both the police and the army were called out to suppress the chaos. In spite of allegations of voting fraud and irregularities Avila Camacho was declared the winner.

 

Almazan left Mexico after the election. Many of his followers felt betrayed, but they could do nothing to stop the political withdrawal. This marked an end to the revolutionary regimes and to the most violent and disputed election of revolutionary Mexico.

The 1938 expropriation of oil fields was one of the brightest spots of the Mexican revolution and of Cardenismo, but it was costly. The expropriations cost Mexico, investment money, access to markets, oil technology, and loans. Because of these costs the reform program of Cardenas could not be fully implemented.

 

When Cárdenas handed the presidency over to Avila Camacho the PRM continued the party line that class struggle was the engine of historical development, and that the ultimate goal of the revolution was to build a society controlled and in the interests of the workers.

 

The ejido, the cooperatives, and state property had to be the economic and social cores of the new Mexico. But opposing forces were on the rise inside and outside the country and by the end of 1940 the Cardenista plan was all but over.

 

When General Avila Camacho assumed the presidency in 1940 it was clear to many people that the construction of a Mexican socialism had ended. And the idea that with the end of the Cardenas administration the revolution itself had finally ended became more and more common.