Mexico’s 1917 Constitution included Article 27, which states that the nation owns subsoil resources such as minerals and petroleum. This principle became the legal foundation for later state control over oil and for disputes with foreign oil companies operating in Mexico.
In early 1938, Mexico’s Supreme Court ruled against foreign oil companies in a major wage-and-benefits dispute with Mexican oil workers. The ruling increased pressure on the companies to comply and helped set the stage for federal intervention in the industry.
On March 18, 1938, President Lázaro Cárdenas ordered the expropriation (government takeover with compensation promised) of foreign-owned oil company assets in Mexico. The decision nationalized key parts of the petroleum industry and became a defining step toward state-led development in the sector.
On June 7, 1938, a presidential decree created Petróleos Mexicanos (PEMEX) as a state entity to manage exploration, production, refining, and marketing. This institutionalized Mexico’s state-capitalist approach by placing the oil industry under a single national company.
In mid-1938, PEMEX began operating the expropriated facilities and taking over oil industry functions previously performed by private firms. Mexico now faced the practical challenge of running complex oil operations while also negotiating compensation and foreign relations.
In 1941, Mexico adopted a key petroleum law regulating Article 27 in the oil sector. The framework reinforced state authority over petroleum activities and clarified how concessions and compensation would be handled, anchoring PEMEX’s central role in law.
On November 19, 1941, the United States and Mexico signed a convention to settle many outstanding bilateral claims, reflecting a shift toward cooperation as World War II expanded. Oil-company expropriation claims were not fully resolved by this convention, but the agreement helped stabilize relations during a high-stakes period.
On May 22, 1942, Mexico declared war on Germany, Italy, and Japan after German submarine attacks sank Mexican oil tankers in the Gulf of Mexico. The move tightened Mexico’s alignment with the Allies and reduced the space for prolonged oil-related diplomatic conflict with the United States.
In 1950, PEMEX inaugurated the Salamanca refinery (RIAMA), one of the company’s major post-expropriation industrial projects. Expanding refining capacity supported domestic fuel supply and tied oil policy to broader industrialization goals.
Beginning in 1972, major discoveries in the Reforma area changed Mexico’s oil outlook and encouraged plans to raise output and exports. In the mid-1970s, PEMEX moved from a cautious approach toward more rapid development, using oil as a tool for state-led economic policy.
In 1976, PEMEX discovered the offshore Cantarell field complex in the Bay of Campeche. Cantarell later became central to Mexico’s rising oil production, strengthening the state’s reliance on PEMEX as both an operator and a revenue source.
After José López Portillo took office in 1976, the government pushed for rapid oil development to fund public goals. PEMEX increased production targets and relied heavily on international credit, tying national finances more tightly to oil prices and external lending conditions.
In 1979, PEMEX began producing oil from the Cantarell complex, helping drive a sharp national output increase. The new supply supported exports and public spending, but it also increased Mexico’s exposure to global oil-market swings.
By 1982, Mexico faced a severe debt and currency crisis after heavy borrowing and weakening oil conditions. On September 1, 1982, President López Portillo nationalized private banks and imposed exchange controls, signaling a major turning point in Mexico’s state-led economic model and closing the 1938–1982 PEMEX-led expansion era.
Mexico's Oil Nationalization and PEMEX Era (1938–1982)