Mexico – Oil And Water

THE capitalists and explorers who responded to Diaz’ invitation were mostly men of the races whose enterprise, thoroughness and staying powers have carried the world to its present cultural level. But soon after the Dictator’s disappearance from the scene “there arose up a new king over Mexico which knew not Joseph,” whereupon the attitude of the authorities towards foreign companies underwent a marked and infelicitous change. They were occasionally mulcted and harried, a few of their contracts were questioned, others formally annulled, some of their servants were killed by bandits and others maltreated or threatened. For the misdeeds of criminals during a revolutionary welter it is not easy to fix moral responsibility upon any administration. Moreover Mexico, in spite of the loud outcry against her “savagery” which has been raised abroad, can point to a much less bloody record than either France or Russia. Foreigners in particular suffered less than elsewhere and much less than was apprehended at the outset. But by gathering together in one compact record all the crimes perpetrated in the name of liberty or order during ten years of civil strife, by branding every Mexican with the mark of the bandit, the cutthroat or the ravisher, by creating odious types, attaching to them the badge of infamy and holding them up to universal opprobrium in moving pictures, it became possible to discredit a whole people in the eyes of the world. And that, Mexicans complain, is what has been, and still is being, done by the plutocratic little oil State which operates within the great Democratic State to the north of the Rio Grande. But as Edmund Burke put it, one cannot frame an indictment against a whole nation.

Notwithstanding the fact that the revolutionary movement at its height was beyond the control of disciplined reason and political expediency, the foreign element as a whole occupied a more or less privileged position even then. And yet the attitude which it assumed, like that of the clergy, was distinctly antagonistic to every popular movement. Hostility to Madero, to the forces that attacked Victoriano Huerta, to Alvaro Obregón and to all democratic movements, whatever their origin or their object, invariably sought and found a rallying point in certain wealthy foreign residents. They upheld Diaz, they gave at least their “moral” support to immorality incarnate in Victoriano Huerta, they courted, encouraged and struck up agreements with “coming politicians” of whom they have always a few in waiting, and they maintained friendly intercourse with rebels throughout the country. It may seem as incredible as it was reprehensible, but it is said to be a demonstrable fact, which will subsequently appear evident to all, that this intercourse took on the character of—shall we call it moral guardianship ?—and exposed the fair name of the people of the United States to aspersions merited only by certain of its servants. Even foreign diplomacy has been known to intervene unofficially and importunely on be-half of the discredited candidate of an anti-popular party and to have dangled before the eager eyes of the people’s representatives the lure of quick recognition by a certain foreign power !

Now this aspect of current Mexican history is still a sealed book to those experts who claim to know the rights and wrongs of the subject and are looked up to for information and guidance by the statesmen of their respective countries. And yet it is a theme full of surprises. If a Mexican, spurred by motives analogous to those which stimulated Mr. Fall, endowed with that politician’s perseverance and supplied with the requisite materials, were to set himself to compile a register of those breaches of hospitality—not to call them by a harsher name—he would shed a wholly new light upon Mexico’s international relations and possibly contribute to modify the policy of the watching and waiting Powers who are fitfully groping their way in darkness.

In view of those and other provocations, it is well worth noting that during the period termed “confiscatory” by foreign interventionists the oil companies were doing a flourishing business. President Obregón ‘himself has supplied the following figures, which make it clear that whoever else was feeling the heavy hand of misfortune, the foreign oil companies were thriving : “In the year 1917 the companies exported 42,545,853 barrels of oil; in 1918, 51,768,110; 1919, 77,703,289; 1920, 151,058,257; 1921, January to May inclusive, 76,493,564; probable production for 1921, 190,000,000 barrels.

“Does this steady increase indicate that the Mexican Government has been placing any obstacles in the way of development or that during the Great War it sought to hamper the United States by crippling oil export?’

But the errors, prejudices and bad faith of one party to the present dispute should not be allowed to blind. one to the blunders and shortcomings of the other. Nor would any survey of the origins of the present impassé, however summary, be complete without some account of the grievances of foreign investors. If moral responsibility for the acts of bandits and other criminals cannot be laid on the shoulders of either of the belligerents in a civil war, the functioning of judicial institutions in peace time undoubtedly concerns the constituted Government and forms an essential part of its responsibilities. And on this score one must admit that the complaints uttered against the Mexican tribunals are too often well founded. Neither the legal procedure nor the subsequent sanction attains or comes near to the standard accepted in English-speaking countries. Hence the rooted aversion displayed by so many, Mexicans and foreigners, to carry their claims into one of the law courts. There are instances not a few in which avoidable procrastination has defeated the ends of justice, and others in which a manifest—or what appeared to be a manifest—violation of rights was countenanced or winked at by the authorised administrators of the law. President Obregón has since devoted much time and study to this fundamental question, and among the first fruits of his investigation was a bill amending and simplifying legal procedure. But as yet much remains to be done.

It may not be amiss to offer here a concrete case of real hardship which the present writer has taken the trouble to investigate on the spot. The details he took from the official records.

A few years ago the Yaqui Valley consisted of arid land of which only 3,750 acres had been reclaimed. The rest was not cultivated for lack of water. An Anglo-American Company which has since become wholly Americans entered into a contractual arrangement with the Mexican Government and without any subsidy or even land grant bound itself to construct at a cost of some twelve million dollars (U. S. currency) a system whereby permanent irrigation would be supplied not only to its own holdings but also to the entire area of the Yaqui Valley susceptible of irrigation—approximately 750,000 acres. The Company estimated that with a fair supply of water the district might be made to produce annually some twenty million dollars’ worth of crops and live stock.

On the strength of this calculation those men of English speech went to work, staked their capital, devoted their time and applied their experience and skill to the realisation of this dream of betterment. The incentive was the innate pioneer impulse of the Aryan race coupled with the prospect of making their venture a financial and technical success. One of the first needs of the district was railway communication—and one of the first achievements of the Company was a trans-action with the South Pacific Railway Co. which had for its effect the construction of a line from the port of Guaymas in an easterly direction through the Yaqui Valley, a distance of 154 miles, which in time will form an iron way of 8oo miles down the West Coast, thus closing the present gap in railway communication along the Pacific seaboard from British Columbia to Central America.

The Company also made and maintained 400 miles of roads with over 100 bridges and thus contributed materially to the breaking down of some of the natural partitions which tend to keep Mexican from Mexican and isolate the Republic from the outside world.

The material achievements just enumerated nowise exhausted the task on which these forerunners of the higher civilisation had embarked. Another was, as has been said, irrigation. Lack of water in season is one of the scourges of Mexico. If the country could reckon upon an adequate amount of rainfall at the right periods, it would be a veritable paradise, a granary of the human race. But dry farming under the actual climatic conditions of the Valley is in some cases a lottery which ruins him who buys a ticket and in other cases a sheer impossibility.

Over and above those contractual obligations the Company discharged functions of a most helpful kind which ought properly to have been fulfilled by a State institution. It surveyed the land most carefully, metre by metre, prepared tables classifying each kind of soil such as sandy loam, red loam, red clay, salt loam, etc., determined the exact area of each, listed the crops that will best grow on them in the order of their suitableness and calculated by actual experiment the number of irrigations requisite and the total volume of water that each crop would need on each variety of soil. Over and above all this, its officials gathered and classified a body of precious meteorological data for each day of the year, giving the state of the atmosphere, the temperature, the relative humidity, the velocity and direction of the wind, etc. In possession of these observations for a period of ten years, one can now foretell with such a degree of accuracy when a frost may occur that all danger of damage to the crops from this source has been practically eliminated.

In the eastern section of the Valley cultivation had already increased from 3,750 to 27,000 acres, and was proceeding apace when the depredations of the Yaqui Indians forced the Company to suspend work. During the ten years of Revolution it went on supplying water to all applicants and for a considerable time accepted payment therefor in worthless pa-per currency. It gave its workmen a wage varying from 50 to 75 cents (U. S. currency) a day. Those in truth were lean years.

For thirteen years it has never paid a dividend.

Those services were never properly appreciated by the local authorities. Not only was the Company denied protection against the Yaquis and bandits, but the duly established State government is affirmed to have endeavoured systematically by taxation to despoil them of the land which they owned. The rate of taxation had been fixed by contract for ten years, ending in September, 1919, but in 1916 this basis was rejected by the authorities as inadequate. As soon as a stretch of land became cultivable by irrigation, the Company sold it, as it was bound by contract to do. The result was that it never had more than a small percentage of soil capable of being tilled, the rest being grazing land. Yet the authorities insisted on taxing all its possessions as though they were all under cultivation, whereas only two per cent came under this head.

In the year 1916, it is further alleged, the Governor of Sonora raised the taxes thirty times more than the proper rate. The motive which he adduced was the advisability of splitting up large estates. The Company refused to pay this impost, whereupon the State Government proceeded to sell the property. Here, however, Mr. Lansing interposed a pro-test in the name of the United States Government, adding that the Company’s position was “unassailable in law and in morals.” None the less the contract was cancelled by a Mexican military decree, but the Company was not apprised of this arbitrary act which came to its knowledge quite casually when its representative was handing in the amount of the legal taxes due.

As the Revolution rendered the carrying out of the contract impossible, the Company petitioned that the term fixed be extended in consequence. For Yaquis were overrunning the district, bandits had killed the live stock, railway communications had ceased. But the Carranza Government turned a deaf ear to the request.’ An appeal was thereupon made to the Federal District Court, but this tribunal declared itself incompetent, whereupon the Company inquired what tribunal was competent. But the question was never answered.

That is one instance of the reception accorded to foreign pioneers whose cooperation is one of Mexico’s greatest assets. It afforded General Obregón, who sees things in correct perspective, an opportunity to show the stuff he is made of. He had no sooner acquainted himself with the preposterous increase of taxation and the consequences drawn from the Company’s refusal to pay than he gave orders that the Company be dealt with as justice required. And it received satisfaction forthwith.

The oil companies profess to have a similar dirge to sing and they have chanted it in many keys. But between the two cases there is no parity. The discovery and exploitation of mineral oil in Mexico is from one angle of vision a romance fraught with interest as intense as that which is still aroused by the adventures and misdeeds of Cortes and Pizarro. The history of the origins of that branch of industry if written without bias or reticence by the right kind of chronicler—a man with a spark of genial fire—would yield a human document worthy to outlive most of the “immortal” works of the past hundred years. Like many other discoveries, that of oil in Mexico has brought worry and anxiety to the country that produced it. It may be compared to the gold of the Rhine, a blessing and a curse in one. Many a Mexican fervently wishes oil had never been deposited in his ill-fated fatherland or else that his country were situated on some other Continent; and many a Yankee regrets that the source of this precious liquid is not placed in some region where North Americans are better appreciated or more free to change the laws and constitution congruously with their interests.

One may readily trace the genesis of the waves of critical feeling in Mexico which for long have been angrily beating against the men who first unlocked the mineral treasure house, gave the precious oil to the world and claim to be regarded as benefactors of the race. Like Rhine-gold, oil is power—economical, political, social power—and the concentration of such power in the hands of a few citizens of a foreign Republic in whose national life the political spirit is as dominant as is greed of gold, fills with apprehension a community of people like the Mexicans who in politics are children almost devoid of social coherency and sadly deficient in the self-protecting faculty inherent in most political communities. This feeling is enhanced by the enormous importance attached by the American people and Government not only to the production of oil but to the establishment of such a system of governance in the country where it is found as will suit the varied requirements of those who exploit it. For this is the point on which the dispute between the two parties really hinges.

Mr. E. L. Doheny, an accepted authority in these matters, publicly announced some time ago that the oil supply from Mexico “has come to be regarded as a part of the available petroleum supply essential to meet the demands of our markets. . . . Consideration of this phase of the petroleum situation immediately raises the conjecture as to the probability of this reliance being supported by a definitely declared policy on the part of our Government to encourage and protect its citizens in the lawful acquisition and development in foreign countries of those essential raw products which include petroleum and many others well known to our men of industry.”

This statement is lucid, comprehensive and significant. “Without the continued importation to the United States of the production of the wells of American companies in Mexico,” he goes on to say, “the Shipping Board might just as well plan to use coal on practically all of its fleet after April 1st next; many industries, including railroads of the South and factories of the East, may just as well look forward to reconverting their plants from the use of oil to the use of coal, and the cities of the East, including New York City, that are planning to use fuel oil in lieu of coal for heating purposes may just as well abandon the idea, because the supply of fuel oil for all these needs is not and will not be available from the production of United States oil fields. They are dependent upon uninterrupted supply from Mexico for the present and immediate future.”

“The strained relations between the United States and Mexico can, I think, very well be classified as being of a three-fold nature, all included under the expression, ‘International Obligations.’ ”

Mr. Doheny then goes on to say that the three points of difference between the two Governments are the failure of the Mexican Government (i.e., the Carranza administration) to protect Americans engaged in lawful and peaceful pursuits in the Republic, the failure of the Government to prevent the spread of bolshevism (!) from Mexico to the United States, and its repeated attempts to confiscate valuable properties rightfully acquired by Americans under Mexican law.

Since those significant utterances were penned Carranza and his régime have vanished from the scene and the new head of the Government is redressing grievances, correcting mistakes, returning property wrongfully sequestered and generally administering justice to all with a firm hand. And he is full of hope that all complainants and creditors will be content. This hope, however, is not shared by all his countrymen. What sceptical Mexicans are apprehensive of is lest the foreign elements should be carried by a strong impetus of right not merely to the point of its enforcement but by the vis inertiae far beyond that. Vaulting into the saddle they may alight on the other side and trespass on Mexico’s reserved ground. . . . Asserting their rights they may demand privileges. Insisting on protection they may prescribe the kind of laws by which it should be secured and establish a precedent destructive of Mexican sovereignty. And their reading of recent American history appears to them to bear out this apprehension.

Well grounded or imaginary, this misgiving is a fact and therefore a force to be reckoned with, just as is the belief of many Americans that the Mexicans are incapable of any kind of self-government and therefore ripe for the status of wardship.

The main grievance of English-speaking oil magnates in Mexico turns upon Article 27 of the last Constitution.’ In principle this enactment disqualifies foreigners collectively and individually from acquiring or holding mines, oil wells or land in the Republic unless they renounce in advance their right to appeal to their respective Governments against laws which they may deem unjust or vexatious. It also declares that all minerals—solids, liquid or gaseous—are vested in the nation and consequently that the rights of ownership hitherto conferred by purchase according to law will from the date of the promulgation of the Constitution cease to be attainable by natives or foreigners.

There is, however, another article in the same Constitution which provides that retroactive force shall not be given to these new canons. But it was ignored in some cases by President Carranza, as were the official representations of the State Department in Washington, and the principle of nationalisation was applied in certain decrees which, according to some jurisconsults, he had no power to issue.

The effect of that innovation upon the outlanders who had discovered and exploited petroleum, enriching themselves and to a limited extent benefiting the country in the process, can well be imagined. They held that it was calculated to despoil them of what was theirs by law and equity. It struck at the roots of private property. It violated solemn promises made by spokesmen of the nation. The decrees that embody it were held by many to be illegal. The Constitution which provoked those decrees was stigmatised by certain jurisconsults as a violation of the preceding Constitution and therefore devoid of legal force. The protests from Washington, London and Paris nullified in advance the application of those decrees to American, British and French citizens. But with Carranza these considerations went for nought. He held that oil having acquired a wholly new value the Government in the interests of the nation could readjust the terms of the original grant. Some oil-bearing lands duly purchased he wrested from their rightful owners. Appeals for protection filed by the injured parties in the Supreme Court were left unanswered and all that was vouchsafed these were arguments purporting to show that their interests were not really impaired.