The Mexican Land and Petroleum Laws

February 8, 1926

Report Outline
Foreign Investments in Mexico
United States-Mexican Commission
Statement of Mexican Position
Provisions of New Mexican Laws

The recent promulgation by the Mexican Government of two land and petroleum laws affecting the rights of foreigners has involved the United States Government in a renewed effort to define and substantiate American property rights in Mexico. The new petroleum law declares that the products of the subsoil are the property of the Mexican nation, no matter to whom the surface land itself may belong. The land law binds foreigners owning property in Mexico not to invoke the protection of their own governments in case of dispute. These laws are held by the United States Government to be confiscator if retroactive. The dispute really centers around the question as to whether or not it is the intention of the Mexican Government to interpret and execute these laws in a retroactive manner. Now that the laws have been promulgated, it only remains for the President to issue regulations regarding their interpretation and execution. This leaves President Calls a final opportunity to reconcile the American and Mexican attitudes.

Past Course of Mexican-American Dispute

The controversy between the two countries as to American property rights in Mexico dates back to May 1, 1917 when the Carr Anza Government adopted the existing Mexican Constitution. In Article 27 of that Constitution Mexico declared for the first time that, regardless of the ownership of any given tract of land, the oil and mineral deposits beneath the surface belonged to the nation. This was a radical departure from the policy which had dictated the various preceding laws and which had enabled and encouraged foreigners to explore and exploit the mineral resources of the country. The question as to whether Article 27 was to be interpreted as being retroactive immediately came up and recourse was had by several American oil companies to the Mexican courts. Meanwhile on February 10, 1918, the Carranza Government aggravated the situation by imposing heavy taxes on petroleum lands and on contracts and royalties and exacted license fees for new drilling and explorations. The Supreme Court of Mexico, however, took the side of the oil companies and upheld all their rights which had been acquired prior to May 1, 1917. Finally in September 1922 President Oberon further clarified the situation by declaring that Article 27 was non-retroactive. The Mexican Government at that time had not been recognized by the United States but on the basis of this declaration a United States - Mexican Commission was appointed and convened in Mexico City on May 14, 1923, to go into all questions in dispute between the two countries. This commission composed of two prominent Mexicans and two prominent Americans sat until August 15, by which time all the differences between the two governments had been satisfactorily cleared up. As an immediate result of this conference the United States Government, on August 31, 1923, recognized the Mexican Government under President Oberon.

Foreign corporations were not entirely satisfied with the results of the conference and maintained that the attitude of the Mexican Government as evidenced by Article 27 was ultimately confiscatory. Further negotiations were then instituted between the Mexican Government and the foreign corporations themselves, grouped as the Association of Producers in Mexico. The Mexican Treasury Department was able to announce on October 15, 1924, that an amicable agreement had finally been reached between the Government and the producers on all points of controversy.

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