The companies evacuated their properties, continuing court action and efforts at negotiation.
Far more was involved in the Mexican expropriation than the oil properties in Mexico. British, American, and other invest ments in Latin America run into large figures. If such action as that taken in Mexico were to spread, that investment was jeopardized. It is of significance that Bolivia seized an oil prop erty owned by an American oil company. Involved, of course, in the whole situation is the extent to which revolutionary social reform will go in Latin America.
Effect on Oil Production.—After seizure of foreign oil prop erties, Mexico negotiated deals with Germany and other countries whereby oil equipment and other supplies would be exchanged for oil. To all practical purposes, Mexican oil was boycotted (un officially) by the countries whose nationals were involved in the expropriation. This meant the loss of the bulk of its normal ex port trade in oil.
A drop in production amounting to io,000,000bbl. in 1938 did not tell the entire story, for during almost the first three months of that year foreign oil companies were still operating their properties.
The beginning of commercial oil production in Mexico was with the discovery of the famous "Golden Lane," one of the world's greatest known oil fields, in 1910, which within io years placed Mexico second only to the United States in annual oil pro duction. The peak was reached in 1921, after which there was a precipitate decline, with the exhaustion of the Golden Lane and Cacalilao fields, until 1932. A slight increase was shown thereafter largely because of the development of the Poza Rica and El Plan fields. From a production of about 33,00o,000bbl. in 1932, output had increased to nearly 47,000,00obbl. in 1937. Peak production in 1921 was over 193,000,000 barrels.
Normal production of Mexico may be considered 45,000,000 bbl. annually. If the expropriation stands, it may take a long pe riod of years before Mexico again reaches this total. Normally, 6o% of Mexican crude oil and derivatives was exported to the United States and England.
A direct effect of the Mexican expropriation of foreign oil properties and the consequent decline of operations in that coun tiy, was the increased takings by the United States and England of Venezuelan, Colombia and Trinidad crude oil and products. Each of these countries showed a substantial increase in produc tion in 1938, and the fact that the combined increase was only about half the Mexican decrease is explained by reduced demand in the United States because of unfavourable economic conditions.
Contrasting with Mexico's nationalization policy is Venezuela's. Forty per cent of Venezuela's revenues is derived from oil which is developed wholly by American, British, and Dutch interests on concessions held by them. The state, in accordance with ancient Spanish law, reserves to itself the sub-soil rights, and under the terms of the concessions collects from the companies small surface taxes and relatively high royalties, the latter ranging from 10 to 15% of the value of production, depending upon the date the con cessions were given and the location of the wells. No revenues from oil production go to land-owners but they receive compensa tion from the companies for any damages to crops and other minor considerations. It is calculated that in taxes and wages Venezuela receives about 50% of the value of oil taken from its sub-soil.
Venezuelan production reached a new high record in 1938 of 187 million bbl. ; Colombia and Trinidad also scored new high levels with 22,45o,000bbl. and 17,736,00obbl. respectively. In Colombia, oil development is on a concession basis wherein after a specified period of years the properties and improvements revert to the Government or operation is continued by the company on a 50-50 basis with the Government. Principal production in Colombia is carried on by American-Canadian interests, and in Trinidad by British-Dutch and American interests. Peruvian production, which totalled 15,837,00obbl. in 1938, and Ecuadorian production, which totalled 1,561,00obbl., is largely by American-Canadian interests, while in Argentina, which produced 16,936,000bbl. in 1938, there is operation by the Government directly, through the Yacimientos Petroliferos Fiscales, the official producing, refining, and marketing organization which is the major factor of control in the industry, and by foreign oil companies. In the Comodoro Rivadavia fields, in the Argentine Pampa, the country's principal source of petroleum, the Government owns and operates about 470 of the 73o producing wells, the remainder being operated by American and British-Dutch interests.