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Domestic Politics and Foreign Investment: British Development of Mexican Petroleum, 1889–1911

Published online by Cambridge University Press:  11 June 2012

Jonathan C. Brown
Jonathan C. Brown
Affiliation:
Jonathan C. Brown is associate professor of history at the University of Texas at Austin.
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Abstract

Business historians and students of political economy quite often analyze the success of foreign investors in the periphery in terms of the entrepreneur's competitive advantage and of the host country's beneficial economic policies. One cannot explain the extraordinary success of British engineer Sir Weetman Pearson in Mexico's early oil history according to such criteria, however, for his American competitors had experience in the technologically advanced U.S. petroleum industry and should have prevailed. Sir Weetman succeeded because Mexican politicians, pursuing their own internal political interests, willed and nurtured his success.

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Articles
Information
Business History Review , Volume 61 , Issue 3 , Autumn 1987 , pp. 387 - 416
Copyright
Copyright © The President and Fellows of Harvard College 1987

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References

1 Prominent in the literature of foreign investment are Wilkins, Mira, The Emergence of Multinational Enterprise: American Business Abroad from the Colonial Era to 1914 (Cambridge, Mass., 1981)Google Scholar; Kindleberger, Charles P., American Business Abroad: Six Lectures on Direct Investment (New Haven, Conn., 1969)Google Scholar; and Hymer, Stephen, The International Operations of National Firms: A Study of Direct Foreign Investment (Cambridge, Mass., 1976)Google Scholar. For works critical of foreign investment, see Lenin, N., “Imperialism, the Last Stage of Capitalism,” in Imperialism: The State and Revolution (New York, 1926), 6–114Google Scholar; Wallerstein, Immanuel, “The Rise and Future Demise of the World Capitalist System; Concepts for Comparative Analysis,” Comparative Studies in Society and History 16 (1974): 387–415CrossRefGoogle Scholar; Emmanuel, Arghiri, Unequal Exchange: A Study of the Imperialism of Trade, trans. Pearce, Brian (London, 1972)Google Scholar; and Hamilton, Nora, The Limits of State Autonomy: Post-Revolutionary Mexico (Princeton, N.J., 1982)CrossRefGoogle Scholar. For a review of the literature, see Fieldhouse, D. K., “The Multinational: A Critique of a Concept,” in Multinational Enterprise in Historical Perspective, ed. Teichova, Alice, Lévy-Leboyer, Maurice, and Nussbaum, Helga (Cambridge, England, 1986), 9–29Google Scholar. Numerous scholars acknowledge the positive role of economic policies in the development process. See especially Wilkins, Emergence of Multinational Enterprise, 101; Rostow, W. W., The Stages of Economic Growth, 2d ed. (Cambridge, England, 1971), 26Google Scholar; and Rostow, , How It All Began: Origins of the Modern Economy (New York, 1975)Google Scholar, chap. 2.

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3 Pierce served as chairman of the board of the Mexican Central Railway that connected Mexico City, San Luis Potosí, Monterrey, Tampico, and Nuevo Laredo. See the references to the Waters-Pierce Oil Company in Hidy, Ralph W. and Hidy, Muriel E., Pioneering in Big Business, 1882–1911: History of Standard Oil Company (New Jersey) (New York, 1955)Google Scholar. Also see the testimony of Robert H. McNall in United States Supreme Court, Transcript of Record: The Waters-Pierce Oil Company vs. The State of Texas, Oct. term, 1908, no. 356 (Washington, D.C., 1909); and of H. C. Pierce in United States Supreme Court, Transcript of Record, Standard Oil Company, et al. vs. the United States, Oct. term, 1909. 221 U.S. 1 (Washington, D.C., 1910).

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7 Of the importance of patronage, Laurens Ballard Perry writes: “One of the implications of the relationship between the caudillo en jefe [Díaz] and the local caudillos who supported him was that the caudillo en jefe was subject to the recommendations of the local caudillos to name partisans of the latter to positions as they arose.” Perry, , Juárez and Díaz: Machine Politics in Mexico (DeKalb, Ill., 1978), 207Google Scholar. In the banking enterprises of the Terrazas and Creel families of Chihuahua, Mark Wasserman provides an apt illustration of “the conjunction of business and politics.” Wasserman, “Enrique C. Creel,” 650–51.

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9 The Mexican Financier, 18 July 1892, as quoted in Cosío Villegas, et al., Historia moderna de México, 9: El Porfiriato: La vida política interior, pt. 2, 324.

10 These three attorneys were members of the famous científicos. “The most lucrative law practices were in their hands,” Cosío Villegas writes of the científicos, “and no one was able to equal them as promoters of national and foreign businesses.” Cosío Villegas, et al., Historia moderna de México, 9: pt. 2, 752.

11 Ruiz, Ramón Eduardo, The Great Rebellion: Mexico, 1905–1924 (New York, 1980), 51Google Scholar; Cosío Villegas, et al., Historia moderna de México, 9: pt. 1, 396–97; and Vanderwood, Paul J., Disorder and Progress: Bandits, Police and Mexican Development (Lincoln, Nebr., 1981), 112–13Google Scholar, 119–20.

12 Dufoo, Carlos Díaz, México y los capitales extranjeros (Mexico City, 1918), 242Google Scholar; and P. H. Morgan to secretary of state, no. 86, 24 Aug. 1880, Papers of the United States Department of State, Record Group 59. Despatches of United States Ministers to Mexico, 1824–1906, National Archives, Washington, D.C. [hereafter cited as NADS U.S. Ministers].

13 Bernstein, Marvin D., The Mexican Mining Industry, 1890–1950: A Study of the Interaction of Politics, Economics, and Technology (Albany, N.Y., 1964), 52Google Scholar; Knight, Mexican Revolution, 1; 70; and Morgan to secretary' of state, no. 26, 7 June 1880; John Weber to William Hunter, no. 71, 28 Oct. 1880, and no. 72, 11 Dec. 1880, NADS U.S. Ministers. Also see Thorup, Cathryn, “La competencia económica britanica y norteamericana en Mexico (1887–1910); el caso de Weetman Pearson,” Historia Mexicana 31 (April-June 1982): 618Google Scholar, 640, which says that Mexico's pro-British strategy did not begin until after 1900.

14 Limantour, José Yves, Apuntes sobre mi vida pública [1872–1911] (Mexico City, 1965), 84Google Scholar; Great Britain, Foreign Office, Diplomatic and Consular Reports: Mexico, 1907 (London, 1908), 9Google Scholar; Randall, Robert W., “Mexico's Pre-Revolutionary Reckoning with Railroads,” The Americas, 42 (July 1985): 26–27CrossRefGoogle Scholar; and Coatsworth, John H., Growth Against Development: The Economic Impact of Railroads in Porfirian Mexico (DeKalb, Ill., 1981), 45–46Google Scholar.

15 Rippy, Merrill, Oil and the Mexican Revolution (Leiden, 1972), 7–26Google Scholar; Bermúdez, Antonio J., The Mexican National Petroleum Industry: A Case Study in Nationalization (Stanford, Calif., 1963), 2–3Google Scholar: and Bernstein. The Mexican Mining Industry, 11, 18–19, 27–28.

16 Ordóñez, Ezequiel. “El petróleo en México: bosquejo histórico,” Revista Mexicano de Ingeniería y Arquetectura 10 (March 1932): 158Google Scholar. For details of the Doheny's interview with Díaz, see Senate Committee on Foreign Relations, Investigation of Mexican Affairs, 212, 218–19, 225; and Katz, Friedrich, The Secret War in Mexico: Europe, the United States and the Mexican Revolution (Chicago, 1981). 22Google Scholar.

17 Kroeber, Clifton B.. Man, Land, and Water: Mexico's Farmlands Irrigation Policies, 1885–1911 (Chicago, 1981), 22Google Scholar.

18 The following information comes from Spender, J. A., Weetman Pearson: First Viscount Cowdray, 1856–1927 (1930; rpt, New York, 1977)Google Scholar; Young, Desmond, Member for Mexico: A Biography of Weetman Pearson, First Viscount Cowdray (London, 1966)Google Scholar; and Middlemas, Robert Keith, The Master Builders: Thomas Brassey; Sir John Aird; Lord Cowdray; Sir John Norton-Griffiths (London, 1963)Google Scholar.

19 “Memorandum by Lord Cowdray,” 10 May 1915, British Science Museum Library, London, Records of S. Pearson and Sons [hereafter cited as Pearson Records], box A-3; Cosío Villegas, et al., Historia moderna de México, 5: pt. 2, 971.

20 Middlemas, The Master Builders, 171–72, 175, 180; and President Díaz's message to congress, Diario Oficial, 28 Feb. 1889, in Reinsen Whitehouse to secretary of state, no. 268, 28 Feb. 1889, NASD, U.S. Ministers. Spender, Weetman Pearson, 286-90, lists the company's contracts from 1854 to 1926.

21 Middlemas. The Master Builders, 183; and Thorup, “La competencia económica,” 634.

22 Thomas Ryan to secretary of state, no. 239, 7 Feb. 1890, and no. 253. 4 March 1890, NADS, U.S. Ministers.

23 Powell Clayton to secretary of state, no. 1532, 18 Aug. 1902, and no. 1634, 26 Nov. 1902, NADS, U.S. Ministers.

24 Mexican Daily Record, 14 May 1906, in D. E. Thompson to secretary of state, no. 69, 25 May 1906, NADS, U.S. Ministers.

25 As quoted in Young, Member for Mexico, 107–8. On the Tehuantepec railway, see Middlemas, The Master Builders, 194–99.

26 As quoted in Spender, Weetman Pearson, 149–50. Also see E. DeGolyer. “The Petroleum Industry of Mexico,” typescript [c. 1920], file 5220, 18–19, Everette L. DeGolyer, Business and Personal Papers, 1886–1956, Southern Methodist University, Dallas, Everette Lee DeGolyer, Sr., Library [hereafter cited as DeGolyer Papers].

27 J. B. Body to Sir Weetman Pearson, Mexico City, 29 May 1903, 23 June 1905, and Pearson, “Memo for Mr. J. B. Body,” London, 28 April 1908, Pearson Records, box A-4.

28 Body to Pearson, Mexico City, 23 Aug. 1904, and Pearson to Body, London, 26 Jan. 1906, Pearson Records, box A-4.

29 Body to Pearson, Salina Cruz, 29 May 1905, Pearson Records, box A-4.

30 In the 1970s, drillers for Petróleos Mexicanos (Pemex, the national oil company) perforated on- and off- shore from 15,000 to 30,000 feet. Had they lived long enough, Pearson and Body might have been gratified that their initial optimism in southeastern Mexico was borne out. Latin American and Caribbean Oil Report, ed. Cooper, Bryan (London, n.d. [c. 1980]), 136Google Scholar.

31 Body to Pearson, Mexico City, 19 Dec. 1905 and 23 Jan. 1906, Pearson Records, box A–4.

32 Middlemas, The Master Builders, 186, 220, 222; Body to Pearson, Mexico City, 30 July 1908; ibid., 9 Nov. 1905, both Pearson Records, box A–4.

33 “Contrato entre la Secretaría de Fomento y la Compañía S. Pearson & Son, Ltd., 12 May 1906, Record Group 59, Decimal File 812, Mexico, 1910–1929, 812.6363/126, National Archives; and I. H. MacDonald to Major Cassius E. Gillette, 13 Oct. 1916, Pearson Papers, box A–4.

34 Body to Pearson, Mexico City, 8 Jan. 1906, Pearson Records, box A–4.

35 Thomas J. Ryder to Body, Mexico City, 8 April 1906, Pearson Records, box A–4. Purdy went on to become a director of Shell-Mex Petroleum, Ltd., the London holding company, in the 1920s. See The Pipeline, 3:57 (1923): 51.

36 Pearson to Body, London, 1 May 1906, and Body to Pearson, 21 Jan. 1909, Pearson Records, box A–4, and “History: The Mexico Eagle Oil Company, Limited,” Pearson Records, box C–43, file 1.

37 Pearson to Body, London, 3 Dec. 1908, 6 Oct. 1906, and “Memo for Mr. Body,” New York, 21 April 1907, Pearson Records, box A–4.

38 “History: The Mexican Eagle Oil Company.”

39 See especially Chandler, Alfred D. Jr., The Visible Hand: The Managerial Revolution in American Business (Cambridge, Mass., 1977), 321–26Google Scholar; Pratt, Joseph A., The Growth of a Refining Region (Greenwich, Conn., 1980), 34–35Google Scholar; and Melosi, Martin V., Coping with Abundance: Energy and Environment in Industrial America (Philadelphia, Penn., 1985), 40–46Google Scholar.

40 Senate Committee on Foreign Relations, Investigation of Mexican Affairs, 214–16.

41 Alfred D. Chandler, Jr., “Technological and Organizational Underpinnings of Modern Industrial Enterprise: The Dynamics of Competitive Advantage,” in Teichova, et al., Multinational Enterprise, 52.

42 Furber, Percy Norman, I Took Chances: From Windjammers to Jets (Leicester, 1953), 141–42, 145Google Scholar; Guillermo Landa y Escandón to Pearson, Mexico City, 8 June 1910, Pearson Records, box A–4.

43 See correspondence of A. J. Lespinasse to David E. Thompson, Tuxpan, 2 Oct. 1908 to 6 Oct. 1908, no. 1854, National Archives, Washington, D.C., Records of the Department of State, Record Group 59, Numerical and Minor Files of the Department of State, 1906–1910, National Archives [hereafter cited as NADS, Numerical and Minor Files].

44 Body, “Notes for Sir Weetman, “ 15 May 1909, and Pearson, “Memo for Mr. Body,” 9 March 1909, Pearson Records, box A–4. On the relationship between the oilmen and the caudillo Peláez, see Seade, Esperanza Durán de, “Mexico's Relations with the Powers during the Great War“ (D. Phil, thesis, St. Anthony's College, Oxford University, 1980), 283–301Google Scholar.

45 Merrill Griffith to assistant secretary of state, Tampico, 15 Aug. 1908, no. 14453/2, NADS, Numerical and Minor Files; ibid., 6 July 1908, no. 14453; also see The Pipe Line, 3:63 (23 May 1923): 126.

46 Pearson to Henry Clay Pierce, London, 30 Nov. 1907; “Aguila/Waters-Pierce Oil Co. Agreement,” 15 May 1908, both Pearson Records, box C–44, file 7.

47 L. to G. W. [sic], 16 May 1908, Pearson Records, box C–14, file 7.

48 Pearson to Body, London, 23 Dec. 1907; Lord Cowdray, “History of the Fight with the Waters Pierce Oil Co.,” Aug. 1928; and Cowdray, “Private Memo re negotiations with Mr. Clay Pierce,” 8 March 1909, Pearson Records, box C–44, file 7.

49 “Memo to Mr. W. re Agreement with C. P.,” 30 Jan. 1908, L. to H.C.P., 8 Feb. 1908, C. to H.J., 20 Oct. 1909, and L. to Japp, 8 Nov. 1909, Pearson Records, box C–44, file 7.

50 From private Cowdray papers, as quoted in Middlemas, The Master Builders, 216.

51 Ronald MacLeay to Sir Edmund Gray, 18 June 1909, Public Record Office, London, Foreign Office Records, 368–309, no. 25272.

52 Diario Oficial, 4 Feb. 1904 and 1 April 1904, in Clayton to secretary of state, no. 2235, 11 April 1904, NADS, Despatches from U.S. Ministers; Pearson to Dr. M., 16 April 1909, “Summary of Correspondence: Negotiations with W. P. O. Co.,” Pearson Records, box C–44, file 7.

53 As quoted in Gerretson, F. C., History of the Royal Dutch, 4 vols. (Leiden, 1953), 4:261Google Scholar.

54 Ordóñez, “El petróleo en México” (March 1932), 158. Limantour had told Body in 1906 that if Standard Oil increased its influence in Mexico, the government would assist the Pearson group in competing against the American oilmen. Thorup, “La competencia económica,” 633; United States Congress, Senate, Committee on Foreign Relations, Revolutions in Mexico: Hearing Before a Subcommittee of the Committee on Foreign Relations, 62d Cong., 2d sess., 1913, 263–65.

55 Benjamin Ridgely, “A Great Oil Fight in Mexico,” 18 July 1908, no. 11770/2–3, NADS, Numerical and Minor Files.

56 “Extract from Letter to Senor [sic] Guillermo Landa,” 30 July 1909, Pearson Records, box A–4.

57 The Mexican Herald, 23 and 29 Oct. 1908.

58 See contracts dated 26 Nov. 1908, Pearson Records, box C–43, file 2; and document dated 18 Oct. 1908, Archivo General de la Nación, Mexico City, Secretaría de Comunicaciones y Obras Públicas, caja 82/118–1. Also see Philip, George, Oil and Politics in Latin America. Nationalist Movements and State Companies (Cambridge, England, 1982), 13–15CrossRefGoogle Scholar.

59 The Mexican Herald, 3 Nov. 1908, in no. 11770/13–15, NADS, Numerical and Minor Files.

60 Extract from letter to Senor [sic] Guillermo Landa.”

61 Ibid.

62 Tinkle, Lon, Mr. De: A Biography of Everette Lee DeGolyer (Boston, Mass., 1970), 15Google Scholar; E. DeGolyer, “History of the Petroleum Industry in Mexico,” typescript, 11 March 1914, DeGolyer Papers, no. 5347, 10.

63 For a detailed description of the scene at Potrero, see ibid., chap. 3; and Chambers, A. E., “Potrero No. 4: A History of One of Mexico's Earliest and Largest Wells,” Journal of the Institute of Petroleum Technologists 37:9 (1923): 141–64Google Scholar.

64 Oil Weekly 59:11 (28 Nov. 1930): 26; and the comments of Robert Stirling in Chambers, “Potrero No. 4,” 163–64.

65 Spender, Weetman Pearson, 157–58.

66 Body to Cowdray, Mexico City, 28 June 1911, and “History: The Mexican Eagle Oil Company, Limited,” typescript, n.d., Pearson Records, box A–4 and box C–13, file 1; Young, Member for Mexico, 131.

67 Ordóñez, Ezequiel, “El petróleo en México: bosquejo histórico [parte segunda],” Revista Mexicano de Ingeniería y Arquetectura 10:4 (15 April 1932), 193Google Scholar; Pan American Petroleum Corporation, Mexico Petroleum (New York, 1922), 31–32Google Scholar; and Senate Committee on Foreign Relations, Investigation of Mexican Affairs, 230–32, 242.

68 President's message to Congress, Diario Oficial, 26 Feb. 1889, in Reinson Whitehouse to secretary of state, Mexico City, no. 168, 28 Feb. 1889, NADS, Despatches from U.S. Ministers.

69 Charles C. Eberhardt to Robert Bacon, no. 221, 23 Dec. 1905, NADS, Despatches from U.S. Consuls in Mexico City, Mexico, 1822–1906; Durán, “Mexico's Relations with the Powers,” 13; Philip C. Hanna to Bacon, Monterrey, no. 281, 25 July 1906, NADS, Despatches from U.S. Consuls in Monterrey, Mexico, 1849–1906.

70 For recent analyses of the overthrow of Díaz, see Knight, The Mexican Revolution, 1: chaps. 2 and 3; Katz, The Secret War in Mexico, chap. 1; Meyer, Michael C. and Sherman, William L., The Course of Mexican History, 2d ed. (New York, 1983)Google Scholar, chap. 31.

71 See Meyer, Lorenzo, Mexico and the United States in the Oil Controversy, 1917–1942 (Austin, Texas, 1977)Google Scholar; Brown, Jonathan C., “Why the Foreign Oil Companies Shifted Their Production from Mexico to Venezuela,” American Historical Review 90 (April 1985): 362–85CrossRefGoogle Scholar; Gordon, Wendell C., The Expropriation of Foreign-Owned Property in Mexico (1941; rpt., Westport, Conn., 1975)Google Scholar.