812.5045/494

Mr. F. C. Pannill of the Standard Oil Company of New Jersey to the Chief of the Division of the American Republics (Duggan)

Dear Mr. Duggan: You will recall that the general strike of petroleum workers in Mexico, which became effective late in May and involved impossible demands, was suspended on June 9; and that the Board of Arbitration and Conciliation, having classified the strike as an economic one, named a Commission of Experts to investigate and report on the question of whether or not the economic position of the oil companies would admit of meeting the demands of the workers.

On August 3, 1937 the Commission of Experts handed down their conclusions and recommendations to the Board of Arbitration.

The findings and recommendations are of such an arbitrary and impossible nature as that the oil companies operating in Mexico will be forced to cease operations if the Board makes a favorable award based on the Commission’s recommendations. The companies willingly submitted information and disclosed their records to the Commission but the findings are so far removed from the true facts as to constitute absurdities. In other words, it is apparent that the findings of the Commission are not true findings but are clearly arbitrary and distorted without regard to the facts.

[Page 663]

The main findings of the Commission of Experts are as follows:

(1)
The principal oil companies operating in Mexico form part of large North American or English economic units.
(2)
Interests of the oil companies foreign to and sometimes even opposed to national interests.
(3)
Companies have only left in Mexico salaries and taxes and never co-operated in social progress of country.
(4)
Companies have obtained enormous profit and invested capital recovered over ten years ago.
(5)
Oil interests have influenced national and international politics.
(6)
Diminution in production since 1921 due to failure to discover new fields and possibly also determined by policy of companies.
(7)
In view of virtual exhaustion of all fields except Poza Rica and El Plan, discovery of new reserves now critical national problem.
(8)
Sixty per cent of Mexican production exported to England and the United States.
(9)
Salaries of oil workers inferior to mining and railway workers and reduced over 16 per cent during past three years, compared to cost of living.
(10)
Real wages of workers are limited while workers’ wages in United States increased 8 per cent in last three years.
(11)
Company books show export prices always lower than prices shown by recognized publications which alleged represent true market values.
(12)
Domestic prices in Mexico higher than similar prices abroad.
(13)
Domestic prices of gas oil 172%; kerosene 341%; gasoline 134%, and lubricants 350% higher than sales abroad.
(14)
Domestic prices so high as to hamper national development.
(15)
Average profits 1934 to 1936—79,000,000 pesos representing 34 per cent on invested capital as compared six per cent limited states in 1935; other comparisons show oil industry states far less prosperous than Mexico.
(16)
Financial situation of oil companies so extraordinarily prosperous that they can easily meet the workers’ increased demands up to annual amount of 26,000,000 pesos.

The main points of recommendation by the Commission of Experts are as follows:

(1)
Appointment of permanent mixed commission formed by two representatives of labor, two representatives of companies and one of government to decide interpretation of collective contracts, draft regulations, settlement seniority lists, etc.
(2)
Payment by companies of special corps of government labor inspectors and certain medical and other special inspectors.
(3)
Ambitious programme for cultural, educational and sports activities by employees.
(4)
Fixation of confidential posts.
(5)
Programme with view replacement all foreign technical staff within two years, involving the immediate employment of Mexican trainees for every foreign technician.
(6)
Higher technical education in Mexico or abroad at Companies’ expense for limited number of employees or their sons.
(7)
Rigid application of seniority rule except for confidential posts.
(8)
Provision of houses for all workers even in towns where staff exceeds one hundred and, failing such housing provision, interim payment of allowances of one peso to one peso and a half, dependent on wage.
(9)
Sale of all oil products to employees at ten per cent discount.
(10)
Rigid application of exclusion clause.
(11)
Forty hour week, five day basis.
(12)
Fondo de Ahorros, ten per cent and six per cent interest.
(13)
Twenty one days furlough per annum up to ten years’ service, and thirty days thereafter.
(14)
In the event of termination of contract, payment three months plus twenty days’ salary for each year of service.
(15)
Companies to spend additional sum of one million pesos per annum on medical services, independent of sum required to improve present medical facilities.
(16)
Eighty per cent wages payable during non-professional illness over four months.
(17)
Life insurance policy for each worker, two thousand pesos.
(18)
Pensions varying from 65 to 85 per cent after twenty-five years’ service to employees over fifty years old.
(19)
Minimum daily wages, five pesos throughout the Republic.
(20)
One hundred per cent strike pay.
(21)
Average 20 per cent increase on wage scale.

From the foregoing it may be readily seen that if favorable award is made by the Board of Arbitration and Conciliation on the report of the Commission of Experts, no basis will be left upon which an agreement may be reached whereby the oil industry in Mexico, as today constituted, could continue to exist.

As you have perhaps noticed from the press dispatches of today, the companies have filed their answer to the report of the Commission. It is now planned that the Mexico City managers of the companies will arrive in New York early next week to make a full report to their principals and later present the situation to the State Department. To the latter end, our Mr. Thomas R. Armstrong has today arranged for an appointment with Mr. Welles for 11 A.M. Wednesday, August 18, at which time the status of the companies will be fully disclosed. In the meantime, I felt that you would be glad to have this preliminary report of the Commission’s findings and recommendations.

With kind regards, I am

Sincerely yours,

F. C. Pannill