# The Mexican Problem (1917)/The "Effectivos" In Mexico

CHAPTER VIII
THE "EFFECTIVOS" IN MEXICO
Neither oil, mineral wealth, nor concentrated land ownership has been responsible for the break-up in Mexico. Outside capital and outside engineers built first-class steel railroads throughout Mexico, opening up her natural resources to the world. Talent enough in Mexico has been developed to operate them with fair efficiency when the rifle bullets are not ringing over the rails.
THE MEN WITH THE "SWING" AND THE "BING"
I was surprised at the high type of Americans directing affairs in the oil fields. They are the big fellows of the physical and mental stamp of our pioneer western railroad builders. They love the life, the climate, the excitement and the opportunity to do things in an expansive way. They must be quick, resourceful, and diplomatic, and they are. The natives admiringly call them the "effectives" the people who do things.
One could readily see that Edward L. Doheny was the driving force of the Mexican Petroleum Company, and he is this whether on the Atlantic or the Pacific, in California or New York; whether planning expansion at Tampico or expressing himself forcefully in Mexico City.
Later I shall write of this remarkable American pioneer, but at present I wish only to say that he and John D. Rockefeller share in common the one transcendent quality that makes a business strong and great. It is said that Rockefeller in his judgment of men never selects a round peg for a square hole. His men always fit their places. In this respect his ​judgment is almost uncanny. Doheny shows the same remarkable quality in his selection of men. Is there a new engineer just located somewhere on the work: Doheny must run across him, ask a couple of questions, learn the correct spelling of his name, and it is all over in two minutes. He will tell General Manager Wylie a little later the seven qualifications of that engineer and his two deficiencies which are to be watched.
And Wylie is the man with the "go" and the "swing" and the "bing." He inspires and fires the whole line. His eye will detect a misplaced culvert on a railroad, a small leakage, or a large wastage. He knows his cost sheets in detail; but Doheny knows the round result in every quarter. No long letters and no correspondence are wanted by these head men. Results only are asked for, and the correspondence is telegraphic at a cost of somewhere between ten thousand and twenty thousand dollars a year.
Americans are not born for position; they make them. The ambitious young man should seek his opportunity near the left-hand of power. The right-hand man of Wylie is Paddleford, but he began on his left as physician. He demanded activity and Wylie sent him down the line "Flick is the boss driller, but you can help in ​detailed reports." The result was Paddleford as General Superintendent, building railroads, pipes lines, and pumping stations.
Captain Green, the local superintendent at Tampico, is rightly titled. He was formerly with our army in the Philippines, where he mastered Spanish, and, therefore, in Mexico he can talk two languages at once—polite Spanish to the court and officials, and forceful English at the same time to the men under him. He is two hundred and fifty pounds of effective dynamite and a jaw that means fight if necessary.
MINTING OIL
The expanding part of the Mexican Petroleum Company's property at the present time is the topping plant at the Tampico terminal of the pipe line, said to be the largest topping plant in the world. Smith, at the head of it, was formerly with the Waters-Pierce refinery. He is several inches over six feet and the Mexicans under him look like children. Of the more than fifty thousand barrels produced daily half goes through the topping plant, which, without impairing the value of the oil fuel, takes a half-dollar's worth of gasolene—wholesale price of distillate at Tampico—right out of the crude oil barrel and at ​ninety per cent profit. This plant should soon be topping all the oil production. It is better than a gold mine so long as gasolene keeps up in price; it is a mine with the gold minted as a by-product. Yet the buyer who transports it, further refines it and makes distribution, gets almost as much more out of it. Doheny believes in division as the proper way to attain results in addition.
Nevertheless, the Mexican Petroleum Company is completing a two-million-dollar refinery at New Orleans, which should soon be in operation.
MINING OR REFINING
And, speaking of oil refining, my mind is still working over the problem of where the wealth from oil in the future is to be, whether from the mining or the refining end.
The Standard Oil people, operating only in American territory and desiring to mine only ten or fifteen per cent of the oil they transport and refine, have taken in dividends, and created in value, more than five billion dollars from the transportation, refining, and marketing of oil. This is a sum five times our recent national debt. It is also the sum of the cost of prosecuting our ​Civil War. It would dig a dozen Panama Canals, and it represents more than one-third of the values that legislation has permitted to remain in the entire transportation system of the United States. But where are the "Coal Oil Johnnies," the original diggers for oil and their early millions?
The Standard Oil Company made its millions where millions are always made, in material service to the widest number of consumers. The "independent" producer in the United States formerly had one main customer. He never had half a dozen people bidding for his oil. The producer of fuel oil to-day has the world for his customer so far as he can reach the world by pipe lines or ships. Still his customer must be a refiner or a fuel oil burner. But it is a wicked waste today to burn the unrefined crude oil from any oil field in the world.
A forty-two gallon barrel of crude Mexican oil is worth only about sixty cents on the Gulf of Mexico. Ten per cent of it is gasolene and there are many Mexican oils from which a good deal more than ten per cent in gasolene can be taken. In the topping plant at Tampico it is separated at a cost of less than one cent a gallon for the gasolene, and the wastage in handling this gallon ​is only one-half of one per cent. Gas from the oil wells heats the oil to a temperature of three hundred and twenty-five degrees, and in the condensation the gasolene is drawn off. Some contracts with the Mexican Petroleum Company have run below sixty cents, but the average received at Tampico for a barrel of oil can be brought up to above ninety cents by the topping plant, which, when finished to top all the oil, will have cost far less than one million dollars. Across the river the Pierce Oil refinery takes in crude oil from the Mexican Petroleum Company and gets two per cent in beautiful paraffin cakes. In all there are thirty-five commercial products in petroleum, and they sub-divide into many more commercial uses.
There is a great future for Mexican oil in the refining business. There is yet more money now in the transportation and refining and merchandising of Mexican oil than there is in the value of the oil itself at the seaboard.
SHIPPING
The Mexican Petroleum Company has put more than twenty millions in cash into development within Mexico, and with its majority owner, the Pan-American Petroleum & ​Transport Company, will soon have a like sum in shipping. Building plans at present under way will round out a fleet of twenty-two ships with two hundred thousand total tonnage, costing about seventeen million dollars, and the whole could be sold to-day, lock, stock, and barrel, completed and uncompleted, for a good deal more than thirty million dollars. There are, besides, five chartered ships abroad promised for the close of the war, bringing the fleet up to twenty-seven ships.
The Mexican Petroleum Company does not own its ocean-going oil carriers, but has put more than three million dollars into refining and storage plants in the United States.
Such is the demand for ships in oil transportation that the Union Oil Company of California is relieving the situation by filling its South American contracts at Tampico instead of Southern California, as the Panama Canal so shortens the shipping distance.
DIVIDENDS
The demands upon the Mexican Petroleum Company for expansion, for increased shipping facilities, for storage, and for refining are so tremendous that in my judgment the stockholders ​ought to be fully informed of the rich possibilities before them and invited to forego all dividends until these can be declared as Standard Oil dividends have always been declared—from overflowing treasuries. Money in oil ships, oil refining, and oil storage facilities will in the end return to the patient holders from twenty-two to fifty per cent per annum. When competition in transportation and refining has lowered this return, Mexican Petroleum stockholders should take their dividends. Meanwhile, the profits will be added to the value of the shares. There is only one place in the world where a gold dollar is worth and is quotable at two gold dollars, and that is in the treasury of a profitably expanding company.