During his March 4th 1933 inaugural speech, FDR announced his "Good Neighbor" policy towards Latin America. The United States withdrew its troops from Nicaragua in 1933 and Haiti in 1934. The Roosevelt administration also negotiated with the Cardenas government of Mexico in 1938 for compensation to the American oil companies and Royal Dutch Shell, that had their assets seized for the new PEMEX Mexican government owned oil company. The major oil companies also boycotted Mexican crude oil and refused to provide technical assistance. The Mexican oil industry was in the doldrums until the oil crisis of the early 1970s.
In 1938, the US Army was still rather small. They had 137,000 troops in the Army, 12,000 Marines and 100,000 men in the Navy. Mexico had 25.000 troops in their regular army and a very small navy. Both sides had reserves that could triple the size of their army on a short notice, but the United States was in no condition to quickly conquer Mexico. Isolationist sentiment in the USA was rather strong. More importantly, an invasion of Mexico would go against the Roosevelt Administration's Good Neighbor policy. FDR felt is was better to get the Mexican government to compensate the oil companies for the investments they had made, developing the oil industry in Mexico. At the time, Mexico's oil industry was considerably smaller than the oil industry in the United States.