Foreign Relations of the United States, 1955–1957, American Republics: Central and South America, Volume VII

567. Memorandum of a Conversation Between Foreign Minister Otáñez and the Assistant Secretary of State for Inter-American Affairs (Holland), San Francisco, June 24, 1955¹

San Francisco, June 24, 1955

SUBJECT

• Venezuela: Petroleum; Government’s Invading Field of Private Enterprise

I had a conversation with Foreign Minister Otáñez in San Francisco on a number of subjects which are covered in another memorandum.²

I told the Foreign Minister that I would like to discuss the petroleum problem and made more or less the following statements to him.

Venezuela must understand that there is no possible way for the United States to give assurance that the regular attempts to restrict importation of Venezuelan oil will end. On the contrary, we can be sure that every year such an attempt will be made. The Executive branch of the Government has demonstrated that, consistently with its announced policies on trade, it opposes any such restriction. However, the ultimate decision lies in the hands of the Congress and the Executive does not control the Congress. The decisions of the Congress reflect, as they should in any democratic country, the prevailing thought among the people. The fact that thus far restrictions on importations of Venezuelan petroleum have been avoided is not due to the position of the Executive, although that position is well known, but is due, instead, to the fact that significant sectors of public opinion in the United States oppose any such restriction. These sectors include exporters who rely upon the important market for U.S. exports represented by Venezuela, private interests owning investments in Venezuela, and that growing sector of our public opinion which believes in a strong and expanding inter-American trade.

The only really effective way for Venezuela to protect itself against restrictions on its oil exports is to strengthen those sectors in the United States who, whenever the issue is raised, throw their weight against the imposition of restrictions. The only way to retain and intensify the support of these groups is to convince the U.S. exporters that their own market in Venezuela will not be imperiled through Venezuelan trade restrictions; to convince U.S. investors in Venezuela that the Government’s traditional reliance on the private enterprise system will not be abandoned for a policy of competing with or replacing private enterprise. If either of these two changes should occur, the surely foreseeable result will be that U.S. interests favoring restrictions on Venezuelan exports of petroleum will prevail in the next Congress, not because of any increased strength on their part, but because of a weakening of their opposition.

The Foreign Minister said that he fully agreed with everything that I had said; that Venezuela was firmly committed to a policy of reliance upon private enterprise, and that the Government had no intention to replace or compete with private businessmen.

I told the Foreign Minister that this pleased me because rumors had reached me with some insistency that the Government was inclining more toward a policy of invading the field of private enterprise, and that I felt sure that this would inevitably weaken those sectors in the United States who had traditionally supported Venezuela’s position in the Congress. He replied that it might be true that from time to time the Government would undertake the creation of some new enterprise, but that it would do so only when private enterprise itself was unwilling to take the step, and that it would do so always with the intention of divesting itself of the enterprise as soon as it was self-sustaining and private interest demonstrated a willingness to take it over.

I said that this was encouraging and that it was inconsistent with a rumor which had reached me recently to the effect that when a group of private businessmen had proposed to the Government the establishment of a gas distribution system, the Government had refused the permit saying that it intended to establish such a system itself. He showed some confusion at this statement and said that perhaps the Government was unwilling to allow private investors to undertake a service which could not be furnished by them at a profit.

I then told the Foreign Minister that it seemed to me that Venezuela should constantly be on the alert for opportunities to create good will in the United States. I said that if the Government availed itself of such opportunities as might present themselves and if he would give me the necessary information, it would give the Department much pleasure to attempt to see that proper publicity were given. I said that, for example, if he could give me accurate information regarding the reported investment recently in Peru by the Venezuelan businessmen we would try to publicize that. I pointed out that Venezuela was known throughout Latin America as an exceedingly prosperous country and said that if it could make a gesture of extending aid to some other less fortunately situated country, that, too, could be made the basis for favorable publicity. I suggested that it might be possible for the Venezuelan Government to find some proper means for extending aid to Guatemala. He replied that the Government had, in fact, sent petroleum experts to Guatemala in order to assist the latter in its drafting of a petroleum code. He agreed to send me further information on this. He added that Venezuela had under study at the time a loan to the Haitian Government for the purpose of establishing air fields. I said that this, likewise, would be a good thing for us to publicize here.

I told him that the reserves of capital and trained technicians available to any government were invariably far less than those which private enterprise could make available. I pointed out that when a government establishes a business, it invariably means freezing a certain amount of the government’s available capital and likewise tying up a portion of its limited reserves of technical people. On the other hand, if the government lends money to private enterprise to establish a business, that money is repaid and may be utilized anew for the establishment of another business through a second loan to other private investors. Such a policy has the additional advantage of attracting private capital to complement that supplied by the government and of utilizing technical people drawn from private industry rather than burdening the limited reserves of such people accessible to the government. I asked whether the Government of Venezuela had ever considered the establishment of a bank which would lend investment capital to its own citizens for the establishment of new enterprises rather than using its capital to establish those businesses itself. He said that Venezuela has experimented with a development corporation; that it had been a failure, but that its failure was in his opinion due to the fact that the corporation had tried to play the role of owner and operator and that no governmental institution was capable of doing that efficiently. He said that he would give further thought to the idea of loans to Venezuelan businessmen for these purposes.

At the conclusion of the conversation, I believe there was no question in the Foreign Minister’s mind as to our concern about the recent trend in Venezuela, and that he fully understands our fears as to the repercussions that it might have on their petroleum problem. The conversation was cordial and the Foreign Minister professed to agree fully with everything that I told him.

1. Source: Department of State, Central Files, 831.2553/6–2455. Confidential. Drafted by Holland. Otáñez and Holland were attending the Special Tenth Anniversary Session of the United Nations.
2. Two other memoranda of conversation are dated June 24. One recorded a conversation on atomic agreements and loan and technical aid programs. (Ibid., 611.3197/6–2455) The other concerned the residence in Puerto Rico of exiled opposition leader, Romulo Betancourt. (Ibid., 731.00/6–2455)