Minister Bowen to the Secretary of State.

No. 265, confidential.]

Sir: In answer to your instructions No: 179 [not printed], of February 16th last, I have the honor to inform you that on-or about the 26th of February I had an informal talk with the minister for foreign affairs. I told him that complaint had been made that Venezuela has not been paying the 30 per cent of the total revenues of the ports of La Guaira and Puerto Cabello, and that his government ought to make some statement about the matter to the nations interested. I handed him a draft statement (a copy of which is inclosed herewith) and advised him to send it to the various legations here, in order that we ministers might send it to our respective governments as an explanation of the course of Venezuela. He thought the idea good, but the next day he told me that the President is very angry at the complaints, and does not see any reason to make any explanation whatsoever about a matter that is beyond criticism. I answered that in my opinion much difficulty would be avoided if Venezuela should meet the complaints now before they are stated officially. He told me that President Castro would not listen to him.

My opinion is that we should either insist that at least 5,400,000 bolivars be set aside annually and paid in monthly installments to the creditor nations, or that, if the terms of the protocols are not respected, Belgian customs officials be put in charge of the said two custom-houses, and be protected while performing their duties there by warships.

I am, etc.,

Herbert W. Bowen.

[Inclosure.]

(Draft of a statement I suggested privately and personally to Mr. Sanabria should be sent to the creditor nations.—H. W. B.)

As there seems to be some misapprehension on the part of several of the creditor nations of Venezuela in regard to what revenues of the ports of La Guaira and Puerto Cabello should constitute the amount out of which the 30 per cent as provided in the Washington protocols should be paid, the Venezuelan Government makes the following statement:

The plenipotentiaries who signed the Washington protocols, having taken into consideration the fact that the average annual incomes of the ports of La Guaira and Puerto Cabello amount to 18,000,000 bolivars, agreed that 30 per cent of the annual incomes of those two ports would be a proper proportion to set aside for the payment of the claims—that is to say, they made their estimate on the normal incomes of those two ports. Venezuela naturally concluded that the creditor nations were satisfied to make that arrangement and would not increase their demands if Venezuela in order to obtain greater revenues for herself adopted measures that would augment the said normal and regular incomes. Consequently she adopted such measures, and they were so carefully devised that the additional revenues were kept absolutely distinct from the said normal and regular revenues. It is impossible to confuse them. One of the additional revenues is a war tax of 30 per cent. That is simply an extra tax beyond the ordinary duties. The other tax is an export tax, and that of course is entirely distinct and apart. Neither of those measures was in the minds of the said plenipotentiaries, and the creditor nations have no right to claim anything under either of them. They are exclusively for Venezuela, who needs them for internal improvements, the support of her army and navy, and the development of her schools and colleges.

Some criticism has also been made in regard to the opening of the port of Tucacas. That, too, was a necessary measure for the Republic to take. Peace being restored, it was the duty of the government to facilitate the delivery of merchandise. With that object in view the port of Tucacas was opened. No important result contrary to the interests of the creditor nations followed. On the contrary, the opening of the new port tends to increase the trade [Page 1006]of Venezuela, and therefore to promote not only her own welfare, but to offer additional securities to her creditors that their claims will be speedily paid.

Venezuela, be it known now once for all, intends to keep good faith with all her creditors, and in order that there may be no further misunderstanding on the part of any of them she now declares that the sum she will annually pay to her creditors will not fall below the amount that formed the bases of the negotiations in Washington—that is to say, 30 per cent of 18,000,000 bolivars, which is 5,400,000 bolivars. She believes the amount will be greater, but she declares that it shall not be less.