Minister Bowen to the Secretary of State.

No. 274.]

Sir: I have the honor to inform you it will probably be July before all the awards will have been made. I will then furnish you with a careful report and estimate about the amounts that have been paid and that remain to be paid and the length of time it will take to conclude the payment.

Owing to the extra duties that Venezuela has imposed on exports and imports since the protocols were signed, the income of the two custom-houses that have to provide the money to pay off the awards is likely to decrease.

Yesterday I had another talk with the minister for foreign affairs about Venezuela’s obligations to the creditor nations, and I left with him a memorandum (a copy of which I inclose herewith) of my views, and he promised to submit it to President Castro. I think it is a fair statement of the facts and of what may be justly and properly expected of Venezuela.

I am, etc.,

Herbert W. Bowen.
[Inclosure.]

Minister Bowen to the Minister for Foreign Affairs.

memorandum.

On January 27, 1903, it was agreed that Venezuela would pay 30 per cent of the “total income” of the customs houses at La Guaira and Puerto Cabello to the creditor nations and that the said 30 per cent should be absolute, unchangeable, and not diminished by any previous or subsequent agreements affecting the said custom-houses. It was estimated by Venezuela that the average yearly payment would amount to 5,400,000 bolivars.

That agreement and that estimate having been made in good faith, the creditor nations naturally expected that Venezuela would not adopt new tariff measures until after their claims had been paid; but she did adopt new tariff measures. She increased her duties on imports by 30 per cent and imposed some heavy duties on exports.

Furthermore, she decided to interpret the words “total imports” as meaning the income she derives solely from the old duties that existed at the time the said agreement was made, and not the entire income she obtains from all the duties, new and old. Thirty per cent of [Page 1009]those old duties is all, she claims, that she is obliged to pay. The first year they amounted to 5,084,577 bolivars and 50 centimos, which is less than the estimate by 315,422 bolivars and 50 centimos, and this next year they are expected to fall considerably below 5,000,000 bolivars. The decrease is of course the natural result of increasing the duties.

It is clear, therefore, that the new tariff measures have increased Venezuela’s share of the income of the said two ports. One of the main objects of the agreement, consequently, has been ignored by Venezuela, and that was to establish and maintain the proportion of the total receipts that should be paid to the creditor nations. No permission was given in that agreement to Venezuela to alter that proportion. On the contrary, it contains a stipulation that the proportion, which was fixed at 30 per cent, should remain absolute and unchangeable. Therefore, the creditor nations are entitled to 30 per cent of the total income of the said two ports, and the plain, indisputable meaning of the words “total income” is the entire income, and not the part of it that the old tariff produces.

In other words, under and by virtue of the agreement the creditor nations are entitled to 30 per cent of all the duties, export and import, ordinary and extraordinary, new and old, that are collected in the custom-houses of the said two ports.

It may of course be urged on behalf of Venezuela that when the protocols were signed the creditor nations had practically decided that they would be satisfied with the payment of the sum they had in mind, which was 5,400,000 bolivars; but unless Venezuela offers to guarantee the payment of that amount and induces the creditor nations to accept that offer the claim may be made by the creditor nations that Venezuela is not carrying out her undertaking, and that consequently Belgian officials must be placed in charge of the said customhouses until the liabilities of Venezuela shall have been duly discharged, and that claim would undoubtedly be strengthened by the assertion of the fact that the new custom-house at Tucacas reduces the income of the custom-house at Puerto Cabello by from 15 to 20 per cent.

In view of all the circumstances the suggestion that Venezuela should guarantee the payment of 5,400,000 bolivars seems likely to remove, if accepted, all cause of dispute and to settle the question of payment satisfactorily and honorably.

Herbert W. Bowen.