631.003/518

The Minister in Venezuela ( Nicholson ) to the Secretary of State

No. 480

Sir: I have the honor to refer to my telegram No. 67 of October 1, 4 p.m. and to previous correspondence concerning the proposed increases in the Venezuelan customs tariff, and to report more fully concerning my interview with the Minister for Foreign Affairs on October 1.

[Page 973]

Dr. Gil Borges was at pains to repeat his assurances that the proposed tariff increases were not directed against the United States, with which it was a policy of his Government to cultivate friendly relations, nor were they intended to serve as bargaining points in any negotiations for a reciprocal trade agreement between the United States and Venezuela. He appeared to be genuinely concerned as to the effect which the new legislation might have on commercial relations between the two countries and explained that he was continuing his discussions with the Minister of Hacienda in an endeavor to arrive at a compromise which would satisfy the proponents of higher customs duties and at the same time eliminate the principal grounds for objection on the part of the United States. He hoped that these discussions would have proceeded far enough to make a definite reply to my representations early next week.

The Minister stated that from the Venezuelan viewpoint, not only was the balance of trade of this country with the United States unfavorable, but that almost half of the imports into Venezuela from the United States represented supplies of various kinds brought in by the oil companies, which were exempt from customs duties in accordance with the terms of the oil concessions. He said that automobiles were regarded as luxuries because many Venezuelans, including laborers, were paying out more than they could afford for private cars, tires and accessories, and that the streets of Caracas had already reached the saturation point as far as motor vehicles were concerned. Moreover, he said, the Ministry of Finance was determined to utilize every possible source of revenue to enable the country to proceed on its program of economic rehabilitation, and that higher customs duties were regarded as essential to a balanced budget.

It was evident that the Foreign Minister in our conversation was employing arguments supplied in a memorandum left with him by the Minister of Hacienda, a copy of which he promised to send me later for the Legation’s information. Some of his statements in regard to importations by the oil companies appeared of rather doubtful accuracy, and the Commercial Attaché is preparing a digest of data on this subject which he will request Dr. Planchart, Chief of the Commercial Policy Bureau, to deliver to the Foreign Minister. Dr. Planchart is inclined to favor the American position in connection with the imposition of increased customs duties, but the Ministry of Finance and members of his office are not so easy to convince.

In replying to Dr. Gil Borges, I endeavored to show, among other things, that the use of automobiles might be considered an important factor in developing the country when the lack of railways was so obvious; that the great part of Venezuelan products entered the United States free of import duty and that the proposed heavy increases in [Page 974] automobile duties here might be compared to quota or other restrictions on the entry of Venezuelan coffee or cacao in the United States; that the United States appeared to be the only country adversely affected to any extent by the new Venezuelan tariff scale; that the action of Venezuela in raising its customs duties at this time was a disappointing development to those who were working for a reduction of trade barriers in all parts of the world; and that any negotiations which might be undertaken for a Venezuelan-American trade agreement might be rendered very difficult thereby. These and other arguments have also been used by the Commercial Attaché in his conversations with the Minister of Finance and the Chief of the Commercial Policy Bureau of the Foreign Ministry.

At this writing it would appear that the Foreign Minister is endeavoring to do everything possible to meet our views and it is possible that the matter may be discussed in a Cabinet meeting. I am not optimistic as to the possibility of obtaining drastic reductions on the proposed duties affecting all American products but I believe there is some chance of having the duties on passenger cars brought down to a more reasonable level. The Legation will of course, lose no suitable opportunity of continuing its representations on the subject and will keep the Department fully informed as to any change in the situation.

Respectfully yours,

Meredith Nicholson