611.3131/91
The Chargé in Venezuela ( Villard ) to the Secretary of State
[Received March 2.]
Sir: I have the honor to refer to the Department’s instruction No. 153 of February 16, 1937 enclosing a set of general provisions to be discussed with the appropriate officials of the Venezuelan Government as a basis for a trade agreement. As reported in my telegram No. 16 of February 23, 6 p.m.9 conversations on the subject were initiated in the Foreign Office on that day, at which time I made it clear that the proposed general provisions were of a tentative nature and that my Government might desire to modify them at a later stage of the discussions.
My telegram No. 18 of February 25, 3 p.m.9 reported that the Foreign Minister had told me that the general provisions would be taken up at a cabinet meeting on March 5 and that he had expressed a strong hope that negotiations on Schedules I and II might commence at an early date. Dr. Gil Borges stated that he was anxious to proceed as rapidly as possible with the discussions and that he was circularizing members of the new cabinet with copies of the general provisions in order that they might be in a position to express their views on the subject at the meeting on March 5. He also proposed to have a study made of the provisions by the Counselor of the Foreign Office, Dr. Juan José Mendoza, and to go over the matter within the next few days with the new Minister of Hacienda, Dr. Cristóbal Mendoza. The two Dr. Mendozas are brothers, and both are personal friends of Dr. Gil Borges.
I told the Foreign Minister that so far no public announcement had been made in the United States of the proposed agreement and that I did not know whether tentative schedules were available for transmission [Page 758] to his Government as yet. Nevertheless, he said he hoped that some indication of the schedules could soon be drawn up, in order that conversations on them and on the general provisions might proceed simultaneously. I may observe confidentially in this connection that if the schedules can be introduced before the new Minister of Hacienda is influenced by certain extreme nationalist elements in his department, the prospects for success will be greatly enhanced.
In response to the Department’s request for an expression of my views as to the desirability of requesting a binding of Venezuelan national internal taxes on cigarettes, I believe that such a request might well be included in the trade agreement negotiations. When the present high internal revenue tax on cigarettes was adopted by the Venezuelan Government, the Legation was given to understand that the customs import duties on American cigarettes might later be reduced “for justifiable reasons,” thus bringing the total cost of such products down to the previous level. While the Venezuelan Government would no doubt consider cigarettes to be one of the products on which duty reductions might be granted in the event of a trade agreement with the United States, there is nothing to prevent a subsequent further increase in the internal revenue tax which would render negative the advantages derived in a trade agreement. As the financial policies of the Ministry of Hacienda are subject to change without notice, a binding of the present internal tax would appear desirable if such can be obtained without undue administrative difficulty in Venezuela.
I also believe it would be desirable to add to Article IX a clause as suggested by the Department which would insure equitable treatment to either party with respect to Government purchases of foreign products other than purchases made by a Government monopoly or licensed agency. Most of the official purchases made by Venezuela are undertaken directly by the Government rather than by a Government monopoly or agency. I do not think there would be any difficulty in obtaining agreement to the insertion or addition of such a clause.
In connection with the question of petroleum, representatives of the Standard Oil of New Jersey have approached me for the second time with an inquiry as to the prospects for a trade agreement with Venezuela, Major Thomas Armstrong of the New York office called today with Mr. Robert Wells, recently assigned to work in Venezuela, and stated that his company was naturally perturbed at the proposal in the United States Congress to double the excise taxes on petroleum or petroleum products. He said that the independent oil companies appeared to have strong support in their backing of this measure, while for political reasons it would be “hopeless” for the Standard Oil or other large interests to plead against it.
[Page 759]Major Armstrong added that he proposed to point out to the Foreign Minister the danger to Venezuela in any proposal of this kind, and to urge that the matter of petroleum be given foremost consideration in case negotiations took place for a trade agreement. He said that he was going to inform the Foreign Minister that in case the excise taxes were raised in the United States his company would have to curtail production and cease shipping its products as formerly to American ports.
Respectfully yours,