611.3131/104: Telegram
The Minister in Venezuela ( Nicholson ) to the Secretary of State
[Received 9:25 p.m.]
64. Your No. 33, May 20, 7 p.m.13 In a protracted discussion yesterday the Foreign Minister raised so many objections to the substance of the reciprocal trade agreement as presented by the Department that I now doubt seriously whether such an agreement can be negotiated with Venezuela. I do not believe that he has any clear idea as yet as to the form he would like the agreement to take and he admitted that he had not made much progress in working out an alternate draft or list of comments in regard to the proposed general provisions.
The Foreign Minister stated that there were two main problems which concerned Venezuela, namely, petroleum and the question of foreign exchange. He pointed out that the recent substantial appreciation in the exchange rate of the bolivar relative to the dollar had made it much easier for American exporters to sell goods to Venezuela and I gathered that he was therefore disinclined to contemplate material reductions in import duties at this time. He said that he was still carrying on conversations with the Minister of Hacienda on the subject but it is my impression that as long as Venezuela’s financial policy remains in its present undefined state it will be impossible to include any reference to foreign exchange in a trade agreement.
The Minister also referred to the 30% surtax on importations from the Colonial Antilles which he said could not be abolished and which raised the problem of Puerto Rico and the Virgin Islands. He furthermore qualified his recent assurances with regard to the unconditional most-favored-nation clause by stating that the United States had been formally granted the preferential treatment following the Legation’s representations last December and that it would be unnecessary to embody any reference thereto in a trade agreement. His additional statement that Venezuela could not afford to have other countries claim similar treatment under existing covenants leads me to believe that he has so far reversed his position as to be unwilling [Page 770] to mention unconditional most-favored-nation treatment in any agreement with the United States.
With respect to tariff reductions, the Minister stated that he could perceive no material favors which the United States could grant to the commerce of Venezuela and he displayed considerable coolness to the idea of schedules annexed to a trade agreement granting specific reductions on a long list of commodities unilaterally presented by the United States. When asked frankly whether his friends would be interested in some concession on petroleum he replied in the negative stating that Venezuelan exports of petroleum went principally to the Netherlands West Indies and that what happened to them subsequently concerned the producing companies and not the Venezuelan Government. All these differences he said were difficult to reconcile [apparent omission] form to be embodied in a trade agreement especially as he wished such an agreement to conform to a general revision of Venezuela’s commercial treaties which is now under contemplation.
It was suggested to the Foreign Minister that if the reciprocal agreement proposed by the Department was unacceptable to his Government it might now be advisable to make a candid statement to that effect but he declined to do so until he had studied the possibilities of an alternate draft. From our conversations on the subject I am inclined to think that his views as to the latter envisage merely a brief instrument of two or three articles in the form of a modus vivendi or exchange of notes “regulating the commercial relations between the two countries” possibly on the lines of the agreement concluded with France last August. He still promises to submit an alternate draft at the Embassy.
It is discouraging to realize from the foregoing that ever since the draft general provisions were presented the eagerness of the Venezuelan Government to conclude a trade agreement with the United States has steadily diminished. Although the Foreign Minister has been fully aware of the scope and form of the reciprocal agreements previously negotiated by the United States, actual examination of the proposed provisions particularly the article on foreign exchange coupled with recent developments in relation to the oil companies and the exchange rate of the bolivar has apparently brought about a complete change in attitude. Difficulties of the situation are enhanced by the lack of familiarity with the subject on the part of new Cabinet ministers and by the fact that the conduct of negotiations rests solely with the overburdened Foreign Minister. The latter appreciated the position of the Legation in this matter and is instructing the Venezuelan Minister in Washington to explain the situation to the Department. [Page 771] I would suggest that the Department go into the subject fully with Doctor Escalante.
- This telegram requested information as to comments of the Minister for Foreign Affairs regarding the general provisions (611.3131/101).↩