Memorandum of Conversation, by Mr. Livingston Satterthwaite of the Division of the American Republics

Participants: Dr. Manrique Pacanins, Venezuelan Attorney General
Mr. Bonsal13
Mr. Walmsley14
Mr. Satterthwaite

Dr. Manrique Pacanins called at Mr. Bonsal’s invitation. He said that he was here for reasons of health and not officially, but that he was taking advantage of his stay here to renew acquaintances with various members of the Government and to meet others.

Dr. Manrique Pacanins said that it had been for sometime the desire of the Venezuelan Government to establish closer and sounder relationships with the oil companies which would give the Venezuelan Government a greater participation in the profits of the industry, at the same time establishing a set of operating and tax conditions which [Page 744] would be just and fair to the industry. He said that such negotiations were proceeding on an informal basis between him and the representatives of the various companies for some time but that no solution had yet been reached. The concessions under which the companies operate have been obtained over a period of years and on the basis of various petroleum laws. They vary greatly from each other. Royalty and tax rates are not uniform nor are exonerations from import duties on materials needed. Dr. Manrique Pacanins has been endeavoring to secure the agreement of the companies to a new basic petroleum law, and new contracts for the companies, which would establish as far as possible uniform legal and fiscal conditions for all of the companies and for all of the concessions which they hold. In some cases, the new contracts would be less favorable than the old contracts and in some cases, more favorable. Dr. Manrique Pacanins said, however, that the companies, while being extremely affable and full of protestations of a desire to cooperate, continue to insist on taking a legalistic approach rather than a broad approach to the problem. For example, Mr. Lineham [Linam?], representing the Standard Oil of New Jersey, agreed to suspend court actions on important matters pending the outcome of the negotiations and Dr. Manrique Pacanins had so advised the President.15 He learned subsequently, however, that the Standard Oil Company had presented an important case to the Supreme Court for decision without mentioning this fact to him.

The essential reason why the negotiations have not met with success has been that the companies do not wish to give up any of the so-called rights which they have acquired in the past, particularly under the Gómez16 regime. Dr. Manrique Pacanins believes that some of the rights the companies enjoyed would not stand a test in the courts—he referred in this instance to one or two cases in which the oil companies had been required to pay large sums of back taxes.… The Government believes that under proper relationships the oil companies can benefit the country greatly, and the country the oil companies, but that a satisfactory agreement can only be worked out in a friendly atmosphere based on a clear understanding of and sympathy for each other’s problems. If the companies do not recognize their social and economic responsibilities and take a broad view of the problem, informal negotiations lead nowhere and then court action is the only alternative.

Mr. Bonsal said that while this is a problem between the Government of Venezuela and the companies, he would be untruthful if he said this Government had no interest in it.

  1. Philip W. Bonsal, Chief of the Division of the American Republics.
  2. Walter N. Walmsley, Jr., Assistant Chief of the Division of the American Republics.
  3. Isaias Medina Angarita.
  4. Juan Vicente Gmez served during the period 19091935 as either President or Chief of Army.