The Ambassador in Venezuela ( Corrigan ) to the Secretary of State

No. 3923

Sir: I have the honor to refer to the Department’s Instruction No. 157 [1571] of December 12, 194259 and to report the following:

Careful consideration has been given by the Embassy to the views of the Department expressed in the instruction under reference, and a number of conferences on the subject have been held with the Venezuelan authorities. The crux of these discussions has been the status of sales contracts negotiated by Venezuelan exporters with American importers prior to the establishment of minimum export prices by the Venezuelan Executive Decree of November 3, 1941. Incident to this question is the dispute as to quantities of coffee actually shipped by Venezuela in the 1941–1942 coffee year.

According to final Venezuelan official figures, the number of bags (60 kilograms) exported by Venezuela to the United States in the 1941–1942 quota year amounted to 527,216 (See December 1942 issue of “Revista del Instituto Nacional del Café”, page No. 53), which represents an excess of 75,689 bags over its quota of 431,527. According to the Department’s Instruction under reference, receipts in the United States of Venezuelan coffee for this period totalled 430,449 bags, or 1,078 short of its quota.

It has been impossible at this end to determine the reason for [Page 815] this marked discrepancy; it might have been caused by loss of shipments at sea, or divergent statistical methods used by the respective export and import authorities. Whatever the cause, it would seem that this question might be clarified, and the methods of determining effective quota shipments settled through the medium of the Inter-American Coffee Board.

With respect to the status of pre-existing contracts, it appears that the Venezuelan Constitution expressly prohibits the retroactive application of laws, (except with respect to questions of procedure, and with respect to Laws reducing the penalty for an offense, which are given immediate application). However, the Minister of Finance,60 with whom this question was discussed, continues to maintain that the restrictive measures to which Venezuelan coffee exporters were subjected in 1941 (Executive Decree of February 18, 1941 requiring export licenses, and Executive Decree of November 3, 1941 establishing minimum prices for export), confronted them with a force majeure situation which would justify non-fulfilment of preexisting contracts, in spite of the constitutional provision above referred to. Dr. Machado, the Finance Minister, admitted that there were arguments on the other side as well, based on the desirability of maintaining the bona fides of contracts, and good-will between the respective national parties.

He suggested, therefore, that this question of the pre-existing contracts be submitted to arbitration. The question of arbitration was then discussed with Sr. De. Tovar, Director of the Instituto Nacional del Café, who concurred in Dr. Machado’s proposal and also believed that the individual exporters concerned would likewise accept the idea. Sr. De. Tovar will consult the exporters to obtain their reactions, and will advise the Embassy of the results. The proposal is: that the Coffee Institute, in agreement with the Venezuelan exporters concerned, should appoint one arbitrator, the American coffee importers involved in such contracts to appoint an arbitrator on their side, and these two to select a third as chairman, the meeting to be held in New York, the decision of the arbitrators to be final and accepted without recourse by both sides; any expense involved in the arbitration to be borne equally by the two sides.

If this proposal is acceptable to the American importers concerned and they are prepared to act upon it, the Department is requested to advise the Embassy as promptly as possible, when steps will be taken at once to effect the appointment of the Venezuelan arbitrator, through the Coffee Institute in order that the arbitration may take place without further delay.

Respectfully yours,

Frank P. Corrigan
  1. Not printed; it indicated that Venezuela’s coffee quota in the 1941–42 quota year was 431,527 bags of which only 430,449 bags were shipped (561.333D3/1437a).
  2. Alfredo Machado Hernandez.