740.00112A European War 1939/29679
The Under Secretary of State (Welles) to the Ambassador in Venezuela (Corrigan)
My Dear Ambassador: I have given the most careful study to your letter of March 17 in which you refer to Dr. Parra Pérez’ request regarding the railroad which runs between Caracas and Valencia. It is my understanding that Dr. Parra Pérez has asked us to approve the purchase by the Venezuela Government of this railroad even though free funds are paid to the Germans who own a majority interest. As you know, I am anxious to resolve every doubt in favor of granting any request made by Dr. Parra Pérez. In this case, however, although all of us here in the Department feel that the nationalization of this railroad and the elimination of its undesirable personnel would be highly desirable, we cannot approve its acquisition on the terms proposed by Dr. Parra Pérez.
The difficulty is that the problem is not the narrow one of striking a balance between the evil of leaving the railroad in Axis hands and the evil of supplying foreign exchange to our enemies. Our approval of this transaction would, I believe, constitute a violation of our commitments to hemispheric security. As a signatory to the Rio and Washington Resolutions, this Government is pledged to avoid transactions which will make free foreign exchange available to the aggressor nations. Our approval in this case (with its implicit promise that equipment necessary for the maintenance of the road would be furnished) and the consequent increase of Axis resources, would not differ in essence from a direct remittance of foreign exchange from the United States to Germany in clear contravention of our Inter-American commitments.
A second broad aspect of the problem is that our approval of the proposed transaction would, I believe, undermine all attempts to secure effective economic controls in Venezuela. As you know, the railroad is popularly known as the “German railroad”; its present ownership and personnel are a threat to Venezuelan and hemispheric [Page 833] security; it is a symbol, in a sense, of the kind of enterprise which the American republics have declared to be inimical to their security, and have agreed to purge of Axis influence. For these reasons, you and your staff have energetically sought to bring about the sale of this railroad against blocked funds, and in this effort, you have received the firm support of the Department. For us to reverse our position at this point, and, in effect, to sanction action by the Venezuelan Government which would permit the local agents of the railroad to make foreign exchange available to the Axis, would, I am convinced, irreparably prejudice the integrity of economic controls in Venezuela by furnishing an undesirable precedent that could be exploited by Axis firms as a reason for their being freed from any controls that now exist or may be established.
Finally, I cannot believe that the choice lies inescapably between leaving the railroad in Axis hands and making free funds available to the German owners, for I am confident that both evils can be avoided if the Venezuelan Government is prepared to exercise its sovereign power in order to discharge its Inter-American commitments.
We have not been unmindful of the difficulties to which Dr. Parra Pérez makes reference. Both in the Department’s instruction no. 1732 of February 23, and in Mr. Acheson’s conversation with Dr. Escalante, the possibility of driving down the valuation of the railroad in forced transfer proceedings by the use of the Proclaimed List was suggested for the consideration of the Venezuelan Government. I am enclosing for your information copies of the memorandum which was handed by Mr. Acheson to Dr. Escalante,85 and the memorandum of their conversation.86 We appreciate as well the problem raised by the nominal Spanish ownership. We have faced that problem repeatedly in this country, and have never permitted formal devices involving nationals of friendly countries, or even co-belligerent countries, to prevent our taking whatever steps were required by our security and the security of the hemisphere. Venezuela has pledged herself, through the Rio and Washington Resolutions, to do no less.
I realize that it is a matter of great delicacy and difficulty to reject this request. However, I am confident that if you will present these considerations again to Dr. Parra Pérez, he will understand the impossibility of our taking any other course, and will appreciate as well the imperative necessity for Venezuela’s taking appropriate measures against the railroad.
Believe me, with kindest regards.
Very sincerely yours,