840.51 Frozen Credits/10811

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

No. 4502

Subject: Investment in Venezuelan Government Securities of PL Funds Frozen in Venezuelan Banks.

Sir: I have the honor to refer to the Department’s Airgram No. 418 of March 4, 8:00 p.m., and the Embassy’s reply by Confidential Despatch No. 4119 of March 15, 1943, both in relation to the above subject.

In a conversation this week between Mr. Groves, of the Embassy Staff, and Dr. Uslar Pietri, Minister of Hacienda, the latter brought up this question and asked what Washington’s attitude might be. He pointed out that the Venezuelan Government was anxious to absorb these especially frozen funds of Proclaimed List firms now deposited with various local commercial banks, on the ground that the volume of bank deposits in the country would thereby be reduced with a proportionate reduction in the inflationary influence inherent in increasing deposits. This is the same argument referred to in the Embassy’s Despatch No. 4119 (page 2). Dr. Uslar estimated the volume of such especially frozen sums at roughly Bs. 10,000,000, or say, $3,000,000.

In the discussion which followed, which indicates that the Venezuelan authorities, of course, would freeze the interest payments on any such investments, together with principle in case of repayment, Mr. Groves told Dr. Uslar that—for his part—he felt his desire was not unreasonable, since there would be some obvious advantage derived by the Venezuelan Government while the Proclaimed List owner of the funds would obtain an appreciable advantage only through the increase in earned income presumably realizable after the War. Dr. Uslar was assured that his inquiry would be transmitted to Washington for comment by the appropriate authorities.

The only Venezuelan Government securities now available for such investment are two issues of short term (six and nine months) 4½% Treasury bills, which were put out some months ago in an aggregate amount of about Bs. 9,000,000. Dr. Uslar stated that the further issue of similar securities will be authorized by Congress for emission during the current fiscal year. It is in these forthcoming issues that the Government would like to place the frozen funds here in question.

While it seems quite probable that the Proclaimed List owners of the frozen funds would welcome the investment of these funds in the Government securities, as the Department suggests in its Airgram No. 418 mentioned above, nevertheless it is believed that the Government is justified in its own expressed desire to see these funds more effectively immobilized for the duration of the War.

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The Embassy would appreciate the Department’s comment on this matter for the benefit of the appropriate Venezuelan authorities.

Respectfully yours,

Frank P. Corrigan