The Acting Secretary of State to the Ambassador in Venezuela (Corrigan)
A–923. The Department quotes below a telegram, as paraphrased, that the American Ambassador at Madrid directed to the Department as a preliminary reply to its request for information concerning the German-controlled Spanish holding company that owns the Gran Ferrocarril de Venezuela:
“The absence from Madrid of the Venezuelan Minister, officials of the company, and Spanish officials has delayed an answer to your #1524 of July 13.8
In about 1924 the firm was registered in Spain with a capital of 21,000,000 pesetas, and ownership of shares is difficult to trace since they are to bearer. The firm’s general manager is still absent, and that individual is apparently the only one with any knowledge of the shares’ ownership. Ignorance of the bona fide Spanish ownership is professed by the vice-president, but he estimates that about onethird of the shares are owned by Germans.
“It is the opinion of the Secretary of the Venezuelan Legation9 that by the demand of the Venezuelan Government, the ownership of the shares could be ascertained in Venezuela. The Secretary states that the Venezuelan Minister,10 who is still absent from Madrid, was informed by the Spanish Government that provided it is agreed to block here for the duration sums owned [owed?] to enemy nationals and provided the purchase price is remitted to Spain, there would be no objection on the part of the Spanish Government to the Venezuelan Government’s purchase of the railroad. I am informed by Huete, [Page 850] (head of the Spanish Foreign Exchange Institute) who participated in the discussions, that interest in the firm has not been registered with the Institute by Spanish shareholders. Such registration is provided by the law under which foreign funds of Spanish nationals may be acquired by the Spanish Government. Huete expressed belief that incorporation in Spain is probably a device to avoid taxation or other disadvantages, that Spanish interest is very small, and that Spanish officers named are dummies. I pointed out that under these circumstances Spain was in effect demanding that funds be sent to Spain by Venezuela to reimburse non-Spanish nationals, if it is insisted by Spain that the purchase price be transferred and control be exercised over its disposition. It was stated by Huete that the protection of bona fide Spanish interests is the only interest of Spain.
“When the managing director of the firm11 and the Venezuelan Minister return to Madrid, further investigations will be made. If funds were to be blocked in the United States or in Venezuela, I do not believe stockholders would agree to the sale of property, in view of the hidden interests. I do not believe, on the other hand, that the Spanish Government would be seriously perturbed if the property were expropriated by the Venezuelan Government and it were agreed by that government to pay a fair price which, after Spanish ownership has been revoked, would be distributed to bona fide stockholders. Probably for the duration of the war the determination of such ownership could be delayed. It would probably be insisted by the Spanish Government that payment be effected to Spanish shareholders at the time purchase is effected, and that government would be reluctant to certify concerning ownership on September 1, 1939.”
The Department would appreciate a prompt reply to the request in its instruction no. 2055 of July 31, 194312 that you comment on the Department’s counter-proposal for the elimination of German interests from the Gran Ferrocarril de Venezuela. Any additional information received from Madrid will be immediately directed to you.