The Chargé in Venezuela ( Flack ) to the Secretary of State
[Received November 16.]
Sir: I have the honor to refer to the Gran Ferrocarril de Venezuela (PL) which was included in Supplement 1 to Revision VI of the Proclaimed List of Certain Blocked Nationals on October 23, 1943, and to review recent developments in this case.[Page 851]
After receipt of the Department’s Strictly Confidential Instruction No. 2055 dated July 31, 1943,13 in which the Department detailed the considerations leading it to the conclusion that the balance of economic warfare advantage lay with rejecting the Venezuelan proposal to purchase this railroad for funds to be blocked in Spain, the subject railway company has repeatedly been the topic of discussion between Mr. Groves, Counselor of Embassy for Economic Affairs, and Dr. Arturo Uslar Pietri, Minister of Finance. In August, 1943, Dr. Uslar expressed the personal opinion that the railroad should be included in the Proclaimed List of Certain Blocked Nationals as a step to facilitate action by the Venezuelan Government in forcibly taking over and nationalizing the road. However, at that time he proposed to discuss the matter with President Medina in order to ascertain the latter’s view thereon. In early October, 1943, Dr. Uslar was reminded of this matter and expressed regret that a decision had not yet been reached and explained that he had discussed the matter in detail with the President but since final decision involved the Foreign Minister as well as the President, the return of the Foreign Minister, who was temporarily out of the city, must be awaited before final determination of the matter. Dr. Uslar then stated that he would inform Mr. Groves of the decision reached within a few days.
On October 11, 1943, Mr. Groves called on Dr. Uslar at the latter’s request and the Minister, after recalling conversations relative to the Railway Company, stated that the road was operating under increasingly difficult conditions and would have to close entirely, perhaps by the end of the year, if necessary supplies were not forthcoming. He also referred to the legal technicality that the road is ostensibly a Spanish corporation, although he did not know exactly what interest therein is actually Spanish. He then requested that the Company be included in the Proclaimed List as soon as this could be accomplished, and, if possible, that the Venezuelan Government be given advance notice thereof to permit it to act simultaneously to take over the railroad and prevent possible sabotage. This request was transmitted to the Department by the Embassy’s Telegram No. 927 of October 11, 1943, 3: P.M.14 The Department’s Telegram No. 765 of October 14, 1943, 10: P.M.14 advised that the inclusion of the railroad in Supplement 1 to Revision VI to the Proclaimed List to be issued October 23, 1943, had been approved by the Interdepartmental Committee and authorized that the Venezuelan Authorities be so informed. In compliance with this authorization, the Minister of Finance was advised of this action by informal note dated October 16, 1943.15[Page 852]
Upon receipt of the information contained in Telegram No. 2882 dated October 7, 1943, from the Embassy at Madrid, quoted in the Department’s telegram No. 770 dated October 15, 1943,15a the Embassy inquired of Dr. Uslar whether there had been any development that might cause the Venezuelan Government to desire a change in the plan to announce the listing of the railroad on October 23, (but he was not given the suggestions from Madrid conveyed in telegram No. 770 regarding possibilities of direct purchase.) Dr. Uslar replied that he foresaw no reason to modify the plan but stated that he would confer with President Medina on Wednesday evening (October 20) and would inform the Embassy early Thursday morning whether any change was desired.
On Wednesday evening, October 20, 1943, Dr. Uslar telephoned Mr. Groves to say that he had discussed the matter with the President and if it was still possible, and not too disturbing, they would like to have the publication date postponed four or five days, explaining that there was a difference of opinion among the Venezuelan Government lawyers on certain legal points which they would like to clear up in the meantime. Mr. Groves stated that he would telephone Washington for a decision early on Thursday morning, (October 21) and expected to have an answer for the Minister by noon. A telephone call to Mr. Francis H. Russell, Chief of Division, World Trade Intelligence, Washington, was completed at 11:30 A.M., October 21, when Mr. Russell advised that the time was now too short to cancel arrangements for publication on Saturday, October 23, and this was communicated to Dr. Uslar by telephone immediately. Dr. Uslar did not seem surprised at the information and, after expressing appreciation, stated that he would advise the President of this fact early in the afternoon, and would telephone again later in the afternoon if there were any further developments.
On Thursday evening, October 21, Dr. Uslar again telephoned Mr. Groves to say that it was of great importance to the Venzuelan Government to have the publication of the German Railroad listing deferred, if at all possible, for several days. He was reminded of the negative answer on this point received in the telephone conversation with Mr. Russell earlier in the day, but Mr. Groves offered to make one further last minute effort in another telephone call to Washington the next day. The morning of October 22, 1943, Mr. Groves again talked with Mr. Russell by telephone and explained Dr. Uslar’s urgent request. Mr. Russell stated with more emphasis that it was then impossible to stop publication on October 23. This answer was communicated at once by telephone to Dr. Uslar who again indicated no surprise and expressed thanks for the effort.[Page 853]
On Saturday, October 23, the three Ministries concerned, by Resolution published in the Gaceta Oficial, No. 21.237, subjected the railroad to the provisions of article 4 of the Executive Decree of December 11, 1941, and to paragraph a) of article 3 of the Decree of December 16, 1941, which in effect blocked bank accounts of the railroad and placed it under the Venezuelan interventor system. A copy of this Resolution with translation is transmitted herewith.16 (It is understood that the railroad now has on deposit in Venezuelan Banks approximately Bs. 440,000.)
. . . . . . . . . . . . . .
On October 26 Mr. Groves called on Dr. Uslar by appointment to ascertain what steps the Venezuelan Government proposed to take looking to the nationalization of the railroad and the elimination of the undesirable elements now connected with it. Dr. Uslar explained that although there were several legal possibilities for attaining the objective, the President of the Republic had decided the procedure should be that the oil companies should not furnish any additional fuel to the railroad for the present; its present supply would be exhausted in about two weeks, at which time it would be obliged to cease operations, and under its franchise would then forfeit all rights and could be taken over by the Government. The oil companies were immediately advised—at the request of Dr. Uslar—that they would not be licensed to furnish petroleum products to the Gran Ferrocarril de Venezuela.
The Embassy now awaits developments under this procedure and is presently making a thorough study of all personnel connected with the railway, so that when the occasion presents itself, it will be in a position to inform the Venezuelan Government as to which of those persons connected with the railway company are considered undesirable.
The Department will be kept informed of further developments.