831.512/1–346
The Secretary of State to the Chargé in Venezuela (Dawson)
10. Urtel 3 and 8 Jan 2 and 3.56 You are instructed to approach Betancourt57 in sense of suggestion in third paragraph urtel 3 Jan 2.
Ambassador Corrigan58 suggests and we concur that in your discussion with Betancourt you might mention in all friendliness the shocked surprise with which the extraordinary excess profits tax was received in both Govt and financial circles here and what a blow it might entail for the Junta’s standing abroad. While it appears that the tax is not technically a violation of the existing agreements between Venezuelan Govt and petroleum companies, Ambassador is disturbed by fact that neither Betancourt nor Morales59 had given the slightest indication that such an important decree was imminent although other very intimate matters were freely discussed just before his departure from Caracas. He feels that such summary action will cause loss of confidence and will have very definite effect on influx of new development capital unless some assurance is given against similar future arbitrary action. The suddenness of the action gives rise to doubts whether adequate consideration was given to competitive position of Venezuelan oil in world markets and to the fact that differential in favor of Venezuela in American markets has almost vanished.
In addition to disappointment emanating from employment by Junta of methods which appear to be contrary to cooperative spirit that characterized the earlier statements, concern is felt for inflationary influence inherent in the recent tax measure.