Memorandum of Conversation, by Mr. Albert H. Gerberich of the Division of North and West Coast Affairs
Subject: Discussion with Colombian Economic Mission of Difficulties Encountered by US oil Companies in Colombia.
Mr. Knapp: We want to discuss with you this morning the increasing concern our petroleum companies find in their operations in Colombia because of what are seemingly excessive demands of Colombian labor, coupled with adverse rulings of the labor courts, and what the companies term an unsympathetic attitude on the part of the Colombian Government. We are preoccupied principally by the effect of this on general economic conditions in Colombia. You understand as well as we that financing by the International and Export-Import Banks is not sufficient to do the main job; their loans are intended to create conditions to encourage a flow of private capital into your country. The Banks naturally expect adequate assurances of repayment and an adjustment of the balance of payments situation.
This development gives us serious concern, as it affects the future economic development of your country. We want to discuss this frankly with you. We have seen certain statistics—extremely rough, but indicative of definite trends—which show no increased investment of foreign capital, but if anything a withdrawal of funds from Colombia last year. There is a widespread feeling that the rights of management [Page 449] are being continually encroached upon by radical labor elements demanding increasing labor participation in the rights of management. The petroleum companies are increasingly reluctant to continue their operations, and consider withdrawing. Can either of you tell us how your Government feels about these developments?
Restrepo: I know little about the oil problems. Can you tell us this: what are the specific complaints of the oil companies? …
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Knapp: Let me emphasize that we are interested only in the flow of investment and its effect on Colombian economy. We are not complaining that the oil companies are treated illegally. We want only to present our concern that these measures—which the Colombian Government may have a right to take—are having a bad effect on the economic condition of the country. We want to know if you too do not feel that the flow of capital into the country and future development are being threatened by these labor troubles. Our Embassy has kept in close touch with the situation, and I do not feel that we should transfer to Washington any discussion as to what laws are just and what ones are not. Perhaps I have talked too long on this subject. Has anyone else any ideas about this?
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Araujo (to Mills): What troubles do the companies complain about?
Knapp (reading telegram): Here is a telegram about a strike on the Texas Company concession at Puerto Niño. The workers apparently declared the strike without fulfilling the legal requirements, yet the court declared the strike legal. Now we don’t want to be put in the position of questioning the law or the competence of the courts, but this destroys the confidence of the oil companies and makes them reluctant to continue operations.
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Restrepo: We are interested in taking full advantage of our natural resources, and we realize we must have the cooperation of the oil companies to do so. But, gentlemen, the Government has no authority to interfere with the decisions of the courts. Our labor legislation was discussed for many years in Colombia and reflects a struggle going on all through the period of the war. Now it is necessary to take into account the serious political issues brought about by the increasing demands of labor. Colombia hasn’t reached a perfect solution in these matters; I wish we could. We know well that labor conditions in Colombia are not good compared with those in the United States. The standard of living is lower, the condition of the workers is backward. We want to reach a fair solution. We recognize that your intention [Page 450] is a very sane one, and we offer to get in touch with our Government and try to reach a solution, and I believe we’ll be able to talk this over again. I think Ambassador Araujo knows the situation in the oil industry better than I do, so I yield the floor to him.
Araujo: I have discussed these problems many times with the company officers and with the American Ambassador, and we have touched upon the possibility of increasing the flow of capital. I am not too familiar with oil problems, but do know something of the situation from my brother in law (Carlos Lozano y Lozano—AHG), who is attorney for the Tropical Oil Company. I am only here on a temporary mission regarding loans. But I explained to Mr. Beaulac that it would have a good effect to discuss all these things preventing the flow of capital—the commercial agreement, navigation matters, social laws, private investments—and reach an agreement good for both parties. Not a cold diplomatic discussion, but frank conversations. I repeat that I know little of oil problems; they lie outside my profession. But I am sure in this question of social laws there has been nothing illegal and no discrimination. I am sure my Government will hear Ambassador Restrepo’s suggestion.
Knapp: I think you understand that the function of this meeting this morning is to make clear to you our concern about the broad implications of these developments. It would be our hope that your Government make clear to the Colombian Congress their probable final effects. The economic condition of the workers is dependent on the development of Colombian resources, they in turn depend on the investment of private capital. We have a common interest with every foreign country in the development of that country—Does anyone want to contribute anything more?
Mills: I think Ambassador Araujo—whose brother in law is carrying the Tropical case to the Council of State must know something of that oil company’s difficulties. Recently a new contract came up for approval between the Tropical and the workers. Labor refused to discuss economic questions, and insisted instead on participation in the company management. Tropical feels that this attitude of labor fundamentally undermines its whole undertaking.
Restrepo: There is a specific complaint, Mr. Mills. That’s what I want.
Mills: Tropical feels that if labor persists in these demands, it will be difficult to carry on.
Restrepo: Thank you, Mr. Mills. It is a wide problem. We’ll promise to present it to the Colombian Government. It involves the management of Colombian enterprises as well. I have noticed that the real problem is not in the terms of the law itself, but in the Colombian [Page 451] policy regarding the development of the country. Be assured that the real feeling of the Colombian Government and people is to increase the flow of capital and to forward the good relations between our two countries.
Mills: And that is our feeling also. There’s an old saying, Mr. Ambassador: “You catch flies with honey, not vinegar.” If the news gets around that there’s bad treatment in Colombia, capital will go elsewhere.
Restrepo (rising): Now there’s only one thing wrong with that saying. I have tried to attract bees with both honey and vinegar, and I have seen that more go for the vinegar than for the honey.