821.6363/9–1548

The Ambassador in Colombia ( Beaulac ) to the Secretary of State

confidential
No. 578

Subject: Does Department Approve Embassy’s Attitude Toward Compulsory Arbitration in the Petroleum Industry in Colombia?

Sir:

. . . . . . . . . . . . . .

This Embassy has supported the efforts of American petroleum companies in Colombia to resist the imposition by the Colombian Government, on doubtful legal grounds, of compulsory arbitration, as a means of settling strikes in the petroleum industry in Colombia. The Embassy’s activities in this regard have been duly reported to the Department, without any objection on the part of the latter.…

Compulsory arbitration in Colombia means, in simple terms, that the striking labor union appoints an arbitrator, the oil company appoints an arbitrator and the Government appoints an arbitrator. In practice, this means that the Government arbitrator makes the decision. This decision, for domestic political reasons, tends to favor labor. There is no provision to limit the subject matter of the arbitration. There is no recourse against the decision, which is binding and final. These circumstances are further aggravated by the following facts: 1) the labor unions in the petroleum industry are Communist-controlled and 2) strikes brought about by the Communist leadership are aimed less at obtaining economic benefits for labor than at obtaining for the Communist labor leaders control of management of the oil companies. The Embassy requests to be informed by the Department, specifically, whether any similar situation involving any form of compulsory arbitration [Page 452] exists in the United States. The Embassy itself is not aware of any.

Conferring upon a Colombian Government representative the right to decide whether or not petroleum companies must accede to labor’s demands, many of which, as stated, have to do with the management of the companies, means giving the Colombian Government, or worse still, some individual appointed by the Colombian Government, the right to transfer to the unions or rather to their Communist leaders, the rights of management of the oil companies, or at least some of those rights. My own opinion is that compulsory arbitration, under the conditions referred to, which are the conditions presently existing in Colombia, can result only in the further deterioration of the position of foreign oil companies in Colombia, and in a progressive lessening of oil production here. There can be little doubt that these are, in fact, the objectives of the labor leaders.

I believe, in this connection, that the Department, before dismissing the Tropical Oil Company’s objections to compulsory arbitration as unimportant and exaggerated, should recall that there is only one industry in Colombia that is principally American-owned and nearly entirely foreign-owned, and that is the petroleum industry. In only the petroleum industry do strikes chronically occur. Many of these strikes are illegal. Some notoriously illegal strikes have been declared legal by Communist labor judges or labor courts. The strikes in the petroleum industry can have no relation to working or living conditions in that industry because the latter compare favorably with working and living conditions in any other comparable industry in Colombia. They must, therefore, be related to 1) the foreign ownership of the companies, or 2) the nature of the industry, or 3) both. I believe they are connected with both. They are directed against foreign ownership and at restricting and, if possible, reducing petroleum production. Both are normal objectives of international Communism.

At a time when the Government of the United States is being asked to make heavy loans to Colombia, and when we are preparing, at Colombia’s suggestion, to begin the negotiation of a General Treaty of Friendship and Commerce to include, among other things, guarantees for American capital invested in Colombia, I believe that the Department should take cognizance of the difficulties faced by American oil companies in Colombia in their resistance to destructive tactics of Communist leaders and that a friendly effort should continue to be made to induce the Colombian Government to use its influence and its legitimate authority to bring about a lessening of these difficulties.

Respectfully yours,

Willard L. Beaulac