The Secretary of State to the Embassy in Venezuela

No. 159

The Secretary of State acknowledges the receipt of the Embassy’s despatch No. 588 dated July 27, 1948, relating to lend-lease accounts1 and other obligations of the Government of Venezuela and suggesting certain advantages which would accrue to the Embassy if settlement were to be effected in bolivars.

As the Embassy indubitably is aware, those American republics which were beneficiaries of lend-lease aid stand committed, through the terms of their respective Lend-Lease Agreements, to settlement of their repayment responsibility in United States dollars. Unfortunately, in the cases of several of these countries the character of the [Page 765]post-war economic trends has so unfavorably affected the economic status through incursions on dollar and other foreign exchange holdings that insistence on the part of this Government on full compliance with agreement terms would have the undesired effect of further aggravating the serious condition of these and other economic contingencies. In order to cooperate in such instances and, at the same time, further the interests of this Government, authority has been extended to the Department to consider and put into effect proposals submitted by such a debtor country for the settlement of lend-lease and other contingent indebtedness in the currency of the negotiating country and to employ the funds realized thereby either in the development of a foreign buildings program or to defray the normal operating expenses of this Government’s foreign service establishment in that country. In addition, if any dollar credit agreements should be negotiated by the Foreign Liquidation Commissioner under existing authority the usual option to request accelerated payment in local currency might be exercised by the United States to finance foreign buildings and/or educational exchange programs. Straight surplus sales other than interim arms program items may also be made for local currency, in special cases, if such transactions are primarily for the convenience of the United States Government in finishing disposals in the Caribbean area.

During his recent visit to the United States, President Gallegos publicly stated that his Government was not in the market for financial assistance in the form of loans.2 Other Venezuelan Government officials, including the Ambassador to Washington, have reiterated the statement made by the President and have added the assurance that Venezuela has an ample supply of dollars. Conversations with Embassy officials on the subject of the settlement of the lend-lease accounts imply that as soon as the reconciliation of lend-lease fiscal reportings has been accomplished, full payment of the amounts due will probably be forthcoming in dollars.

According to information received from the Office of the Foreign Liquidation Commissioner, the transactions reported by the Munitions Division, and mentioned in the Embassy’s despatch No. 588, were not negotiated through that office but were open market purchases. Certain surplus military properties have been sold to the Venezuelan armed forces by the Office of the Foreign Liquidation Commissioner [Page 766]through the Field Commissioner for Military Programs and these sales were negotiated and paid for in dollars. Up to this time no credit agreements have been negotiated with Venezuela under the authority set up for extending such facilities in connection with overseas surplus property transactions.

Gold and foreign exchange holdings of the Central Bank of Venezuela, other banks and the Treasury, at the beginning of the current calendar year, amounted to $274 million. The value of these accounts, according to statistics published by the International Monetary Fund, had reached $301 million on May 31, 1948.

On the basis of the above data it will be understood by the Embassy that its suggestion for an alternative settlement formula cannot, in the case of Venezuela, be accorded the favorable consideration of the Department.3

  1. In despatch No. 588, not printed, Ambassador Donnelly indicated that under the terms of the Lend Lease Agreement signed by representatives of the two countries on March 18, 1942 ( Foreign Relations, 1942, vol. vi, p. 735), a balance due to the United States remained in the amount of $411,243.39 (831.24/7–2748).
  2. The Export-Import Bank of Washington, on April 2, 1948 authorized Credit No. 365–A for Hotel Tamanaco Compania Anonima, $2,337,697.00, for U.S. goods and services; on the same date, another Credit No. 441, for S & S Construction Co., $500,000.00, for U.S. goods and services; and on September 8, Credit No. 451, $1,950,000.00 for La Electricidad de Caracas, for Diesel electric generator units (Export-Import Bank of Washington, Eighth Semiannual Report to Congress for the period January–June 1949, p. 30).
  3. In a note of May 13, 1949 to the Venezuelan Ambassador (Pocaterra), not printed, the Secretary of State acknowledged receipt of his note of April 27 transmitting checks in payment of the $411,243.39 balance remaining due on the Venezuelan lend-lease account (831.24/4–2749).