911.5331/2–250

Memorandum of Conversation, by the Ambassador to Venezuela (Donnelly)

restricted

Subject: Competition of Venezuelan Navigation Company

Participants: Walter J. Donnelly
Mr. Shea, President, W. R. Grace and Company
Mr. Adams, President, Grace Line, Incorporated
Mr. Magner, Vice President, Grace Line, Incorporated
ARA—Mr. Charles P. Nolan2
NWC—Mr. Bainbridge C. Davis3

Messrs. Shea, Adams and Magner requested a meeting with Ambassador Donnelly to discuss with him the situation which has been developing with respect to the operations of the Ven Navigation Company and their effect upon the Grace Line. Due to the lower freight rates being quoted by the Venezuelan Navigation Company which are 10% under the freight rates charged by Conference4 members, and the amount of Venezuelan Government consigned cargo being carried by the Venezuelan flag vessels, the volume of cargo formerly carried by Grace vessels to Venezuela has decreased to a very great extent. As of December 1949, Venezuelan ships were carrying about 44% of the total southbound cargo from New York to Venezuela. The Grace Line representatives outlined various steps that they have taken to get the Venezuelan Navigation Company to agree to operate on a more competitive basis. Among these, various unsuccessful attempts have been made to get the Venezuelan shipping companies into the Shipping Conference. The Grace Line representatives stated in confidence that, because of the 10% cheaper freight rates being charged by the Venezuelan Navigation Company, the Conference line members had a meeting last week at which it was decided that unless the situation is corrected, the Conference members will meet the rates [Page 1020] charged by the Venezuelan Navigation Company. This, in effect, will mean a rate war.

Ambassador Donnelly asked the Grace representatives if they had any suggestions as to what action could be taken. They stated that it would be very desirable and effective if he could bring this matter to the attention of the Venezuelan Ambassador with certain suggestions and with the request that he bring it to the attention of his Government in Caracas. This would supplement conversations on the same subject which Ambassador Donnelly had with Venezuelan officials prior to his leaving Caracas a couple of weeks ago. It was agreed that Ambassador Donnelly would give the Venezuelan Ambassador a memorandum on the subject later on in the day when he had an appointment with the Ambassador.

The memorandum was as follows:

“The present practice of the Compania Anonima Venezolana de Navigacion in quoting freight rates on cargo moving between East Coast and Gulf Coast ports of the United States and Venezuelan ports by 10% under the conference rates is having a disturbing effect on steamship services between the United States and Venezuela.

“It is feared that unless the practice is discontinued a freight rate war may ensue with resulting serious disadvantages to all lines engaged in the service.

“It appears that the best way to effect at least a temporary adjustment of the problem is 1) the Compania Anonima Venezolana de Navigacion to agree to observe the Flota rates which in most instances are lower than the conference rates, 2) arrangements to be made for a meeting of the representatives of the steamship lines in New York at an early date with a view to reaching a permanent settlement.

“The Compania Anonima Venezolana de Navigacion and the Flota are now carrying a substantial part of the freight moving from New York to Venezuelan ports, and in December the participation of the two Venezuelan lines amounted to 44%.”5

  1. Transportation Officer in the Office of the Economic and Finance Adviser to ARA.
  2. Assigned to Venezuelan Affairs.
  3. The U.S. Atlantic and Gulf–Netherlands West Indies and Venezuela (shipping) Conference.
  4. Documents in files 911.53 and 911.5331 for 1950 indicate that Ambassador Donnelly helped to arrange a meeting in New York in mid-March between the Conference shippers and the two Venezuelan lines mentioned. The conferees agreed to meet again in Caracas in late June. See the Department’s instruction 87 to Caracas, June 15, p. 1022.