611.31/6–3050

Department of State Policy Statement

top secret

Venezuela

a. objectives

US objectives in Latin America are the security of the United States and of this Hemisphere, the achievement of world peace, the encouragement of democratic representative institutions, and positive cooperation in the economic field in order to help in the attainment of the first three objectives. Within this general framework our specific objectives in Venezuela are: to assure an adequate supply of petroleum, especially in time of war, and to encourage the development of Venezuela’s rich iron ore deposits to supplement US reserves; to foster the economic stability and development of Venezuela and the achievement of a more balanced economy, and to contribute to better living conditions for the masses as a sound basis for the growth of democracy and the continuance of a system of free enterprise; and to strengthen the friendship of the Venezuelan people and Government toward the United States, and to promote their political development along democratic lines, both as an aid in defending the strategic Caribbean-Canal Zone area and as support for hemispheric cooperation, world peace, and other basic US objectives.

[Page 1025]

b. policies

Maintenance of Supply of Strategic Resources. All US policies toward Venezuela are affected in greater or less degree by the objective of assuring an adequate supply of petroleum for the US, especially in time of war. Furthermore the means of attaining our other objectives are conditioned by the overwhelming importance of petroleum in the economy of Venezuela.

Commercial development of oil following the first world war transformed Venezuela’s poor and primitive economy—which had been based on the export of coffee, cacao, hides and skins—into a thriving but extremely unbalanced economy overwhelmingly dependent upon the export of petroleum. While the dictatorship of Juan Vicente Gómez (1908–35) gave no opportunity for the development of democratic experience and anticipated in many respects some of the most odious features of the Nazi-Soviet police state, his economic policies laid the foundation for the growth of the country into the financially-strongest nation of Latin America. Gómez paid off substantially all of Venezuela’s foreign debt and sedulously avoided disputes or entanglements with foreign powers. He had legislation enacted which made it possible for foreign companies to develop Venezuela’s vast petroleum resources to such an extent that income from activities of the oil companies currently supply Venezuela with 95% of its foreign exchange and 72% of its total government revenue. They have made possible a degree of economic activity by the Government unmatched elsewhere among the American Republics: in spite of expenditures equivalent to $680 million in the fiscal year ending June 30, 1949, the Venezuelan Treasury possessed liquid reserves on that date equivalent to $114 million or more than four times the total outstanding amount of government and government-guaranteed bonds. Total Venezuelan gold and foreign exchange resources amounted in terms of US dollars to $440 million on the same date.

When Gómez died and Venezuela took its first faltering steps in the direction of increased popular participation in the affairs of state, the close relationship between the dictator and the oil companies became a political liability to the companies. Both the companies and their foreign employees have been the objects of envy, distrust and dislike by the Venezuelans. This is partly due to the higher standard of living enjoyed by the foreign managerial personnel and to their practice of living in isolated US-type villages. It was also due partly to the conflict of different mentalities: the “hurry-up” psychology of the Yankee boss in conflict with the “mañana” complex of the poorly-trained, inefficient Venezuelan. The upper-class Venezuelans have a far more basic reason for their latent antipathy to Americans. They deeply resent the fact that Venezuela’s greatest natural resource is [Page 1026]exclusively controlled by aliens. They realize all too clearly that the economic life of their country is completely dependent on the operations of foreign companies, which theoretically could bring all government and most business activity to a standstill simply by suspending operations for a few months.

As a result there have been many Venezuelans who have advocated the nationalization of the petroleum industry, and there are few politicians in Venezuela who would dare assert publicly that they oppose nationalization. Responsible leaders have, however, usually admitted that Venezuela could not successfully manage the complex oil business in view of the lack of trained technicians in virtually every branch of operations from exploration to marketing, and they have therefore been content to confine their aspirations to the indefinite future.

The sentiment in favor of nationalization has not been without its effect on governmental policy. From 1945 to the present no additional concessions for exploration have been granted by the Venezuelan Government. Although it never formulated its policy precisely, the administrations which held power from October 18, 1945 to November 24, 1948 apparently planned to make no more concessions on the old terms; they seemed to be considering plans for mixed companies in which the Venezuelan Government would be at least an equal partner, or possibly for a Government petroleum administration which alone would receive new concessions and exploit them through operating contracts with foreign concerns. Each succeeding regime from Gómez until the present self-styled provisional military dictatorship has found it politically expedient to increase the participation of the state in the profits of the petroleum companies and to require ever greater social benefits for the workers and their dependents. Present legislation requires all petroleum companies to compare their profits with the taxes and royalties already paid the Government; if the payments do not equal half the profits, the companies must then pay an additional tax to effect a 50–50 split. The companies are also required to provide the workers free medical care, educational facilities, vacations with pay, a share in the profits, and commissaries which sell essentials at lower than market prices.

In these circumstances it is United States policy to persuade Venezuela that its own best interests would be served by encouraging the participation of private foreign capital in the development of the petroleum deposits. The U.S. Government and the companies are cooperating and must continue to cooperate in this task. Under private control Venezuela has become the world’s second largest producer, while countries which have insisted on national control are still importing their domestic requirements. The efficient exploitation by private companies has paid great dividends to the Venezuelan state, enabling it to undertake ambitious projects for improving living conditions [Page 1027]far beyond the capacity of most countries of equal population.

Every effort is also being made to increase mutual respect between the Venezuelan people and American workers through intelligent training programs and less exclusive administration on the part of the principal oil companies. In this undertaking the US cultural and information program is making a distinct contribution to better understanding; an all expense tour to the United States by young amateur baseball players in 1949 gives a sample of new techniques in public affairs work which holds great promise for the future.

On a government-to-government basis, we have tried to show Venezuela that we genuinely respect the sovereignty of that country and are prepared to demonstrate that respect by adhering strictly to the policy of non-intervention. In this way we hope to reduce somewhat the effects of the Venezuelan national inferiority complex. At the same time we have continued to express our views on problems affecting the industry and to render such general assistance to our companies as seems appropriate. We have allowed the Venezuelan authorities to become aware of our hope that the Government will once again resume the granting of concessions so as to permit the normal growth and development of the petroleum industry; that the tax burden upon the companies will not be made so severe as to impair their competitive position in the world market; and that rigid “conservation” measures of an uneconomic nature may be avoided.

By the end of 1949 Venezuela had reached an all-time high in production (nearly 1½ million barrels per day). At the same time, as a result of the recent shift from a world shortage of petroleum to a world surplus, Venezuela has been threatened by four developments of varying seriousness. The discovery and development of petroleum in the Near East and in western Canada provides an increasing long-range threat to Venezuela’s oil markets. With the rapid development of low-cost production and of transportation facilities in the Near East it seems likely that Venezuela will lose its European markets and will face increasing competition elsewhere. On the other hand the discovery of oil in western Canada threatens eventually to reduce seriously the North American market for Venezuelan oil. While the competitive situation between oil companies operating in various parts of the world is a matter primarily for adjustment by the private interests concerned, nevertheless it is US policy to safeguard the nearby Venezuelan resources as of greater strategic importance to us than those of the Near East.

British efforts to reduce the drain on its dollar balance by placing restrictions on imports of dollar oil into the sterling area1 constitute a second threat to the Venezuelan oil industry, the exact extent of [Page 1028]which is difficult to measure at this time. This British action furthermore discriminates against US companies in favor of the British Shell interests in Venezuela. Aside from the unfair commercial aspect of this discrimination, the fact that approximately two-thirds of all Venezuelan oil is produced by American companies indicates probable injury to the Venezuelan economy if the British do not alter their course of action. It is the policy of the US to persuade the British to refrain from the displacement of US company oil by British company oil in the sterling area and elsewhere wherever US company oil is available at no greater cost in dollars than the average dollar cost of British company oil.

The cutback of oil production in the US, particularly in Texas, resulting from the world surplus has stimulated efforts in the US Congress to impose quota restrictions on the importation of oil or to place prohibitive taxes on imports. The imposition of such restrictions or taxes would be contrary to our basic commercial policy as well as detrimental to our strategic interests in Venezuela and our relations with that country. Consequently the Department has informed Congress of our opposition to such measures and the important considerations which motivate our opposition. Voluntary cutbacks in Venezuelan oil production and exports, demonstrating a cooperative approach to this situation, and the efforts of an unofficial Trade Mission of leading Venezuelan businessmen to bring the foreign trade aspects of the proposed legislation to the attention of US exporters have lessened though not removed the immediate danger of such action.2 The significance to US exporters of maintaining the US market for Venezuelan oil is demonstrated by the fact that US exports to Venezuela totaled over a half billion dollars in 1949, maintaining Venezuela’s place as our largest Latin American market and our second largest cash customer in the world.

A less serious matter of concern to the Venezuelan oil industry is the recent denunciation of the US-Mexican trade agreement.3 The US-Venezuelan trade agreement, in effect since 1939,4 reduced the [Page 1029]import tax from 21¢ to 10½¢ per barrel on petroleum imports not in excess of five percent of US domestic refinery runs in the preceding year. The US-Mexican trade agreement extended this reduction to oil imports irrespective of quantity, and Venezuela benefited by application of most-favored-nation treatment. Upon termination of the Mexican agreement, effective January 1, 1951, the tariff quota provisions of the Venezuelan agreement will again become controlling. It is believed that Venezuelan production and exports to the US will not be curtailed as a result of this development although it will, according to industry estimates, cost the companies annually about $5,000,000 and the Venezuelan Government about $3,000,000.

There is a further aspect of our petroleum policy in Venezuela concerned with the industry’s physical security. It would be difficult to exaggerate the importance of a continuous supply of Venezuelan petroleum to this country in case of a national emergency. In addition to the problem of nationalization, threats to the availability of Venezuelan oil may come from communist sabotage, domestic riot and disorder, or foreign attack.

The Communist Party in Venezuela, which has been well organized and disciplined in comparison with other Venezuelan parties, has had an estimated membership of approximately 20,000; in the 1947 Congressional elections the party polled about 50,000 votes which represented 4.3% of the total vote. This party, sometimes called the Red Communist Party, was declared dissolved by Government decree issued May 13, 1950, charging the party with subversive propaganda, promotion of illegal strikes, sabotage and armed attacks. Its leaders have either left the country, been arrested or gone into hiding. There is a much smaller dissident party, known as PRP or the Black Communists, which has not caused trouble and continues as a legal party. The power of the Red Communists as an underground organization has not yet had time to be tested.

The Communists have had considerable success in organizing the labor movement. It has been estimated that from 10 to 25% of Venezuelan oil workers, some of them very strategically located, have joined Communist trade unions. In May 1950, a strike called primarily for political purposes by the Red Communists and the outlawed AD elements practically paralyzed the Venezuelan oil industry for a few days. In reprisal the Government dissolved the Communist labor federation of oil workers and 20 of its component unions, as well as 24 AD unions all of which participated in this strike. A few Red Communist, AD and Black Communist unions which did not participate were not dissolved. While this recent strike was directed against the Military Junta rather than the US, it may serve as a reminder that in case of war between the US and the Soviet Union, the Communist leaders will make every effort, as they have publicly [Page 1030]proclaimed, to prevent a single drop of oil reaching the United States or its allies. However, if the present Government is in power, it will probably make every effort to prevent sabotage.

After the revolution of November 1948, the Military Junta outlawed the Acción Democrática political party which had supported the previous government, and abolished the labor federations and confederations which had been organized by that party. The individual AD unions were not abolished, but their experienced leadership was largely removed. This has given the Communists an excellent opportunity to infiltrate the non-Communist labor movement, and there have been many indications that, prior to the recent Government decree, they had worked themselves into a position where they had a marked degree of influence over the policies of the former AD petroleum workers’ unions. The AD unions have successfully maintained their separate organizational identities, and the degree of Communist infiltration cannot be accurately determined.

The situation was considered to be sufficiently serious even in 1948 to warrant the sending of a special mission to Venezuela to make a survey of security factors in the petroleum industry in Venezuela and the adjacent Netherlands West Indies. This mission found that, because of the dispersed character of the industry, it would be impossible to prevent isolated acts of sabotage, but it did suggest several concrete measures which the companies and the Venezuelan Government could take in order to minimize this danger. The Embassy in Caracas has been instructed to consult with representatives of the oil companies and, when desirable, with the Venezuelan authorities in order to put into effect as many as possible of the recommendations.

Since the control of the Communist union leaders over the rank and file has not been put to any severe test and may in practice be far from complete, we should not limit ourselves to purely precautionary measures. We have been trying through our USIE program to undermine the confidence of union members in their Communist leaders, exposing the latter as tools of a foreign power.

The second source of danger to the security of our petroleum supply in Venezuela lies in domestic riot and disorder. Political conditions in Venezuela are not stable and it is not impossible to envisage a situation where law and order might break down completely and the country be delivered over to anarchy for a brief period of time. In such a case, it is possible that the latent resentment of the ordinary Venezuelans against foreigners could be fanned into flames by agitators, possibly Communist-inspired, and directed into a destructive attack against strategic petroleum installations.

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

The danger also exists of foreign attack, possibly of the hit-and-run variety, against petroleum installations. In the event of war, or immediate [Page 1031]threat of war, it is possible, though far from probable, that Venezuela might be persuaded to accept military assistance from the US. Such plans would, however, have to give due consideration to Venezuelan nationalism as was the case with the secret military agreement of 1942.5

While access to an adequate supply of petroleum is of outstanding importance to the US in its relations with Venezuela, the existence of tremendous iron ore reserves of unusual purity is potentially of strategic value to the US. The Iron Mines Company of Venezuela, a Bethlehem subsidiary, hopes to start shipping ore during the first half of this year. The Orinoco Mining Company, a new subsidiary of US Steel, has obtained concessions from the Venezuelan Government, and Republic Steel and the M. A. Hanna Company may also seek concessions. This important addition to the dwindling high-grade iron ore reserves in the US and the increase in US private investment in Venezuela (which already approximates $1.5 billion) as well as the introduction of American personnel and methods into another section of Venezuela add to the importance of maintaining friendly relations. The development of this additional source of dollar exchange will likewise contribute to Venezuela’s economic stability. It is US policy to encourage Venezuela to accelerate its economic development by maintaining its present policies which have attracted private direct investment from abroad, supplemented in appropriate cases by external public investment in the country. Investment from abroad should be regarded as ancillary to internal investment which should be the principal source of funds for economic development. In the granting of the iron-ore concessions the Venezuelan Government has given further indications of its desire to maintain a favorable climate for private foreign investment and to encourage free enterprise.

General Economic Policy. Costs in Venezuela have remained exceptionally high and labor in general is neither skilled nor especially eager to acquire modern techniques. In these circumstances few industries have been developed in Venezuela and those few such as textiles, vegetable shortening and rubber tires, are protected by high duties or quotas. Since merchandise became readily available in the US after the war, Venezuelan industralists have demanded more stringent protective measures and the Government has resorted to an increasing number of quota restrictions severely limiting the importation of competitive foreign products.

[Page 1032]

Although we favor the development of a greater variety of agricultural and industrial production as a means to increased economic stability, we do not favor the establishment of manifestly uneconomic industries and we have endeavored to discourage the use of trade barriers, particularly quotas, as an instrument of protection for local industry. Despite the application of quotas to certain trade agreement items, the US has refrained from terminating the existing trade agreement since we did not wish to lose the advantages conferred by the agreement. Furthermore, while Venezuela’s principal advantage in this trade agreement is the tariff concession granted on US imports of oil, it is realized that any step which places an additional burden on the Venezuelan oil industry affects American investments and that the well-being of this Venezuelan industry contributes to US security.

It is US policy to encourage Venezuela to accede to the General Agreement on Tariffs and Trade and to negotiate for tariff concessions under the terms of that agreement. However, the Venezuelan Government has felt that the only item of major importance in its export trade is oil and that it could not at this time expect to improve materially the concession obtained under the US-Venezuelan Trade Agreement. Moreover, during a time of protectionist sentiment in Venezuela, it would not be in a good position to offer concessions on its own import tariffs. In view of the current efforts of independent oil producers in the US to curtail imports, it is believed that any effort to enter into trade agreement negotiations with Venezuela on oil might result in the imposition by Congress of additional barriers to importation. Therefore our efforts have been directed more toward convincing the Venezuelans of the desirability of their eventual adherence to GATT than toward their participation in the forthcomings round of negotiations.

As a means of diversifying the economy of the country and developing additional sources of foreign exchange, as well as for reasons of national pride, the Venezuelan Government has encouraged the expansion of a Venezuelan merchant marine and civil air carriers. It is our policy to regard this development favorably provided the Venezuelan Government interposes no obstacles to free competition by American carriers for this international trade. Recently the increasing amount of cargo carried by the Venezuelan Navigation Company and the Gran Colombiana Merchant Fleet and their policy of undercutting Grace Line and other Shipping Conference vessels brought a threat of a rate war. The US used its good offices to bring all of the shipping interests together, and an agreement has been reached to permit non-conference shipping lines to compete on fair terms with the conference lines.

[Page 1033]

A bilateral air transport agreement was signed by Venezuela and the US in May 1948, but it has not yet received the necessary ratification by the Junta. While such agreements are normally ratified by Congress in Venezuela, the Military Junta, in the absence of any Congress, assumed the power to ratify the International Wheat Agreement. It is therefore assumed that similar action could be taken in this case and our Embassy has been informed of their intention to ratify shortly.6 We shall continue to urge the ratification and implementation of this agreement as a part of our effort to obtain more general acceptance of our aviation policy. We continue to urge the Venezuelan Government to concede fair operating conditions to American airlines and it is our policy to apply these same principles in granting permission for flights to the US by Venezuelan airlines.

Venezuela already has many of the factors which create a favorable climate for the investment of private foreign capital. A substantial source of dollar exchange, freedom from exchange control, the complete solvency of the Venezuelan Government, low-income tax rates, and freedom to withdraw foreign capital or earnings from the country are factors which have contributed to the existence of this favorable climate. The presence of an estimated $2 billion of foreign investments in Venezuela (about three-fourths of which are American) testify to the existence of these conditions. It is US policy to encourage this flow of private capital to Venezuela for the economic development of the country as a means of creating a more balanced economy, greater economic stability, and an increasing market for American exports and the strengthening of Venezuela as an exponent of the free enterprise system. As an additional contribution to this favorable investment climate, we are encouraging the negotiation of a bilateral treaty for the avoidance of double taxation.7 The Venezuelan Government is prepared to negotiate, and Treasury Department representatives intend to visit Venezuela for this purpose at the earliest opportunity consistent with negotiations already scheduled with other countries.

It is also our policy to lend technical and financial assistance to Venezuela in a variety of fields. The IIAA, for example, has made a substantial contribution to the improvement of health conditions throughout the country. Training in the use of modern agricultural methods of research and production have improved utilization of the land and, in view of the dependence of three-fourths of Venezuela’s population upon agriculture for a livelihood as well as the fact that Venezuela must import part of its food supply, such assistance is of particular importance. Technical aid has been rendered in connection with reclamation of land, hydroelectric development, coordination [Page 1034]and improvement of transportation facilities, greater utilization of fishery resources, and a variety of other projects. It is our policy to continue and to expand this cooperation, upon the request of the Venezuelan Government, in whatever fields appear to be suited to this type of inter-governmental effort. It is also our policy to encourage private developmental enterprises and to supplement them with intergovernmental cooperation. The Export-Import Bank has so far extended to Venezuela credits amounting to more than $52 million, of which about $8 million has been used. On outstanding credits there is still available for disbursement approximately $7.5 million. It is our policy to continue to support such loan requests wherever justified. However, the willingness of private foreign and domestic capital to invest in sound enterprises and the solvency of the Venezuelan Government which permits it to assist private industry ordinarily make unnecessary the use of US Government capital.

Encouragement of Democracy and Friendship for US. Venezuela still lives under the shadow of the 27-year iron-handed dictatorship of Juan Vicente Gómez. Since Gómez’ death in 1935 Venezuela has been struggling to find her way to a representative form of Government which will reconcile the desire of the people for self-government with their complete inexperience in the art of self-government and their general lack of education. At the same time, the vested interests of less than five per cent of the population, which have an almost complete monopoly of the wealth, education and political experience in Venezuela, have shown no desire to encourage any rapid progress in the direction of government by the Venezuelan masses. Between 1935 and November 1948 there was nevertheless a steady growth of increasingly democratic government which finally reached the point where all citizens of both sexes, literate or illiterate, 18 years of age and over, were permitted to vote.

In November 1948 the democratically elected Government of President Gallegos was overthrown by a clique of military officers. After long consideration and consultation with the other American republics the US Government decided to continue relations with the Venezuelan Government. In so doing it informed the Military Junta that we had taken particular note of the Junta’s declared intention to return as rapidly as possible to a democratic form of government and we also reminded the public that resumption of relations did not imply approval of the present form of government in Venezuela. Since the recognition of the Military Junta in January 1949, this Government has followed a policy delicately balanced between strict adherence to the basic policy of non-intervention in the domestic affairs of other governments and our desire to promote democratic processes throughout the world. We have tried to make our opposition to press censorship, [Page 1035]arbitrary denial of individual liberties and the suppression of trade union rights obvious by expressing whenever appropriate and opportune our dislike of such steps. We have expressed approval whenever steps were taken to liberate political prisoners or to prepare the country for a return to constitutional procedures. We tried for some time to avoid adding to the prestige of the military dictatorship by refraining from conferring upon it any marks of approbation such as the visit of high Venezuelan Army officers to this country and ceremonial visits of US military officers to Venezuela. The importance of maintaining good relations with Venezuela has forced us to recede somewhat from our ban on exchange of visits,8 but we have lost no opportunity to remind the Venezuelan authorities of our interest in the restoration of democracy and in the welfare of political prisoners.

While Venezuela has made some feeble motions in the direction of eventual return to a more democratic form of government, it continues to be clear that the Government is not sufficiently sure of its own position to risk an unhampered show of popular approval or disapproval at the polls. It seems quite possible that elections will not be held before the latter part of 1951.

As a means for encouraging the growth of democracy in Venezuela and for strengthening the friendship of the Venezuelan people toward the US, the USIE program has both short-range and long-range value. This program endeavors to present to the Venezuelans a picture of the US as a nation without imperialistic intentions and, on the contrary, with a feeling of active good will toward the Venezuelan people and a desire to strengthen the historic friendship between the two nations. It is also presenting a picture of the US as a country where democracy has made great progress and has been accompanied by a high degree of freedom and of economic welfare. It is not endeavoring to transplant American patterns onto Venezuelan soil, but rather to increase mutual understanding between the peoples of both countries and to enable the Venezuelans to adopt that which is best in American civilization to the Venezuelan cultural pattern.

The unusual problems presented for such a program by the tremendous US investments in Venezuela, the predominance of American technical and managerial skill in the production of oil upon which the Venezuelan Government and economy is largely dependent, and the residence in Venezuela of fairly large numbers of American citizens enjoying American standards of living, accentuate the importance of a carefully planned information program. A particular effort is being made to reach the labor element with this program. It is also our policy to encourage the American companies operating in Venezuela [Page 1036]to pay even greater attention to their own programs for improved labor and public relations.

Other target groups of particular importance to the achievement of our objectives include the writers, jouralists and other intellectuals, who tend at least to flirt with Communist ideas and whose conception of the US as a materialistic, unlettered civilization we wish to correct. It is our policy to alter these concepts through the various media such as exchange of teachers, journalists and others, the work of the Cultural Institute, and the distribution of American books. The teachers and students are two other groups particularly susceptible to Communist ideology and efforts are being made to present to them a clearer understanding of the value of democracy as applied to their own cultural and economic background.

We desire broad popular support in Venezuela for our policies because of the role which that country appears to be called upon to play in hemispheric defense. Venezuela has ratified the Inter-American Treaty of Reciprocal Assistance and has been disposed, both during and since the last war, to cooperate with the US in military matters. It is obvious that Venezuela’s primary contribution to any future war involving the US would be to assist in assuring a steady flow of petroleum in maximum quantities for use in the war effort, and it is equally clear that this flow of petroleum might be interrupted unless domestic order and security were maintained. In this task, the Venezuelan Armed Forces would play an important part.

In addition to the maintenance of internal order, the Venezuelan Armed Forces may also, when our concept of their military role has been worked out by the competent agencies of this Government and agreement reached with the Venezuelans, be expected to be prepared to assist in protecting shipping in the vicinity of their coasts against possible enemy submarine attack and to be ready to repel raids against strategic installations.

Our Government has endeavored to assist the Venezuelans in improving the quality of their Armed Forces by furnishing Army, Air and Naval Missions, and it is the Department’s policy that these missions should be continued. It is, however, the Department’s policy that they should not serve as they have at times to stimulate demand for armaments not yet agreed upon as essential for hemisphere defense.

During World War II Venezuela acquired nearly $4 million worth of military equipment under Lend Lease and settlement of this account has practically been completed. Further arms were sold to Venezuela under the Interim Arms Program but the lack of legislative authority for inaugurating an arms standardization plan and the relatively high cost of American aims have been responsible for the fact that Venezuela has acquired the greater part of its recent purchases of [Page 1037]arms from European countries, principally Great Britain,9 Belgium and Czechoslovakia. Unless we are willing to meet European prices on whatever arms Venezuela desires, it will continue to purchase wherever bargains are available. Despite predictions that such purchases would cause Venezuela to lose interest in our military missions, that Government has in fact during recent mouths requested increased personnel for those missions. Recently the passage of the Mutual Defense Assistance Act10 has encouraged the Venezuelan Government to believe it may be able to obtain additional arms from the United States.

[Here follows a statement regarding Western Hemisphere defense based on recent action of the National Security Council. Documentation on this subject is scheduled for publication in volume I.]

Until such time as Venezuela’s defense role has been specifically set forth and agreed upon by both countries, it is our policy to scrutinize with great care all applications for export of armaments to Venezuela and to avoid encouraging any significant increase in Venezuela’s military forces and equipment. In this connection this Government is taking into consideration the continuing unrest in the Caribbean area.

c. relations with other states

No major friction has existed in recent years in Venezuela’s relations with other states, with the exception of the Dominican Republic. This tension arose from the harboring of each other’s exiles and reached its peak with a threat of possible hostilties under the Acción Democrática Government. It has nearly disappeared since the November 1948 revolution. Very recently Venezuelan resentment toward Cuba for permitting the Inter-American Conference for the Defense of Democracy to meet at Habana and for permitting a Cuban official to publish remarks insulting to the Venezuelan Junta caused a nearrupture in relations.

The present Venezuelan Government has held some fear of hostile action by a combination of AD exiles and the “Caribbean Legion,” possibly operating from Guatemala, and may now fear the additional efforts of the Communist Party in conjunction with AD. The AD exiles are principally in Mexico, Puerto Rico and continental US, but the Guatemalan Government was very friendly toward AD and has not resumed relations with Venezuela since the 1948 coup. Chile and Uruguay have likewise not resumed relations. Our general policy in all these cases of friction has been to urge reliance upon established inter-American machinery for maintenance of hemispheric peace and [Page 1038]solidarity, to oppose intervention by one state in the domestic affairs of another either directly or by aiding exiled groups and at the same time to make clear that we consider the denial of democratic rights by any country to its citizens inconsistent with the expressed ideals of the American republics.

Venezuelan relations with Colombia and Ecuador have been traditionally friendly. These three countries which once formed Gran Colombia have stressed their common cultural tradition and in recent years have endeavored to strengthen economic ties through such efforts as the Gran Colombian merchant fleet. Venezuela has been less enthusiastic than Colombia with respect to these efforts, but as a valued partner because of its large supplies of dollar exchange. The Quito Charter signed by Ecuador, Colombia, Panama and Venezuela in August 1948 envisages among other things a Customs and Economic Union. Only Colombia and Ecuador have ratified this Charter and the Venezuelan Foreign Minister has recently stated that while many useful steps may be taken by the newly organized Provisional Gran-colombian Economic Council, a customs union is not suitable between countries which lack complementary economies. It is our policy to favor developments which strengthen the economy of Venezuela, so long as they are not in conflict with our commercial policies and do not result in unfair discrimination against US enterprise.

Venezuela has maintained basically friendly, although not close, relations with its other large neighbor, Brazil. A recent affinity has developed with Perú as both military juntas came into power by coups d’état. In contrast, Venezuela’s firm friendship with Haiti dates back to its struggle for independence when Bolívar received aid from Haiti.

Venezuela has, at times, desired the independence of the Netherlands West Indies from European rule but there has been no recent agitation. In the past Curaçao and Aruba have been a meeting place for Venezuelan exiles plotting their return to power.

Relations with Great Britain, which have been generally friendly, are affected chiefly by the presence of British oil companies (Shell subsidiaries) producing about one-third of Venezuela’s oil. Recent British restriction on imports of dollar oil from Venezuela caused some resentment.

Venezuela maintains diplomatic relations with the USSR and Czechoslovakia. In presenting his credentials in Moscow some months ago the present Ambassador spoke in glowing terms of the Soviet Government, but it is believed that he does not carry much weight in Venezuela and that he did not reflect the views of his Government. While many who sought to overthrow Dictator Gómez were trained in Communist revolutionary methods, relatively few Venezuelans had, or have, the slightest interest in cooperating with the international objectives of the USSR. However, the principal Communist [Page 1039]Party, until recently outlawed, exerted an influence in organized labor and certain other groups, and it is assumed that it will continue to function as an underground movement.

d. evaluation

US policies have been successful in encouraging friendly cooperation between the Venezuelan Government and American oil companies and have thus created a favorable atmosphere for the continuance of US private ownership of the oil industry and have prevented any widespread demand for nationalization by the Venezuelan Government. It is important that this Government continue to use its best efforts to this end. We should also continue to encourage the economic development of Venezuela along present lines as representative of the effective functioning of the free enterprise system. In this connection the success of our technical assistance programs, encouraging the economic development and diversification of industry in Venezuela warrants not only their continuance but their expansion along the lines envisaged under the Point IV program. In fact, Venezuela affords one of the best opportunities for the effective use of Point IV.

Our efforts to guide the commercial policy of Venezuela along the lines of reduced trade barriers have been successful only to the extent that they have moderated the trend toward protectionism. In view of the importance to both countries of avoiding high US tariff barriers against Venezuelan oil, continued efforts should be made to impress upon the Venezuelan Government and public the necessity of avoiding high Venezuelan tariffs or restrictive quotas on imports of significance to US exporters. This is particularly true of items which are specifically covered by the US-Venezuelan Trade Agreement.

We have been successful, at least temporarily, in avoiding a rate war between Venezuelan and American shipping lines which would have been detrimental to the best commercial relations between the two countries. Our efforts to encourage the restoration of a greater measure of democracy have not been successful. Such few steps as Venezuela has taken in this direction can hardly be said to have been brought about to any substantial degree by US policy. Accordingly, taking into account the importance of strengthening Venezuela’s friendship for the US and its cooperation with us in the furtherance of our international policies, we have recently been less outspoken in expressing our lack of enthusiasm for the present military dictatorship. On those occasions when Venezuela may take what appears to be substantial steps toward the restoration of democratic procedures, it may be possible for the US to express its approval in terms which will make clear our preference for a democratic form of government.

Our efforts to maintain and strengthen Venezuelan friendship at the government and upper-class levels have met with reasonable success. [Page 1040]The traditional friendliness of educated Venezuelans toward the US has been furthered by the USIE program. On the other hand much remains to be done, particularly in the direction of greater appeal to the laboring masses and among the students and writers, especially in view of the appeal of Communist propaganda to these groups.

The US Army, Air and Naval Missions in Venezuela have achieved a modicum of success in improving the standards of the Venezuelan Armed Forces. The unavailability and high cost of US arms compared with those of European manufacture have militated against standardization of Venezuelan arms along US lines. In view of urgent requirements of nonhemispheric countries, the Mutual Defense Assistance Act of 1949 makes it possible for Venezuela and other American Republics to buy from the US Government only limited amounts of military equipment and these must be paid for in full and in cash.

[Here follows further discussion of Western Hemisphere defense matters; see bracketed note, page 1037.]

On September 22 officials of the Departments of State and Defense met in Washington to discuss the security of Venezuelan petroleum installations and the possibility of holding conversations between the Venezuelan military authorities and representatives of the Caribbean Defense Command. It was noted that Colonel Moreno in his recent visit to Washington had presented lists of equipment desired by the Venezuelan armed forces and that a comprehensive reply was nearly ready to be delivered to him. (Information on Venezuelan military procurement is in file 731.5 and its subfiles.) It was generally agreed in the meeting that the Department of State would aid the Department of Defense in getting talks started.

In a letter of December 6 to Secretary Marshall, H. Freeman Matthews, Deputy Under Secretary of State, writing in behalf of Secretary Acheson, stated in part that Edward John Sparks, Chargé in Venezuela, and discussed the matter with Carlos Delgado Chalbaud, President of the Military Junta Government, and that on November 11 the former had stated that the Venezuelan Government had accepted in principle the “… proposed joint defense planning talks to be held at Panama.” (731.56/12–650)

  1. Pertinent documentation is scheduled for publication in volume iii.
  2. Neither a quota for nor a tariff increase on imported oil was enacted by the 81st Congress.
  3. On the basis of considerations relating to Venezuela, the Department had for a time in 1950 delayed denunciation of the Trade Agreement with Mexico signed at Washington, December 23, 1942. (For text, see Department of State Executive Agreement Series (EAS) No. 311, or 57 Stat. (pt. 2) 833.) See the memorandum of February 23 by Thomas C. Mann, Director of the Office of Middle American Affairs, to Willard F. Barber, Deputy Assistant Secretary of State for Inter-American Affairs, p. 942.

    For the decision to proceed with denunciation, see the memorandum of May 5 by William L. Krieg, Acting Deputy Director of the Office of North and West Coast Affairs, to Edward G. Miller, Jr., Assistant Secretary of State for Inter-American Affairs, p. 947.

  4. Signed at Caracas, November 6, provisionally effective from December 16. For text, see 54 Stat. (pt. 2) 2375. Texts of related presidential proclamations issued December 12 and 28, 1939, are ibid., 2451 and 2456, respectively.
  5. Apparently the Staff Agreement of January 15, 1942, not printed. The Agreement was modified and put into effect by an exchange of notes at Caracas, January 28, 1943. For text of the latter, see Foreign Relations, 1943, vol. vi, pp. 793 794. Documents in file 731.56 for 1950 indicate that ofiicers of the Department were uncertain as to what might then have been the legal status of this Agreement but were in any case not disposed to revive it.
  6. Venezuela did not ratify this agreement.
  7. No such agreement was concluded in 1950.
  8. See the editorial note under date of July 7, infra.
  9. For the Department’s attitude concerning British arms sales to Venezuela, see the memorandum of June 1 from Mr. Miller to John Foster Dulles, and the memorandum of July 20 by John W. Black to Wayne G. Jackson, scheduled for publication in volume i.
  10. Approved October 6, 1949. See 63 Stat. 714.