Miller files, lot 53 D 26. “Venezuela”

The Ambassador in Venezuela ( Warren ) to the Assistant Secretary of State for Inter-American Affairs ( Miller )

secret

Dear Ed : While I am sure you know I have never suffered from any illusion that the successful negotiation of revisions to our existing [Page 1590] reciprocal Trade Agreement1 with Venezuela would be an easy matter,2 I have never been pessimistic with regard to the eventual outcome and I am not pessimistic today. However, I am enough of a realist to recognize after my few months in Caracas certain of the difficulties which must be overcome. I have just had a long talk with the Foreign Minister, Dr. Gomez Ruiz, and the principal item on my agenda was the Trade Agreement. As a result, it is my judgement that, in addition to the Embassy’s despatch no. 1198 of today,3 containing an analysis of present thinking in Venezuela relative to the Trade Agreement, together with my telegram no. 340 of today,4 you should be informed directly in this manner of the way the problem seems to be shaping up.

The fundamental difficulty, as I see it, is that unfortunately and due to causes entirely beyond our control, this matter of the Trade Agreement has been delayed too long. You are familiar with the efforts made last year by the Embassy to prevent a unilateral denunciation of the existing Agreement when local pressures from the protectionist group powerfully influenced the thinking of the Foreign Minister from a domestic political standpoint. Eventually the necessary legislation renewing the Reciprocal Trade Agreement Act was passed by the Congress,5 and this was followed by a brief period of high hopes on the part of the Venezuelans that it would not be long before a revised agreement could be reached. Despite all our efforts, they simply did not understand the cumbersome and time-consuming procedures required by our laws, and, despite the fact that the hearings before the Tariff Commission and the Reciprocity Information Committee were accomplished without any unreasonable delays, a general atmosphere of dissatisfaction and impatience developed toward the end of the past calendar year.

With the return from abroad of the Foreign Minister, he found himself faced with a situation that was far from easy from a domestic political standpoint. He is too well informed to believe that formal negotiations for revisions can actually begin much before April 1st, and the time necessary for such complicated negotiations, even at the most optimistic estimate, would not be less than 90 days. The question confronting him then is whether or not he feels strong enough to hold the line through the first six months of this calendar year.

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Dr. Gomez Ruiz knows very well that we in the United States are in the middle of an election year. He also knows that within his own country the Government in power is committed to a carrying through of the electoral statutes without delay. Under such circumstances it seems to me that we must recognize the fact that the Government of Venezuela at present is not only a Military Junta but that more and more real power is being concentrated in the hands of one member6 of the Junta. There is no Cabinet Minister today in Venezuela whose authority is great enough to stand alone on any major political subject, and, regardless of how much the Foreign Minister may wish a successful renegotiation of the Trade Agreement, he may be forced, if there are further delays, accompanied by increasing domestic pressures, to accede to the wishes of one member of the Junta.

I believe firmly that if there should be a failure to negotiate successfully a revision of the existing Trade Agreement, there would inevitably set in a deterioration in relations between the United States and Venezuela, and in all probability the solution of many pending problems, such as, for example, our bilateral Civil Aviation Agreement,7 might become impossible of mutually satisfactory solution.

Unless the administration in power can present to the people of Venezuela a revised Trade Agreement which will clearly and unequivocally show a material improvement over the Mexican Agreement as far as oil is concerned and simultaneously give to the protectionist group in Venezuela part of what it demands, the prospects at this moment, to my mind, of a successful renegotiation are definitely not bright. I believe, therefore, that if anything can be done in the way of speeding up the delivery of arms and military equipment to Venezuela, such action would tend to remove existing irritation and help to put the Military Junta in a more favorable frame of mind to support the Foreign Minister in his plea for more patience. Furthermore, if we are finally able to enter into actual negotiations, every member of the U.S. team must be impressed with the fact that under the existing emergency there is far more to be gained by granting concessions, even at the risk of having it considerd a “one-way street”, than there is to try to negotiate on a strictly legalistic basis.

As I said at the beginning, I am not pessimistic. The Foreign Minister is subject to the influence of his principal adviser on this [Page 1592] matter, Dr. Reyna,8 who has pointed out clearly that Venezuela has a better chance for obtaining a degree of protectionism if it does not fight too hard on petroleum. Furthermore, Mr. Wolf 9 has continually pointed out to Dr. Reyna that in the redrafting of the basic provisions of the existing Trade Agreement, certain advantages may accrue to Venezuela, particularly with regard to quantitative restrictions, which could eventually prove more valuable than the specific items in Schedule I. Reyna knows these things, and the Foreign Minister is considering this problem. However, we are fighting against the bad effects of long delays and no one who is well informed could say positively today that the patience of the Foreign Minister himself may not become exhausted any day. To prevent this from happening, we must find some way to create a new atmosphere of hope. I have only suggested specifically the speeding up of the delivery of arms and military supplies. Other ways of accomplishing our purpose may be apparent in Washington.

This afternoon Mr. Proudfit 10 of Creole called on me to discuss the two problems of the oil concessions and the Trade Agreement, which problems, incidentally, he regards as probably closely related. He had just spent almost four hours with Otis Ellis 11 and was seriously disturbed. After he had presented his views relative to the danger, not only to Venezuela but to the United States, of Venezuela’s granting new concessions to independents without adequate financial and moral responsibility (and I cannot emphasize too strongly that he would be more than willing to see the right types of independent operators come in) he stated that he was gravely concerned with the possibility that the Foreign Minister might denounce the Trade Agreement unless he could clearly show to the Venezuelan people that he had obtained something better than the Mexican Agreement. He said he was thoroughly convinced that the peril point findings of the Tariff Commission had resulted in a rate of 10½ cents and he added that while Otis Ellis protested continually his ignorance, he felt Otis Ellis was convinced that the rate is 10½ cents. He said that he was considering departing for Washington immediately by air in order that he could do his part without any further loss of time in preventing any official action on the part of the United States which might force Gomez Ruiz to denounce the Agreement. Mr. Proudfit analyzed at great length and with considerable force the reasons for the present thinking of the Foreign Minister. He then added that he was unable to understand why, in a matter of such grave importance as this to the United States, [Page 1593] the President might not be convinced of the advisability of declining to accept the findings of the Tariff Commission, inasmuch as the President in his announcement could always refer to the fact that domestic American interests were adequately protected under the law by the escape clause. He realized that it was a presidential election year, but he felt that the risks involved at this time of emergency of the possibility of deterioration of our relations with Venezuela were all together too great to permit the President to be too much influenced by the domestic political situation of our country.

Both Mr. Wolf and I were greatly impressed with the intense seriousness of Mr. Proudfit, a man who is not only extremely level headed but has been the outstanding leader in the petroleum industry in Venezuela for more than a quarter of a century. We believe that he is not in any way acting from selfish interests, and I am sure that, if he should indeed depart for Washington within the next few days, you will not only want to receive him but do everything possible to facilitate the purposes of his mission.

While the above was being written, Mr. Nelson Rockefeller called to pay his respects on February 6th. We reviewed the political situation and during our conversation he asked me about the progress on the Trade Agreement. I told him frankly of the situation as related in paragraph 5 of my telegram of today.12 He immediately asked me if the oil people understood the situation. I told him that Mr. Proudfit had followed the matter as closely as has this Embassy, and that he had the matter very much on his mind and was trying to figure out what he might do about it. Mr. Rockefeller stated that he was seeing Mr. Proudfit later today (I believe he left my office to go to see Mr. Proudfit). As our conversation progressed, he said that he would like to do something to assist in the matter and, after reflection, stated that he could talk with Mr. Steelman 13 at the White House since his relations with that official are very good. He asked me what I thought of the idea, and I did not hesitate to say that I thought it was opportune and very good. Consequently, we will have the support of both of these gentlemen in an endeavor to get an agreement.

I should add that last evening (February 5) I saw Mr. Swensrud,14 President of Gulf Oil. He had learned about the stand of Dr. Gomez Ruiz, and asked me about it. Without talking as freely or to the extent that I did with Mr. Rockefeller, I told him what the situation is at this time. He said that, when he got back to New York, he might make a trip to Washington to see whether he could be of any assistance. I feel sure he will come to see you should he decide to try to assist. I was much impressed by him.

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All of us in the Embassy are agreed that there is no time to be lost. Unless some way can be found at once to assure the Foreign Minister that there is a chance of his coming up with a revised agreement, better on oil than the Mexican Agreement, there will probably be, at an early date, a denunciation of the existing agreement with all the unfortunate effects which I am sure are evident both in Caracas and Washington. Franklin Wolf and I see Srs. Reyna and Gomez Ruiz on Monday. We shall try to hold the fort until the recommendation of the Tariff Commission is known and we can be sure what are the next steps to be taken.

With warmest regards,

Fletch
  1. For text of the referenced agreement, signed Nov. 6, 1939, and entered into force, Dec. 14, 1940, see 54 Stat. 2375.
  2. The United States agreed in 1951 to renegotiate the existing trade agreement with Venezuela.
  3. Not printed (411.3131/2–552).
  4. Not printed (611.31/2–552).
  5. Apparent reference to the Trade Agreement Extension Act of 1951 (Public Law 50), approved June 16, 1951; for text, see 65 Stat. 72.
  6. At this point in the margin of the source text appears the following handwritten notation, initialed by Deputy Assistant Secretary of State for Inter-American Affairs Mann: “And, in my opinion, one who is basically unfriendly to us.”
  7. Apparent reference to the agreement signed in 1948, but never ratified by the Venezuelan Government.
  8. Manuel Reyna, Director of Economic Policy, Venezuelan Ministry for Foreign Affairs.
  9. Franklin W. Wolf, Counselor of Embassy for Economic Affairs, Caracas.
  10. Arthur T. Proudfit, President, Creole Petroleum Corporation.
  11. Representative of the Venezuelan Ministry of Mines and Hydrocarbons.
  12. See footnote 4 above.
  13. John R. Steelman, the Assistant to the President.
  14. Sidney A. Swensrud.