VE–17. Memorandum of a Conversation, Department of State, Washington, December 24, 19581
SUBJECT
- Venezuelan Income Tax Revision
PARTICIPANTS
- Dr. Marcos Falcón-Briceño, Ambassador of Venezuela
- Mr. R. R. Rubottom, Jr., Assistant Secretary for Inter-American Affairs
- Mr. Maurice M. Bernbaum, Director, East Coast Affairs, ARA
- Mr. C. E. Bartch, Officer-in-Charge, Venezuelan Affairs
Ambassador Falcón-Briceño called at the Department this afternoon at Mr. Rubottom’s request. Mr. Rubottom expressed the serious concern of the highest levels of the U. S. Government over the action taken by the Venezuelan Government on December 19 to increase the general income tax rates, particularly since Venezuela failed to consult with the United States.
Mr. Rubottom pointed out that in view of the substantial U. S. interests in Venezuela, especially in the petroleum industry, we would have expected that the Venezuelan Government would have consulted with us in advance of taking action which so clearly affects those interests. Mr. Rubottom said that there was no question whatsoever of the Venezuelan Government’s right to adjust its income tax rates, as a matter of national sovereignty. He reminded the Ambassador, however, that the United States has scrupulously followed a policy of consulting with other governments before taking any action which might affect their interests. He pointed out that special efforts along these lines had been made to consult regularly with Venezuela, as the Ambassador well knew. Mr. Rubottom alluded to the importance we attach to friendly consultation and cooperation on matters of common interest among the nations of the hemisphere. He said the United States considers this friendly consultation a cornerstone of our Latin American relations. He pointed out that Venezuela’s failure to consult in advance with the United States had been even more astonishing in view of the fact that Assistant Secretary Mann was in Venezuela on the very day the decree was promulgated and made public, having gone there for the second time this year to consult with Venezuelan [Facsimile Page 2] officials concerning the oil import situation. As a matter of fact, Minister of Mines Julio Diez had [Typeset Page 1238] gone directly from a three-hour meeting with Mr. Mann to the White Palace to participate in a ceremony announcing the income tax reform, without having even mentioned to Mr. Mann the reason for his departure from the meeting.
An additional reason why consultation would have been expected is the fact that the action of the Venezuelan Government could have far-reaching repercussions in other areas of the world, Mr. Rubottom stated. He asked that the Ambassador report to his Government the serious concern of the United States over the action it had taken.
The Venezuelan Ambassador declared that he had no explanation of the lack of advance discussion with the United States of the action taken by his Government. He said he was certain that his Government’s action, and its failure to consult with us, did not imply that his Government did not value highly the friendship and good will of the United States. He assured Mr. Rubottom that the Government’s action did not mean that his Government did not appreciate the importance of consultation. He thought that the reason the tax reform was announced without consultation or other advance notification was that it was considered a matter of extreme urgency. He referred to the economic problems and unpaid debts inherited from the Pérez Jiménez Government and the unbalanced budget for the current fiscal year. He said Venezuela’s need for additional funds was imperative and that action before the end of this calendar year was considered necessary in order to obtain the benefits of the higher tax rates on 1958 income. He mentioned also the fact that the foreign loan of $225 million approved by the Provisional Government had been delayed until Congress convened in January.
The Ambassador called attention to the statements by the Ministers of Mines and Treasury concerning the income tax reform, and repeated the most significant points made in the statements. He reiterated his Government’s position that the tax revision was an internal matter and entirely within the sovereign power of Venezuela. He characterized the statement issued on December 22 by Mr. H. W. Haight, President of the Creole Petroleum Corporation, as somewhat violent (“una poca violenta”) and as unfortunate. He attempted to refute the claim made by Mr. Haight that the new tax rates would affect the costs of the oil companies or impair Venezuela’s competitive position in the world petroleum market.
The Ambassador repeated Mr. Rubottom’s expression of serious concern several times in order to make certain that he would interpret to his Government precisely the attitude of the United States. In response to Mr. Rubottom’s request, he promised to ask his Government for additional information on the background and meaning of the action it had taken.
- Source: Department of State, Central Files, 831.112/12–2458. Confidential. Drafted by Bartch, and initialled by Rubottom.↩