VE–38. Memorandum of Conversation, Department of State, Washington, November 16, 19591
SUBJECT
- VENEZUELA: Financial Situation and Proposed Import Restrictions
PARTICIPANTS
- Dr. Marcos Falcon-Briceño, Ambassador of Venezuela
- Mr. Manuel Perez Guerrero, Director, Commission of Coordination and Planning
- Mr. Thomas C. Mann, Assistant Secretary of State for Economic Affairs
- Mr. John J. Ingersoll, Officer in Charge of Venezuelan Affairs
- Mr. William Pryce, Staff Assistant, Economic Affairs
Mr. Perez Guerrero was introduced by the Ambassador, who had requested this appointment on his behalf.
[Typeset Page 1291]Perez Guerrero said that, as is widely known, Venezuela is faced with serious balance of payments difficulties, with her reserves being eroded at a rate of about $100 million per month. Foreign exchange reserves had dropped from over one billion dollars to about $600 million. The Venezuelan Government feels it must act quickly to stem this flow while it can still do so coolly and deliberately, and not wait until reserves are exhausted and be forced into measures of haste and desperation.
Mr. Mann said that he had been aware of this situation and was pleased to hear that the Venezuelan Government intended to face-up to the problem.
Perez Guerrero said that his Government intended to cut imports of items which are considered to be draining off Venezuela’s foreign exchange. As a temporary step it is proposed to immediately (within a few days) require licensing of all imports of a list of items which are considered to be of a non-essential or luxury nature. He exhibited a typewritten list which included, among other things:
[Facsimile Page 2]caviar
wines
liquors
perfumes
cigars, cigarettes
leaf tobacco
automobiles
cameras
film (except motion picture film)
radio receivers
television receivers
marble
building ornaments
He said that with the introduction of the licensing system, imports of these items will be severely restricted, possibly being limited to only those items already en route or on contract order. This is to be, however, only temporary until action can be taken by the Congress to impose a new, heavy excise tax on all goods in this list, whether they be imported or of domestic manufacture. When the tax becomes effective, which he estimated to be in “a matter of weeks”, the licensing requirements would be abolished. The tax would curtail effectively the importation and domestic production of these items and, at the same time, provide a new source of revenue to help balance the national budget.
[Typeset Page 1292]Mr. Mann said this sounded like a step in the right direction but he doubted that import controls alone would be enough to cope with the problem. He also emphasized the importance of consulting with the IMF before taking any step such as this and the need to insure that such action is not discriminatory against U.S. products.
Perez Guerrero said that he had come up from Caracas only last night and that he would return this evening. He had already talked with the IMF staff technicians and there seemed to be a possibility, he said, that a small IMF mission might go to Venezuela to discuss these matters. He made note of Mr. Mann’s remarks about avoiding discrimination and pointed out that the tax would apply to domestic goods as well as to imports. Perez Guerrero noted that this was not a matter calling for U.S. approval and that this meeting was designed merely to continue our customary policy of confiding in one another with respect to our problems and the actions proposed to meet them.
Mr. Ingersoll raised the question of the consistency of this proposed action with our bi-lateral Trade Agreement. Perez Guerrero said that, of course, a lot of the items to be licensed are included in the bi-lateral but that neither the temporary, emergency licensing system nor the non-discriminatory excise tax would contravene that agreement.
Mr. Mann said that while this might help, he felt that other actions were imperative, especially the restoration of confidence in relations between the foreign oil companies and the Venezuelan Government. He said that the increasing [Facsimile Page 3] oversupply of oil on the world markets coupled with the increasing efforts of such areas as the European Common Market to reserve their markets for preferred suppliers in their own political orbit, all augured ill for the competitive position of Venezuelan oil unless there is a high degree of cooperation between the Government and the private producers.
Perez Guerrero said that President Betancourt, Perez Alfonso, and others in his Government were trying to deal with these problems. He said that he, himself, was much more optimistic than Mr. Mann with respect to future markets for Venezuelan oil.
Perez Guerrero spoke of various, recurring rumors that the Bolivar will shortly be devalued and said, in a most emphatic tone, that there will be no devaluation. Such will be avoided at all costs.
Both Perez Guerrero and Mr. Mann agreed on the extremely sensitive nature of the information which had been discussed concerning proposed import restrictions. It was recognized by all present that a serious and embarrassing scandal could result if there were any leak of this information before the official announcement by the Venezuelan Government.
- Source: Department of State, Central Files, 831.10/11–1659. Secret. Drafted by Ingersoll.↩