VE–47. Telegram from the Chargé in Venezuela (Stewart) to the Department of State1
418. In view current generally precarious situation in Venezuela, it is vital that country’s economic, political, and social problems be placed in proper perspective in Department’s and Embassy’s thinking [Typeset Page 1304] in order that sound approach can be adopted re Venezuela’s need for external assistance.
It would be easy dismiss Venezuela as country too rich to need external assistance for economic and social development projects. Indeed Venezuela still enjoys high level foreign exchange income and government revenues relative other Latin-American countries. Moreover, if Venezuela were able utilize these resources effectively, without waste, for sound economic and social development projects, it is possible that Venezuela would in fact not need outside assistance.
But U.S. must face reality that Venezuela not likely achieve stable, well administered, democratic government for some years to come. While rich in resources, Venezuela is young and inexperienced in democracy, short of capable public administrators, lacking in technicians, and as result, weak and ineffective in implementing government’s good intentions. Venezuela’s background in dictatorship governments over the years was characterized by rapidly increasing expenditures on expanding bureaucracy and on ill-planned projects of questionable economic usefulness. Waste and corruption were widespread. To expect Venezuela to shake off heritage of dictatorships and evils of dictatorships and to establish responsible, effective, democratic government in one or two years would be expecting too much under very favorable conditions. It is unrealistic under conditions prevailing in Venezuela today. It may not even be possible during President Betancourt’s five year term of office.
[Facsimile Page 2]Coalition government has increased difficulties achieving goals in economic and social spheres but considered by President Betancourt essential for achieving political stability and maintaining democracy in Venezuela. Withdrawal URD from existing coalition, which now appears imminent, will increase Betancourt’s political problems and opposition parties.
Ineffectiveness coalition government and effect unstable political situation on Venezuelan economy have been adverse and serious. They have undermined confidence, both business and public, which in turn has resulted in the withdrawal deposits from banks and flight of capital. President Betancourt faced up to this problem this week. On advice of his closest economic advisers, and apparently also, IMF, he proposed to devalue the bolivar. This engendered such overwhelming and unanimous opposition, not only among industry, commerce, banking and labor, but also from COPEI and URD, coalition partners with Betancourt’s AD Party, that he was forced instead to adopt exchange controls. Country has not yet recovered from shock and confusion. Budget for current fiscal year is out of balance by over 600 million [Typeset Page 1305] bolivars, and to reduce expenditures further not only is difficult but could be politically and socially explosive.
[Facsimile Page 3]President Betancourt is our best bet to achieve kind of government in Venezuela that would best promote and protect U.S. national interests. He stands for what we stand for. He recognizes the dangers of Castroism and can be counted upon to assist in blocking its spread. He has come long way in being able be openly critical in his November 1 speech what is happening in Cuba. This would not have been possible six months ago.
Venezuela is thus beset with serious political, social and economic difficulties. President Betancourt needs help and Embassy considers it vital that U.S. give him all possible assistance along following lines:
- 1)
- Expanded technical assistance for remainder this fiscal year. Request for technicians are still pending, even those for which GOV willing cover costs. If necessary, contingency funds should be provided. President commented bitterly to me about inability obtain technicians.
- 2)
- Urgent reconsideration of policy limiting Venezuela to very restricted ICA program. President Betancourt informed me his government is definitely interested in expanded ICA program coming fiscal year and would welcome discussions about such program. However, Embassy is reluctant approach GOV unless USG policy is such that we can follow through on any reasonable program.
- 3)
- Prompt action on loans. President made strong plea for urgent action on GOV money needs. He said he did not want grant aid; that his country would be able to repay loans. [Facsimile Page 4] What is needed, he said, is financial assistance at this time since government is in trouble.
- 4)
- Embassy has been pushing GOV for some indication what PL-4802 assistance will be wanted from U.S. President said country still interested and experts working on program. Embassy is aware U.S. agencies concerned are interested in a PL–480 program for Venezuela and only asks that when request are made they be given sympathetic prompt action.
In conclusion, Embassy again emphasizes that special conditions exist in Venezuela at this time; that our stake in Venezuela amounts to some four billion dollars and that our best bet is President Betancourt. If Venezuela’s inexperience in applying for assistance makes it impossible to meet normal economic criteria of our government then assistance must be provided on political grounds. With the imminent breakup of [Typeset Page 1306] tri-party coalition, with battle lines formed between anti-democratic extremism and constitutional democracy we must in our own national interest, support Betancourt to limit.