Foreign Relations of the United States, 1961–1963, American Republics; Cuba 1961–1962; Cuban Missile Crisis and Aftermath, Volumes X/XI/XII, Microfiche Supplement

222. Memorandum from Hilsman to Edwin M. Martin, May 29¹

May 29, 1962

SUBJECT

• Venezuela and the Alliance for Progress

The following study on Venezuela has been prepared in connection with the meeting of the Latin American Policy Committee to be held June 7.

1. Political Setting

The Venezuelan political picture has historically been characterized by chronic instability and extended periods of dictatorship, usually in the persons of military caudillos. Progress toward popular self-government is a product of the last 25 years, but was interrupted by the authoritarian regime of General Marcos Pérez Jiménez (1948–58). In fact, the present government headed by President Rómulo Betancourt, who recently completed three years in office, is the longest-lived popularly elected civilian government in the country’s experience.

Power and authority in the society traditionally rested with an oligarchy of landholders and merchants. However, in response to increasingly insistent popular demands for representative government and socio-economic reforms during the past quarter century, two vigorous and competing political forces emerged: the armed forces, which espoused order and authority and were also eager to seize and exercise power in their own interest, and mass-based political parties. In addition, as part of the process of modernization of the country in recent decades, a new class of industrial and commercial representatives has arisen to displace the old order as directing elements in the society. Moreover, burgeoning urban labor and middle class groups have made their appearance, and at present the political party and government leadership is largely derived from the latter sector.

The Betancourt government was elected to a 5-year term in December 1958 in an atmosphere marked by widespread revulsion over the excesses of the recently overthrown Pérez Jiménez dictatorship, strong popular determination to prevent a return to authoritarianism, and a formal pre-election agreement to establish a coalition government with representation of the major political parties and independent political sectors and to undertake basic socio-economic reforms. Inaugurated in February 1959, President Betancourt organized a coalition government comprised of his own Democratic Action (AD) Party, the Social Christian (COPEI) Party, the Republican Democratic Union (URD) Party, and political independents, which was endorsed by the armed forces and all major non-political civilian groups.

During the first two years of the regime, President Betancourt followed a policy of preserving harmonious relations among the political parties as a prerequisite for survival of constitutional, democratic government, and initiated action on a comprehensive 4-year socio-economic reform program. Nevertheless, from its inception the government was subjected to a continuing series of attempted coups d’état by disgruntled reactionary civilian and dissident rightist military elements, including an almost successful assassination attempt against the President. These moves have been thwarted by effective government action, strongly supported by the armed forces, and rightist plotters have been generally discredited. Nevertheless, their activities continue at the present time.

In addition, since mid-1960 the Betancourt government has been threatened by the militant activities of extreme leftist groups, including the Communists (PCV), the pro-Communist Leftist Revolutionary Movement (MIR) and elements of the URD, seeking its overthrow and the installation of a Castro-type regime. To counter this threat the government partially suspended constitutional guarantees and initiated a campaign of moderate harassment against these groups. With the separation of the URD from the coalition in late 1960, President Betancourt reorganized his government along a narrower but more homogeneous political basis, including only AD, COPEI and independents, which still retained majority control over the Congress and organized labor and continued to have the support of the armed forces and responsible non-political groups. The coalition lost control of the lower house of Congress in early 1962 after a “Young Turk” group (ARS) abandoned the AD and joined forces with the opposition. Moreover, in recent months the government has had to contend with renewed agitation by extreme leftist forces including a small Communist-student guerrilla movement in the interior, a campaign of terrorist activities in the major urban areas, and a sizable abortive revolt by dissident leftwing military elements collaborating with PCV and MIR in the port city of Carúpano in early May. In the face of considerable popular unrest over the continuing violence and indications of growing armed forces uneasiness, the government undertook vigorous military action to curb the guerrilla groups and on May 10 issued a decree banning PCV and MIR activities.

2. The Socio-Economic Setting

The large-scale development of its petroleum resources during the past 20 years has provided Venezuela with the highest economic growth rate and per capita income in Latin America. It is the largest petroleum exporter and third largest petroleum producer in the world. Its tremendous natural resources offer the prospect for continued rapid advances and diversified economic development over the long run. However, even in the short run there is also the alternative of economic collapse and chaos as the result of a possible breakdown in orderly political processes.

US economic interest in Venezuela is quite substantial, since total US trade with the country is greater than with any other in Latin America and US direct investment in Venezuela (about $3 billion) is larger than in any other country except Canada. In fact, foreign capital and technology (US, British, Dutch) have been primarily responsible for development of the country’s natural resources.

The population of over 7.5 million, although growing at an annual rate of about 3.5%, is small in comparison with Venezuela’s natural resources, and the rapid economic expansion in recent years has not been accompanied by development of its human resources. Many Venezuelans have been virtually untouched by the nation’s prosperity, and distribution of national income is extremely uneven. Thus, most Venezuelans are ill-fed, poorly housed, unhealthy, and lacking in basic facilities. As recently as 1958 perhaps 50% of the population was still illiterate, while several hundred thousand school age children were unable to attend school due to lack of teachers and adequate facilities. The housing shortage is on the order of an estimated 700,000 units and is increasing at the rate of more than 100,000 each year. Unemployment (about 13% of the labor force) and underemployment are critical problems, primarily in the large urban areas. As the result of the petroleum boom and recent heavy internal migration to the cities, there is a considerable imbalance between urban (70% of the population) and rural areas.

During the past 4 years the economy has been depressed by comparison with the pre-1958 high, and the annual economic growth rate has since declined almost to insignificance. This situation resulted from a combination of factors, including large-scale capital outflow, sharp reduction of foreign exchange reserves, Venezuela’s weakened competitive position in the world petroleum market, a slowdown in petroleum exploration and construction, serious budgetary deficits, and widespread apprehension and distrust in foreign and domestic business circles concerning the economic policies and objectives of the leftist reform government. The problem has been aggravated by a marked increase in bureaucratic payrolls, the large expenditures required in the implementation of the government’s reform program, and widespread opposition to austerity and exchange control measures.

The government’s 4-year development program (adopted April 1960 and revised annually in subsequent years) calls for a more rational utilization of income derived from the petroleum industry in order to promote diversification and expansion of agriculture and industry, agrarian reform, and improvements in education, housing, and health and public welfare services. The plan gives target dates and specifies the goals set forth in each sector of planned development. Substantial but varying progress has been achieved to date in several areas of reform, notably agrarian resettlement, rural housing and education, but in other areas, such as urban renewal and measures to relieve unemployment, improvements have at best been haphazard. Nevertheless, the Betancourt government is one of the hemispheric leaders in the promotion of social reform and economic development within a democratic constitutional framework.

3. Problems and Prospects

The basic problem confronting Venezuela and, specifically, the Betancourt regime involves, on the one hand, strengthening the framework of constitutional, representative government and orderly political processes, and, on the other, moving forward energetically on socio-economic reforms, while promoting a revitalization of the economy and its diversification. The success of such efforts is hampered by lack of consensus in the society and violent divergences between political groupings in the country, which threaten to precipitate a breakdown in public order and reversion to authoritarian government. The vested interests—including the propertied groups, some of the military, and certain favored classes in the metropolitan area—developed their expectations during the 1950’s boom period, tend to associate the Betancourt regime with lack of popular discipline and unsound economic policies, and regard the masses with fear and distrust. Some metropolitan interests see their future compromised by AD’s emphasis on development of the hinterland and of human resources in general. Agrarian reform has whetted the appetite of campesinos for land, credits, and housing, without providing solutions up to the level demanded by this group. The national complex of dependence on the foreign petroleum companies nourishes suspicion and dislike of foreigners in dominant positions. Student groups supply a receptive audience for Communist and Castroist propaganda and have shown their alienation from society in violent demonstrations and, recently, in guerrilla activity.

In all these conflicts and suspicions extremist political forces find a fertile field to sow dissension and to hinder the growth of broad support of government programs for development. Frequently Venezuelans appear to be agreed only on the desirability of getting as much money as possible as fast as possible. This nourishes political conflict, since competing groups in the population make most of their claims in terms of material aid, direct or indirect, from the government. In this charged atmosphere the pressures on the government have increased considerably with adverse effects on the economy.

The close involvement of business, labor, agrarian, and unemployed elements as well as political parties with the exercise of government authority has meant that the maintenance of power on a democratic footing required a repeated marshalling of pro-government groups to match displays of force by the opposition. This in turn has tended to limit the flexibility and the range of action in government economic policy. To ask for austerity and restraint on behalf of a long-term investment program becomes impractical when political stability is constantly being placed in question by subversive movements of the right and the left.

Compounding the effect of pressures on the government for immediate satisfaction of conflicting demands is the general inexperience and incapacity of the bureaucracy. It is not only highly political by recruitment and by sympathy, but it is also learning to govern and administer on a trial and error basis. The present government and political leadership not only has much to learn about economic management but inherited a fiscal and administrative system little changed from pre-modern days. With a background largely in party organization this leadership is personalistic and expedient in approach, and it is not inclined to impose the discipline and standards needed for large-scale economic operations of the government at the expense of losing political support. Moreover, the tendency of the Old Guard political leadership, particularly in AD, to monopolize the positions of power has frustrated much of the parties’ younger, less experienced element, with the consequence that much of this group has defected to the opposition and to advocating extremist solutions for the country’s problems.

4. The Alliance for Progress and Related Programs

Until recently there was virtually no US assistance program for Venezuela, and the government’s development plan originally did not call for large-scale foreign assistance. Nevertheless, during the past year a substantial Alliance for Progress program has been formulated with respect to Venezuela, involving assistance in the fields of programming and urban and rural development. The Venezuelan Government is also currently revising its 4-year development program in line with the coordinated country plan approach set down at Punta del Este, which is scheduled for early submission to the “Nine Wise Men” and the US Government. Considerable progress has been made in formulating Alliance programs and selecting projects, and some actual work is already in progress on a number of projects. Nevertheless, USAID Caracas is still only about one-third staffed and President Betancourt has complained to our Embassy over what he characterized as undue slowness in implementation of the Alliance program. This, obviously, is the major problem toward the solution of which those involved in the Alliance operation have been exerting their efforts.

To supplement the substantial progress already being achieved in the economic and social aspects, consideration might also be given to formulating a joint program directed specifically toward preserving political stability in Venezuela over the long run, and over the short run assisting the present government to fill out the remainder of its term (to March 1964), providing for an orderly transition of power to its duly elected successor, and contributing to the efforts of the moderate forces to win the late 1963 elections. Although the US capacity of influencing this situation directly is limited, our interest in the problem might be dramatized by efforts to improve the somewhat deteriorating relationship between Old Guard political leaders, who presently occupy most top positions in the government, the parties and the labor and peasant unions, and the younger leaders in these sectors, many of whom are frustrated in their ambitions to advance rapidly in their professions and see their progress blocked by the older element. We might influence this situation initially by approaching President Betancourt and other top government and party officials with suggestions for a joint US-Venezuelan undertaking along the following lines:

a) To establish in Caracas a Venezuelan version of the Costa Rican Institute of Political and Social Studies, which would offer political leadership training to acceptable (moderate, progressive, non-extremist) young members of the AD and possibly COPEI and independents. Young AD members have been participating in the Costa Rican experiment for some time; however, their numbers are limited and they are forced to be away from Venezuela for extended periods. An institution located in Venezuela would enable larger numbers of young political figures to participate while continuing to fill their party, labor, government or other positions. Moreover, assuming a favorable Venezuelan response, the United States would be able to contribute directly and to a greater degree than in Costa Rica to a new undertaking of this type, with the resultant political and propaganda advantages. As in Costa Rica US universities should be encouraged to participate. However, consideration should also be given to the possible propaganda and other pitfalls resulting from extensive official US involvement in such a project.

b) To expand on a priority basis the exchange program for young leaders, whereby really significant numbers of party, labor, government and other representatives are regularly invited to visit the United States (including Puerto Rico) for short observation, study, or other types of tours. To date the exchange program has been quite limited in this respect. An expanded program would enable a sizable proportion of the country’s future leadership to acquire a first-hand impression of the United States, which should contribute to continuing close relations between the two countries and to a better understanding of democratic constitutional government processes by the younger Venezuelan element. Moreover, it would be most profitable to have regular visits of similarly qualified young American leaders to Venezuela. American companies operating in Venezuela should be encouraged to participate.

c) To investigate the feasibility of initiating a large-scale public administration educational program in Venezuela, probably in cooperation with local and American universities. In view of the limited capacity of Venezuelan universities at present to offer courses in this field, consideration should be given to assisting these universities to expand their facilities. Some study has already been devoted to an effort of this type.

d) To provide US assistance for a major program of training for labor union rank-and-file members and junior directors in Venezuela, in addition to the effort that has existed for some time on the part of AD and to the somewhat limited approach scheduled under the US aid program. In this connection also, urgent action is imperative. American universities, labor unions and businesses should be urged to participate.

e) To undertake overt and covert approaches to moderate elements in ARS as a possible means to encourage stronger support for the present government, its reform program, and orderly political processes. Similarly, with regard to URD, consideration should be given to (1) encouraging “responsible” opposition and (2) splitting the moderates away from the extremists in the party.

In view of the dangerous extent of Communist and pro-Communist infiltration of university and secondary student circles in Venezuela and their success in instigating anti-government student violence and anti-American sentiment there would appear to be urgent need for the formulation of a broad US program aimed specifically at students. There are indications that the Venezuelan Government is reaching the limits of its toleration of student agitation and insurgency, and that it may be contemplating adoption of restrictive measures against these elements. Nevertheless, the problem of student irresponsibility and extremism is a basic and long-lasting one and, consequently, it might be appropriate to investigate in some detail the feasibility of implementing a positive US approach to Venezuelan students, as well as the possibility of assisting the Betancourt Government in its efforts in this field. Some study has already been devoted to this question by the Embassy in Caracas and in the Department, but early action on a positive counter strategy (overt and covert) program is indicated.

1. Venezuela and the Alliance for Progress. Confidential. 8 pp. Kennedy Library, National Security Files, William H. Brubeck Series, Venezuela, 1961–1962.