227. Memorandum of conversation, February 19, between President Kennedy and President Bentancourt and other U.S. and Venezuelan officials1
SUBJECT
- U.S.-Venezuelan Balance of Payments (Part 2 of 2 parts)
PARTICIPANTS
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For the United States:
- The President
- Mr. Edwin M. Martin (ARA)
- Mr. Griffith Johnson (E)
- Ambassador C. Allan Stewart (ARA)
- Mr. Teodoro Moscoso (AID)
- Mr. John M. Kelly, (Interior)
- Mr. Ralph A. Dungan (White House)
- Mr. Myer Feldman (White House)
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For Venezuela:
- President Betancourt
- Dr. Andres German Otero, Minister of Finance
- Dr. Godofredo Gonzalez, Minister of Development
- Dr. Enrique Tejera Paris, Venezuelan Ambassador to U.S.
- Dr. Carlos Perez de la Cova, Venezuelan Embassy
Following a discussion of petroleum matters, President Kennedy raised the question of the U.S.’s unfavorable balance of payments with Venezuela.
Dr. Otero stated that his figures did not indicate that the U.S. had an unfavorable balance with Venezuela. Venezuela sells to the U.S. 36% of its total exports and buys 55 to 56% of its imports from it.
[Facsimile Page 2]President Kennedy gave the following figures on U.S. payments with Venezuela for the year 1962:
Exports $500 million.
Returns on investment $100 million.
Imports from Venezuela $970 million.
Adverse balance of payments in the order of $300 million.
Dr. Otero replied that although he did not have available figures for 1962, 1961 figures did not reflect such an imbalance. On the basis of income tax returns of U.S. oil companies a disinvestment of over $300 million had taken place in contrast to the U.S. figures of only $100 million.
Secretary Martin stated that there had been some disinvestment. However there was an increase in the value of the companies as a result of reinvestment.
Dr. Otero stated that the 1961 balance of payments was favorable to the U.S. and that U.S. oil companies had possibly reinvested profits withdrawn from Venezuela in other areas such as Libya, Argentina and other countries.
President Betancourt noted the existence of another problem related to this disinvestment. While foreign capital needed to finance Venezuelan industrialization was being withdrawn for investment elsewhere, Venezuelan banks were making loans to U.S. companies. The Ford Co., with a solid reputation and Detroit backing, had set up an assembly plant financed largely by Venezuelan banks.
President Kennedy expressed interest in the possibility of such a “leakage” and asked his economic advisers to look into the balance of payments figures more deeply.
[Typeset Page 550]Dr. Otero stated that there were only three countries with a surplus balance of payments with Venezuela: Italy, Germany and Japan. All other countries have an unfavorable balance with the exception of the United States which up to 1961 had an even balance of payments.
[Facsimile Page 3]President Kennedy noted that in 1962 there was an unfavorable trade balance of about $400 million and suggested that technical discussions could probably be held with U.S. companies focusing attention on this problem. He then asked about steps that could be taken to steer Venezuelan trade to the U.S.
Dr. Otero stated that until 1961 he considered Venezuela had been instrumental in collecting U.S. dollars around the world. Another point in connection with the balance of trade between both countries was that oil companies had decreased imports of equipment from $400 million in 1957 to only about $30 million in 1962. He understood the U.S. dollar drain problem and agreed to cooperate in seeking solutions to it.
In conclusion President Kennedy indicated his satisfaction with the cordial meeting and stated it would be necessary to set aside at least one and one-half hours the following day to continue the discussion of the political questions.
- Balance of payments. Confidential. 3 pp. Kennedy Library, National Security Files, Countries Series, Venezuela, March–May 1963.↩