The Chargé in Venezuela ( Engert ) to the Secretary of State

No. 1486

Sir: Referring to previous correspondence1 in recent years between the Department and this Legation regarding the desire of the All America Cables, Incorporated, to extend its activities to the Republic of Venezuela I have the honor to submit herewith a brief report recapitulating certain events and bringing them up to date:

The Department will recall that in 1922 All America Cables submitted to the Venezuelan Government a petition asking for a cable concession. This step, I understand, was taken primarily for the purpose of testing the effectiveness of the monopoly of the “Compagnie Française des Cables Télégraphiques” whose exclusive rights in Venezuela were acquired in 1909 and do not expire until May 11, 1929.

To this petition the Venezuelan Government, as was expected, replied under date of August 7, 1922, that as the existing contract with the French company provided that no other cable concessions could be granted for a period of twenty years it regretted that it was impossible for the Government to comply with the request of the American Company.

However, as the French monopoly only covers communications by submarine cable and grants merely a preferential right over third parties as regards other means of communications, All America Cables conceived the idea of establishing wireless communications in Venezuela in connection with its cable system. In 1923 the company accordingly made application for a concession to operate a radiotelegraph station in Venezuela, its intention being to lay its cables to a point near Venezuela (e. g. Curaçao) and to use wireless between there and Venezuela, and is said to have received an informal reply to the effect that for a consideration of $25,000 (U. S. Cy.) a wireless concession could be secured.

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No further action appears to have been taken by the company in that direction inasmuch as in the meantime the French cable company had opened negotiations with All America Cables for the sale to the latter of all French cables south of New York. But the sale was not completed and in 1924 All America Cables renewed negotiations with the Venezuelan Government for the wireless concession, without asking for either a monopoly or preferential rights. These negotiations did not lead to any results either.

In 1925 All America Cables again took up with the Government of Venezuela the question of a radio concession. Although under Venezuelan law only the Government can operate wireless installations the Cabinet appeared for a while sufficiently interested in the proposition to appoint a committee to redraft and modify the Radio Law so as to permit the granting of a concession to All America Cables. Suddenly, however, the decision was reversed and the company was informed that such a concession could not be granted under existing laws. …

In the meantime negotiations between All America Cables and the Compagnie Française des Cables to take over the latter’s system had been successfully concluded and the French company applied to its Government for permission to effect the transfer. The French Government refused to give its consent, presumably because of objections raised by representatives of the French West Indies who feared that these colonies might be left without proper cable facilities. It was then suggested to the French company by its own government that it use the purchase price which it was to receive from All America Cables to erect powerful wireless stations in the West Indies. This it declined as it wished to use the money for improvements in its North Atlantic cables.

In view of these repeated failures and the fact that the French monopoly expires in May, 1929, All America Cables decided in 1926 to apply for permission to land in Venezuela a submarine cable connecting the United States with Venezuela, to become effective upon the expiration of the French concession. A petition was accordingly submitted on December 1, 1926, and was strongly supported by the Chamber of Commerce of Caracas. But the Minister of Fomento replied under date of March 3, 1927, that his Government would not consider any application for concessions until a new Cable Law had been enacted.

Such a law was finally passed by the Venezuelan Congress on June 17, 1927, and was signed by the President on July 1, 1927. (See Gaceta Oficial) July 20, 1927.) A translation of it was transmitted to the Department with Despatch No. 1358 of July 22, 1927.2 Although I [Page 852] understand that both the local manager of the French cable company and a representative of the All America Cables were perfunctorily consulted in connection with the drafting of this Cable Law, I should like to point out to the Department certain features of it which would seem to leave much to be desired from the point of view of any company intending to operate thereunder:

In the first place, it confers upon the Minister of Fomento (or the Executive) practically arbitrary powers which, in my opinion, would enable an unfriendly official to cripple the company very seriously or to prevent it from operating altogether. (See especially Art. 2, paragraph 1; Art. 3, paragraphs 6 and 10; and Art. 4, paragraph 4.)
The company is expected to pay all taxes of a general nature as well as a special tax to be fixed by the Executive which shall never be less than 5% of the gross earnings. (Art. 3, paragraphs 6 and 8.) In many countries All America Cables is exempt from all taxation.
No special facilities are granted as regards the use of government lands or the expropriation of private properties. (Art. 3, paragraph 5.) In other countries All America Cables has been given the free use of national lands.
A strict government censorship is established without, apparently, previous notice to the public. (Art. 3, paragraph 12.)
The Government has the right to demand the removal of any employee of the company, even the highest, without being liable for any indemnification. (Art. 3, paragraph 13.)

While this Cable Law was being considered All America Cables was preparing a fresh petition requesting a permit under the new law, but meanwhile the question of purchasing the French cables had again arisen and the presentation of the petition was once more postponed.

The Legation understands that Mr. Ernest F. Cummings, who has been in Caracas intermittently for the past six years on behalf of the All America Cables, has instructions to await here the result of the negotiations in Paris between his company and the French company. If they succeed he will arrange for the transfer of the French lines; if they fall through he will submit to the Venezuelan Government a petition for an independent concession to become operative after May 1929.

As far as I have been able to ascertain there is no serious opposition in Venezuela to All America Cables as such, but the Venezuelan Government—having apparently decided to keep wireless communications entirely in its own hands—is not quite clear what effect an efficient cable service would have upon radiotelegraphy, as it has made no study of the relative merits of cables and wireless as means for the cheap and safe transmission of messages. It is generally admitted that the French company’s services have been both [Page 853] expensive and slow, and the Venezuelan Government and public are anxious to see the monopoly terminate which enabled this foreign company to maintain artificial rates not otherwise warranted. I therefore believe that the Venezuelan Government would welcome also an application from the French company for a permit to operate after May, 1929, in the hope that open competition would reduce rates to a minimum. The question naturally presents itself whether at the present time there is room for two cable companies that would not only have to compete with one another but also with the Government radio which—if only for military reasons—is certain to be encouraged and developed beyond anything now in existence. It may then even become necessary for the Government to reconsider its position and to sanction some arrangement by which cooperation and coordination between its wireless and cable companies would render their relations complementary instead of merely competitive. Much will depend upon the wisdom with which the Venezuelan Government will exercise official control over this public utility under the new Cable Law so as to reconcile the interests of the State with the interests of the commercial life of the community.

I should be glad to be advised whether the Department has any information regarding the present status of the negotiations in Paris between All America Cables and the Compagnie Française des Cables Télégraphiques.

I have [etc.]

C. Van H. Engert
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  2. Not printed.