831.77/147
The Department of State to the Venezuelan Embassy73
Memorandum
The Department of State views with sympathetic interest the desire of the Venezuelan Government to nationalize the railroad which runs between Caracas and Valencia. This railroad, as presently owned and controlled, is deemed by this Government to endanger hemispheric security, and the Department desires, within the framework of the common objectives of hemispheric defense, to cooperate fully with the Government of Venezuela in connection with a plan to eliminate from this railroad all interests or personnel prejudicial to hemispheric defense.
It is the view of this Government, however, that any transfer which would make free funds available to the German owners of the railroad, would be extremely prejudicial to hemispheric security. This Department is confident that the Venezuelan Government fully realizes the value to the Axis of a direct payment in free funds and the danger inherent therein to the security of this hemisphere. Accordingly, it is assumed that if the German owners of the railroad refuse to accept payment in funds effectively blocked for the duration of the war, the Venezuelan Government intends to effect the replacement of the Axis ownership on some basis other than a voluntary sale.
It is noted that the memorandum from the Venezuelan Embassy74 suggests that the nominal ownership of the railroad by a Spanish national may impede nationalization in the event that the German interests are unwilling to agree to a transfer with blocked proceeds. [Page 824] In this connection, it appears appropriate to state that the whole inter-American control program embodied in the Resolutions adopted at the Rio75 and Washington Conferences rests on the standard of real, as distinguished from formal, ownership and control. This standard was deemed necessary for the protection of hemispheric security because the aggressor nations have assiduously attempted, and are continuing to attempt to elude effective control by establishing fictitious forms of ownership. The American republics would be submitting to this obvious Axis stratagem, with serious detriment to the security of this hemisphere, if they should fail to search for, and to act in the light of, the realities of ownership, in the administration of their control measures. In view of these considerations, the fact that legal title is in a Spanish national will not, the Department is confident, preclude the Venezuelan Government from taking such measures with respect to the railroad as are required by hemispheric security.
The Department notes from the memorandum under reference that the railroad is in need of maintenance equipment. It is the desire of this Government to reduce to a minimum any inconvenience which may result to the Venezuelan economy through the application of controls upon the export of material from the United States. As the Venezuelan Government will appreciate, however, these controls must be applied in the light of the broad objectives of hemispheric defense, and of the requirements of enterprises which leave no doubt as to their complete loyalty to these objectives.
This Government will be pleased to receive such further comments as the Venezuelan Government may wish to present with reference to the plan for nationalization of this railroad.
- Handed to the Venezuelan Ambassador, Diógenes Escalante, by Assistant Secretary of State Acheson.↩
- No. 67, not printed.↩
- For text of the resolutions of the Third Meeting of the Foreign Ministers of the American Republics, held at Rio de Janeiro, January 15–28, 1942, see Department of State Bulletin, February 7, 1942, pp. 117–141. For correspondence concerning the meeting at Rio de Janeiro, see Foreign Relations, 1942, vol. v, pp. 6 ff.↩