6 at U UNIVERSITE D'OTTAWA ~ ECOLE DES GRADUES ECONOMIC DEVELOPMENT OF VENEZUELA WITH SPECIAL REFERENCE TO HER TRADE WITH CANADA by Manuel A. Aranguren Guillen Thesis presented to the Faculty of Social, Political and Economic Sciences of the University of Ottawa as partial fulfillment of the requirements for the degree of Master of Arts. BIBUOTHEQUES ^ Ottawa' •' **>:> y.RY*.m&,€& LIBRARI6S ,«. 'v. VN» er*/ty of Ottawa, Canada, 1956 UNIVERSITY OF OTTAWA SCHOOL OF GRADUATE STUDIES UMI Number: EC56050 INFORMATION TO USERS The quality of this reproduction is dependent upon the quality of the copy submitted. Broken or indistinct print, colored or poor quality illustrations and photographs, print bleed-through, substandard margins, and improper alignment can adversely affect reproduction. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if unauthorized copyright material had to be removed, a note will indicate the deletion. UMI UMI Microform EC56050 Copyright 2011 by ProQuest LLC All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 UNIVERS1TE D'OTTAWA ~ ECOLE DES GRADUES TABLE OF CONTENTS Chapter page INTRODUCTION I.-ECONOMIC DEVELOPMENT OF VENEZUELA 1 1. Geography and Resources 2. Periods of Economic History 3. Industries 4. Venezuela as a Trading Nation II.-HISTORY OF TRADE BETWEEN VENEZUELA AND CANADA 44 1. Period between the Two World Wars 2. Second World War 3. Post-World War III.-SOME ASPECTS OF THE TRADE BETWEEN CANADA AND VENEZUELA 103 1. Customs Duties 2. Import and Export Licenses 3. Transportation 4. Investments IV.-WHAT OF THE FUTURE? 122 1. Oil 2. Iron Ore BIBLIOGRAPHY 144 Appendix A.-MODUS VIVENDI - Agreement Sent to The Minister of External Affairs of Venezuela. 150 UNIVERSITY OF OTTAWA SCHOOL OF GRADUATE STUDIES UNIVERSITE D'OTTAWA -- ECOLE DES GRADUES LIST OF TABLES Table page I.- Venezuela, Aruba and Curacao: Combined Exports of Petroleum and Refined Products to Principal Markets 37 II.- Venezuela's Exports by Main Groups to Canada, and Venezuela's Exports to Canada via the United States of America. 48 III.- Venezuela's Imports by Main Groups from Canada and Venezuela's Imports from Canada via the United States of America. 50 IV.- Venezuela's Total Trade with Canada; Balance-of-Trade and Exports to Canada (Dutiable, duty collected and total exports). 53 V.- Venezuela's Exports by Main Groups to Canada and Exports via the United States of America 61 VI.- Venezuela's Imports by Main Groups from Canada and Imports via the United States of America 64 VII.- Venezuela's Balance of Trade with Canada, Total Trade and Exports to Canada (Total exports, dutiable and duty collected) ... 67 VIII.- Percentages of Venezuela's Exports to Canada and Imports from Canada according to their Degree of Manufacture 71 IX.- Venezuela's Exports by Main Groups to Canada and Venezuela's Exports to Canada via the United States of America 75 X.- Venezuela's Imports by Main Groups from Canada and Venezuela's Imports of Canadian Produce via the United States of America . 78 XI.- Venezuela's Balance of Trade with Canada ... 81 UNIVERSITY OF OTTAWA - SCHOOL OF GRADUATE STUDIES UNIVERSITE D'OTTAWA -- ECOLE DES GRADUES LIST OF TABLES Table Page XII.- Percentages of Venezuela's Exports to Canada and Venezuela's Imports from Canada according to their Degree of Manufacture. #4 XIII.- Venezuela's Exports by Main Groups to Canada and Venezuela's Exports to Canada via the United States of America 90 XIV.- Venezuela's Imports by Main Groups from Canada and Venezuela's Imports from Canada via the United States of America 92 XV.- Venezuela's Balance of Trade with Canada, Total Trade, and Venezuela's Exports to Canada (Total exports, dutiable and duty collected) 96 XVI.- Percentages of Venezuela's Exports to Canada and Imports from the Latter according to their Degree of Manufacture 99 XVII.- Venezuela's Oil Production (Daily Average Production in Barrels) 126 XVIII.- Venezuelan Iron Ore Exports 140 UNIVERSITY OF OTTAWA ~ SCHOOL OF GRADUATE STUDIES ^__ UNIVERSITE D'OTTAWA - ECOLE PES GRADUES ——— — - _ _ _ ,, INTRODUCTION Tierra Firme, "The Mainland", as the Spaniards called the northern coast -Venezuela- of the continent of South America, once a Spanish plantation, has begun to de­ velop only in the past thirty years. Canadians will be interested to learn that Venezuela is now producing over ten per cent of the world's oil, that she possesses 12 per cent of the world's oil reserves, and her production is only exceeded by that of the United States of America. Furthermore, it should be remembered that South Venezuelan plains were once the breeding grounds for twelve million head of cattle, and that the country is still an important grower of fine coffee and cocoa; that the iron ore fields in Cerro Bolivar are among the most important sources of iron ore in the world, with an approximate output of 13 million metric tons a year, so that if agriculture is the dusty base, and oil the jambs, iron ore will become the lintel of Venezuelan economy; that the gold backing of the currency in circulation is 146 per cent; that the total national debt is less than the equivalent of $5.3 millions; that the national income in 1953 was 9.158.000.000 bolivares; that Venezuela is Canada's first customer in South America. In this thesis the reader will get acquainted with i the history of Venezuela's trade with Canada, from the year j 19lS to 1953 inclusive, wherein one can appreciate the growing trade of the two nations which, after World War II ! UNIVERSITY OF OTTAWA SCHOOL O," GRADUA^TyfuDlis ~ "'' UNIVERSITE D'OTTAWA - ECOLE DES GRADUES INTRODUCTION vi has been very important both in amounts and values; but this in the case of Venezuela, as will be seen, is mainly due to the outstanding importance of her oil output which, in the exports to Canada, accounts for 10 per cent of Venezuela's world total exports. These figures show that Canada is an important market for Venezuela. Nevertheless, the prospects of Venezuela's oil exports to Canada in the future are uncertain, because Canada herself is becoming an outstanding oil pro­ ducer in the world market. However, the opinion of the writer is that Venezuela could keep this important market for about five more years, and this favourable advantage is due to the comparative cost of Venezuela's oil exports in Canada. A detailed study of the potentiality of this precious item will be presented in Chapter IV. In order to give a better illustration of the Venezuelan-Canadian trade relations, the writer has considered it necessary to write a special chapter on Venezuela, where her general situation and economic development is studied in detail. Following the main chapter, which is the history of trade between the two countries under study, we shall discuss in Chapter III some aspects of the trade between the two countries, and this will include Venezuela's customs UNIVERSITY OF OTTAWA ~ SCHOOL OF GRADUATE STUDIES UNIVERSITE D'OTTAWA - ECOLE DES GRADUES INTRODUCTION vii duties applied to Canadian goods because of the limited items that are exported by Venezuela to Canada. Then, the import and export licenses will be carefully considered, wherein will appear all the exportable items which require a license. This is an economic measure adopted by the Venezuelan Government for the expressed purpose of assisting local agriculture and industry of the country. Later on, transportation and investments will be discussed, in which will be included first the main outgoing and incoming cargo of the trade values, as well as of the calling ports of both countries; and secondly, investments will be discussed according to real Canadian investment in Venezuela; and to a lesser extent, the main economic reasons for the paucity of Canadian investments in Venezuelan territory. To conclude this research, it is of vital importance in my opinion, to discuss the potentiality of these two growing nations, whose future trade relations are mainly concerned with their two valuable export items -oil and iron ore-' and even though the reader will observe that at the moment iron ore is not an item involved in the trade re­ lations, it is nevertheless important to discuss it, as at the present Venezuela is leading in the exports of this mineral to the United States of America. But what will happen to Venezuela's iron ore when, in the forseeable UNIVERSITY OF OTTAWA - SCHOOL OF GRADUATE STUDIES UNIVERSITE D'OTTAWA « ECOLE DES GRADUES INTRODUCTION viii future, the St. Lawrence Sea-way project will be completed? Then Canada most probably will compete with this Venezuelan mineral in the economic factors of cost and transportation. However, the quality of this mineral is of great advantage to Venezuela because of its super quality and higher content of iron. Before going into the matter of this research, I would like to mention that, economically speaking, Venezuela cannot but be to some extent at the mercy of forces over which she has little control. The prices of her principal products -petroleum, coffee, iron ore and cocoa- are world prices, in the determining of which Venezuelan cost of production, level of supply, and internal demand have little influence. For it is notjwho determines the price of the goods she imports. For all her wealth, she is a comparatively small consumer in the framework of world demand. The result of the last census taken in November 1950 shows that Venezuela has achieved rapid growth and economic progress.