COMMERCIAL TRAVELERS IN VENEZUELA
The importance of commercial travelers not only as representatives of business concerns, but also as types of a given nationality, has at last been realized and they are being treated as important factors not to be overlooked by corporations or the nation in the formulation of trade policies. They are the spokesmen of their countries and from their lips and by their actions a nation is sometimes judged not only from a business but also from a political standpoint.
The importance of this factor was realized but by few nations before the war, and the nations fortunate enough to appreciate their importance readily provided means for improving their service. The United States of Venezuela and the United States of America were among the nations which had been slow to realize the benefits that could be reaped from commercial travelers for their respective countries. However, once they had realized the necessity, Venezuela and the United States signed a treaty, effective July 3, 1920, which greatly benefited the travelers of all countries and also testified to the influence of their service.
The convention also impressed upon the business houses in both countries, and demonstrated the fact, that commercial travelers are the criterion by which concerns and countries are judged in foreign countries. Representation in overseas commerce requires men of skill and character and without these two qualities no traveler can ever succeed.
Venezuela is one of the best fields in South America for commercial travelers, as the nation is very rich and has a high standing in the financial world. The natural resources are innumerable and rich, as can be readily realized from the number of countries competing for investments and monopolies at the present time. The large amount of money in circulation and the importance of Venezuelan markets in the export trade has encouraged export houses throughout the world to send representatives to study conditions and eventually place their products in that market.
In order for commercial travelers to rightfully represent their principals they must be fully acquainted with climatic, political and legal conditions in Venezuela. The legal requirements for commercial travelers are few and by far less stringent than the laws of other Latin-American countries. Commercial travelers coming to Venezuela are not required by law to present any document other than their passports. No power of attorney is necessary, but it is advisable to have it in case it should be required in business transactions. A letter from the home office of the traveler or from some well established exporting or importing house is not necessary but advisable as a medium of introduction to the prospective buyers.
The recent convention signed between the United States of Venezuela and the United States of America has slightly changed previous customs. The object of the convention was that both countries might encourage commercial relations and increase business by facilitating the activities of commercial travelers. The convention provided for a license in both countries but as yet that provision of the convention has not been complied with and the prospects are that the old custom requiring no licenses will remain in effect.
There are no baggage restrictions, but, as the means of travel are limited in some parts of the country, it is advisable that the traveler confine his baggage to as small a trunk as possible.
In customs treatment of samples it is necessary to follow the provisions of the recent convention:
1. All samples which have no commercial value shall be admitted free of duty.
2. All samples shall be considered without value when they are stamped or rendered unusable.
3. Merchandise having commercial value shall be admitted provisionally, security having first been given for the customs duties and with the understanding that they leave the county within a period of six months.
4. Duties shall be paid on that part which shall not be exported.
Means have been provided at all principal ports in Venezuela for the immediate clearance of samples so as not to delay the commercial travelers. Samples usually receive consideration immediately after personal baggage and in some cases they are first.
In connection with advertising matter it is interesting to note that catalogues are admitted free; but the term is strictly construed. Pamphlets and advertising matter in general, including calendars, are dutiable at $1.37 per hundred pounds gross weight. Advertising matter with lithographed or printed designs not bearing the name and legend of the advertiser is dutiable at $17.13 per hundred pounds gross weight.
Practically all exporting countries are transacting business with Venezuela at the present time. America ranks first with Spain and England second and third respectively. Competition is keen, due to the fluctuation of the foreign exchange and the manufacture of goods. The American commercial travelers are excellent salesmen and thoroughly understand their products. The appearances, personalities and ways of the Americans are very popular in Venezuela, but the English and German travelers are very efficient and have considerable influence.
Before a commercial traveler can successfully sell goods in Venezuela he must understand Spanish. It is necessary to know not only the words but also the construction of the language. Many commercial travelers have failed in their attempts to sell goods due to the fact that they possessed only slight knowledge of the language, which is not alone a fault of the travelers but also of the houses they represent. The German nation was the first to realize that the knowledge of Spanish was indispensable to commercial travelers; knowing that this essential was the basis of business success in South America, the various German concerns prior to the war established schools where they instructed their agents in the language and customs of the countries to which they were to be sent. Offices were opened in the principal cities of various countries and agents sent to them where they remained for fully a year learning the business customs and language, and after mastering both they were given positions as commercial travelers. Consequently the Germans successfully entrenched themselves in numerous countries and were enabled to compete with every advantage in export trade. But many American travelers have neglected to learn Spanish, preferring to talk their own language whenever possible.
The national customs of Venezuela are naturally different from those of the United States and other countries. Business customs, too, are different and so are the customs of the home. It is easy to become used to them and one must know them in order to transact business. In some parts of the country business would seem to be a secondary consideration, social life ranking first, which of course is contrary to the habits of thought in the United States and many European countries.
It is advisable, too, that we consider the variations in climatic conditions in Venezuela and the effect of such conditions on the demand for goods in general. In order intelligently to understand the situation it will be necessary to know the climatic features of each important city.
Caracas, the capital of Venezuela, has a splendid climate, invigorating and refreshing, somewhat similar to that of Los Angeles, California. The days are rather cool with the exception of mid-day which, of course, is very warm. Light-weight clothing is worn during the day while at night medium-weight clothing is preferable. As Caracas is the capital, there is a steady demand there for fashionable clothing. Aside from clothing, many other products are in demand such as drygoods, machinery of all descriptions, autos, hardware, etc. The same products are generally needed in all other cities. The intensity of the heat in Valencia, Maracaibo, Maracay and Ciudad Bolívar allows only light-weight clothing to be worn.
Commercial travelers should acquaint themselves with conditions in all cities and must carefully study the demands for their products. The market for machinery is greater in Caracas than any other city in Venezuela. The demand for farming implements is greater in Valencia than elsewhere. Mining machinery is needed in Maracaibo and surrounding cities where the various mines are located. Dry goods are in demand throughout the country districts. Regardless of the size of the city one can find American goods everywhere. The quality of the goods outranks that of other countries and, moreover, there is a strong feeling of friendship on the part of the Venezuelans in favor of America and American goods.
One of the frequent complaints uttered to American commercial travelers is directed against American methods of packing goods for shipment. During the last two years the majority of American exporting houses sending goods to South America have neglected proper packing with the result that the goods are often received in woefully poor condition. Although a small item, it is of prime importance from the standpoint of the importer and a hindrance to the success of commercial travelers.
We have enumerated the legal requirements and personal duties of commercial travelers and have also mentioned the market. It will be helpful to point out the means of transportation and communication in Venezuela. Companies that have never sent commercial travelers to Venezuela have a wrong impression as to the means of communication and transportation. The roads are excellent and in some cases surpass those in the United States and other countries. The railroads, although not as modern as the roads in the United States or Europe, are well capable of carrying passengers and freight up and down the high mountains. In some cases in Venezuela, a train will ascend from sea level to an altitude of 12,000 feet. There is herewith submitted a complete list of the railroads, showing destinations and number of stations. There is also attached a complete list of the roads showing distances between principal cities en route, the outline further showing the altitude of each city.
[Railroad facilities may be found enumerated on pp. [69]-70.]
The following list of the roads and highways in Venezuela show the distances between cities and the altitudes of the respective highways:
The charge for freight on the railroads is rather high, $.58 per hundred pounds, and the passenger rate averages 10c. per mile. Hotel accommodations are not scarce nor are they excessive in prices. Statistics show that European commercial travelers can live on $3.50 to $4.00 per day while it costs the average American $7.00 per day. The hotels are not as modern as in the States but are very clean and suitable. The food is exceptionally good and wholesome.
The means of transportation by automobiles are as modern as those of some of the largest cities of the world. The majority of the cars are high priced and high powered as they are designed to climb to high altitudes in the surrounding mountains.
It may be stated that the financial condition of Venezuela is superior to that of any other country in Latin-America with the exception of Argentina. Her public debt has been decreased and her financial standing, although established comparatively few years ago, is very high.
Germany, France and England prior to the war practically had a monopoly on the Venezuelan trade, due largely to the long credits offered by them to the Venezuelan merchants. Before the war the above mentioned countries extended credit from four to nine months. The policy has changed now and the merchants are satisfied with from three to four months' credit. The reduction of the long term credit is also due to improved banking methods, and it is expected that trade will soon reflect the change when conditions are settled.
At the present time many of the exporting houses in the United States are dealing on either a 90 day sight draft or a 120 day draft dated New York. This system has been approved by the Credit Association of America.
Since practically every exporting or importing country is represented in Venezuela at the present time by bank affiliation, the average commercial traveler encounters very little difficulty in having his drafts or letters of credit honored. The difference in rate of exchange is an important item and should be carefully considered by all commercial travelers upon arriving in Venezuela. The exchange fluctuates slightly, the rate now being $5.35. The standard of value is the bolivar, valued at $.193, American gold.
One of the most exasperating difficulties confronting all commercial travelers is their ignorance of the metric system. The system has always been in effect here and must be learned in order to transact business.
The customs duties of Venezuela are very high, more so than in many other Latin-American countries. The high protective tariff has been a means of increasing the revenue of the country but on the other hand it has made it practically impossible for the poorer classes of Venezuela to purchase foreign made goods. Another purpose of the high protective tariff is to protect home industries but the fact remains that the manufacturers in Venezuela can not supply the demand. In many cases the tariff is so high that it is inadvisable for outside merchants to attempt to do business there. For example, it would be very poor business judgment for a shoe salesman to attempt to sell shoes in Venezuela as that industry is well protected by the tariff. The same applies to many other industries. Appeals have been made to the Venezuelan government to lower the tariff but as yet it has not complied with the request. Tobacco is another protected industry. American cigarettes in Venezuela retail for as much as three times the price in the States. The reduction of the tariff will open a greater field for all commercial travelers and will mean an increased foreign trade for Venezuela.
Before concluding this report it may be useful to say a word regarding the present opportunities for commercial travelers in Venezuela and the attitude of merchants in that country as to American travelers. The writer has visited Maracay, Caracas, Valencia and La Victoria, and after talking with business men reached the conclusion that American commercial travelers are considered among the best and are most welcome. The only complaints heard were that American concerns would not allow more than a three months' credit and that the packing of goods for shipment has been deplorable. The Englishman with his great variety of goods such as woolens, cottons, crockery and with facilities for long credit has gained the confidence of the merchants and has built up considerable trade throughout the country. Germany prior to the war also had considerable trade with Venezuela due to their banking facilities and diversity of products. Before the war, for example, Germany had a monopoly on the dye industry and the toy industry and was thus able to establish herself successfully in Venezuela. American business houses prior to the war had not realized the importance of Venezuelan trade until the establishment of the International High Commission, an organization which has brought South America and North America into closer contact and thus assured friendly relations.
The old proverb has it that "Commercial travelers are here to-day and away to-morrow." As the proverb is undoubtedly true, the only way to leave a favorable impression with all is to smile, be courteous, considerate and clean, not only in business transactions but in morals as well. The possession and exercising of these social qualities will be of inestimable advantage not only to commercial travelers but to the good name of the United States.
W. J. Donnelly.
PRESENT FOREIGN INVESTMENTS IN VENEZUELA
AND
FUTURE OPPORTUNITIES FOR AMERICAN CAPITAL
Part I
Present Foreign Investments in Venezuela
In a report on foreign investments in Venezuela, the public debt, at least the external foreign debt, ought not, perhaps, be included as an investment. For two reasons, however, it deserves consideration, first, because of the sum involved and the manner in which the government meets this obligation; and secondly, as a barometer of other nationals' interests in Venezuela.
PUBLIC DEBT
The public debt of Venezuela is a topic important enough in itself to warrant consideration in a special report, hence we shall concern ourselves here solely with the external foreign debt. Its history is interesting but long and involved and since our interest as far as this report is concerned is not in the debt itself but in the debt as a factor in influencing investments in Venezuela, we shall confine ourselves solely to a statement of the following statistics from the Report of the Minister of Finance:[20]
| June 30, 1919 | December 31, 1919 | ||
|---|---|---|---|
| 1. | Deuda Nacional del 3% annual por Convenios Diplomatics | Bs. 9,208,291.61 | Bs. 9,088,291.61 |
| 2. | Certificados Provisionales (Españoles) | 1,600.00 | 1,600.00 |
| 3. | Deuda Diplomatics del 3% annual de Venezuela, Emisión de 1905 | 84,511,755.00 | 80,295,615.00 |
| 4. | Deuda Diplomatica sin interes | 23,769.12 | |
| Total | Bs. 93,745,415.73 | Bs. 89,385,506.61 | |
[20] Cuenta de Gastos del Departmento de Hacienda, July 1, 1919, and January 1, 1920.
The national debt of 3% is divided between France, Spain and Holland in approximately the following proportions: France, 86%, Holland, 11% and Spain, 3%.
The second item of 1,600 bolivares is held in the Venezuelan Treasury pending a settlement as to whom the debt should be paid.
The 3% diplomatic debt is held by English and Germans, while the diplomatic debt without interest due to France was entirely paid at the expiration of December, 1919.
The obvious conclusion to be drawn directly from the above statistics is that Venezuelan public finance is in good hands and that the country is in a flourishing condition as witnesses a payment of nearly $1,000,000 on the foreign debt in six months. Under such conditions, foreign investors may feel reasonably sure that capital may be invested here both securely and profitably.
FOREIGN BANKS
Closely allied to the above topic is the subject of foreign banks. When foreign capital first finds its way into a new country it is inevitably followed by a branch of some large home bank, a fact as true in Venezuela as elsewhere. In Caracas we find The National City Bank of New York, the pioneer American bank in foreign fields, serving not only American firms but many Venezuelans in their business dealings with the United States. The National City Bank made its initial bow to the city of Caracas in 1917. American interests are further represented in Caracas by a branch of the Mercantile Bank of the Americas which has a subscribed and paid up capital of Bs. 2,600,000.
Canadian interests are represented in Venezuela by the Royal Bank of Canada with a paid-up capital of Bs. 88,400,000 and a reserve amounting to a like sum. English interests are served, to a great extent, by The Commercial Bank of Spanish America, Ltd., which is affiliated with the Anglo-South American Bank, Ltd., and has a capital and reserve amounting to Bs. 200,000,000. This is the most recent foreign banking institution to appear.
The Dutch have here a branch bank of the Hollandsche Bank Voor West-Indie, which has a subscribed and paid-up capital amounting to Bs. 2,000,000, and lastly we have the Deschanel International Corporation de Venezuela of French origin which has a capital and reserve of Bs. 1,260,000. Besides doing a banking business, this corporation is itself interested in the importing and exporting business. From the above facts we may see that the investor will not lack any of the banking facilities so essential in a foreign field.
PUBLIC UTILITIES
Under the caption of "Public Utilities" may be considered street railways, telephones, telegraph, gas and electric light and power companies. The English seem to have a monopoly on most of the public utilities in Venezuela, but whether or not this is an advantage either for the English or Venezuelans is matter for speculation. One of the leading American governmental officials in Venezuela on being interviewed by the writer said: "Nearly all the public utilities are in the hands of the English and I am glad they are being operated by English and not American companies, for the service is poor and the people are discontented." From the writer's observation, this is indeed true in the city of Caracas, for the street railway company (English) uses very ancient cars, each capable of holding only twenty-four people, and there are turn-outs about every two hundred yards which give the passengers opportunity to reflect on the service while waiting for the other car to come along. Data as to the investment and earnings are lacking but as a general conclusion it may be stated that there is much room for improvement in all these fields. For example, the only cable in Venezuela is in the hands of a French company and in order to send a message to the United States it is necessary first to relay it to Haiti and thence to the United States which occasions unnecessary delay and considerable expense in commercial transactions. (See special report on Radio Communication.)
OTHER INVESTMENTS
In Venezuela it is the ordinary thing to find American goods on sale in most of the stores and agents for different classes of American goods throughout the country. These agencies are mainly in the hands of established Venezuelan firms but in Caracas there are fewer Americans acting as agents for many of the best known American products. Here too is the Caribbean Petroleum Company with important oil and asphalt concessions along the shores of Lake Maracaibo. For the year 1919 the output of the company was 45,913,840 metric tons of oil on which the government receives a tax of two bolivares a ton. English capital has of late been used increasingly in buying land in the interior "llanos," for the development of the cattle industry. At the present writing American capital is being diverted to the same purpose, as, with the development of transportation facilities, live stock promises to be of utmost importance because of an increasing world population and a greater demand for food.
Part II
Investment Opportunities in Venezuela
Before entering upon a discussion of the future opportunities for investment in Venezuela, two outstanding features need to be emphasized as factors influencing the investing of money in Venezuela. They are: 1st, A realization of the fact that Venezuela needs immigration and needs it badly to develop her rich natural resources, as her population has been almost at a standstill for the last ten years. The other crying need is foreign, not native, capital.
Venezuela, a country larger than Germany, at present maintains a population estimated at 2,800,000. The greater proportion of the population is found in six or eight large cities in the north. Around the Orinoco and south of it lie thousands of acres of rich virgin soil and, strange to say, mines of coal, iron, copper, and gold which are not worked due to lack of transportation facilities.
Here, then, lies the prime investment of the country, a proper system of railroads to make these rich natural resources available. These projects have already been discussed widely, and Doctor Vicente Lecuna, President of the Bank of Venezuela, considered the most prominent man in the country, named railroads as the greatest need of the country and the best investment for foreign capital.
Here we may be permitted to digress for a moment to point out an unique advantage which Venezuela holds in regard to commerce with the United States. Due to the opening of the Panama Canal, Venezuela can ship as easily and quickly to the western part of the United States as to the eastern and thus effect a considerable saving on trans-shipment of goods by rail across the United States. Further, the proposal holds much favor here to-day for the introduction of a steamship line to Saint Louis which would be quicker and cheaper than the present line to New York. Thus we see that three direct lines might be maintained from the States to Venezuela, one from some western port via the Canal, a second from Saint Louis which would transport the goods to the Middle West; and, lastly, an expansion of the present service from New York.
Venezuelan Students Depositing Wreath before Statue of George Washington, Caracas, July 4, 1920
Georgetown Students Depositing Wreath at the Tomb of Simón Bolívar in the Pantheon, Caracas, July 4, 1920
Here too a word would not be amiss relative to the present service from New York. The Red D Line maintains a fleet of four passenger ships, the largest being of three thousand tons and the time consumed from New York to La Guaira usually nine days. The need for more and better ships is obvious. With improved service, there is no reason why Americans in search of a cool spot to visit in the summer time should not come to Caracas situated, as it is, three thousand feet above sea level in a mountainous country and with a wealth of that beautiful scenery found only in the tropics.
PROPOSED RAILROADS
1. San Felipe to Puerto Cabello.
The first line to be considered would run from San Felipe to Puerto Cabello. Puerto Cabello already occupies a prominent place in the economic life of Venezuela, being one of the principal ports and a port of call for all American and European steamers. The proposed railroad would be approximately eighty kilometers in length and would pass through one of the best cacao regions of Venezuela. This section is especially favored due to the trade winds which blow across it, giving this locality a special aptitude for the raising of a superior brand of cacao; it is from this section along the coast that the best cacao in the world comes. At present, due to the lack of transportation facilities, it is useless to develop the region, for the product can not find its way to market. A railroad here would serve to make available a huge, rich territory for cacao which could then find its way into the markets of the world.
2. San Cristobal to Valencia.
The second proposed railroad is one from San Cristobal to Valencia passing by way of Barinas. Considerable construction work would be necessary as this line would be about 615 kilometers in length, through rich, fertile lands which at present lie untouched due to lack of communications with the outside world. The railroad would lie over flat level land except for a stretch of approximately fifty kilometers over the mountains.
All along the southeast of this road lies fertile table land suitable for the raising of cattle. In fact, the llanos extend all along the route while to the north stretches the coffee producing section of Venezuela. Near Barinas there are large cacao and tobacco plantations but they are not developed to any appreciable degree nor to their real capacity, due to the lack of proper forwarding agencies. Furthermore, the opening up of this region by railroad would give great impetus to further settlement and investment in the interior, for it is an observed fact that after the railroad come cities and civilization. The situation is similar to that existing in our own history when, simultaneously with the building of the trans-continental railroads, caravans pushed their way westward and have left as their heritage the great cities of the West. This lesson from our own history should not go unnoticed, for the same opportunity exists in Venezuela and to the pioneers will come rewards similar to those reaped by our own dauntless settlers.
Even now before the building of this railway, English companies have acquired large concessions of territory near the proposed line. This is only a start and soon they will be extending their concessions and if Americans do not act before it is too late they will find the choicest land already taken. Most of the English concessions lie in the Apure district, the best cattle land in Venezuela, whose only disadvantage lies in the fact that the land is frequently inundated by the overflowing of the waters of the Apure River. The value of the land, of course, depends on its fertility and the availability of water, but it may be stated that a square league, that is, twenty-five square kilometers (9 square miles), varies in price from two thousand to five thousand bolivars, or from $400.00 to $1000.00. And this for land in the best cattle section of Venezuela! Among other sections of the country well suited for cattle raising are the llanos of Marturin, extremely fertile lands, swept by the trade winds. As they are situated in the northwestern part, shipment could be made through the port of Guanta which, it is predicted, will be the future main port of Venezuela. In this same vicinity lie the llanos of Barcelona, even closer to the port high tablelands, but somewhat dryer than the llanos of Maturin. To develop this land, a railroad from Ciudad Bolívar, a port used now on the Orinoco and Barcelona, is necessary. This would connect with the present line from Barcelona to Guanta, thus connecting two important ports and serving a rich cattle section, necessitating the building of only three hundred kilometers of road.
Further west, running parallel to the last mentioned line, lies a region between San Fernando and Cagua, and as Cagua is already on a railroad line, shipments can be made either to Puerto Cabello or La Guaira. The llanos of Guárico which lie in this region are high table lands but with numerous oases which provide sufficient water for the cattle. At times, parts of this region are subjected to inundation which makes the land very rich and fertile. This is another section merely waiting the day when capital will develop railroads. It may not be amiss to remind American investors that the English have already secured three large concessions along this route.
Another important consideration deserving of mention is that along this route lie coal mines which have not been developed due to lack of transportation facilities. These mines would serve as an easy means of procuring fuel for the road.
3. Limon-Castilletas.
Another railroad projected is that from Limon to Castilletas. About Limon are rich oil fields now being developed but which are handicapped by the fact that Maracaibo, the present shipping port for oil, lies inside the Gulf of Maracaibo and only small ships can enter due to deposits which are continually filling up the strait. Maracaibo is not always available for small ships and a line from Limon to Castilletas, which is a port lying outside the bar and on the shores of the Gulf of Venezuela, would solve the present difficulty and, besides, effect a saving of over two hundred kilometers in sailing distance.
4. Yuruari-Orinoco.
The last important railroad which the country needs is one from the Yuruari River to the Orinoco. About the region of Yuruari are rich gold mines which are only worked to a small extent and in a very primitive way due to the impossibility of bringing the necessary machinery to the mines. Not only would a line connecting the two rivers do this but it would also pass through rich grazing lands. Then, too, only a short distance to the east are the iron mines of Imataca, still unworked due to the lack of transportation facilities.
Railroads are, then, the key to a double prosperity—prosperity for the foreign investor and an opportunity for Venezuela to take her proper place in the markets of the world. It seems inconceivable that here, close at hand, potential factors of great wealth are lying dormant awaiting the magic touch which in this case must come from the railroad, the forerunner of civilization. Dipping further into the future, we can see other results which would quickly follow the opening up of this great country,—an increase in immigration, consequently a larger market in which to buy and sell. And whom should it benefit more, the United State close at hand, or Europe a week further away! Time alone will decide, but this point can bear emphasis again and again that now is the propitious hour when, due to the recent war, American goods are being sought for in increasing volume by Venezuela. But England is already in the field and Germany is striving hard to regain her lost place in the sun. It behooves all of us, therefore, to strive with might and main to consolidate the position in world commerce which was thrust upon us and there lies no better path to that end in South America than along iron rails constructed by American capital in the sister Republic of Venezuela.
Joseph P. Quinlan.