I subsequently sent a copy of the “Panama Star and Herald” to the Department,
containing a long editorial upon this subject, in which Ecuador more
especially was assailed in this regard.
At various times I have also been applied to by American holders of such
bonds for their collection, but inquiry has invariably elicited the
information that all responsibility therefor was declined and denied by this
government. In “El Nacional,” the government organ, of date March 19, I find
the article, (1,) of which I inclose a translation, (2.)
Herein is set forth the Ecuadorian view of the whole matter, and, as such, it
will doubtless prove valuable and interesting to the Department.
[Inclosure 1.—Translation.]
Ecuador and the panama “star and
herald”.
(Extract from El Nacional, March 19, 1873.)
The author of the editorial in the “Star” manifests some surprise at the
not very flattering remarks toward this republic set forth in the report
of a meeting in London of the English holders of foreign bonds.
With the purpose of doing away with this surprise, we have resolved to
write the following lines:
Through the mere fact that Ecuador once formed part of Colombia, and
notwithstanding that none of the loan raised in London appertained to
it, still it had to accept the enormous burden of seven millions at six
per cent, interest.
When Colombia was divided in three sections, Ecuador could not fulfill
the payment, as the propositions advanced by the creditors were utterly
unacceptable.
In 1854 the government of Ecuador concluded a contract with Mr. E.
Mocatta, the attorney of the bond-holders, and in the twenty-eight
articles the nation was sacrificed and became a perpetual serf to its
foreign creditors.
By article first of that memorable contract, the sum of one million eight
hundred and twenty thousand pounds sterling was recognized in favor of
the holders of the Colombian bonds, together with four hundred thousand
pounds sterling of interest which had fallen due. That is to say, that
to the seven millions of the first loan two millions more were added.
Upon this enormous amount, burdened by the addition of interest due, it
was agreed to pay six per cent, interest, so that in interest alone
Ecuador would be compelled to pay more than a half million annually.
It did what none of the other sections of Colombia has done. It delivered
to the foreign creditors the eight hundred thousand dollars which Peru
paid as part of its debt to Colombia.
[Page 238]
The fourth part of the custom-house at Guayaquil was indefinitely
promised to be delivered into the hands of the creditors, and as this
twenty-five per cent, of the custom-house never covered even the
ever-increasing interest, Ecuador could not flatter itself with the
hope, we will not say of arriving at a complete settlement of its debt,
but of the interest continually falling due.
By articles 9 and 14 of the same contract, Ecuador was to pay besides an
annual stipend of a thousand dollars to the commissioner of the holders
of the bonds in Guayaquil, and to bear the expense of exchange and the
remission of the funds to Europe.
This retrospect is enough to demonstrate to the judgment of all right and
impartial men that the contract with Mr. Mocatta removed all hope of
payment, inflicted on the republic of Ecuador a serious infliction,
which it was impossible to support for so long a time.
From 1855 to 1869, more than two million dollars have been given to the
foreign creditors, and the original debt, instead of decreasing, is
increased by more than a million.
The government, desirous of clearing up the complicated fiscal situation,
in virtue of which, with the small income of the treasury, it had to
arrange for the expense of its own maintenance, and at the same time to
effectuate the payment of its native and foreign debt, it was
indispensable to suspend the payment of the interest of the foreign debt
with the twenty-five per cent, of the receipts of the custom-house.
By this action no bad faith can be attributed to it, since the suspension
proceeds from the right-that the enormous damage arising from a contract
made with haste, and the pre-eminent necessity of attending to its own
expenses, gave it; nor ingratitude either, because the amount of the
debt was not used in anywise for its own advantage, and which merely had
its origin in the fact that Ecuador once formed part of Colombia.
Colombia, whose conduct in this matter has not surprised the editor of
the “Star,” also proceeded like Ecuador, urged by similar motives, as
will be seen in the following lines written in 1861, by the Secretary of
the Treasury, in a memorial on the foreign debt:
“In effect, how would the credit of the republic have advanced by
burdening the custom-house with the enormous sum of one million
thirty-five thousand two hundred and twelve dollars to pay the interest
of the foreign debt which it owed up to December, 1855, when that
interest continued increasing, without there being other means to
arrange it, and at the same time the custom-houses having to produce the
funds for the interior floating debt and the expenses of the
administration.
What hope was there of paying the foreign debt, when, in virtue of the
emission of bills, hardly a part of the interest of the debt was paid,
and when the partial payment, to which twenty-five per cent, of the
import duties was applied, could not be effectuated in less time than
one hundred years.
When and with what resources could the treasury satisfy the other
interests due and falling due successively to the end of re-establishing
the foreign debt upon a firm and permanent basis?
Such were the grave difficulties that would have arisen had the present
administration complied with the last act on this matter. * * * And it
has rather desired to cheerfully meet the affronts of the creditors and
the passionate and unjust censures of the press. * * * * * And to
continue working in persuading the same creditors that, respecting them
and the nation, it was best to conciliate their respective interests,
receiving and paying whatever the situation of the debtors and creditors
permitted.
This is the only method of re-establishing the credit, and as such was
advised by good faith, and has ever been the constant plan that the
administration proposed to follow in this matter.
The views of Ecuador are identical, of whose good faith the foreign
creditors must expect that, so soon as the invincible difficulties that
obliged it to suspend deli very of the fourth part of the custom-house
duties have disappeared, it will enter with them into equitable
arrangements that will lead to a definite solution of the debt.
