No. 93.
Mr. Wing to Mr. Fish.

No. 300.]

Sir: Recently at a meeting of certain parties in Europe holding old Spanish-American bonds, Honduras, Nicaragua, Venezuela, and Ecuador were strongly denounced as having acted in bad faith, &c., &c.

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.

I have, &c.,

[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.

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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.