File No. 422.11 G93/455.]

The Secretary of State to the American Minister .

[Telegram.—Paraphrase.]

Railway official statement shows there is now due railway company from the Government of Ecuador, on bills heretofore approved by the competent authorities of that Government, approximately 375,000 sucres, exclusive of approved bills of the company for services rendered and damages sustained during the recent revolution. As General Plaza apparently acknowledges that revolutionary bills are technically correct, the Department does not understand why payment of the 100,000 sucres so urgently needed should be made conditional upon compromise of bills of revolutionary period.

The railway officials are very anxious to work in harmony with the Government of Ecuador, and the Department believes they would be inclined to consider favorably an arrangement, if immediately accepted, on the following basis:

The Government of Ecuador, having paid 100,000 sucres, to pay hereafter 50,000 sucres monthly in addition to its current account until such time as the Government of Ecuador shall have been placed by virtue of a loan in a position to extinguish all its indebtedness to the railway company; or, in the event of the loan not being negotiated, until such time as the total indebtedness of the Government to the railway company shall have been extinguished; and unqualifiedly to approve and accept all other accounts previously passed by the Director of Public Works; and to pay interest at the rate of six per cent on the unpaid balance of the railway accounts until such accounts shall have been fully discharged. The railway company on its part, on consideration of strict compliance with the foregoing, to adjust revolutionary bills on basis of average earnings last six months of last year, plus 50 per cent, plus 65,000 sucres damages.

Communicate the foregoing to the Government of Ecuador and press for immediate payment of 100,000 sucres, pointing out that, exclusive of revolutionary bills, more than three times this amount is due.

Knox.