Papers Relating to the Foreign Relations of the United States, With the Address of the President to Congress December 8, 1914

File No. 422.11G93/739.

The Secretary of State to Minister Hartman.

Department of State,
Washington, April 3, 1914.

Sir: I enclose herewith a copy of a letter of Mr. T. H. Powers Farr, Vice President of the Guayaquil and Quito-Railway Company, protesting in behalf of the company against any operation of the Ecuadorian Government’s recent contract with Messrs. J. G. White and Company, Limited,⁶ which would infringe or encroach upon the first and preferential charge on the entire customs revenues, previously given by the Ecuadorian Government to the railway company as a guaranty for the payment of the principal, interest and sinking fund of the latter’s bonds. The provisions therein quoted from the contract between the Government of Ecuador and Messrs. J. G. White and Company, Limited, purporting to assign or pledge to the latter certain percentages of the customs duties collected at Guayaquil, appear to be correct according to the translation of that contract forwarded by the Legation with its No. 30 of January 30, 1914, except that paragraph B of article 8 as cited by Mr. Farr should apparently be paragraph G.

It also appears from the copy of the contract between the Government of Ecuador and the Guayaquil and Quito Railway Company which is in the Department’s possession that Mr. Farr’s statements as to the provisions of that contract relating to the guaranty by the Government of Ecuador of the bonds of the railway company are substantially correct, except that in such contract it is provided that the customs revenues of the Government are subject to certain prior liens for the payment of the Consolidated Debt and the active debt of the Government due to certain banks.

In any event, it would appear, from the Department’s information, that the lien upon such customs revenues for the guaranty of the railway company’s bonds must be considered under the Government’s contract with the company as superior to any lien on such revenues attempted to be imposed by the later contract with White and Company.

If the Legation’s information confirms the above statement of facts, you will bring to the attention of the Foreign Office the substance of the protest of the railway company as set forth in Mr. Farr’s letter, and say that, as the company’s representations appear to be well founded, the matter is brought to the notice of the Government of Ecuador only in a precautionary sense, for the purpose of reserving the company’s rights and preventing future misunderstanding, it being assumed that the Ecuadorian Government does not contemplate the performance of the recent contract with White and Company in such a way as to infringe the guaranty previously given to the railway company.

I am [etc.]

For the Secretary of State:

Robert Lansing

.

[Inclosure.]

The Guayaquil and Quito Railway Company to the Secretary of State.

New York, January [sic] 6, 1914.

Sir: At a meeting of the Directors of the Guayaquil and Quito Railway Company held on the 5th day of February [sic], 1914, the Vice President was instructed to call the attention of the Department of State at Washington to certain provisions in the reported contract between the Government of Ecuador and J. G. White & Co., Limited, to wit:

Art. 8. The funds for the construction of the water-works are the following:

(A) 2 % of the import duties collected at the Guayaquil Custom House.

(B) 8 % additional of the import duties collected in the Guayaquil Custom House.

The contract between the Government of Ecuador and the Railway Company provides that the Government of Ecuador guarantees the principal, interest and sinking fund of the Railway Company bonds by a first and preferential charge on the entire Custom revenues.

There is due the Railway Company on account of interest and sinking fund as follows:

Jan. 2, 1909	£5,230
Jan. 2, 1910, to Jan. 1, 1914, incl., 9 semi-yearly periods at 11,230	101,070
Total amount of sinking fund overdue	106,300
4 coupons of 56,165 each	224,660
Total gross arrears on a/c of 5% bonds	330,960

Until this indebtedness is settled by the Government of Ecuador, the Railway Company protest against any operation of the contract with Messrs. J. G. White & Company Limited which will in any way infringe the prior right and claim of the Railway Company upon Custom House revenues.

I have [etc.]

T. H. Powers Farr,
Vice President

.

6. For. Rel. 1913, p. 519.