File No. 422.11G93/835

Minister Hartman to the Secretary of State

No. 161

Sir: Referring to my No. 153 of December 5, 1915,4 in partial answer to Department’s No. 83 of October 23, 1915,3 I now have the honor to complete my answer to Department’s said No. 83 by transmitting herewith copies of my note No. 162 of November 24, 1915, to [Page 261] the Minister for Foreign Affairs, and copies of the Minister’s note No. 266 dated December 28, 1915, (with translation) in reply thereto.

The Department will observe from the note of the Minister for Foreign Affairs that he not only again raises the question of the right of the Government of the United States to diplomatically intervene in such questions as this one, but also protests against the repeated interventions by our Government on behalf of the Guayaquil & Quito Railway Company on similar matters.

Upon receipt of instructions on the questions raised by the Minister for Foreign Affairs, I will answer his note.

I have [etc.]

Chas. S. Hartman
[Inclosure 1]

Minister Hartman to the Minister for Foreign Affairs

No. 162

Mr. Minister: In compliance with an instruction from my Government, I have the honor to bring to the attention of your excellency’s Government a certain Executive decree of His Excellency the President of Ecuador dated July 13, 1915, wherein the issuance of three hundred thousand sucres of Treasury warrants, to be received in payment of export duties, was authorized. Inasmuch as the decree in question constitutes a further impairment of the customs receipts of Ecuador, and diverts a part thereof from the service of the railway bonds, which are entitled to a first charge on all customs receipts, I respectfully present to your excellency’s Government the protest of the Guayaquil & Quito Railway Company against said decree.

I avail [etc]

Chas. S. Hartman
[Inclosure 2—Translation]

The Minister for Foreign Affairs to Minister Hartman

No. 266

Mr. Minister: I have the honor to acknowledge receipt of your excellency’s note No. 162 [etc.]

My Government has not recognized and has not considered the possibility of recognizing, under present conditions, as legitimate the attorneyship of the Government of the United States in representation of the Guayaquil & Quito Railway Company; it regards each one of the protests of your excellency’s Government on account of said company’s affairs as foreign to the friendly relations which, in other fields, said Government cultivates with that of Ecuador, and regrets that it is obliged—with a frequency improper to the governments of nations for whose harmonious and tranquil relations all sensible men of both countries strive or ought to strive—to elude in the field of diplomacy an intervention detrimental not only to friendship between brother peoples—with higher interests to respect and even to defend than those which today occasion your excellency’s protests—but also to our rights of sovereignty, which the Government of the United States recognizes by the mere fact of having furnished your excellency with credentials as its diplomatic representative to the Government of Ecuador.

An example by no means favorable to the interests of the United States in the South American continent, it seems to me, is this constant pressure that a foreign company through a powerful government brings to bear upon the dignity and life of an honorable and justice-loving but relatively weak people. Such a case as ours, which will perforce become notorious, is not in my judgment a fit example to set before the nations of a continent in which it is proposed to develop a vast plan of industrial and economic progress on the basis of capital from the United States.

[Page 262]

“We must regulate our conduct,” said Mr. Wilson, the present President of the United States, on November 4, 1912, on closing his presidential campaign, “We must regulate our conduct by the rules of justice, liberality and good-will; think of the progress of mankind rather than of the progress of this or that unit; of the protection of American honor and the advance of American ideals rather than of American contracts; and we must place our diplomacy on the plane on which great thinkers are anxious to place humanity.”

Either there are diverse standards by which to determine the sense of words and expressions Or the great statesman of the United States who pronounced these admirable words and who today presides over the destinies of a great people is unaware that there is another nation, in South America, that knows those words by heart and contemplates with painful surprise the extent to which the beautiful inspiration of one who is getting ready to govern differs from the act of the ruler when he has to yield to the pressure of private interests which are opposed to the ideals of the statesman and stifle the general and permanent interests of his country.

Ecuador has not been able to obtain the application of justice to the matter of settling its accounts with the Guayaquil & Quito Railway Company. Thus far it has not been possible to find a judge to do justice therein. My Government has twice tried to establish the arbitration tribunal which, according to the contracts, should make the award in respect to the dispute between the parties; and twice that arbitration has failed. My Government solemnly declared its absolute inculpability respecting both failures. The successively appointed American arbitrators, Messrs. Janes and Miller, could not come to an understanding with the Ecuadorian arbitrator, even although there was appointed to that office one of the most eminent, calm and tractable jurisconsults of the Republic. My Government solemnly declared that it had never authorized the prior contract the violation of which is imputed to Ecuador and which is blamed for the failure of the second arbitration.

Liberality has not existed on the part of the Government of His Excellency President Wilson, toward Ecuador. Ecuador has demanded of the United States nothing but justice, the justice of not sheltering the American contracts of the Guayaquil & Quito Railway Company to the prejudice of the honor of an American nation and the advance of American ideals, which honor and ideals Ecuador entertains with as legitimate a right as that of the United States.

If good will is indispensable in order that we may be heard, we demand it in the name of American honor and ideals, in order to reach a solution that shall forever extinguish the disagreements which today exist between your excellency’s Government and mine, to the prejudice of that honor and those ideals.

I have already had occasion to express to your excellency the exceeding good will of all Ecuadorians toward increase of all kinds of relations with the United States. To that end we ask of the United States nothing more than to proceed in a way that will not wound our national dignity.

Meanwhile let there be recorded our solemn and energetic yet respectful protest against the repeated interventions of your excellency’s Government in behalf of the Guayaquil & Quito Railway Company, the representation of which on the part of your excellency’s Government in the present case—which is different from those contemplated by international law as warranting diplomatic intervention—my Government cannot recognize.

This being understood, and in order that your excellency may be informed of the opinion of the Minister of Finance, I have the honor to enclose herewith a copy of the official note he has addressed to me on the subject of your excellency’s note under acknowledgment.

I avail [etc.]

R. H. Elizalde

The Minister of Finance to the Minister of Foreign Affairs

No. 192

Mr. Minister: I have the honor of acknowledging receipt of your note No. 201 in which you quote the communication of his excellency the American Minister, who in compliance with instructions from his Government protests [etc.]

[Page 263]

I have reason to believe that you will give this protest an able and patriotic answer, but it will nevertheless be allowable to request you to take into account in your reply the following considerations suggested to me on reading the American Minister’s note.

As an official of the Government of Ecuador I cannot see by what right the Government of the United States believes itself entitled to protest to our Government regarding acts of internal administration that have nothing to do with the international relations of the United States; especially since the Executive decree that has occasioned the protest reads in its pertinent part as follows:

The payment of the aforesaid vouchers is guaranteed by the duties on the exportation of cacao through the Guayaquil custom house, in the free part to which the Treasury is entitled and which at present enters the common funds.

That Guayaquil & Quito Railway Company, in whose name the protest has been made, has no claim of any kind upon the revenues of the Ecuadorian State.
If the Government of Ecuador had believed that the disagreements with the Guayaquil & Quito Railway Company could have been settled by the intervention of the Government of the United States it would have presented its protests to that Government from the time when the Company began the construction work of the railway from Guayaquil to Quito, on account of the Company’s failure to comply with almost all the obligations contracted with the Government of Ecuador.
It is the Government of Ecuador that is entitled to protest—daily, constantly—on account of the faults of the Guayaquil & Quito Railway Company as constructor, administrator and operator of the railroad. For that purpose it would have been sufficient to recall some of the irregularities denounced by the Government auditor in his reports; it would have mentioned, for example, the organization of another company which, under the name of the Ecuador Express Company and with a personnel composed of some of the high officials of the Guayaquil & Quito Railway Company, had for its exclusive object the securing of a large part of the proceeds of the operation of the railway, to the prejudice of national interests; the diversion of large sums from the traffic receipts under the pretext of creating special funds not authorized by the contracts nor by the Government of Ecuador, such as those called “Reserve fund, Insurance, Depreciation, etc.”; the inclusion within operating expenses of large sums invested in construction works which should have been effected at the proper time and with the proper funds; the diversion of funds for payments—whether real or imaginary I do not know—of taxes in the United States, to justify which obligations contracted with the Interstate Commerce Commission were alleged, the fact being that the affirmation that the Guayaquil & Quito Railway Company belonged to said association has been demonstrated to be inaccurate.
In the case of the hypothesis above stated, the Government would have been the one to protest against the reductions made in freights and fares to certain persons and corporations without the consent of the Government of Ecuador and without legal authority therefor. Finally, the Government would have been able to place on record its protest against the repeated irregularities of the railway’s administration and traffic, so frequent up to a little while ago; against the innumerable failures to comply with the stipulations relative to the construction and operation of the line. But the Government has not protested because it believed it was not the course it should adopt; it has, rather, preferred to make use of the legal means to which it was entitled in accordance with the contracts, appealing on two occasions to arbitration, which failed through no fault of the Government of Ecuador nor of the Arbitrator appointed thereby.

In the foregoing you will find expressed my personal attitude toward this question and will make use of this note as you may deem best for the interests of Ecuador.

Agustín Cabezas G.