File No. 422.11G93/890
The Secretary of State to Minister Hartman
Washington, December 31, 1916.
Department has received no reply to its December 14.
Department now informed by representative council foreign bondholders that council has received report to effect Government of Ecuador intends to repudiate contract of September 30, 1908, and all indebtedness due on bonds of railway, which amounts to eight unpaid coupons; and that council is also advised that proposed repudiation is supported by President of Ecuador and Finance Minister but that no official announcement will be made until action pending by bondholders against Speyer & Co. for recovery of certain funds has been concluded.
Discreetly investigate and inform Department if there is any foundation for this report.
Representative bondholders further advises Department that largest holder prior lien bonds of Guayaquil & Quito has notified railway company that unless interest due January 1 is paid foreclosure proceedings will be commenced; also states that this action would put 5% bonds in serious situation and would probably result in destruction of American company and interests.
[Page 269]British Embassy has made confidential inquiries at Department in regard to payment of this interest by Government of Ecuador.
Department feels that American interests may be very seriously affected if Government of Ecuador does not live up to her obligations, and wishes you to clearly impress upon that Government the necessity of paying interest due January 1 as soon thereafter as possible and of cabling immediately to council of bondholders assurances that interest will be paid. You may say to Government of Ecuador that aside from desire which Government of the United States has in seeing these American interests given that proper protection which they are entitled to by the Government of Ecuador, its feeling of friendship for Ecuador forces it to point out the unfortunate position in which she would place herself if she defaulted in this payment—a position which might lead to many complications, especially the impairment of her credit.