File No. 422.11G93/916
Minister Hartman to
the Secretary of State
No. 205
American Legation,
Quito,
February 6, 1917.
Sir: Referring to the several telegrams which
have passed between the Department and this Legation on the subject of
interest due on prior hen bonds of the Guayaquil & Quito Railway
Co., since, and including Department’s telegram of December 14, 1916, 5
p.m.,2 I
have the honor to report as follows:
As stated in my telegram of January 3, 1917, 1 p.m., I brought the
subject to the attention of the Minister for Foreign Affairs by
memorandum dated December 18, which I presented in person, and of which
I enclose herewith duplicate copies.
On that occasion the Minister for Foreign Affairs informed me that, by
reason of the absence from Quito of the Minister of Hacienda, it would
be necessary to delay answering until his return. He returned on
Saturday evening December 30, and on January 2, I again brought the
matter to the attention of the Minister for Foreign Affairs, who agreed
to answer within two days. This time was extended, at his request, until
Tuesday, January 9, to enable the Minister of Hacienda to study the
subject. On January 12, I again called upon the Minister to urge an
answer, and was promised that the answer would be delivered in the
afternoon of that day. It was so delivered, and duplicate copies of it
together with translation are herewith enclosed.
On January 13, 10 a.m., I telegraphed the Department the substance of its
contents, wherein I said that owing to the unsatisfactory answer of
Ecuador, I would immediately prepare and file a note with the Foreign
Office, restating the case, and basing the note upon the telegram of the
Department dated December 31, 7 p.m.2
Accordingly, on January 15, I prepared and presented my note No. 219 to
Foreign Office, of which duplicate copies are herewith enclosed. To that
note, the Minister for Foreign Affairs replied in his note No. 10, of
January 16, 1917, and I am enclosing herewith duplicate copies of same,
together with translation.
The offer by Ecuador to contribute 1,000 tons of coal at 57 sucres per
ton towards the payment of said interest, provided the railway company
would pay the balance, was telegraphed by the local office to the New
York office of the railway about January 18, but no
[Page 733]
reply had been received up to yesterday
afternoon. In the absence of Mr. Norton, the controller of the railway,
Mr. Dobbie, and Dr. Leroux, its general counsel, have been in frequent
consultation with me on this subject and have been of much
assistance.
I regret very much that the results of our efforts in the matter, have,
thus far, been so disappointing; but in reviewing the several steps
taken in the case, I am unable to discover where I could have taken a
different course to advantage.
I therefore submit the foregoing report and respectfully await the
further instructions of the Department.
I have [etc.]
[Inclosure 1—Memorandum]
Minister Hartman
to the Minister of Foreign Relations
American Legation,
Quito,
December 18, 1916.
The American Minister respectfully salutes his excellency the
Minister for Foreign Affairs and has the honor to submit for the
information and consideration of his excellency the following
data:
Upon receipt of his excellency’s note No. 48, of November 4, 1916,
the American Minister transmitted to his Government, by mail, copies
of that note and of the Legation’s note No. 210 to his excellency,
of date October 3, 1916.
On December 16, 1916, the Legation received a cable from the
Department of State at Washington in relation to the subject of said
notes.
My Government is particularly gratified at that portion of your
excellency’s said note which follows:
“After the Government was changed, as your excellency is well
aware, the Esmeraldas revolution having been in fact ended,
a new, reasonable and economic budget having been issued,
which will be in force after January 1, 1917, it is very
probable that the economic situation will be adjusted
without having to appeal for a loan, and when this occurs,
Ecuador will be able, and that is what my Government
desires, to meet its obligations fully and completely. The
President and his Cabinet have the firm disposition to do
this, and I hope that this attention will be accomplished to
the satisfaction of all those who have interest in the
national revenues.”
Though not so definitely stated, the views expressed in the foregoing
quotation appear to be in harmony with those orally expressed by his
excellency to the American Minister in the interview at the Foreign
Office a few days before said note of November 4 was written, in
which interview his excellency expressed the hope and belief that in
January the Government of Ecuador would resume deposits. This fair
and just attitude of the Government of Ecuador in the premises is
especially gratifying to the Government of the United States,
because a duly certified statement has been presented to the
Department of State by the President of the Guayaquil and Quito
Railway Company, stating that, owing to unfavorable exchange and the
great cost of coal, the railway company will not be able to pay
interest on the prior lien bonds in January as it did last year.
Entertaining, as it does, a most friendly feeling for the Government
and people of Ecuador, and earnestly desiring that nothing may occur
to injure or impair the credit of Ecuador, the Government of the
United States sincerely hopes that the Government of Ecuador will be
able to make payment of the interest on said bonds in January, in
accordance with the above-expressed desires of his excellency the
Minister for Foreign Affairs.
The American Minister believes that the Government of Ecuador will
concur with the Government of the United States in considering that
it would be most regrettable if payment of the interest on prior
lien bonds should go by default.
In view of the deep interest felt by the Government of the United
States in the welfare of Ecuador, and of the common desire of both
Governments to maintain and strengthen the credit of Ecuador, the
American Minister will take pleasure in transmitting to his
Government, by cable at the earliest possible moment after
notification thereof by his excellency, the news of the prompt
payment of the interest on said bonds by the Government of
Ecuador.
[Page 734]
Fully appreciating the honorable intentions and desires of the
Government of Ecuador, so well expressed by his excellency the
Minister for Foreign Affairs, the American Minister indulges the
hope that those desires may soon be realized.
Charles S. Hartman avails [etc.]
[Inclosure 2—Memorandum—Translation]
The Minister of Foreign
Relations to Minister Hartman
Ministry of Foreign Relations,
Quito,
January 12, 1917.
In reply to the memorandum of his excellency, the Minister of the
United States in Quito, the Minister of Foreign Relations, after
duly greeting him, has the honor to repeat what has been stated in
several previous communications to that Legation, namely; that it is
the intention of the Government, which coincides with the national
will and with the international juridical rules and customs, not to
discuss through diplomatic channels anything relating to the private
contracts it may have entered into with private parties or persons.
This general doctrine is the same it has observed in the particular
case of the Guayaquil and Quito Railway, and which has been followed
invariably, with unusual uniformity, by the Ecuadorean Governments
and by the different Ministers who have held the portfolio of
Foreign Relations.
The Government of the United States which, on many occasions, has
made statements that honor it, with respect to the rights of the
weaker nations, statements which the Secretary of State has recently
repeated, in so clear and recommendable a manner, in the name of the
President, can not ignore the right Ecuador has in its desire to
deal, on the only grounds possible—those of simple justice—with the
different discussions that have arisen between it and the railway
company or its legal representatives.
Since, neither in the original contract, nor in the successive
reformatory contracts with the Guayaquil and Quito Railway Company,
no foreign government took part; since it is an invariable rule in
this country not to admit of diplomatic intervention in agreements
of that kind; since there was explicitly rejected a certain proposed
protocol, in which the American Secretary of State was made to
figure, even though only in a passive character and
extra-officially, in connection with these affairs of the Southern
Railway; since, only the other day, the Minister of Foreign
Relations stated to his excellency, the Minister of the United
States, that the attitude of the Ecuadoran Government had not
changed with respect thereto, because it could not change: his
excellency, the Minister of the United States can not wonder at the
surprise the Ecuadoran Government has felt at the renewed attempt to
employ a method of procedure it does not consider the most adequate
for many reasons of justice and convenience.
If this Minister answers the memorandum of the 18th of December last
in the form in which it does, this reply can have no other character
than that of an unofficial communication, since it is given, very
largely, on account of the courtesy due to the very worthy Mr.
Charles S. Hartman.
The Government’s purpose, set forth in an official communication from
this Ministry, No. 48 of November 4, 1916,3 has not changed; its firm and resolute
intention, its irrevocable will is to comply with its obligations,
with all its obligations, however burdensome they may have been in
their constitution, and of complying therewith in the shortest
possible time, according to the measure of its ability.
It has been stated to his excellency, Mr. Hartman, and to-day it is
regarded as a great honor to repeat to him, that the present
Ecuadorean Government entertains hopes that the financial situation
of the country will improve, from the first day of the present month
of January; that is to say: from the date on which the new budget
became effective; and it is a pleasure to inform the Minister that
those hopes, up to date, can not be held to have been frustrated,
since, as the month of January has just begun, it is not yet
possible to talk of immediate payments, since it will first be
necessary to collect the money before disbursing it. Will three,
four, six, ten weeks be necessary to meet such and such a payment?
Probably; we can not give assurance thereof.
[Page 735]
With respect to the particular case of the deposit for the prior lien
bonds, it is to be observed that the president of the railway
company has requested of the Government its mere assistance as such
for the January payment; it is not therefore comprehensible how, at
the same time, the company should have addressed the American State
Department explaining something only pertaining to the Ecuadorean
Government, namely, that, on account of the present unfavorable rate
of exchange and the high price of coal, the said company is not in a
position to pay the interest on the prior lien bonds as it did last
year.
No one is more interested than the Ecuadorean Government in
maintaining and strengthening its credit; and for that very reason
it will spare no effort to assure it permanently and definitely.
C. M. Tobar y Borgoño avails [etc.]
[Inclosure 3]
Minister Hartman
to the Minister of Foreign Relations
No. 219
American Legation,
Quito,
January 15, 1917.
Mr. Minister: I have the honor to
acknowledge the receipt of your excellency’s memorandum dated
January 12, 1917, relating to the inquiry submitted by me to your
excellency in my memorandum dated December 18, 1916, as to the
approximate date when the Government of Ecuador would be in position
to pay interest due January 1, 1917, on the Guayaquil and Quito
prior lien railway bonds, and resume daily deposits pursuant to
contract, and in accordance with its laudable purposes, so clearly
announced to me by your excellency in the interview with your
excellency referred to in my said memorandum of December 18,
1916.
I was greatly gratified, but not surprised, to read again the clearly
expressed unalterable purpose of your excellency’s Government to
meet all Ecuador’s obligations as soon as possible, but I note, with
considerable disappointment, that your excellency has overlooked
stating in said memorandum any date, either definite or approximate,
when the interest due January 1, 1917, on the prior lien railway
bonds will be paid, or daily deposits resumed.
I have of course assumed that the failure to furnish this information
was not intentional on the part of your excellency, but was
inadvertent, and I am therefore respectfully calling your
excellency’s attention to the apparent oversight, and, at the same
time, I have the honor to present for the consideration of your
excellency’s Government, some additional views of my Government on
this important subject, which were received January 1, 1917, by
cable from the Department of State. I therefore, by way of
supplement to my said memorandum of December 18, have the further
honor respectfully to impress upon your excellency’s Government the
necessity of the payment of the interest on the prior lien bonds,
due on January 1, 1917, as soon as possible after said date, and to
suggest to your excellency that definite assurances that said
interest would be paid at a fixed date ought properly to be cabled
to the council of foreign bondholders by your excellency’s
Government.
In addition to the great desire which the Government of the United
States has in seeing that these American interests are given that
adequate and proper protection, to which they are entitled, by the
Ecuadorean Government, its feeling of sincere friendship for Ecuador
compels it to point out the very unfortunate position in which she
would place herself if she made default in this payment—a position
which might indeed lead to many complications and especially to the
impairment of her credit.
In bringing this note to a close, it gives me great pleasure to
express my sincere appreciation of the sentiments of personal
friendship for me, so generously stated by your excellency, and to
assure your excellency that those sentiments of personal esteem are
fully reciprocated by me towards your excellency, and that I
personally and officially deeply desire the welfare and prosperity
of your excellency, and the Government and people of Ecuador.
I avail myself [etc.]
[Page 736]
[Inclosure 4—Translation]
The Minister of Foreign
Relations to Minister Hartman
No. 10
Ministry of Foreign Relations,
Quito,
January 16, 1917.
Mr. Minister: I have the honor to make an
answer to the note No. 219, dated yesterday, in which your
excellency insists regarding the approximate indication, by my
Government, of the date on which it will be able to carry out the
payment of interest on the prior lien bonds of the Guayaquil and
Quito Railway Company, due January 1, 1917, and also asks assurances
that the daily deposits will be hereafter effected in accordance
with the contracts.
Your excellency adds that since the memorandum of December 18,
already answered in similar form by me, your excellency has received
instructions from the Government of the United States to point out
to my Government the necessity that the payment of the interest on
the bonds, due January 1, 1917, be made as soon as possible, and
that the dates on which payments are to be made, be fixed, the
Ecuadoran Government having to cable its decision to the council of
foreign bondholders.
I have expressed to your excellency in my previous communications, in
accordance with the doctrine very justly observed by my predecessors
in the portfolio of Foreign Relations, the surprise with which my
Government sees the intervention of the American Legation in a
matter which exclusively relates to fulfilment and interpretation of
a contract.
I might, within the strict right which Ecuador enjoys, excuse myself
from making an answer to the concrete points contained in the
communication of your excellency; this case not being one of denial
of justice, it cannot be explained, in the light of international
law and of usage justly and reasonably adopted by civilized
countries, that a foreign Legation may officially subject a
Government to interrogations of the kind contained in the note to
which I answer.
This attitude is all the more surprising, since it is adopted just
now, when the Ecuadorean Government has just reestablished peace,
and has adopted as its rule the fulfilment of its obligations—all
the obligations which belong to it—and when, in order to achieve
that end, it has adopted for itself a system of economies, which may
enable it to do that promptly.
In previous years no deposits were made nor coupons paid, and
nevertheless, the intervention of the American Legation was never so
pressing as now; indeed, Mr. Minister, I am unable to understand
what is the reason for the proceeding now taken, of asking immediate
answers and demanding the fixing of terms incapable of
extension.
As to the balance, I repeat what has been said every time that I have
discussed this point with your excellency: the Government is
disposed to comply with all its proper obligations; but not to fix
dates nor give other explanations than those already stated.
I avail myself [etc.]
