The Chargé in Ecuador (Belt) to the Acting Secretary of State

No. 370

Sir: I have the honor to refer to my cablegram under date of April 7, 4 p.m., resulting from my conference with Mr. E. Hope Norton, President of the Guayaquil & Quito Rail-Road, prior to his departure for the United States, at which time he went thoroughly into the results of the work of the Commission which was created by executive order of March 12 to consider the Railroad question.

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In this connection there is attached hereto a memorandum of [on?] the Advisory Commission which appeared in El Comercio of Quito under date of April 10. This memorandum gives in detail the questions discussed and the results reached.

. . . . . . .

The local press comment favorably upon the attitude of Mr. Norton and express satisfaction as to the conclusions reached between him and the Commission, which is a favorable indication that the Government and people in general feel that this matter is progressing towards a satisfactory settlement.

I have [etc.]

John W. Belt

Memorandum on the Advisory Commission, Guayaquil & Quito Railway Co., Published in “El Comercio”, April 10, 1919

The Ministry of the Interior has given us the following data relating to the steps taken by the Advisory Commission and Mr. E. H. Norton, President of the Company.

The Commission was created by Executive Order of the 12th of March. The President of the Republic in forming the Commission took into consideration the fact that the questions pending between the Government and the Railroad Company are among the most important which concern the public and that therefore it was essential to name a commission, the personnel of which because of their ability, integrity and competence could accomplish a satisfactory result in the interest of justice and the national welfare.

The Commission was constituted thus: President, The Minister of Public Works, Dr. Jose Maria Ayora; Members, Messrs. Dr. Jose Julian Andrade, Dr. Victor Manuel Penaherrera, don Juan F. Game and Dr. Manuel Benigno Cueva Garcia. At the meetings which the Commission has held thus far, Dr. Serafin S. Wither, S., General Auditor of the Railroad, has also been present.

The first session of the Commission was held on March 17, and the following sessions on March 26 and 28, and on April 2, 5 and 6. As the Minister of Public Works had advised the President of the Railroad Company of the formation and object of the Commission and Mr. Norton had replied that the Company was ready to contribute with the utmost good will toward an amicable and equitable adjustment of the differences existing between the Railroad and the Government, in accordance with which Mr. Norton would be [Page 183] at the service of the Commission during the three weeks he was to remain in the country, the Commission invited Mr. Norton to the session held March 28, with a view to ascertaining the form in which the Company would be disposed to proceed with these arrangements.

In effect, Mr. Norton attended the session of March 28 and also the sessions of April 2, 5, and 6 respectively, in which an agreement was reached as to a modus vivendi which is expected to result in a definite solution when the Government obtains the approval of Congress.

According to this modus vivendi there have been reached the following agreements:

The Company recognizes the urgent necessity of improving the roadbed and rolling stock of the railroad. In consequence, it will as soon as possible order three locomotives, 25 freight cars and 300 tons of rails in order to render better service to the public. As soon as the locomotives arrive, and sooner if possible, the mid-weekly passenger train will be re-established between Duran and Quito.

The Company will proceed immediately to improve the railroad line in order to procure the best service.

The Company will return to the use of coal as fuel for its locomotives as soon as it can do this economically. In the meantime, whether using wood and coal or oil the Company will use every effort to the end that trains shall run according to schedule and to avoid all delays.

The general accounting offices of the Railroad will be located in Ecuador and all the books and documents will be available at any time for examination by the Fiscal Auditor of Ecuador.

The Company accepts the right which the Government has to inspect and revise all the operations of the Company as regards their administrative and economic aspects.

The Company has presented for the consideration of the Commission and approval of the Government the proposed estimate which it will place in effect during this year from April 1. Hereafter the Company will send to the Minister of Public Works up to the 10th of December of each year the estimate to be followed the succeeding year. In case no agreement should be reached with regard to these estimates, the last one approved by the Government will continue in effect. The estimate for this year was approved the 7th of this month in accordance with the project presented by Mr. Norton and observations of the commission thereon. In this estimate there has been effected an annual saving of S/. 43,914.24, with respect to the estimate that has been in effect up to March last. The Commission pointed out that in conformity with the contract there would be greater reductions in the estimate, reserving the right of the Government when this question is definitely settled. In general, both parties reserve for the same time their respective rights.

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From the first of January of the present year the Company will remit to London, to apply on the bonds, the net earnings of the Railroad in conformity with the stipulations of the contracts.17

Furthermore, we have been advised that to the observations made by the Commission that the Company should have legal representatives to attend to the claims presented by individuals, Mr. Norton stated that the Company actually has two representatives in Quito and Huigra who attend to all claims, which claims he asserted are paid almost in their entirety.

The Commission has not occupied itself for the present in the reduction of freight and passenger rates because a reduction takes effect the first of next month in accordance with agreement reached between the Ministry and the Company.

Very soon there will be presented for the consideration of the Commission new train regulations in which will be taken into consideration the provisions of the regulations issued by the Government in 1909. For the discussion of these regulations the Manager of the Company has received sufficient authority from Mr. Norton, who has begun his return voyage to New York.

Mr. Norton in the session in which was approved the modus vivendi expressed through Manager Dobbie the satisfaction he felt at having found such a spirit of justice and equity on the part of the Commission, which has resulted in an easy adjustment of matters submitted for discussion, adding that the Company sincerely desired a satisfactory solution of all questions pending between the Government and the Railroad, in accordance with which Mr. Norton hoped to have the pleasure of again meeting the Commission after his return from New York in order to reach a definite arrangement, and that the Company had the utmost confidence that an agreement would be reached with this spirit of justice and equity which he was pleased to recognize on the part of the Commission.

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On his part, the Minister of Public Works has left record of the good will with which the Company has contributed towards the discussion and approval of the modus vivendi and he has expressed the hope that this same good will will prevail in the discussions to be had on the return of Mr. Norton, taking into consideration that the Government in no case will demand anything not based on justice, on the rights to which it is entitled under the contracts, and on the well understood interests of the people.

Furthermore, the Minister is pleased to render a tribute of gratitude to the constancy, labor and patriotic disinterestedness of each member of the Commission in the important questions thus far settled, and asking in the interest of the public that they continue in their labors initiated to reach an arrangement with regard to all the points involved between the Government and the Guayaquil & Quito Railroad Company.

  1. According to the minutes of the conferences, transmitted in despatch No. 387, June 7 (File No. 422.11G93/1038), the understanding on this point was supplemented by the following conditions:

    “The Government in turn will pay to the Railway Company on the same date [July 2, 1919] the equivalent of the amount remitted to London by the Railway Company for account of the bond interest every six months, without relieving the Government in any way of its obligation to pay the balance necessary to complete the bond interest and sinking fund payment in full in accordance with the respective contract [contracts?]. The agreement as regards the refund to the Company by the Government of such funds remitted to London will continue in effect until the Company has been paid the sum of $210,500 dollars, with which to make the purchase of the necessary material referred to above [see first paragraph of summary of modus vivendi], thereafter, the Government shall have no obligation whatsoever in connection with the payment of the S/. 807,774.36 referred to above [the old debt still unpaid by the Government since 1910 up to 1912 for approved bills which amounted to S/. 632, 192.68 and for bills submitted to the Government but not approved for payment the sum of S/. 175,581.68 or a total of S/. 807,774.36].”