The Minister in Ecuador (Hartman) to the Secretary of State

No. 466

Sir: Referring to my despatch No. 455, of November 5, 1919,1 and to previous correspondence, relating to a bill passed by Congress, authorizing the President to make an ad referendum contract for a loan to Ecuador with the Italian Government, etc., I have the honor to enclose herewith triplicate copies of the law, with translation, as it was passed and approved on November 3, 1919.

By comparing this law with the original proposal submitted to the Government by Colonel Accorsi, which I reported in my telegram of October 2, 12 noon, the Department will observe that the original plan has been considerably amplified.

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I have not made these reports because I believe that any arrangement will finally be consummated under the authority granted to the President, for I entertain no such belief. But I have felt that the Department would be interested in learning of these and all similar negotiations.

I have [etc.]

Chas. S. Hartman

Legislative Decree of October 28, 1919, Authorizing an Italian Loan to Ecuador

The Congress of the Republic of Ecuador


  • Art. 1. The Executive Power is authorized to make an ad referendum contract, in accordance with the following general bases:
    • First. The Government of Ecuador cedes to the company which the Government of Italy will organize, the monopoly which will be established on raw tobacco produced in the Republic of Ecuador.
    • Second. Said company will furnish the Ecuadorean tobacco industry all the raw material necessary to attend to the consumption requirements within the territory of the Republic. At the time of signing the contract there will be stipulated the bases in conformity with which there will be fixed each year the minimum price at which the company will purchase the raw tobacco, as well as the maximum price at which it will sell the raw tobacco to the Ecuadorean tobacco industry, and the manner in which any difference arising between the producers and the company will be settled. The Ecuadorean tobacco industry will be free within the territory of the Republic. The Executive Power may establish exemptions from duties on exports of tobacco in favor of dealers or merchants who up to the date of the approval of this Law shall have been engaged in said exportation for South America, in the quantity shown by the statistics of the Ministry of Hacienda.
    • Third. The company may not intervene in any manner in the formation, administration, and development of the national tobacco industry, nor in relation with the taxes placed upon said industry.
    • Fourth. The company may export all its raw or manufactured tobacco in the manner and form which it shall deem convenient, but it will not have the privilege of selling manufactured tobacco within the Republic unless so to do should be agreeable to the Ecuadorean dealers, in which event the sale will be subject to the provisions of Ecuadorean laws.
    • Fifth. The Government of Italy will open in favor of the Government of Ecuador a credit not exceeding forty million sucres, at the rate of 5 per cent interest per annum.
    • Sixth. This credit is destined exclusively to the following objects:
      Ten million sucres for the construction of the Esmeraldas–Ibarra–Quito Railroad, and a wharf in the Province of Esmeraldas, with access to said railroad.
      Ten million sucres for the construction of Puerto Bolivar–Cuenca, Puerto Bolivar–Loja Railroad, and a wharf in Puerto Bolivar. In the event of the construction of this railroad by the Chilean-Ecuadorean Syndicate, seven million of these ten million sucres will be utilized in the construction of the Sibambe–Cuenca–Lojar–Macara Railroad, and three million sucres in the construction of the branch of the railroad from Puerto Bolivar to Zaruma via Santa Rosa.
      Five million sucres for the construction of the Guayaquil–Santa Elena Railroad, and a wharf in Santa Elena.
      One million sucres for the port of Pailon and public works of Esmeraldas; three million sucres for the construction of roads to the Oriente; one million sucres for a road from Quito to Bahia de Caraquez via Santo Domingo of the Colorados, and a wharf in Bahia de Caraquez; one million five hundred thousand sucres for the railroad from Bolivar to Los Rios; and five hundred thousand sucres for the dredging of the Babahoyo River; and
      Eight million sucres for the purposes which the Government of Ecuador may deem convenient, taking into consideration the vital needs of the nation.
    • Seventh. Said works will be constructed by Italian companies, guaranteed by the Government of Italy, and the construction will be effected in the least possible time, and in the best conditions, according to concrete studies and decisions which will be made in common.
    • Eighth. The works will be the exclusive property of the Government of Ecuador, to which the sections as they are constructed will be transferred, in order that the Government of Ecuador may place them in the public service.
    • Ninth. In order to supply the funds referred to in the sixth clause, the Government of Italy will establish in Quito a branch of one of the great Italian institutions of credit, in accordance with the banking laws of Ecuador. Said Italian banking institution will open in favor of the Government of Ecuador an account current for a sum not exceeding forty million sucres, for the objects above mentioned. Said bank will be charged with the duty of collecting the interest for the amounts which the Government of Ecuador shall receive in the account current and also with the collection of the amounts for the amortization of the credit.
    • Tenth. The Italian company will have the privilege of buying uncultivated lands, at the current market values, throughout the entire Republic for the cultivation of tobacco, and is authorized to bring to Ecuador specialists, sowers, harvesters, and dealers, in order to intensify, improve, and increase the production of tobacco. The transfer of ownership of these lands shall not be made without previous authorization from the Executive Power in each concrete case.
    • Eleventh. Should the company bring colonies of farmers for the production of tobacco or for other agricultural work, for the establishment of schools of Agriculture, or for the implantation of new industries which may employ Ecuadorean raw material, they will be given, gratis, in the zones which the Executive Power shall determine, all the uncultivated lands which they shall require. At the time of signing the contract there will be fixed the extensions of land which will be granted to each person or family, it being understood that the land conceded is solely private property and that those acquiring it shall be entirely subject to Ecuadorean laws.
    • Twelfth. The company will administer the monopoly of tobacco with entire independence, but the Government of Ecuador is authorized to establish oversight of the administration through means of an auditor, in order that it may know definitely the amount of profits of the company.
    • Thirteenth. The profits referred to in the preceding clause will be apportioned annually in the following manner: Fifty per cent for the amortization of the loan above mentioned; twenty-five per cent for the Government of Ecuador, and twenty-five per cent for the company.
    • Fourteenth. The companies of Italian nationality may obtain, if the Government of Ecuador deems it convenient, preference in contracts for the exploitation of forests and of petroleum and coal mines, etc., in the interior, on the coast, and in the Archipelago of Colon. (Galapagos Islands).
    • Fifteenth. At the time of signing the contract the period of its duration will be fixed.
    • Sixteenth. The differences which may arise in connection with or by reason of the contract shall not be subject to Diplomatic intervention, and will be settled by the Judges of Ecuador, in conformity with Ecuadorean laws.
  • Art. 2. With the approval of the foregoing bases by the contracting Governments, said Governments will designate special commissions to arrange the details of the contract to be made.

Given in Quito, etc. October 28, 1919.

  1. Not printed.