The Chargé in Italy (Jay) to the Secretary of State

No. 1581

Sir: I have the honor to acknowledge the receipt of the Department’s instruction No. 1074 of February 25th enclosing copy of a despatch from the American Legation at Quito in regard to a prospective Italian loan to the Government of Ecuador. I may mention that the Department’s Instruction was only received by the Embassy on March 27th.

The Commercial Attaché of the Embassy, Dr. Alfred P. Dennis—an especially efficient official—had already reported in December to the Department of Commerce in regard to the proposed arrangement by which Ecuador should receive an Italian loan in exchange for the concession to an Italian Corporation of the tobacco monopoly, and he has since been in correspondence with the Department of Commerce on the subject.

Upon his calling early in April at my request on the Head of the Italian Government Tobacco Monopoly (Signor Alibrandi) with whom he is on good relations, Dr. Dennis was informed by Signor Alibrandi that he knew nothing of such an arrangement.

Not feeling however very certain that some such loan might not be contemplated and in view of the final paragraph of the Department’s Instruction under acknowledgement which left action to my discretion, I have sought an opportunity of informally discussing the matter at the Foreign Office.

I have there heard in substance as follows: The Italian Mission which visited Ecuador some months ago made certain proposals but no decision has yet been reached. The proposed Tobacco Monopoly in return for an Italian loan has been definitely discarded as the tobacco of Ecuador has been found unsuitable for Italian consumption.

However an Italian loan—not made directly by the Government—but by a group of Italian financiers under the auspices of the Italian Government is under consideration. I was assured the Italian Government would not guarantee the loan but would feel bound to approve and support it as the object of the loan would be to secure “economic benefits” and “raw materials” for Italy. My Official informants at the Foreign Office—the Director General of Political Affairs and his Colleague the Director General of Commercial Affairs—were both somewhat vague as to the economic benefits and raw materials anticipated, but emphasized the absolute need for Italy to obtain raw materials and give employment to her laboring population.

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The establishment, under the auspices of the Italian and Mexican Governments, of a steamship service between Italy and Mexico which has recently been reported to the Department by both the Embassy and the Commercial Attaché, is primarily for the purpose of enabling Italy to obtain raw materials.

Upon my intimating that for several years past the Government of Ecuador has been in default on the service of the Guayaquil to Quito Railway bonds which are guaranteed by the Government of Ecuador and to the service of which the whole of the customs revenues of Ecuador are pledged, I was told by the Director General of Political Affairs that this Railway Company has recently informed the Italian Ambassador in Washington of its keen desire to sell the Railway.

I have nevertheless intimated verbally but clearly and unmistakeably to the Ministry for Foreign Affairs that the Government of the United States looks with disfavor on any increase in the foreign debt of Ecuador which does not provide for paying the arrears and in future meeting the service of the bonds of the Guayaquil to Quito Railway Company.

I have [etc.]

Peter A. Jay