Memorandum by Mr. Johnson, Division of Latin American Affairs, Department of State


Notes taken of a conference between Mr. Davis, Assistant Secretary of the Treasury, Doctor Rowe,4 Ecuadorian Minister, and Senor Vásconez5 in Mr. Davis’ office at 11 a.m., May 19, 1920.

Present, the above named and S. Johnson.

Mr. Vásconez outlined his object—to obtain a small loan from the Mercantile Bank of the Americas in New York of about $2,500,000—which proposition the bank has received favorably, but informed Mr. Vásconez they could give no definite answer until they had the approval of the State Department. This project includes the establishment of a new bank of emission in Quito which would be an Ecuadorian bank, but in which the American syndicate would have an interest. The same syndicate furnishing the money would be given the opportunity to spend it on various public works in Ecuador, [Page 182]thus making a double profit. Mr. Vásconez himself would have a considerable share of the capital of this bank.

In answer to a question Mr. Vásconez said that Ecuador owed over $4,000,000 in back interest on her foreign debt which had gotten into default not because of lack of the desire to pay it but because of the financial difficulties that Ecuador encountered because of the European war. Secondly, that a revolution which occurred about four years ago caused the Government an expense of over $2,000,000.

Mr. Vásconez stated that secondarily his object is to procure a large loan, or rather a conversion of the present indebtedness of Ecuador.

Mr. Davis asked whether the problem could not be solved by enforcing new taxes. Mr. Vásconez replied that the method would be a conversion of the public debt.

He handed to Mr. Davis a typewritten outline of his own plan for such a conversion of the debt by an American syndicate.

Mr. Vásconez said in regard to the difficulty of obtaining a loan that a creditor (referring to the United States) should not discredit his debtor.

In reply to a question from Mr. Davis as to why propose another bank of emission when there are already four established, Mr. Elizalde6 remarked that banks are the most profitable kind of enterprise in Ecuador.

Mr. Vásconez remarked that he was acting under instructions from the Ecuadorian Government. (He appeared to be much more interested in the bank of emission plan than in the conversion plan.) He was anxious to have some expression from Mr. Davis as to the attitude of our Government toward both propositions.

Mr. Elizalde said that Brown Brothers in New York have proposed a conversion to take care of Ecuador’s entire public debt.

Mr. Davis said that first hand he saw no objection to the small loan and bank of emission proposed by Mr. Vásconez, also that his first impression of the conversion proposition is good, but that he will consult the Secretary of State. That if the bankers are willing he sees no reason for objection by the United States.

Mr. Vásconez said that he appreciated having been given this conference with Mr. Davis and for his expression of views, and that on the strength of it he will negotiate further details with Brown Brothers for a concrete proposition.

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S[tewart] J[ohnson]
  1. Leo S. Rowe, Chief, Division of Latin American Affairs, Department of State.
  2. R. Vásconez Gómez, President of the Chamber of Commerce of Quito.
  3. Señor Dr. Don Rafael H. Elizalde, Ecuadoran Minister at Washington.