. . . . . . . . . . . . . .
On Saturday evening, November 13, 1920, I received a letter from Mr.
A. F. Lindberg, of which the enclosed is a copy. …
. . . . . . . . . . . . . .
I will keep the Department advised of any developments in the
case.
[Enclosure—Extract]
The Assistant Manager, Mercantile Bank of
the Americas (Lindberg) to the
Minister in Ecuador (Hartman)
Guayaquil, November 10, 1920.
My Dear Mr. Minister: I saw Dr. Goding,
the Consul General,38 Monday noon, and
he agreed to send you a telephone message to find out the exact
facts as to the status of the Three Sucre Tax Law in Congress,
but up to this hour (Wednesday 2 p.m.) we have not received any
message. I wanted to get official information from you before
cabling to the Bank in New York. However, officers of the
Asociacion de Agricultores del Ecuador, as well as Senators
Chavez and Espinel, whom I met this morning, have informed me
that Congress took no action on this law.
. . . . . . . . . . . . . .
The refusal of Congress to take action on this law has put us in
an extremely difficult and dangerous situation, both as
affecting ourselves, the Association and the local banks.
The Association owes the local banks S/.4,000,000, which is
guar-anteed by the Three Sucre Tax of [for?] 1921. The Association also owes to growers
“vales” bearing 7% interest in the amount of S/.2,608,360. The
first series of these “vales” began maturing November 3rd last.
At the first conference I had with the Association officials, I
told them it was advisable to get extensions of these “vales,”
say for three months, until the situation could be worked out.
You will thus see that the Association has been practically
denied the right to pay its debts, even if it were willing, and
creditors, both foreign and local, are exposed to a heavy loss.
The action of Congress practically amounts to confiscation of
our property.
. . . . . . . . . . . . . .
For the past four years the Mercantile Bank of the Americas,
Inc., has been financing the Asociacion de Agricultores del
Ecuador. Through our efforts, and the efforts of our
shareholding banks in San Francisco, Chicago, New Orleans,
Cleveland and Boston, New
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York has become the primary world market
for Ecuadorean cacao, having displaced both London and
Hamburg.
. . . . . . . . . . . . . .
The Association has promised to send the cacao on hand here to us
in New York, to apply against their deficit. It remains to be
seen whether they will comply with their promise. On Tuesday
last they advised me that they would give us 7,000 bags in Bahia
and 5,000 bags in Puerto Bolivar, a total of 12,000 bags. Even
if the 31,000 bags now on hand in Guayaquil were shipped
tomorrow, it would not balance our deficit, after we have
ourselves paid about nine sucres per quintal for export duties,
local imposts and expenses, as well as about $2.25 per bag (a
bag contains about 175 pounds, as a rule) cost of freight and
insurance, Guayaquil to New York City. All these expenses, based
on the present situation, we will have to advance ourselves, and
the immediate shipment of 43,000 bags of cacao means about
75,000 quitals will be shipped, producing to the National and
Municipal governments about S/.300,000.
The action of Congress has completely ruined the credit of the
Association, as well as any opportunity for securing further
credit in order to operate and more quickly pay its debts.
The contracts between the Association and the local banks are so
broad that they not only include the Three Sucre Tax for 1921,
all stock of cacao in Guayaquil, on the Coast and abroad, but
also any moneys due to the Association at home or abroad, in
addition to whatever real property the Association may have in
Ecuador, that is—warehouses. We think the application of these
contracts as they stand, and in view of our prior claims and
prior advances, is preferential, and that the claims of the
local banks begin when ours have been paid.
In view of the quasi-public character of the Association, the
Government’s approval of its statutes and regulations, the
levying of an impost, and the payment of this impost to the
Association for the purpose of protecting the cacao industry,
this in my opinion makes the Government of Ecuador both legally
and morally responsible for the debts of the Association. Even
opponents of the Association admit this fact.
Therefore, in view of the action of the Ecuadorean Congress, of
the apparent reluctance of the Association to release cacao for
moneys due us through fear of the local banks, as representative
of the United States banking interests doing business in
Ecuador, I respectfully appeal to you for the protection of
these interests in Ecuador. If I may venture a suggestion, would
the Government call an extra session in the near future to take
up the law anew?
If there is any further information or facts which I can give you
which would serve your more mature judgment, I am entirely at
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your service. I
think it advisable to remain in Guayaquil until all the cacao
stock on hand is shipped to us, and when this is done I shall be
in a position to make some suggestion to the Association for the
future, on behalf of the Mercantile Bank of the Americas, Inc.
After the debtor has done all that he can, then is the time to
see if he can be helped.
Another thing which has complicated the situation is the fixed
rate of exchange, which no one but the Association has had to
follow. If Ecuador has no exports, naturally there will be a
correspondingly heavy decrease in imports, business will be
paralyzed, and the Government’s revenues will suffer
accordingly.
With assurances [etc.]
Mercantile Bank of the Americas,
Inc.
A. F.
Lindberg
,
Assistant
Manager
