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

No. 752

Sir: Referring to the Department’s instruction No. 291, of October 19, 1921, with which there was transmitted a copy of a letter from the Brown Shoe Co., of St. Louis, Missouri, dated September 23, 1921, “wherein the Company states that its dollar drafts are being repudiated under the recent ruling of the Government of Ecuador, fixing the rate of exchange for sucres, which retroactively affects contracts already entered into, and which provide for specific arrangements”, I have the honor to submit the following preliminary report.

Upon reading said instruction, it appeared to me advisable to have an informal interview on the subject with the Minister for Foreign Affairs, with a view to ascertaining his views in the matter.

Accordingly, I called upon him at the Foreign Office on Monday, November 14th, and brought the matter to his attention informally.

From what he said during the interview, it was apparent to me that he is in accord with the claim of Ecuadorean debtors that they have the right to compel acceptance by their creditors in the United States of sucres at the rate of 2.60 in payment of their dollar drafts, even though the market rate of exchange is much greater, and even though the contract creating the indebtedness was made before the passage of the law authorizing the fixing of an official rate of exchange.

In answer to an inquiry from me as to whether he knew of any case, involving the question, having been tried and decided by any Ecuadorean Court, he replied that he did not.

In view of his attitude I prepared and delivered my note No. 445, of November 16, 1921, of which the enclosed is a copy. Upon receipt of the Minister’s answer, I will make further report to the Department.

I have [etc.]

Chas. S. Hartman
[Page 874]

The American Minister (Hartman) to the Ecuadoran Minister for Foreign Affairs (Ponce)

No. 445

Excellency: Referring to our informal interview on November 14th, in respect to the law authorizing the President, in conjunction with a commission, to fix the rate of exchange for sucres, I have the honor, by direction of my Government, to submit the following:—

I understand from what was said in that interview by Your Excellency, that Your Excellency is of the opinion that under the law of October 10, 1917, and the Executive Decree of March 11, 1921, made pursuant thereto, fixing the rate of exchange between the United States and Ecuador at 2.60, a resident of Ecuador who may be indebted to a person residing in the United States, may legally compel his creditor to accept payment of his debt at the rate of 2.60, notwithstanding the fact that the commercial or market rate is at present from 3.70 to 4.00, and notwithstanding the fact that drafts drawn representing such indebtedness are payable in United States dollars and not in sucres.

I further understand from that interview that it is Your Excellency’s opinion that this is the right of the debtor even though the contract creating the debt was entered into before the passage of the law authorizing the fixing of an official rate of exchange.

From this opinion of Your Excellency I am impelled, most respectfully, to dissent.

A number of cases have been reported to my Government wherein debtors in Ecuador to commercial houses or others in the United States have asserted their right to compel their creditors to accept sucres at less than the market price in discharge of obligations payable in dollars.

With the foregoing understanding of the opinion of Your Excellency, which apparently sustains Ecuadorean debtors in that claim I earnestly urge that, if the regulation of exchange is to be continued by Your Excellency’s Government, it may be done in such a manner that the rights of Americans under such contracts will not be prejudiced.

I avail myself [etc.]

Chas. S. Hartman