611.2231/10
The Minister in Ecuador (Hartman) to
the Secretary of State
Quito, November 17,
1921.
[Received December 7.]
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.]
[Page 874]
[Enclosure]
The American Minister (Hartman) to the Ecuadoran Minister for Foreign Affairs
(Ponce)
Quito, November 16,
1921.
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.]
