422.11 Am 8/23

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

No. 772

Sir: Referring to the Department’s telegram No. 25, of December 24th, 4 p.m., I have the honor to inform the Department that on yesterday afternoon I had an informal and confidential interview with President Tamayo respecting the matters mentioned in said telegram.

The President was evidently deeply concerned and greatly worried over the existing financial conditions, and the many difficult and complex problems which are each day crowding upon him for solution. I have never before seen him when he was so thoroughly depressed and downhearted. He stated that he would welcome the day when his term of office expired and he was released of its burdens and responsibilities. He said that he felt that the Government of the United States was pressing him unduly in these matters, in view of the fact that he was doing all in his power under adverse circumstances to meet the national obligations. To that statement I replied that I was certain that my Government entertained the most friendly feeling for him and for his Government, and that its purpose in calling attention to the matters which I had submitted to him is, not only to obtain fair treatment for the xlmerican interests involved, but also to enable my Government to be of substantial assistance to him in obtaining the loan for his Government now in process of negotiation.

[Page 879]

He further said that he had ordered the transfer of funds deposited for the service of the Guayaquil and Quito railway from the Banco Comercial y Agricola to the Bank of Spanish America, but that he had been informed that Mr. Luis A. Dillon, Manager of the Bank of Spanish America, had told the Minister of Hacienda that unless the Government arranged to replace the funds withdrawn (S/390,000) by means of a loan for that amount from his bank, he would not accept the transfer. (The amount of bond interest ordered transferred is S/1,027,941., which amount includes the service of the Salt Certificates.8) The President also stated that Mr. Dillon claims to be authorized by the bondholders to refuse to accept the transfer of the above sum unless the amount previously withdrawn is replaced.

The President added that his efforts to obtain a foreign loan were particularly inspired by his desire to pay all overdue interest on the Guayaquil and Quito Railway bonds, and that he did not desire to contract the proposed loan to cover the funds which were withdrawn without his consent by the former Minister of Hacienda, as it would impose an additional annual interest charge of thirty or forty thousand sucres.

As to the rate of exchange he seemed to be very much embarrassed, as on the one hand he is pressed by the merchants to abrogate the present rate of 3.60, and on the other hand he is requested by foreign creditors to state that it is not applicable to previous contracts. No definite answer was given as to whether he believes that the official rate of exchange is applicable to the debt of Amsinck and Company and foreign creditors in general whose transactions had taken place previous to the issue of the decree fixing it. However, from what he said I am inclined to believe that he is of the opinion that the official rate should govern payment of debts in general, no matter whether those debts have been contracted before or after the issuance of the decree fixing it.

In this connection I desire to say that this problem of the rate of exchange is so much discussed by the press of Ecuador that I would not be surprised if the President takes some further action soon concerning it. Many people believe that the best thing would be to abstain from fixing any official rate of exchange, but the President construes the law of Congress as mandatory.

The President further stated that if Mr. Dillon refused to accept the funds which he has ordered transferred, he will instruct the [Page 880] Banco Comercial y Agricola to place all funds now on deposit to the order of the bondholders in that bank, so that no official of the Government of Ecuador can withdraw any portion thereof.

As to whether the Municipality of Guayaquil acknowledges the debt to Amsinck and Company, he said that, since the Municipality is an autonomous body, he is not able to answer for it.

Regarding the information which I have concerning the retroactive application of the Exchange Decree to claims in general, I respectfully refer the Department to my despatches No. 752, of November 17, 1921, and No. 761, of December 1, 1921, in which I reported the opinion of the Minister of Foreign Relations to be that the application should be retroactive, and added his further statement that as yet no case had been brought before the Ecuadorean Courts which would involve a decision in the matter.

I left an informal confidential memorandum with the President (of which I enclose copies), to which he stated that he would reply in a few days.

It is probable that his answer to this memorandum may contain some modifications of what he said in the oral interview.

When his answer is received, I will promptly communicate its contents to the Department.

I have [etc.]

Chas. S. Hartman

The American Minister ( Hartman ) to President Tamayo


The American Minister respectfully salutes His Excellency, The President of Ecuador, and has the honor to submit the following informal confidential memorandum for His Excellency’s consideration; and the Minister expresses the hope that His Excellency will find it convenient and agreeable, at an early date, to make his reply thereto, containing the desired information indicated in said memorandum, and such expression of His Excellency’s views on the several subjects therein mentioned as His Excellency may deem meet and proper.

The Department of State desires very much to receive a statement to the effect that the debt to G. Amsinck and Co. is acknowledged by the Municipality of Guayaquil, as well as a statement that the decree fixing the rate of exchange is not applicable in this case, Amsinck & Co. regard these statements as important prerequisites to initiating negotiations with the Municipality.
The Department would be pleased to learn definitely the attitude of the Government of Ecuador toward the application retroactively of the Exchange Decree to claims in general.
American claimants are so numerous that practically all important American banks are directly or indirectly concerned as to the attitude of the Government of Ecuador in this matter, and these banks might not be favorably inclined toward any further financial transaction with the Ecuadorean Government until this matter is adjusted satisfactorily.
The delay in transferring bond interest funds of the Guayaquil and Quito Railway from the Banco Comercial y Agricola to the Commercial Bank of Spanish America, as per agreement, is causing the Department great concern, and it is apprehended that such delay will further embarrass the pending negotiations for the loan hereafter mentioned.
The Department has received calls from Mr. Harman, the Ecuadorean Minister, and other persons, for the purpose of discussing the plans of the Ecuadorean Government regarding the foreign loan, but His Excellency will of course understand that unless the difficulties mentioned are satisfactorily adjusted, the efforts made by the Department of State and by other friends of His Government will be without results.

Charles S. Hartman avails himself of this occasion to renew to His Excellency, Sr. Dr. Dn. José Luis Tamayo the assurances of his highest consideration.

  1. In despatch no. 782, Jan. 16, 1922, not printed, the Minister corrects the statement in parentheses in substance as follows: The funds for the Salt Certificates were not transferred to the Bank of Spanish America, but were transferred on Jan. 13, 1922, to the credit of the bondholders in the Banco Comercial y Agricola, the transfer having been made to prevent any withdrawal of these funds for other purposes (file no. 422.11 Am 8/30).