822.61334/47: Telegram
The Mercantile Bank of the Americas, Inc., to the Secretary of State
[Received 11:52 p.m.]
Referring to our wire to-day quoting cable35 received from our representative in Ecuador,36 we take the liberty of quoting reply which we are forwarding. We believe that the proposal we are making is more than an equitable one and hope that you can see your way clear to instruct the American Minister to urge its acceptance.
“Referring your 10. We authorize you make following proposal President. Mercantile Bank will agree to advance to Ecuadorean Government up to $500,000 on following conditions: (1) threesucre tax to be extended until December 31st 1927; (2) that out of the, tax 50 centavos be allocated to the budget requirements of [Page 898] the Association39 including interest on and repayment of the vales; (3) the remaining 2½ sucres to be prorated between the local banks and the Mercantile Bank in proportion to the indebtedness of the Association to each and to be used exclusively for the extinguishment of the present indebtedness plus interest at 6 percent; (4) the loan to the Ecuadorean Government to be made only out of funds coming into the hands of the bank as a result of the tax and then only up to 50 percent of the amount so received, that is, out of the first $50,000 which we receive from the tax to extinguish the debt of the Association we would lend to the Government $25,000; (5) the proposed loan to the Government to mature on December 31st, 1927, with interest at 6 percent payable on June 30th and December 31st in each year and to be secured by pledge of any excess of three-sucre tax after the repayment of the existing indebtedness of the Association held by local banks and the Mercantile Bank, such excess to be used exclusively in repayment of such debt further with an undertaking to utilize similarly any surplus which may arise out of the 50 centavos allocated for Association uses and repayment of vales and not needed for those purposes, such loan to be duly authorized by Congress before any advances are made thereunder; (6) the whole of the three-sucre tax collected for the year 1927 to be applied to the liquidation of the loan to the Government; (7) the agreement of Congress to extend the tax after 1927 in any portion of Government or Association loans not repaid at the expiration of that period. You will note that we are not attempting to urge the allocation of the proposed law in any way except that our loan to the Association should be considered on a basis of equality with that of the local banks. Five hundred thousand dollars loan would seem to be ample to cover harbor improvement which you hint is a public work which President would like to see carried out. We also point out that under present form of law Government does not retain the use of any of the funds derived from the tax, whereas, if altered so as to include the Mercantile Bank on basis proposed a large portion will remain to be used by the Government without restrictions in times when public officials can do much to alleviate suffering due to present world-wide conditions. Should Congress pass law covering suggested points you will of course see that our interests are safeguarded fully in drawing up loan agreement with Government.”