822.61334/149

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

No. 433

Sir: With reference to the Department’s cable No. 19, of November 26th, 6 P.M., concerning the matter of the indebtedness of the Asociación de Agricultores del Ecuador to the Mercantile Bank of the Americas, the partial answer to which was cabled in my telegram No. 18 of November 29th, 3 P.M.,12 I have the honor to report that immediately upon receipt of the Department’s cable we secured the copy of the law of centralisacion de las rentas and subjected it to a careful study which convinced me that the law does not in any way apply to the law of October 15, 1921, by which was established the tax of three sucres per quintel on cacao for the benefit of the Asociación de Agricultores del Ecuador.

I called Mr. Hord, the financial adviser of the Ecuadorian Government, into conference, and he concurred with me in this opinion.

In order to ascertain the opinion of the Ecuadorian Government on this question, the matter was referred to Sr. Albornoz, the Minister of Hacienda, and both he and his Undersecretary, Mr. Rivas, expressed the opinion that in view of the fact that the Asociación is a “private institution” the law of centralization is not applicable, and this is further borne out by the fact that the funds derived from this three sucre tax never have been for the benefit of the Ecuadorian Government and that the tax always has been collected by [Page 705] the treasurer of the Asociación and never by officials of the Government.

Furthermore, we have ascertained that the three Sucre tax is being collected and deposited for the benefit of the Asociación as heretofore.

The budget finally adopted by the Government, in spite of the protests of Mr. Hord, does not contain any provision whatever in regard to the amount to be collected by this three sucre tax nor as to its disposal.

Copy and translation of the law of centralization are hereto attached.13

With regard to the first paragraph of the Department’s cable above mentioned, I may state that we are now making an investigation as to whether the Asociación has made full payment of its debts to local banks and holders of “vales” and a report will be made by telegraph, doubtless some time before this despatch reaches the Department.

I have [etc.]

G. A. Bading
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