The Secretary of State to the Minister in Ecuador (Bading)
21. You will please deliver the following note to the Ecuadorean Government:
“I have the honor to inform you that I am instructed by my Government to state that it has given very careful consideration to the question of the debt of the Association of Agriculturists of Ecuador to the Mercantile Bank of the Americas and desires to make known to the Ecuadorean Government its position as follows:
His Excellency President Cordova assured the American Minister that this matter could be arranged satisfactorily and expressed his concurrence with a bill introduced into the Ecuadorean Congress in [Page 706] 1923 providing for the continuation of the export tax on cacao until the liquidation of this indebtedness. The Government of the United States confidently expects the President to comply with the promises mentioned by urging passage of the necessary legislation in the next session, either ordinary or extraordinary, of the Ecuadorean Congress. In this connection it is pertinent to point out that the President of Ecuador on February 5, 1922 formally promised the American Minister in Quito:
- That if in 1925 the debt to the Mercantile Bank of the Americas shall not have been extinguished the export tax on cacao will be extended until its cancellation;
- That the Association will apply to the debt of the Mercantile Bank, in addition to 22 per cent of the tax, any other balance left after carrying out its operations according to the Decree creating said tax;
- That if the Government obtains a foreign loan it will immediately pay half of the debt due to the above mentioned Bank.
The Government of the United States has learned with profound surprise that not only has the 22 per cent of the tax aforementioned not been devoted to the cancellation of the Mercantile Bank debt but that there has been actual discrimination against the Bank in favor of Ecuadorean nationals as evidenced by the payment by the Agricultural Association of all its debts to the banks in Guayaquil and to all the holders of “vales” with the exception of one “vale” now in litigation. The United States Government consequently expects that the 22 per cent of the tax allocated to the Mercantile Bank which has been withheld up to now will immediately be paid to the Bank and that the full 66 per cent of the tax allocated for the payment of the debts of the Association will, now that the other debts have been paid with the exception indicated, be paid to the Mercantile Bank in the future or else that the Government of Ecuador will oblige the Association to deposit in a bank acceptable to both parties all the funds now on hand and regularly in the future those to be collected, to be held in escrow until a settlement of the accounts has been reached. In furtherance of this proposal the Government of the United States must express its expectation that there will be immediate compliance with the provisions of the law of 1921 and the appointment of a comptroller or interventor for the Association to assure that the latter will make a just settlement of its debts to the American creditors.
The Government of the United States is constrained to consider the Government of Ecuador responsible for the discrimination mentioned in the preceding paragraph as, according to the aforementioned Ecuadorean law of 1921, the Government of Ecuador appears obligated to control the activities of the Association and moreover it is understood that the President of Ecuador assigned, as stated above, a certain portion of the proceeds of the tax which should be paid to the Mercantile Bank at the same time that another portion of the proceeds of the tax was allocated to the remaining creditors.
The Government of the United States furthermore confidently expects that the export tax on cacao will be continued after its expiration [Page 707] December 31, 1925, until the debt is fully satisfied as was promised by the President of Ecuador in the note above referred to.
The question of the debt of the Association of Agriculturists to the Mercantile Bank of the Americas has been pending for a number of years without any efficacious action on the part of the Ecuadorean Government and the Government of the United States feels that it must now ask for a prompt settlement and desires to be informed without delay of the steps contemplated by the Ecuadorean Government to bring the matter to a satisfactory conclusion.”
A copy of the above note has been handed to the Ecuadorean Minister in Washington and he has been informed that this Government is wholly dissatisfied with the attitude and action of the Ecuadorean authorities in the premises and that this Government feels that a settlement of the matter cannot well be prolonged and it expects to be advised without delay of the intentions of the Ecuadorean Government in the premises.