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

No. 1108

Sir: I have the honor to refer to the Department’s air mail instruction No. 237 of July 29, 1933 (File No. 822.5151/177), concerning eventual concessions on the part of Ecuador to French and Spanish merchants in the matter of exchange control, and directing me to advise the Minister for Foreign Affairs informally, if no objection is seen to such action, that, while the Government of the United States will not desire to obtain an agreement similar to the proposals referred to in my despatch No. 1059 of July 10,3 it will expect the Government of Ecuador to assure practical most-favored-nation treatment by extending to American interests advantages equivalent to those obtained by other countries through clearing agreements.

In compliance with the Department’s instruction, an informal statement to the foregoing effect was made to the Undersecretary for Foreign Affairs on August 24. The Undersecretary, with whom I left an appropriate aide-mémoire, stated that he would bring the matter at once to the attention of the Minister of Government, temporarily in charge of Foreign Affairs, and subsequently to the attention of the Minister for Foreign Affairs, as soon as a definite appointment is made.

My informal representation to the Foreign Office was deferred until August 24 because of the perturbed internal situation which has prevailed in Ecuador since the receipt of the Department’s instruction. Indeed, in the absence of a Minister for Foreign Affairs and in view of the general uncertainty as respects the stability of the present regime, I should have been disposed to postpone still further my communication, had I not felt that it might be advisable to place our position on record for eventual future reference.

As soon as domestic political conditions become somewhat more favorable, I shall take the matter up again with the official then in charge of the Foreign Office.

In the meantime, I hope to receive from the Consul General in Guayaquil detailed information regarding the past and present operations [Page 674] of the exchange control with particular reference to the treatment of American interests as compared with those of other countries. In a preliminary report of August 17, Mr. Quarton expresses some concern on this score. I have requested him to furnish the Legation detailed information, and, if it appears that there has been any discrimination against American interests, I shall bring the matter to the attention of the Foreign Office.

Attitude of Congress.

As forecast in my despatch No. 1059 of July 10, Congress has been too preoccupied with political matters to give any serious attention thus far to the exchange control. Early in the session, a bill was introduced in the Chamber of Deputies the effect of which would be to abrogate the present system but to provide at the same time for the requisition of thirty per cent of the amount of export drafts to be applied to existing obligations. On August 12, the Senate approved motions calling for information concerning the exchange control and the appointment of a commission to investigate its operations. On August 22, the Chamber of Commerce and Agriculture of Guayaquil urged Congress to give immediate consideration to the exchange control, alleging that in the meantime commercial transactions were completely paralyzed.

Agreement with France; Negotiations with Spain.

As previously reported by the Legation (see despatch No. 1091 of August 5, 19334), an agreement has been signed with France under which fifty per cent of exchange arising from Ecuadoran exports to France will be set aside to satisfy obligations to French nationals.

From such information as I have been able to obtain from the Ecuadoran Foreign Office, it is not clear whether the agreement has been formally ratified. In particular, the Undersecretary for Foreign Affairs informs me that he does not know whether the French Government has accepted an Ecuadoran reservation under which the agreement would cease to operate in the event that the Ecuadoran Congress should abrogate the existing exchange control.

However this may be, I am advised by the Central Bank of Ecuador, in charge of the exchange control, that the agreement is in effect and will apply to drafts covering export shipments to France subsequent to August 1. Regulations for the carrying out of the agreement have not yet been drawn up. They will, it is understood, be discussed with the Banco Italiano, of Guayaquil, which has been appointed to act as the agent of the French interests concerned.

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The text of the Franco-Ecuadoran agreement has not been made public. I am endeavoring to obtain a copy which will be furnished to the Department, if available.

As respects the negotiations with Spain referred to in my despatches No. 1059 of July 10 and No. 1063 of July 14,5 I am informed that no agreement has yet been reached.

Respectfully yours,

William Dawson
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