822.5151/196

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

No. 1130

Sir: I have the honor to refer to my despatch No. 1108 of August 28, 1933, concerning the Ecuadoran exchange control and in particular to the opening paragraphs reporting that on August 24 I advised the Undersecretary for Foreign Affairs informally that the United States Government would expect the Ecuadoran Government to assure practical most-favored-nation treatment by extending to American interests advantages equivalent to those obtained by other countries through clearing agreements.

In view of the perturbed and unstable conditions prevailing in Ecuador and the frequent cabinet changes of the past few days, I have considered it useless to discuss the matter further with the Undersecretary for the present. It may be recalled in this connection that, save for a few hours on September 4 and 5, the country has been without a Minister for Foreign Affairs since August 16 and that during the past week the President was twice compelled to reconstitute his cabinet.

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.

As respects proposed legislation concerning the exchange control, little progress has been made and the Chamber of Deputies has not yet taken any definitive action touching the bill under discussion for the partial abrogation of the existing system (Despatch No. 1108, Page 3).

Protection of American Interests.

In spite of present confusion and the uncertain outlook, as respects not only political developments but also the future of the exchange control, I believe that it would be well to give timely consideration to the eventual means of assuring equitable treatment for American [Page 676] interests, in case the present or some similar system should be maintained.

As reported in my despatch No. 1126 of September 9, 1933,6 concerning the relative treatment of American interests, I find no reason to believe that there has thus far been any discrimination against the United States in the distribution of exchange. However, the recent conclusion of a clearing agreement with France may in practice alter the situation to our disadvantage.

Even if it be assumed that, following my recent informal statement to the Undersecretary or as a result of subsequent informal representations, the Ecuadoran Government will be ready to extend most-favored-nation treatment in principle, I doubt if, in practice, such treatment can be counted upon in the absence of some more definite arrangement. It must be borne in mind that available exchange is and will be wholly inadequate and that, in addition to urgent private demands, the Government itself is in constant need of drafts. Furthermore, it would be difficult to ascertain just how American interests might be faring, since no reliable detailed information is currently available concerning exchange requisitioned, applied for, and issued.

The Franco–Ecuadoran clearing agreement assures to French interests fifty per cent of exchange arising from Ecuadoran exports to France and provides adequate machinery for making this assurance effective. From the Department’s instruction No. 237 of July 29, 1933, I infer that in the case of the United States such an agreement is considered inadvisable or impracticable. Consideration might, however, I believe, be given to the advisability of seeking from the Ecuadoran Government some more definite commitment than a mere general assurance of most-favored-nation treatment. Such a commitment might perhaps take the form of an agreement to the effect that fifty per cent of exchange arising from exports to the United States would be applied to the payment of sums due American nationals.

Of course, even such a commitment would still leave us without the advantages of the machinery set up by France to insure collection of the sums due its nationals. However, ways and means might be found by which the Consulate General in Guayaquil could keep some check on the requisition and issuance of dollar exchange with a view to assuring itself that our interests were receiving the percentage guaranteed them. In any case, I should consider an agreement to set aside a definite percentage of exchange as offering decided advantages over a mere promise of most-favored-nation treatment.

Statement by President of Central Bank.

On September 7, the President of the Central Bank, Dr. Alberto Larrea Chiriboga, [Page 677] attended a session of the Chamber of Deputies for the purpose of furnishing information in connection with the discussion of legislation concerning the exchange control.

According to the reports of the session published by two local papers, he stated in the course of his remarks that clearing agreements were in course of negotiation with the United States and Italy. Fearing that my statement to the Undersecretary might have been misunderstood or have reached Dr. Larrea Chiriboga in a garbled form, I questioned him about the remarks attributed to him in the press. In reply, he informed me that he had made no such statement, that he had no information from the Foreign Office concerning any negotiations, and that he had merely said, in referring to the Franco–Ecuadoran agreement, that it was to be assumed that similar arrangements would be sought sooner or later by the United States and Italy.

It may be inferred that Dr. Larrea Chiriboga and no doubt others anticipate that the United States and other countries will request concessions similar to those made to France.

Conclusion.

In conclusion, I desire to make it clear that the purpose of the present despatch is merely to lay the situation before the Department and to submit for its consideration a course of action which might serve to protect American interests, in the event that the present or some similar system of exchange control is maintained in Ecuador. Since the future status of the exchange control itself is in doubt, it is obvious that a definite decision can hardly be reached for the present, and it might seem more logical to defer any consideration of the matter pending further action by the Ecuadoran Congress. However, little progress is being made with legislation of any sort, and the decision of Congress as respects the exchange control may be greatly delayed. Furthermore, present indications are that the existing system will in any case be only partially abrogated. It should also be noted that, as has been pointed out by Consul General Quarton, cacao shipments to the United States will begin in December and that, in consequence, any concessions in the matter of exchange which our Government may wish to request should be taken up with the Ecuadoran Government before that time. It seems likely that the Ecuadoran authorities would be less disposed to heed any representations after exports are underway and financing arrangements for the season have been made.7

Respectfully yours,

William Dawson
  1. Not printed.
  2. No further representations were made in the matter. On November 27, 1933, a Legislative decree partially abrogating exchange control was passed by the Ecuadoran Congress; the decree was promulgated in the Registro Oficial, December 16, 1933.