The Chargé in Ecuador (Sparks) to the Secretary of State

No. 289

Sir: With reference to my despatch No. 262 of February 14, 1936, relative to the most-favored-nation modus vivendi which the Department proposed to Ecuador pending the outcome of further discussions concerning the possibility of initiating trade agreement negotiations, I have the honor to state that I had an opportunity yesterday to discuss this matter with Mr. Eduardo Riofrio, Technical Adviser of the Ministry of Finance. He stated that the proposal had not yet been submitted to him for consideration. However, he immediately communicated with the officer in the Ministry of Finance who had this document in his possession. It appears that the latter was holding it pending the formation of a special committee which would act as an advisory council to the Ministry on all matters involving commercial treaty agreements. Mr. Riofrio requested that the matter be brought to his attention immediately so that he could make the necessary recommendations. He added that he had already studied the trade relations between the United States and Ecuador and that he had found them very satisfactory. He pointed out that at first glance the trade seems to leave a very favorable balance for Ecuador, inasmuch as exports in 1935 amounted to 52,873,066 sucres, whereas imports from the United States were only 28,140,109 sucres. He maintains, however, that the value of gold precipitates and petroleum exported to the United States, amounting last year in excess of 26,000,000 sucres, must be deducted in order to reach the real balance of trade, since these two exports are produced, respectively, by American and British companies, and less than half of the proceeds remains in the country. I argued that it would not be fair to make this deduction in view of the fact that the export of gold precipitates and petroleum represents a definite gain to Ecuador. In the first place, the Ecuadorean Government collects very heavy taxes on the production of these items, and secondly, these industries are definitely an integral part of the economy of the country and give considerable [Page 491] occupation to Ecuadorean labor. He admitted the soundness of this reasoning, but observed that these two products could be sold in any market. He added, however, that he considers that Ecuadorean-American trade relations are eminently satisfactory to his country, that the United States should be accorded at once equality of treatment with France and Germany, and that he would immediately recommend such action.

I had an opportunity this afternoon to discuss this matter with the Under Secretary for Foreign Affairs who has only recently returned from the Labor Conference in Santiago, Chile.10 He told me that the proposal arrived during his absence and that he had not known of its existence. However, Mr. Riofrio had discussed it with him this morning by telephone and he had since had occasion to study it. He explained that the cause for delay in giving consideration to the proposal had been due to the fact that the Ministry of Finance intended to appoint an advisory council on matters of this kind, and that action on our proposal had been withheld pending the appointment of the council. He agreed with Mr. Riofrio that the matter was urgent and that immediate consideration should be accorded. He added that in November, 1935, when I brought to his attention the question of the discrimination which had arisen as a result of the French-Ecuadorean Modus Vivendi (See the Legation’s despatch No. 177 of November 8, 193511), he had consulted with the Ministry of Finance concerning the expediency of reaching an agreement with the United States to remove this discrimination, and that it had agreed to the necessity of such a measure. The Under Secretary therefore expressed the opinion that as a commitment had already been made by the Ministry of Finance and as the Foreign Office is in accord, a favorable decision should be forthcoming immediately.

Respectfully yours,

Edward J. Sparks
  1. The First Labor Conference of American States Members of the International Labor Organization met at Santiago, Chile, January 2–14, 1930.
  2. Foreign Relations, 1935, vol. iv, p. 510.