422.11G93/1719: Telegram
The Minister in Ecuador ( Gonzalez ) to the Secretary of State
[Received August 6—10:40 a.m.]
40. With reference to the Department’s telegram No. 29, August 4, 1 [2] p.m., I delivered Council’s message this morning but I fear that it will receive unfavorable action. Consultation is favored by the Minister for Foreign Affairs and the Minister of Public Works but the matter is entirely in the hands of the President who has been convinced by the Ecuadoran Minister and Sherwell that the Council is a nonentity without any authority; that Hewitt, the largest American holder, is intransigent and will not consider a reasonable settlement; that the British Council will approach the question only from a legal point of view; and that under the circumstances the only solution is bankruptcy proceedings under which, according to alleged opinion of the American attorneys, the stock bond and guarantor obligations would be extinguished. I have just been informed that the [Page 552] President has determined to continue bankruptcy proceedings immediately.
It is my opinion that these proceedings concern only the obligations of the railway and that the guarantor obligation can be extinguished solely by fulfillment, mutual agreement or similar proceedings against the Government. An opinion to that effect and an expression of a fear that the grounds are now being laid for a future claim might possibly deter the President.