822.6341 South American Development C0./60
The Chargé in Ecuador (Gade) to the Secretary of State
[Received February 5.]
Sir: In recapitulation of my telegram No. 10 of January 27, 11 a.m., 1938,35 and previous correspondence regarding the proposed obligatory revision of the South American Development Company’s contract with the Ecuadorean Government, I have the honor to report that to date I have received no reply to my representations made on January 20, 1938, in conformity with the Department’s telegraphic instructions No. 1 of January 8, 3 p.m., 1938, and No. 3 of January 19, 3 p.m., 1938. I do not expect a reply now until the Government has fully determined its course of action.
On January 21st, the date on which an answer was demanded, Mr. Tweedy, the General Manager of the South American Development Company, duly presented his company’s reply to the Government.36 While couched in conciliatory terms, it declined to accept an obligatory revision of the contract. In this connection Mr. Tweedy [Page 542] promised to telegraph his New York office to forward a copy thereof to the Department. A translation was also contained in despatch No. 625 of January 24, 1938, from the Consul General at Guayaquil.38
According to the Government, the envelope containing the reply was left unopened until General Enríquez’ return from a trip to Guayaquil on January 24th. The Company’s answer was subsequently turned over to the Attorney General (Procurador de la Nación) for an opinion, which is at present awaited.
As reported in my telegram No. 10 of January 27, 11 a.m., 1938, the Government by Decree dated January 26, 1938 (a translation of which is enclosed38), imposed a fine of 50,000 sucres, payable within 30 days, on the South American Development Company on the ground that it has circulated bearer bills of exchange, payable at sight, which, it is alleged, are in contravention of Article 7 of Decree No. 118 of December 30, 1937,39 forbidding the private issue of “money, counters, tokens, or documents of any kind, which might circulate as money” (my despatch No. 1010 of January 10, 193838).
Mr. Tweedy informs me that his company, after receiving the best legal counsel, did give its employees counters for fractional amounts two or three years ago, owing to the impossibility of securing fractional currency. The employees were supposed to present five of these counters, in the sum of one sucre, to the cashier for a five-sucre bill, but doubtless sometimes used them instead of currency. No objection to this practice has been made up to now. Attention is called to the fact that only three days are given for the payment of the fine and that all legal recourse is expressly denied to the Company. It will also be observed that no fines are established by the above-mentioned Decree. Mr. Tweedy states that a Decree especially drafted on January 24th but not yet promulgated and published, establishes a maximum fine of 50,000 sucres and that this irregular Decree is being retroactively invoked.
After delaying some days out of courtesy to the Government, Mr. Tweedy gave the principal newspapers the text of his Company’s reply to the Government, which was published in the press on January 27th. In view of the continual newspaper attacks on the Company, it was believed that an explanation to the public, of its attitude was advisable.
Various rumors are in circulation as to what action the Government will take. According to latest reports, troops will be sent to the mines to keep order but not, as originally stated by General Enríquez, to seize the property. It is also said that the Government intends to [Page 543] cancel its contract with the Company on the ground that it is not a proper “contract” but a “revocable concession”.
The Anglo-Ecuadorean Oilfields, Ltd., which had been given a period of fifteen days to accept a somewhat similar revision of its contract, on January 26th delivered its reply, accepting the Government’s proposal to negotiate a new contract to provide for increased taxes, but refusing a proposed large tax payment in advance.
I shall not fail promptly to inform the Department of further developments in the matter.
Respectfully yours,
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- The company’s reply of January 21, together with the Ecuadoran Government’s answer of January 28, were printed by the Government in a pamphlet entitled Memorandum Sobre los Antecedentes y Efectos del Decreto Dictatorial No. 7 de 18 Febrero de 1938 Que Desconoce Clertas Estipulaciones del Contrato Vigente Entre el Gobieno del Ecuador y la ‘South American Development Company’ (Quito, 1938).↩
- Not printed.↩
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- Ecuador, Registro Oficial, January 4, 1938.↩
- Not printed.↩