822.72 AL 5/42½

Memorandum of Conversation, by the Under Secretary of State (Welles)

I asked the Ambassador of Ecuador54 to call to see me this morning and told him of my very deep concern at learning of the action taken by the Government of Ecuador in regard to the All America Cable Company, namely, that unless the company paid within a period of forty-eight hours $350,000 of alleged back taxes, which the company states it is under no obligation to pay either under the law or under principles of equity, the Government of Ecuador would sever communications south of Ecuador.

I reminded the Ambassador that the All America Cable Company was a company which had done a vast amount of service to all of the American republics in perfecting and maintaining adequate cable communications between them, and that he himself knew the officials of the company and the fair and friendly spirit in which they dealt when problems arose between the company and the governments of the American countries which they served. I said to the Ambassador that if the action threatened was taken by the Government of Ecuador, we could of course immediately anticipate a very vocal and violent protest on the part of the Governments of Brazil, Uruguay, Argentina, Chile and Peru, who would thus be severed from all communication with the United States and with the northern countries of the hemisphere. Furthermore, I said, this type of action which had been undertaken by the present Government of Ecuador was surely not one that could be classified as coming within that practical carrying out of the Good Neighbor policy for which all of the American republics stood and to which I was sure the people of Ecuador were sympathetic. I said it seemed to me that the equitable, reasonable and friendly thing for the Government of Ecuador to do would be to advise the company that this period of forty-eight hours laid down in the ultimatum would be extended to at least a period of two weeks in the belief that a fair and satisfactory solution of the difficulties which had arisen could be found within that period. I told the Ambassador that that was the only official representation which I had to make to him on the subject this morning.

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Off the record and speaking, I told the Ambassador, solely as a personal friend and as an individual citizen of this country, I felt that if the officials of the company decided, should the Government of Ecuador sever the cables of the company, to move their cables outside of Ecuador’s territorial waters, such action would be applauded by every republic of this continent. I said that unfair and high-handed dealings in matters of this kind on the part of the Government would not serve the interests of the continent nor the interests of Ecuador herself. The company was in a position where it could isolate Ecuador from communications with the rest of the continent and, I said, I was by no means certain that the company would not be driven to take such action.

The Ambassador told me that on frequent occasions in the past he had intervened to prevent the company from being “mulcted” and that he would do everything in his power to help in the present instance. He said the fact was there were very few foreign companies doing business in Ecuador and the situation of Colonel Enriquez, the Provisional President of Ecuador,55 in the financial sense was so straitened that he was probably trying to get money in any way he possibly could. The Ambassador said he regretted the incident deeply and that he would do everything within his power to persuade his Government to take the action I had suggested.

S[umner] W[elles]