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

No. 507

Sir: With reference to my despatch No. 500 of May 26, 1939, and previous correspondence, regarding the Ecuadorean Law of March 3, 1939, calculating the exports of mineral earth at only 20 percent of its declared value, I have the honor to report that, in conformity with my request (Despatch No. 492 of May 19, 1939), Mr. R. P. Luke, the Resident Manager of the South American Development Company, has furnished me with statistics, covering the years 1936, 1937, 1938, and 1939 up to April 30th, on the production of his Company, salaries and taxes paid, and the amounts of dollars returned to Ecuador. Mr. Luke was good enough also to have prepared a memorandum on the Cotopaxi Exploration Company, a subsidiary of the South American Development Company, giving details of the large investments and expenditures made by the former Company up to December 31, 1938 and estimates thereof for the first four months of 1939. Copies of the foregoing documents37 are enclosed for the Department’s information.

While it appears that the Government either cannot or will not take steps to repeal or amend the Law of March 3, 1939, before the Congress convenes in August, it is believed that it might consent, in spite of its uncompromising note No. 61 D. C. of May 18, 1939 (Despatch No. 500 of May 26, 1939), to recommend a higher percentage than the present 20 percent. The figures furnished by the American gold-mining companies should prove valuable in showing that the computation of 20 percent is inequitable.

In view of the foregoing considerations, I have the honor to inquire whether the Department wishes me to, maintain the attitude expressed in the draft note contained in its instruction No. 112 of May 5, 1939, that the Law of March 3, 1939 contravenes the provisions of the Trade Agreement, or whether consideration should be given to a possible proposal to increase the 20 percent to a larger percentage.

The French Minister, who learned of the draft law when it was first introduced into the Assembly last year, secretly agreed with the Ministry of Foreign Affairs to accept the computation of petroleum at 15 [Page 623] percent, in case the Franco-Ecuadorean trade agreement were concluded.

The British Chargé d’Affaires confidentially states that his Government has made no objections, in view of the fact that the Ecuadorean Government recently removed Great Britain from the list of countries on whose products a 50 percent surcharge tax is imposed upon importation into Ecuador, although Ecuador had an unfavorable trade balance of about 31 percent with Great Britain last year.

Respectfully yours,

Boaz Long
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