822.796/183a: Telegram

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

87. As a result of discussions with representatives of Pan American-Grace Airways, we are now prepared to approach the Ecuadoran Government [Page 836] with a comprehensive aviation plan. Unless you perceive some objection, in which case please communicate with the Department by telegraph, you are accordingly instructed to arrange for a joint interview with the President, the Minister for Foreign Affairs and the Minister of National Defense, and to outline the proposal as follows:

Having in mind the necessity for safeguarding the Panama Canal and appreciating the interest of Ecuador in the safety of the Canal as well as in the general question of hemisphere defense and continental solidarity, we believe that the Sedta franchise should be terminated at once by action of the Ecuadoran Government. The facts as to the real value of Sedta (and hence of what would constitute adequate compensation to be paid by the Ecuadoran Government) ought not to be difficult for the Government to ascertain; for example, if as has been reported the planes have been loaned or leased (or sold on mortgage) to Sedta by the Lufthansa organization, they could be turned back to the latter on the termination of the concession.
This Government is in entire sympathy with the desire of the Ecuadoran Government to be supplied with an efficient modern domestic air transport service to meet the present needs and anticipated developments of the country, and is prepared to cooperate fully with the Ecuadoran Government to that end. Having in mind the immediate problem, it suggests that the following steps be taken:
Concurrently with the elimination of Sedta operations, Pan American-Grace will institute services replacing Sedta services at all points at which satisfactory ground facilities now exist. Pan American-Grace will serve all other points now reached by Sedta as soon as satisfactory ground facilities are provided, and will cooperate with the Ecuadoran Government to the end that such ground facilities may be promptly established. Services between points in Ecuador will be at the now published Sedta rates. Schedules will be so arranged that the new services will include one trip per week in each direction between Esmeraldas, Quito, Manta, Salinas, Guayaquil, Cuenca and Loja, and in addition at least six trips per week between Guayaquil and Quito, making a total of seven trips per week between the latter two points. The trip to Esmeraldas would also be continued to Cali and Cristóbal, thus providing a fourth international service to and from Ecuador.
If after the inauguration of services on the foregoing bases it appears desirable to do so, Pan American-Grace is prepared to undertake a part of these services through a local subsidiary to be incorporated by it in Ecuador; the company has in mind in that connection facilitating the future establishment of a national Ecuadoran air transport company as outlined in section (3) hereafter.
The Pan American-Grace organization will arrange for ground instruction of Ecuadoran mechanics and technicians without cost to the Ecuadoran Government.
It is believed that arrangements now being worked out in connection with the preparations for a Military Aviation Mission to Ecuador will shortly provide for adequate training of Ecuadoran pilots.
At such time in the future as the Ecuadoran Government may desire, this Government will cooperate with the Ecuadoran Government in the establishment of a national Ecuadoran air transport company to operate domestic services within Ecuador, it being anticipated that in due course 51% or more of the stock of such company would be acquired by the Ecuadoran Government or by the Ecuadoran Government and nativeborn Ecuadoran citizens. The details in connection with the organization of such a company and the conduct of the operations would, however, be worked out when the occasion arises. In any case, it would of course be provided that present Pan American-Grace cabotage and other contractual rights in Ecuador would be maintained.
With respect to Ecuador’s desire for an Oriente service, we are in agreement with the views of the Minister of War that in the first instance this should be undertaken by the Ecuadoran Government direct. We are prepared to furnish credit for the purchase of the necessary equipment and will be pleased to recommend the names of whatever United States pilots and mechanics might be necessary for the initial operations. It is assumed that the Ecuadoran Government would be prepared to allocate sufficient funds to the Ministry of War for the operation of the service, and for the repayment of the credit on mutually satisfactory terms.
In consideration of all of the foregoing, Ecuador would undertake to grant no further aviation concessions or franchises to any organization or individual not of the American Republics. Having in mind the suggested establishment of a national Ecuadoran company, we are confident that the Ecuadoran Government will immediately perceive the importance of this point.