822.796/189: Telegram

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

144. Department’s No. 89 of July 6, 4 p.m. Ecuadoran authorities disagree and think it would be more difficult and expensive for them to eliminate Sedta than for Panagra to do so. In any event they are without funds for this purpose but assert they are disposed to cooperate fully and suggest the following procedure.

For Panagra representative to start negotiations to buy out Sedta through some third person probably Lucindo Almeida13 in which Government will assist. If this plan is unacceptable or if the negotiations should fail the following alternative is suggested.
For Panagra to make Ecuador formal proposals as indicated in recent telegrams and immediately initiate services paralleling those of Sedta for authorization which the Ecuadoran Government will promptly grant whereupon latter will bring pressure to bear, for example, by permitting Panagra to carry air mail within Ecuador. Dr. Tobar14 believes Panagra should have this right exclusively for the same period that Sedta has enjoyed the monopoly. In addition pressure will be applied on grounds of technical violations of Sedta contract but of these there are few. Only violations so far known are Sedta’s failure to construct hangar and to establish repair shops but it claims war interrupted shipment of hangar.
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However, there exists here a definite disposition, still more noticeable than when Campbell left, to find some reasonable way for terminating Sedta violations. Even so we must recognize that as Sedta was probably established for political and propaganda purposes its German subsidy may be continued.

Minister of National Defense points out that but 30 days remain before Congress meets; that in the light of present conditions Ecuador cannot afford to proceed unjustly against Sedta but with Panagra to take the initiative they will do their best and that when Sedta sees the drift it will probably yield.

Plaza desires to avert misunderstanding with Panagra so [he] mentioned that immediate services to be undertaken were [to] Guayaquil, Salinas, Quito, also probably Loja, and, with very little work, Manta; other stops to be scheduled as landing fields are fixed by Panagra.

I recommend that if Panagra is prepared to follow either proposal and start service in time to get the benefit of pressure by those now in office who offer to help that Mr. Campbell return here forthwith. Definite consideration must be given to method of financing Sedta elimination. The Government is unable to assist with funds. Should the Department desire to offer financial assistance to the Government of Ecuador for elimination Sedta, please so advise.

  1. A prominent Ecuadoran banker.
  2. Julio Tobar Donoso, Ecuadoran Minister for Foreign Affairs.