822.796/224: Telegram

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

207. Department’s No. 126, August 30, 6 p.m. At an interview yesterday morning President Arroyo and Foreign Minister Tobar expressed approval of Panagra authorizing representative to obtain permits under Panagra contract for itself or Ecuadoran subsidiary to establish and maintain local services which would duplicate those Sedta now renders at rates no higher than those of Sedta as of July 1.

President Arroyo and Foreign Minister Tobar are in sympathy with the objectives sought and agreed to the provisions set down by the Department.

With regard to the elimination of Sedta they had the following comments to make:

The Sedta contract was signed under dictatorship and Ecuador has now a constitutional government which cannot violate existing contracts. President and Foreign Minister offer forthwith to study Sedta contract seeking method for accomplishing elimination legally. President and Foreign Minister favor Panagra establishing service as soon as possible and recognize that Sedta had unjustly enjoyed a monopoly for internal air mail. This injustice will be rectified by them when granting Panagra or subsidiary special rights to operate internal service and it was thought that by starting such service Panagra would get fair share of business thus increasing losses of Sedta which with indirect pressure that might be applied would facilitate reaching an agreement to liquidate Sedta the funds for which Ecuador counts on receiving from our Government.

President and Foreign Minister thought words used to safeguard issuance other aviation concessions or franchises inadequate: They agree proposed new Ecuadoran company should have protection and thought an exchange of notes might establish this fact.

The substance of the foregoing has been approved by Dr. Tobar.

I believe that President and Foreign Minister have now given as clear a commitment on the elimination of Sedta as can be obtained [Page 845] and that the present is a propitious moment for a competent negotiator to proceed here to carry on the negotiations on behalf of Panagra.

Amplified report follows by air mail18 leaving September 21.

  1. Despatch No. 1267, September 19, 1940, not printed.