822.151/38

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

No. 439

Sir: Reference is made to your despatch no. 1537 of January 17, 194195 reporting the views of the Ecuadoran Ministers of Foreign Affairs and Finance96 with respect to application of certain new and additional customs charges upon Ecuadoran imports of products in Schedule I of the trade agreement under authority of recent legislation enacted for the purpose of obtaining revenues to liquidate possible loans for new water-supply systems in various cities of Ecuador. The Ecuadoran Minister of Finance was reported to have stated in this connection that he would withhold application of the additional duties mentioned until March 31, 1941 if the Department would arrange for the extension by the Export-Import Bank of Washington of a credit of $3,000,000 to the Ecuadoran Government for construction of the water-supply systems in question.

As you explained to the Minister of Finance, the decisions concerning specific loans by the Export-Import Bank are based on the merits of the individual applications for such loans. As the Ecuadoran Ministers of Foreign Affairs and Finance indicated might be the case, in the course of their discussion of this matter with you, there has as yet been no direct application by the Ecuadoran Government or by the Municipalities of Guayaquil or Quito for the loan of a specific amount or amounts for the construction of new waterworks systems.

Several months ago the Ecuadoran Ambassador97 informed the Department orally of the interest of the President of Ecuador in the possibility of obtaining credits for a new water supply system in Guayaquil. This information was brought to the attention of the Export-Import Bank, and at the same time the Department expressed its interest in the project. The Bank officials, however, have at no time in the course of discussing this matter given any specific indication of a favorable disposition toward extending such credit assistance, and the action of the Bank so far has been restricted to the authorization of $700 of its funds for the expenses of an engineer [Page 299] who will obtain more information concerning the projects in Guayaquil and Quito. The arrangements for the preliminary survey work to be conducted by this engineer, Mr. Frank E. DeMartini of the United States Public Health Service, were described to you in detail in the Department’s instruction no. 414 of January 22, 1941.98

When Mr. DeMartini completes his compilation of preliminary data with respect to the probable nature and cost of new water-works systems in Guayaquil and Quito, it is expected that the information prepared by him will be studied by the appropriate agencies of this Government. It is hoped that the data will likewise be of use to the Ecuadoran authorities in considering a possible loan application or applications.

With respect to the application of the additional customs duties to products in Schedule I of the trade agreement, you may inform the Minister of Finance that it is believed to be most practicable to consider this question separately. If, however, the Minister insists upon linking the questions together and the issue therefore arises of the conflict with the provisions of the agreement, you may inform him of the substance of the confidential paragraph in the Department’s telegram no. 5 of January 8, 1941.99 Before doing this, however, you should assure yourself that the Ecuadoran officials have a full understanding of the revenue possibilities in the suggestion contained in the second paragraph of the Department’s telegram no. 1 of January 2, 1941.1 It would appear desirable to emphasize this point again to the Ecuadoran officials.

Very truly yours,

For the Secretary of State:
Sumner Welles
  1. Not printed.
  2. Julio Tobar Donoso and Vicente Illingworth, respectively.
  3. Colón Eloy Alfaro.
  4. Not printed.
  5. Not printed. This paragraph reads: “For your information, if after due consideration of these possibilities the Ecuadoran Government should take the position that sufficient revenues could not feasibly be raised in a manner consonant with the provisions of the trade agreement the Department would, of course, be glad to consider any specific proposals by that Government for changes in the agreement.” (822.151/35)
  6. Not printed. This paragraph suggested an increase in certain customs duties provided the tax on domestic industries were increased correspondingly. (822.151/33)