811.20 Defense (M)/6058: Telegram

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

256. Your 271 of April 8 and 282 of April 10.71 While anything reasonably designed to increase rubber production, including the trunk road you refer to, will be favored, nevertheless it does not seem appropriate for this to be undertaken by Rubber Reserve out of the fund to be set up by it. This type of project is more closely related to the general development of Ecuador, and we suggest that it be carried out through the Ecuadoran Development Corporation.

The bonus payments suggested in your 271 would make the price to Ecuador out of line with other countries, and various other producing countries have requested assurances that no more favorable prices will be granted to the other producing countries. You can readily understand that it seems undesirable to vary the price from country to country for the same type of product without some justification for the difference.

You refer to amortization of the larger cash advance. The fund proposed to be set up by Rubber Reserve is not an advance, but a fund to be used to increase production which Ecuador is not obligated to repay. If there are any premiums paid, the amount of the fund not theretofore expended which Rubber Reserve is thereafter bound to provide is reduced by the amount of the premiums. Accordingly, there is no principle of amortization involved.

The Government has under consideration the fixing of quotas for the various Latin American countries for the purpose of allocating rubber products to be delivered from here, and while the basis of allocation and the adoption of any such principle generally has not yet been finally determined, in all probability it appears that Ecuador’s essential needs will be provided and its agreement to send us rubber could be conditioned upon this being done.

The price offered to Ecuador is the same as that offered the other rubber producing countries for the same grade. All these prices are based on the price agreed upon with Brazil, which is 39 cents per pound f.o.b. Belem for Upriver Acre Fine on a washed and dried basis with appropriate differentials for unwashed types and lower grades. As pointed out in Department’s no. 168 of March 17, 1942, it is understood that Ecuador does not produce any Hevea type rubber except that exported through Brazil. However, if there is any Hevea type rubber of the same grade as the top grade in Brazil, on a washed and [Page 401] dried basis, Rubber Reserve Company is prepared to pay the same price as to Brazil.

If the Ecuadoran Government would prefer it, Rubber Reserve Company is prepared to pay 33 cents per pound f.o.b. Guayaquil instead of 35 cents c. & f. New York price already quoted.

The price quoted is intended to apply both to the Andulla type and to the Maroma grade. It is not possible to quote a price for washed and pressed rubber unless you can give us some information as to type and grade.

  1. Latter not printed.