811.20 Defense (M)/9369: Telegram

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

736. Your A–66, September 24.97 The Department has discussed this matter fully with Rubber Reserve, Board of Economic Warfare, Export-Import Bank and Dr. Moore. It concurs fully in the objective of having the Development Corporation play an active and substantial part in the rubber program. While recognizing the factors pointed out by the Minister of Finance, the urgent need of the United Nations for rubber leads the Department to the view that Rubber Reserve should be permitted to continue its operations.

However, in order that the Corporation may be afforded the opportunity of maximum progress in rubber, Rubber Reserve is prepared to agree that the development fund of $500,000 shall be expended by the Corporation in projects approved by Rubber Reserve, the amounts necessary to carry out each particular project to be transferred by Rubber Reserve to the Corporation upon its approval of the project. Provision would be made for periodic accounting by the Corporation to Rubber Reserve for expenditures theretofore made. Rubber Reserve would remain free to continue operations, and Rubber Reserve would establish, in favor of its representatives in Ecuador, credits available for financing operations initiated by Rubber Reserve.

This proposal has the merit of carrying out what is understood to have been Illingworth’s expectation at the time the rubber agreement was signed. It also puts the Corporation in a position to take an energetic part in the rubber program. The success of the arrangement will naturally depend to a considerable extent on the ability of the [Page 412] Corporation and of the Rubber Reserve local representatives to plan their activities to their mutual satisfaction. The Department would anticipate no difficulty in this respect. It will be particularly necessary for them to agree on prices to be paid producers.

Moore and Mercereau98 will bring with them documents intended to express the suggested arrangement. Pending their arrival please do not inform Ecuadoran authorities of proposal, but it is suggested you advise Rubber Reserve for its confidential information. Moore and Mercereau will discuss the matter with Kinnear upon their arrival.

Welles
  1. Not printed; in this airgram the Ambassador commented upon the proposal to turn over to the Ecuadoran Development Corporation for exploitation a wild rubber area that the Rubber Reserve Company was expected to develop.
  2. James F. Mersereau, official of the Export-Import Bank.