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

No. 3307

Sir: I have the honor to refer to the Embassy’s Despatch No. 3257 of July 14, 1942,3 concerning the restrictions which have been placed by the Banco Central on United States currency transactions.

This matter has been discussed with the Minister of Finance,4 who has been somewhat disturbed by the provisions adopted by the Banco Central. After discussing with the Minister of Finance and Mr. Friedman of the United States Treasury Department the regulations which have been adopted in the United States and by other American Republics, Mr. Friedman has drawn up a proposed decree which would regulate all transactions in United States currency in Ecuador, as well as the importation and exportation of United States currency.5 The Minister is now studying the matter and probably will soon prepare a revised draft decree. From the course of the discussions it seems likely that the draft submitted by the Minister will be considerably changed.

In the proposed draft there is a provision which would permit travelers coming into Ecuador from the United States to carry with them amounts of currency not exceeding fifty dollars in any one [Page 416] month. In view of the fact that we are not well acquainted with the character of the export control which is now in effect in Panama and the United States, we would appreciate your advice as to the desirability of eliminating such a provision entirely.

We would also appreciate the Department’s comments with respect to one point raised by the Minister of Finance. The Minister desires some assurance that, if Ecuador requires all persons within the country to deliver all United States money to the Banco Central, such money will be purchased by the United States Government. The Minister feels that this arrangement could be worked out somewhat as follows:

Upon delivery of the dollars to the Banco Central, the dollars would be placed in blocked accounts. The persons for whose accounts such deposits were made would be given an opportunity to file proof that these dollars had not come from any Axis source. If the Minister is satisfied with this proof, he would authorize the Banco Central to pay to the depositor an equivalent amount of sucres for the dollars. In this case the dollars would then be transmitted to the Federal Reserve Bank or the Treasury Department by the Banco Central. In cases where the Minister is not satisfied as to the origin of the dollars, he would nevertheless like the dollars to be converted into sucres, the sucres to be retained in the blocked account and not returned to the owner, and the dollars to be sold by the Banco Central to the Federal Reserve Bank. There may well be several objections to this procedure, but it seems desirable that we be in a position to give the Minister a definitive answer in this respect.

As long as Mr. Illingworth remains in office as Minister of Finance, it is believed that the payments of sucres to certain depositors and the retention of sucres in blocked accounts would be carefully controlled. However, if there should be a change in the Ministry of Finance, the situation might be different and there does not seem to be any sound objection to requiring that dollars of uncertain origin be retained in a blocked dollar account in the Banco Central rather than maintaining blocked accounts of sucres.

We propose to discuss the matter further with Minister Illingworth upon the basis of the enclosed draft decree.6

Respectfully yours,

For the Ambassador:
Rollin S. Atwood

Junior Economic Analyst
  1. Not printed.
  2. Vicente Illingworth.
  3. This was to supplement a decree of February 9 by which transactions with individuals and firms on the Proclaimed List were prohibited, banks were required to block the accounts of Axis nationals, and the Central Bank was authorized to administer these accounts which could be used for certain limited purposes.
  4. Not printed.