822.6176/31: Telegram
The Chargé in Ecuador (Nester) to the Secretary of State
[Received May 14—5:01 p.m.]
423. The President13a today summoned me requesting also the presence of Messrs. Lowry and Tewksbury.14 He stated that he was entirely dissatisfied with the working of certain features of the rubber agreement and stated that Ecuador has faithfully complied with all provisions of the agreement but that to be very frank he did not feel the U. S. had met its obligations. He pointed out that in discussions with Ecuadoreans he defended the U. S. but there are three points concerning which he was dissatisfied: (1) Tires have not been shipped to Ecuador as provided in the agreement. No tires have been received from Brazil as yet covering the quota for the fourth quarter 1942 and first quarter 1943. (2) The agreement provides for the payment of premiums to the Ecuadorean Government for use in the procurement and development of wild rubber. Although a specific request was made as far back as December for the utilization of these funds for building roads into rubber producing sections of the Oriente it has not been possible to obtain authorization for this. (3) He also stated that he was dissatisfied with the way the $500,000 development fund had been utilized. However, as the conversation developed this was not again mentioned and apparently this is not a very serious problem at the moment. Presumably such a dissatisfaction as exists is due to the fact that in nearly 10 months very little of this fund has actually been spent.
[Page 289]After a brief discussion of difficulties which have been encountered in connection with supplying tires the President stated that one serious objection to receiving tires from Brazil was that these tires cost Ecuador approximately 25% more than tires from the U. S. Although he dropped the discussion of tires after explanations as to various difficulties which have been encountered, the question of receiving tires is of paramount importance and is certain to arise again. Kindly inform the Embassy in detail as to the status of shipments from Brazil and as to shipment of the second and third emergency stock piles.
He expressed his great dissatisfaction at not having definite authorization to use the premium payments for the construction of the road from Cuenca to Mendez. (Reference Embassy’s telegram No. 96, February 3, 5 p.m. and 189, March 2 [3], 9 p.m.; and Department’s telegram No. 335, April 29, midnight.15) It was explained that after discussions between Lowry and the Minister of Finance it had been decided to request authorization up to $30,000 for an engineering survey of the road and that authority had recently been received from Washington to spend this amount.
The President explained that the premium payments were made to the Government of Ecuador to spend for projects for the development of rubber. This project was of the character named and he insisted that authority be granted immediately to spend the premium payments on this work. He emphasized the fact that when Congress meets early in August one of the first questions to be raised will be as to the uses which have been made of the premium payments. Apparently he feels that the political pressure for the utilization of this fund on the road mentioned will be irresistible.
The President stated that although the contract has been in force since last July the announcement of authorization to spend $30,000 of Ecuador’s money is the first indication he has had of approval to utilize these funds. He stated that it would be better not to have the funds than to receive similar driblet authorizations. It was explained that apparently there had been a misunderstanding since Mr. Lowry was of the impression that the Minister of Finance merely desired authorization for the survey in connection with the Cuenca-Mendez road. He did not understand that approval for expenditure of the entire premium payments on the Cuenca-Méndez road was essential.
The President ended by saying that if the Rubber Development Corporation16 did not authorize the expenditure of the premium payments [Page 290] for the construction of this road prior to June 1 he would terminate the rubber agreement.
I consider it of the utmost importance that authorization be granted immediately for spending premium payments made to date on the Cuenca-Méndez highway project. Lowry concurs.