822.6176/31

The Secretary of State to the Chargé in Ecuador ( Nester )

379. Embassy’s 423, May 13. While under the agreement Rubber Development has no specific right to approve or disapprove application of premium payments, it would have a right to object if the funds are expended other than “in the development of the production of wild rubber” in Ecuador. In order to avoid disagreements it seems desirable to have Rubber Development concur in advance in the making of any expenditures of premium payments. Because the payments are large compared to those in other countries and the opportunities for spending them in increasing rubber production in Ecuador are limited, Rubber Development is not disposed to claim a narrow or strict interpretation of the provisions of the agreement. Accordingly, while the direct connection between the construction of the Cuenca-Méndez road and the production of rubber may be open to question and hence Rubber Development might be justified in objecting to the proposed expenditure, it has decided not to do so.

This decision has been made subject to two conditions: (1) that it shall be clearly understood by the Ecuadoran Government that this Government can give no undertaking to assure availability of requisite machinery and equipment or engineering or other personnel and (2) construction of road will not be permitted by Ecuadoran Government to draw labor which would otherwise engage in rubber production.

Rubber Development’s position has not been influenced by the statement of the President as to termination of the agreement. It has already agreed to expenditure of $30,000 for a survey of the road and had not understood that anything further was contemplated pending the outcome of the survey.

Any dissatisfaction with respect to use of the $500,000 development fund seems unjustified. Approval has been given by Rubber Development for expenditure from the fund of over $170,000, and so far as is known here few, if any, proposals chargeable against the fund have been turned down.

Hull