822.61/145
The Ambassador in Ecuador (Scotten) to the Chief of the Division of the American Republics (Bonsal)
[Received July 10.]
Dear Phil: In reply to your letter of June 28, which has just arrived, let me refer you to my letter of July 1,21 addressed to Larry Duggan,22 on the same subject. Before receipt of your letter, Tewks-bury was preparing a despatch (No. 184 of July 3)23 giving the newspaper comment which has occurred upon this matter from time to time. Although we are sending the despatch up in the regular way, a copy is enclosed with this letter for your information.
Let me say, in the first place, Phil, that I can see no necessity for our Government’s extending a $10,000,000 credit either to the Ecuadoran Development Corporation, or to the Ecuadoran Government as such in order to procure the good will of Ecuador.
Secondly, from an economic standpoint, the banks of this country are so loaded down with a surplus of dollars that I personally share the general view here among thinking people that further extensions of credit would be harmful rather than helpful to Ecuador. This country can finance its own present crop development program with its own funds and, in fact, has already taken steps to do so, as you will see from the law reported in despatch No. 164 of June 30,23 which provides that commercial banks are required to invest 15% of their portfolio of investments in agricultural loans or to rediscount paper of the Mortgage Bank of Ecuador, which represents loans for agricultural purposes.
From the political point of view, I do not, frankly, believe that President Arroyo has gone very far out on a limb in this matter. The only discussions about it had been those in the press which are enclosed herewith.24 You will notice that these articles do not refer to it as government credit which has been promised by Washington, but [Page 293] rather as an extension of the credit of the Development Corporation. I cannot see that the refusal of our Government to extend further credit would be in any way embarrassing to the President. In fact, as regards the press angle, you will see from the enclosed leading editorial in El Día of yesterday, regarding the reported $1,200,000 road loan, that the attitude which is taken in at least one section of the press is that no more dollars are needed in this country.
The President has not mentioned this subject to me in any way whatsoever and, quite frankly, when the first article in the press appeared about the possibility of a further $10,000,000 credit, both myself and the rest of the staff were completely in a fog as to what it referred to. Of course, if the President’s request is turned down, I imagine he will be somewhat miffed, but I certainly do not think that his political prestige here … will be in any way impaired.
Enclosed is a memorandum of a pertinent conversation on July 125 with Plauché, the Acting Manager of the Ecuadoran Development Corporation.
This is a rather hastily written letter, Phil, as I feel that you want me to answer your own letter right away. However, perhaps the general atmosphere which it conveys will be helpful to you.
Sincerely yours,