Memorandum of Conversation, by Mr. Henry Dearborn of the Division of North and West Coast Affairs

Participants: Export-Import Bank: Mr. Taylor, Mr. Machold, Mr. Chase
Embassy of Ecuador: Ambassador Plaza, Dr. Laso
Department of State: Ambassador Scotten, Mr. Briggs, Mr. Flack, Mr. Stenger, Mr. Dearborn

A meeting was held today in Mr. Taylor’s office for the purpose of making certain that the United States and Ecuadoran Governments entertained a similar understanding of matters relating to the aide-mémoire signed by representatives of the two Governments in Quito on September 1, 1945. There had been reason to suppose that these matters required clarification in view of statements which Ambassador Plaza made during his recent trip to Ecuador.

The first subject discussed was “dollar requirements”. Mr. Taylor explained that this expression as used in the aide-mémoire indicated that the Bank was only laying the basis for a loan to cover those expenditures under the Ecuadoran development program which were to be made in dollars. He explained that the loan would not be applicable to sucre expenditures for local labor or local materials. Ambassador Plaza stated that he had not understood this previously and added that if this were the case his Government would not have sufficient funds to carry out the projects recommended by the preliminary studies mentioned in the aide-mémoire. He said that the sucre requirements [Page 1024] would be beyond the means of Ecuador. Mr. Taylor replied that the Bank necessarily followed this policy in respect to practically all of its loans to foreign countries and that it could not very well make an exception in the case of Ecuador. The Bank would, he emphasized, be in an impossible situation if it undertook to finance the deficits of foreign Governments. Ambassador Plaza said that he understood this. He inquired as to whether the Bank could not find some way to finance a part of the sucre requirements as it had in some cases in the past, but to this Mr. Taylor remarked that the war was over and no such practice would be continued. Ambassador Scotten asked if there might not be some way around the difficulty which the Ecuadorans faced in view of the Bank’s policy. Dr. Laso suggested that the sucre requirements of the development program might be included in the Ecuadoran appropriations for the Ministry of Public Works so that these requirements could be arranged for when the yearly national budget was drawn up. Mr. Taylor replied that it was in just such a way that he anticipated sucre requirements would be taken care of.

At this point Mr. Taylor suggested that it was useless to discuss details as to the money to be used for the construction of the projects themselves since, until the preliminary surveys were completed, no one knew what the projects would be. He stressed that the Bank had agreed to make one million dollars available for the preliminary surveys, that only dollar requirements were concerned therewith, and that a considerable period would elapse before there would be any question of sucres; the selection of an engineering firm and the receipt of its report would be time-consuming factors. Mr. Briggs asked how long it would be before the survey was completed. It was Ambassador Plaza’s opinion that the whole preliminary work might take two years but that some parts of it could be completed within six months. He said he was basing his opinion on talks with prospective engineering firms. Ambassador Plaza was further of the opinion that work could be begun after particular studies were terminated without waiting for the completion of the countrywide survey.

The question of the amount of the loan came up. It was clear that every one present understood that $20,000,000 was a ceiling figure beyond which the credit mentioned in the aide-mémoire would not be expected to go. It was equally clear that the Eximbank had not committed itself to lend Ecuador a total of $20,000,000. The way was open up to that amount if Ecuador offered adequate security to satisfy the Bank.

Security for the loan led to a discussion of the tie-up between the loan and the Galápagos base treaty. Ambassador Plaza said that he understood [Page 1025] that Ecuador had not been promised $20,000,000 in return for permitting the United States to operate a Galápagos base. He reviewed, accurately, the loan and base negotiations since the Estrada mission of September 194458 and pointed out that he and Mr. Estrada had been told at that time that no discussion of a loan could take place until the matter of a military base was settled. He recalled that Estrada had been seeking a $20,000,000 loan, that that figure had been mentioned upon numerous occasions since Estrada’s visit, and that in consequence of this chain of events the Ecuadoran people had come to think of the Galápagos base as being worth $20,000,000. Ambassador Plaza correctly said that his Government had been asked several months ago by us to say how much it wished to receive in return for permitting us to operate a Galápagos base but that his Government had not been able to make a suggestion. He added that he understood that the State Department had not been able to obtain a definite figure from the War and Navy Departments. (It was evident that Ambassador Plaza understood the situation very well and that he realized that the Department of State was still seeking an answer to the question: how much will the United States pay for a Galápagos base?)

As for the minimum amount Ecuador would accept for permitting us to operate a base, Ambassador Plaza had no clear conception. He did say that if his country were offered seven, eight or nine million dollars he believed it would simply leave the United States in the Archipelago without a treaty. However, he expressed his confidence that there would not be a “shot-gun wedding” and that some agreement would be reached.

Ambassador Plaza brought up the question of the draft treaty pertaining to the Galápagos base. He explained how no reference to payment had been mentioned therein so that the Department of State and the Government of Ecuador could complete a draft for the use of the base while the matter of payment was being held up pending a decision as to the amount. He said that he had discussed the draft with his Government during his recent visit to Ecuador and that a number of changes had been suggested. He was prepared to bring the altered draft in for discussion with Mr. Braden as soon as Mr. Braden was ready to discuss the matter. The Department would, he hoped, have present the necessary military personnel so that he would not have to repeat his remarks in further meetings.

  1. Victor Emilio Estrada visited Washington to discuss financial matters as a personal representative of the Ecuadoran President.