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

Participants: Mr. Wayne Taylor
Mr. Braden42
Mr. Wright
Mr. Briggs
Mr. Hooker43
Mr. Stenger
Mr. Flack
Mr. Schnee44
Mr. Dearborn

A meeting was held in Mr. Braden’s office this morning for the purpose of informing Mr. Taylor that the Department wished to separate the matter of the Eximbank loan to Ecuador contemplated in the aide-mémoire of September 1, 194545 from the Galapagos base question. The Department wished to get Mr. Taylor’s reaction.

Mr. Wright explained that the Ecuadorans were officially informed last year that discussions on the loan could not be carried further until some arrangement was made regarding a Galapagos base and that the Department now wished to separate the two issues so that the Ecuadorans could deal with the Eximbank without reference to the base. He said, and Mr. Braden agreed, that it had been a mistake to link the two questions in the first place because, while no commitment had ever been made to Ecuador as to the amount we would pay for a base, we had encouraged the Ecuadorans to think of the loan and the base together. Mr. Wright then referred to Mr. Braden’s conversation with Ambassador Plaza of November 27, 1945 during which Mr. Braden [Page 1060] and the Ambassador agreed that it would be desirable to separate the loan and base question.46

Mr. Taylor indicated that there would be no objection on the part of the Bank to the separation of the two matters. He went on to explain the Bank’s present policy toward Ecuador. He said Ambassador Plaza had recently asked the Bank to add a credit of approximately $750,000 to the credit of $1,200,000 already allowed for the construction of the Tambo–Guamote road; the $1,200,000 would not be enough to cover the project, as President Arroyo47 had been informed when he named the sum. Mr. Taylor said that the Bank was inclined to allow this extension of credit rather than to loan further funds for the completion of the Manta–Quevedo road which had been a headache. The Ecuadorans could then finish the Manta–Quevedo highway with their own resources, as they are committed to do. Mr. Taylor stated that the policy of the bank after arranging the $750,000 loan would be to lie low and to await developments from the $1,000,000 survey to be conducted in Ecuador under the September 1, 1945 aide-mémoire. The bank would be willing, he said, further to assist Ecuador by combining the $5,000,000 Development Corporation loan with the $1,000,000 survey loan and by extending the maturity dates somewhat. Mr. Schnee asked whether the loan was for engineering projects only or for general development and Mr. Taylor replied that the purpose was general. Mr. Schnee then inquired whether Ecuador would be informed that the Bank was ready to consider extending credit for projects in Ecuador which appeared to promise sufficient return on the investment to pay off the loan. Mr. Taylor replied, “no” and that, on the contrary, the Bank was not interested in self-liquidating projects and was not disposed to consider further loans to Ecuador at this time.

The Ecuadoran Development Corporation was discussed and it was generally agreed that the organization had been a headache from the beginning and that it had not adequately served its purpose of helping Ecuador to develop economically. Mr. Taylor remarked that progress was being made in the reorganization of the Corporation into a solely Ecuadoran planning agency and that this agency would administer the $1,000,000 survey loan.

The Guayaquil waterworks commitment of $4,000,000 was then discussed and all agreed that it was a worthwhile project. Mr. Wright urged that this be gotten under way as soon as possible.

Mr. Braden summed up the situation on loans by stating that we were willing to help the Ecuadorans financially but that Ecuador [Page 1061] would have to recognize that this was not a one way proposition and would have to be responsible for keeping up its end of the arrangement. He said that if we went ahead on a friendly and self-respecting basis Ecuador would be obliged to recognize the justice of our actions.

Mr. Braden then asked if we had heard from the War and Navy Departments in reply to our question as to how much they would be willing to pay for the use of a Galapagos base.48 Mr. Briggs replied that the SWNCC49 sub-committee for Latin America had considered the question and had recommended that we ask Ecuador for joint use of the Galápagos base and that we offer maintenance as the maximum compensation. The sub-committee anticipated that if the Ecuadorans refused to consider this we could go back with another proposition. Mr. Braden recalled that Ambassador Plaza had said that if the compensation were to be “chicken feed” it would be better not to tell him about it. It was agreed that in view of the incendiary political nature of the Galápagos question we should await the adjournment of the Ecuadoran National Assembly before informing the Ecuadoran Ambassador of this recent turn of events. (The latest reports indicated that Foreign Minister Trujillo expects the Assembly to adjourn within eight or ten days).

  1. Spruille Braden, Assistant Secretary of State.
  2. John S. Hooker, Assistant Chief, Division of Financial and Monetary Affairs.
  3. Alexander Schnee, Division of North and West Coast Affairs.
  4. See footnote 37, p. 1056.
  5. See memorandum of conversation, November 27, p. 1029.
  6. Carlos Alberto Arroyo del Rio. He was succeeded in the Presidency toy José Maria Velasco Ibarra in June 1944.
  7. For documentation on the compensation for the Galápagos base, see pp. 1007 ff.
  8. State-War-Navy Coordinating Committees.