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

Participants: Ambassador Plaza, Ambassador of Eucador
Mr. Braden
Mr. Wright
Mr. Briggs
Mr. Flack
Mr. Dearborn

A meeting was held in Mr. Braden’s office this afternoon to discuss our financial policy toward Ecuador and the Galápagos Base question. Ambassador Plaza was present, at Mr. Braden’s request, for part of the time.

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Upon Ambassador Plaza’s arrival Mr. Braden outlined the Department’s position with respect to the Galápagos in effect as follows: The Department understood that Ecuador desired the United States to regularize its use of the Base or withdraw entirely. A treaty had already been drafted which required some changes, all of which the Ambassador regarded as minor ones which could easily be ironed out. We were still trying to get a definite statement from War and Navy as to the amount they would be willing to agree to, but we had not yet received a satisfactory reply.23 The Department would appreciate being informed by the Ambassador whether we might obtain the Base if we agreed to pay maintenance costs, and what terms he thought Ecuador would accept as a final arrangement. Finally, Mr. Braden said he wished to emphasize that, whether we continued to use a Galápagos Base or not, the Department desired to help Ecuador economically, and would go to bat to do so.

Ambassador Plaza stated that he wanted to make it clear that Ecuador did not wish the United States to maintain a base in the Galápagos unless it was considered indispensable by our armed forces. The idea was not popular in Ecuador, and in no case would his government consider granting us long-term rights for less than $20,000,000, a sum which had become fixed in the minds of Ecuadorans, owing to a series of circumstances over the past year and a half. The Ambassador emphasized that Ecuador had permitted the United States to use the Base in its hour of need on a war basis only, that negotiations for long-term rights were begun by the United States, and that the [Page 846] United States was the first to suggest paying Ecuador compensation when in October 1944 Mr. Armour24 mentioned it to the Ambassador himself. (Mr. Braden interjected that our record showed that it was Ecuador which first asked the United States, two days after Pearl Harbor, to defend the Galápagos. The Ambassador recognized this, but said he referred to our having begun the long-term negotiations. Mr. Dearborn pointed out that the current negotiations actually began in Quito in the summer of 1944, and that the first mention of compensation had come, not from Mr. Armour, but from the Ecuadoran Foreign Minister, Dr. Ponce,25 who had indicated to Ambassador Scotten that Ecuador would be willing to grant the United States long-term rights in the Galápagos, but that some form of compensation would be necessary in order to gain public support. The Ambassador said that he did not know about this statement of the Foreign Minister.)

The Ambassador went on to explain why he believed the United States was committed to pay Ecuador $20,000,000 for the use of the base. He mentioned the Estrada Mission,26 Mr. Armour’s offer of compensation, his own talks with Mr. Nelson Rockefeller27 and Mr. Avra Warren,28 which he said revolved around $20,000,000, Mr. Rockefeller’s letter which actually mentioned this sum, and finally the aide-mémoire of September 1, 1945,29 which spoke clearly of a million dollar survey paving the way for later projects, the interest and amortization on which should be partly guaranteed by the sum paid by us for the Galápagos. The Ambassador elaborated that, though the aide-mémoire itself did not mention $20,000,000, it could scarcely be supposed that the million dollar survey would be applied to projects valued at anything as low as four or five million. There was general agreement on this among those present.

Thereupon, the Ambassador went into a discussion of the Ecuadoran Development Corporation.30 His main point was that the $5,000,000, which the Eximbank had loaned to Ecuador for its economic development, had been dissipated so that now, while Ecuador owed this amount to the United States, that country had practically nothing to show for the expenditure. He said that a good part of the loan was spent to promote the rubber and cinchona programs of the United [Page 847] States in obtaining raw materials for the war and to finance the construction of the Manta-Quevedo Highway, the costliness of which was scandalous. Those present agreed that the Development Corporation had not been a success, that the $5,000,000 had not been economically used, that it had not been devoted solely to the benefit of Ecuador, and that the United States was at least fifty per cent to blame for the poor showing made by the Corporation. Mr. Braden said he would like to see an analysis of what the Development Corporation loan had been spent for with a view to determining how much of it really went toward the economic development of the country, how much went toward the prosecution of the war, and whether any was dissipated through waste and extravagance.

Ambassador Plaza then suggested as an idea of his own, which he had not discussed with his government, that, if the United States did not wish to pay a lump sum for the base, it might arrange to make a very long term loan to Ecuador on which payment would not begin for four or five years. This would permit the country to get on its feet economically before being burdened with servicing the debt. He assumed that this Government would have to get Congressional authorization to make such a loan. A discussion ensued whether it would be better psychologically, to go to, Congress for a direct payment of $20,000,000, or to go to Congress for an authorization to extend a loan to Ecuador such as that mentioned by the Ambassador. Mr. Braden thought the former approach would be more likely to succeed, while Mr. Wright thought (he stated after the Ambassador left) that the loan approach might help to circumvent the objection that we could not pay $20,000,000 for the Galápagos, since we were not in a position to offer a similar remuneration for other comparable bases desired by us. No definite decision was made as to which course should be followed.

Mr. Dearborn asked the Ambassador’s opinion as to whether the $4,000,000 commitment of the Eximbank to build a waterworks in Quito might not be used to take care of the $3,000,000 loan being sought with the support of the Ecuadoran Government by Mr. H. T. Smith, to install waterworks in 15 to 20 Ecuadoran municipalities. Mr. Braden recalled that Quito was installing a waterworks without recourse to an Eximbank loan, and observed that the Smith project would benefit many parts of the country. The Ambassador replied that, while it was true that Quito had not attempted to avail itself of this credit, it had immediate plans to draw on the commitment to construct waterworks in sections of Quito not to be reached by present construction. He added, however, that Quito would not require the whole $4,000,000 and that some such country-wide project as Smith’s might well use the remainder.

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Following the departure of Ambassador Plaza, it was agreed that letters should immediately be sent to the Secretaries of War and Navy, informing them that Ecuador would not permit us to maintain a Galápagos Base for less than $20,000,000, and asking them what course they wished us to pursue. When a reply should be received we would be in a position to take up our financial policy toward Ecuador with the Eximbank.

  1. The Secretary of State informed the Secretary of War in a letter of March 1, 1946, that Ecuador would be receptive only to a long-term lease and a payment of 20 million dollars; otherwise the base should be evacuated (811.24522/2–1146).
  2. Norman Armour in 1944 was Director of the Office of American Republic Affairs.
  3. Camilo Ponce Enrique.
  4. Victor Emilio Estrada, as a personal representative of the Ecuadoran President, carried on discussions in Washington on economic and financial matters in the summer of 1944.
  5. Assistant Secretary of State for American Republic Affairs, December 1944 to August 1945.
  6. Director of the Office of American Republic Affairs, December 1944 to October 1945.
  7. See footnote 11, p. 838.
  8. For documentation on economic development projects, see pp. 873 ff.