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

Participants: A-BR—Mr. Braden
A-C—Mr. Clayton86
ARA—Mr. Briggs
OFD—Mr. Luthringer87
NWC—Mr. Schnee
NWC—Mr. Dearborn

At Mr. Braden’s request, a meeting was held in Mr. Clayton’s office today for the purpose of informing Mr. Clayton of the political division’s reasons for desiring that favorable action should be taken by the Eximbank on the H. T. Smith application for a $3,000,000 loan.

Mr. Braden began the conversation by stating that there were four substantial reasons of justice involved:

Ecuador had accepted a highly unpopular boundary settlement in 1942, and was persuaded to do this largely as a result of US promises to assist that country economically;88
The Ecuadoran Development Corporation, which the Eximbank had financed with a $5,000,000 loan, had been a failure and we were at least partially responsible;89
An American company, the Ambursen Company which engaged in road construction in Ecuador and which was under contract to the Ecuadoran Development Corporation, conspired against the Ecuadoran Government;
Through a combination of factors, the Ecuadorans had been prevented from discussing loans with the Eximbank over a period of almost two years, because the Department of State had informed the Ecuadoran Ambassador that negotiations for such loans could only be carried on after some settlement was reached regarding a Galápagos Base.

Mr. Braden continued that there was general agreement that the Smith project was economically sound, and that it would be highly beneficial to Ecuador. He suggested that, if the Ecuadorans were now carrying too heavy a debt burden to the Eximbank, outstanding loans might be extended to twenty-year periods, thereby decreasing the amortization and interest payments due annually.

Mr. Clayton replied that he had never favored this Government’s making a foreign loan when there was not a reasonable chance of repayment and that, in the case of the Smith application he felt that there was almost no likelihood of repayment. A discussion ensued, but there was no real meeting of minds. Mr. Clayton concluded the meeting by saying that he would consider Mr. Braden’s position and would act according to the dictates of his (Mr. Clayton’s) conscience when the Smith application came up before the Eximbank Board.

  1. William L. Clayton, Assistant Secretary of State for Economic Affairs.
  2. George F. Luthringer, Chief of the Division of Financial Affairs.
  3. See Foreign Relations, 1942, vol. vi, pp. 387388.
  4. See Foreign Relations, 1945, vol. ix, pp. 1051 ff.