822.24 FLC/7–1147
The Chargé in Ecuador ( Shaw ) to the Secretary of State
No. 5357
Sir: I have the honor to inform the Department that Mr. Robert F. Edgar, Central Field Commissioner for Latin America, Office of the Foreign Liquidation Commissioner with headquarters in Balboa, Canal Zone, came to Quito on about May 15, 1947 to discuss with the Minister of National Defense of Ecuador the matter of signing an agreement and contract of sale between Ecuador and the United States whereby Ecuador would have the privilege of purchasing on credit up to $350,000 in United States currency surplus movable property, including maritime and aviation equipment. The agreement in effect is an open credit payable in five annual installments and bearing interest at 2⅜% per annum.
The Minister of Defense was very much interested and indicated that he was willing to sign the contract within a few days. Mr. Edgar was traveling in a United States Government plane and took a commission to the Galápagos Islands to survey certain property whose sale was contemplated. A list of said property was drawn up and agreed upon.
[Page 682]Mr. Edgar was informed, upon returning to Quito, that the Minister of Defense would have to clear the contract with the Minister of Treasury and, therefore, he could not sign it prior to Mr. Edgar’s departure. Mr. Edgar delegated me to sign the contract for him at such time as it should be approved by the Ecuadoran Government.
On taking off on Saturday morning, May 17, Mr. Edgar’s airplane was wrecked and was declared a total loss. Incidentally, it is understood that the remains of the plane, which contained a lot of undamaged instruments and other equipment, were turned over to the Ecuadoran Government for the insignificant sum of $300.
Mr. Edgar and a commission of Ecuadoran officers proceeded to Panama by other means and the commission went on to Trinidad where it drew up an additional list of property that Ecuador desired to acquire.
In the meantime, and despite frequent urgings by the Embassy, the Minister of Defense ran into difficulties not only with the Minister of Treasury but with the Council of State as well. It was decided that, in view of the terms of the contract, the Council of State would have to approve it. The Council of State at that time was in conflict with the Minister of Defense and it is understood that the matter was held up for political reasons. It was only when the contents of Mr. Edgar’s telegram of June 25,33 stating that unless the agreement were executed before June 30 the privilege of purchasing the property would be cut off, was brought to the attention of the Ecuadoran Government through the Ministries of Foreign Affairs and of National Defense that the Council of State acted. It approved the contract except for the provision whereby the Government of Ecuador might transfer Government property to the Government of the United States. This situation confronted me on the evening of June 27 and I realized that if the contract and the opinion of the Council of State were both interpreted strictly and literally it would be impossible to sign any agreement. Therefore, I acquired the verbal assurance of the Foreign Office and the Ministry of Defense that the contract and the opinion of the Council of State both would be given the most liberal interpretation and I was assured that the Government was disposed to assist the United States in acquiring property to liquidate this account, as the use of sucres for this purpose was very advantageous to Ecuador. Also, I was assured that property could be transferred to the United States through a third person or with the special permission of Congress. In order not to declare that Ecuador had lost its opportunity to purchase this property, and confident that a practical solution for the [Page 683] technical difficulties would be found, I signed the document and it was forwarded by airmail to Mr. Edgar in Balboa. I have since received a communication from him stating that the contract was found to be acceptable. It was pointed out, however, that the principal object of the contract was to carry out the property acquisition program, and that if the Ecuadoran Government failed to cooperate as it had promised, the obligation to pay in United States dollars would remain.
In view of the various conversations which I had had with the Minister of Defense and officials of the Foreign Office concerning this matter, I deemed it advisable to reduce my statements to the form of a memorandum and deliver it to the Foreign Office for the information of the Minister of Defense so there would be no misunderstanding as to the objectives that the United States had in mind when the offer was made and the property was transferred.
One signed copy of the contract in English together with a copy of the opinion of the Council of State and a copy of my memorandum today to the Foreign Office are transmitted herewith to the Department as a matter of record and for possible use should any question arise as to the circumstances under which this agreement was signed and the understanding of the signers as to interpretation at that time.
General Alfonso Jaramillo Zumarraga, who signed the contract as Minister of National Defense, resigned immediately after signing the contract and was succeeded by Colonel Carlos Mancheno, former Minister of Defense. Colonel Mancheno has evinced great interest in this matter since assuming the duties of Minister and has assured me personally and even more emphatically than did General Jaramillo that the contract will be given the most liberal interpretation and that there will be no practical difficulties encountered in acquiring property or material desired by the United States in liquidation of the account. As a matter of fact, Colonel Mancheno already has brought to me tentative propositions for certain pieces of property in which he thinks the United States Government might be interested. He has suggested that the site of the present military hospital might be used to much more advantage as a site for an Embassy chancery and if a transfer of some kind could be worked out he could move the hospital to the suburbs which would be much more advantageous to him. This incident is cited merely to show the good will which exists on the part of the present Minister of Defense at this time.
The matter of suitable property which may be acquired is being investigated actively as it is believed advisable to take advantage of the aid and assistance proffered by the Minister of Defense before further changes may occur in the administration.
Respectfully yours,
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