Memorandum by Mr. Edward L. McGinnis, Jr., of the Office of South American Affairs

Things We Want From President Plaza

1) Bases on Galapagos. To obtain his agreement to open early negotiations for US military bases in the Galapagos. We want the base agreement to be finalized now so that it will come immediately into effect in the event of war.

2) Shipping Discrimination. We want to get his support to end Ecuador’s discrimination against US shipping. Shipments on Gran Colombian1 vessels pay 3½% consular fees (on value of goods) while shipments on other lines pay 7%. We have repeatedly tried to have Ecuador remove this discrimination, pointing out that it reduces their revenues. We would have no objection if Ecuador chose to grant a direct subsidy to the Gran Colombian line in lieu of the present discriminatory practice.

3) Communism. We should try to convince him that membership of the Ecuadoran National Labor Federation (CTE) in the CTAL aids communism. We could point out that the CTE is the only Latin American labor group, not completely dominated by communists, that is affiliated with CTAL. The two US labor confederations, as well as many free Latin American labor unions, belong to the Inter-American Regional Organization of Workers (OIRT).

Things President Plaza Wants From US

1) Loans—Earthquake. Under the unexpired earthquake credit,2 he wishes loans for grain storage, waterworks in Ambato and about nine small towns, hydroelectric power development at Rio Verde, and housing [Page 1397] construction materials. The Bank has granted the Ambato loan (to be announced later)3 and will sympathetically consider waterworks for the additional towns and the grain storage program. It will also consider the Rio Verde project provided it is sealed down. The Bank is opposed to any housing materials project that does not provide for realistic housing costs in Ecuador.

2) Loans Outside the Earthquake Credit. Plaza wishes loans for airport development at Quito and Guayaquil, highway construction and improvement, and development of a deep water port at Guayaquil. The Export-Import Bank will sympathetically consider the airports project and may possibly approve it next week. The other development projects should be submitted to the IBRD 4 instead of the Export-Import Bank under present Departmental policy.

3) Abaca 5 Program. Plaza desires the RFC to establish an abaca program in Ecuador. Under US legislation to encourage Western Hemisphere production of abaca,6 the RFC has been surveying the possibility of establishing a large plantation in Ecuador. No commitment can be made to Plaza on this since RFC surveys are not completed. However, preliminary studies indicate that conditions are favorable in Ecuador for the production of abaca. If other conditions are satisfactory, the RFC will require the construction of a road from Camarones to Quevedo (about twenty-five miles).7

4) Destroyer Escorts. Although we have told the Embassy here that destroyer escorts are not available, Plaza may request the sale of two such vessels to his Government. In seeking legislative approval for the sale of DE’s to Peru and other countries, the Navy Department has told us that they absolutely cannot release further DE’s for sale to any country.

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5) Boundary Dispute. Plaza may ask our support in Ecuador’s boundary dispute with Peru. We should, of course, maintain a strictly neutral attitude but indicate that we are always prepared to meet with the other Guarantors of the Rio Protocol8 (Brazil, Argentina, and Chile) to assist the two countries to solve their dispute.

6) Earthquake Grant. Plaza may inquire regarding the fate of the legislation proposed in the House of Representatives in 1949 to appropriate $5,000,000 for earthquake rehabilitation in Ecuador.9 Despite the Department’s endorsement, this legislation never got out of committee. Its prospects at present are nil.

7) Supply Problems. The President might request our assistance in obtaining scarce supplies and equipment in the US. We should offer sympathetically to examine any specific requests, pointing out that the civilian consumption of many items has been severely restricted in the United States.

8) Point IV Economic Commission. The President already knows that we have agreed to establish a Joint Economic Development Commission under Point IV. In any case, he should be informed that we are willing at any time to sign such an agreement.10

9) Point IV Assistance. Plaza may request individual technicians for various projects, including a survey of the irrigation possibilities on the Santa Elena Peninsula. I understand that TCA is prepared to grant any reasonable request.

In addition to the foregoing, we have already informally agreed with Ecuador to announce that the two countries will shortly enter into negotiations for the signature of a cultural convention. We also expect to announce the granting by the CAB, with the approval of President Truman, of a foreign air carrier permit to AREA. This Ecuadoran airline applied about six months ago, under the US-Ecuadoran bilateral air transport agreement,11 for a route from Ecuador via Panama to Miami.12

  1. Flota Mercante Gran Colombiana, S. A., a shipping line jointly owned by Ecuador, Colombia, and Venezuela.
  2. Reference is to the $7,000,000 credit (popularly known as the Earthquake Rehabilitation Loan) which the Export-Import Bank had approved on December 14, 1949, to finance reconstruction work in the area damaged by the earthquake of August 1949.
  3. On June 14, 1951, the Board of Directors of the Export-Import Bank had approved a credit of $500,000 under the Earthquake Rehabilitation Loan to assist Ecuador in financing the cost of rehabilitating and improving the water supply system in the city of Ambato, but the credit was not announced until June 22. For further information, see Export-Import Bank of Washington, Twelfth Semiannual Report to Congress for the Period January–June 1951 (Washington, 1951), pp. 16–17. For the Export-Import Bank’s press release, see Department of State Bulletin, July 9, 1951, p. 71.
  4. In a memorandum of conversation, by the Deputy Director of the Office of Financial and Development Policy (Corbett), dated June 13, 1951, the President of the International Bank for Reconstruction and Development (Black) was reported to have stated, in part, that “the IBRD would be willing to start studying any projects that the Ecuadorean President might have in mind but could in no way give a commitment to finance these projects in the absence of some settlement on the foreign debt [of Ecuador] mutually satisfactory to both Ecuador and the bondholders.” (398.14/6–1351)
  5. Manila hemp.
  6. Reference is to the Abacá Production Act (Public Law 683), approved August 10, 1950; for text, see 64 Stat. 435.
  7. Negotiations between the Government of Ecuador and the Reconstruction Finance Corporation toward an agreement for the production of abacà continued intermittently throughout 1951, but no agreement was reached. Pertinent documents are in Department of State decimal file 822.2327.
  8. For the text of the protocol between Ecuador and Peru regarding peace, friendShip, and boundaries, signed at Rio de Janeiro, January 29, 1942, see Department of State Executive Agreement Series (EAS) No. 288, or 56 Stat. (pt. 2) 1818.
  9. H.R. 355, 80th Congress.
  10. The proposed commission was discussed intermittently by the two governments during 1951, but primarily because of inability to agree on the commission’s composition, jurisdiction, and funding the discussions were suspended in October. Pertinent documents are in decimal file 822.00–TA.
  11. Reference is to the Commercial Air Transport Agreement signed at Quito, January 8, 1947, and entered into force on October 27, 1947; for text, see TIAS No. 1774, or 61 Stat. (pt. 4) 4013.
  12. For the press release dated June 25, 1951 announcing the awarding of a route to Aerovias Ecuatorianas, S. A. (AREA), see Department of State Bulletin, July 9, 1951, p. 70.