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


Subject: General Discussion of Ecuadoran Loan Projects

Participants: Senor Galo Plaza—President of Ecuador
Senor Luis Antonio Penaherrera—Ecuadoran Ambassador

Export-Import Bank Representatives 1

Mr. Gaston—President Mr. Whittemore
Mr. Arey Mr. Sherwood
Mr. Stambaugh Mr. Townsend
Mr. Gauss Mr. Chase
Mr. Sauer Mr. Jordan

Department of State Representatives

  • Mr. Daniels—US Ambassador to Ecuador
  • Mr.Krieg2OSA
  • Mr. McGinnis—OSA
  • Mr. Stenger3ED

President Plaza remarked that Ecuador had been slow in developing projects under the Earthquake Rehabilitation Loan of 1949, largely due to technical difficulties. He observed that geological studies had to be made; building codes examined and adopted; and detailed data on construction needs gathered. He remarked that three loans had already been approved under the earthquake credit providing for railway and highway improvement and rehabilitation and for the IBEC rice cultivation [Page 1400] project on the coast. He said that, while these loans would indirectly benefit the area affected by the earthquake, he was hopeful that future loans from the undisbursed portion of the credit would be made for projects more directly associated with the needs of the devastated areas.

In this connection President Plaza said that he was hopeful that there could shortly be approved credits for the waterworks systems in Ambato and nine other Ecuadoran towns under the earthquake loan. He mentioned that local authorities were receiving valuable aid from the Health and Sanitation Servicio4 in the preparation of the necessary plans. He also referred to his Government’s desire to obtain a credit of $800,000 for building materials for housing construction in the earthquake zone to be granted under the same loan.

Mr. Gaston replied that the Board of Directors had approved the Ambato loan application and would proceed to consider credits for waterworks systems in the other Ecuadoran towns mentioned by the President as soon as the necessary technical information was received from Ecuador. With reference to the building materials application, Mr. Gaston indicated that the information so far received from Ecuador gave him the impression that the housing contemplated was perhaps beyond the financial reach of the people for whom it was intended. President Plaza replied that Mr. Cornwell5 and his colleagues of the Pan American Union was now making further studies of this situation and would shortly furnish the Bank with detailed information on building materials requirements for a modest building program. The President said that the type of housing constructed would be tailored to local requirements and would be very modestly priced.

President Plaza then referred to the pending Ecuadoran application for a $1,000,000 loan for airport improvement at Guayaquil and Quito. He said that it was his understanding that this loan would be approved by the Bank in the near future. Mr. Gaston said that the Bank had the matter under consideration and that certain additional technical data, to be furnished by Panagra, was required before final action could be taken. He indicated that the Bank was favorably disposed toward this project. Mr. Gaston also asserted that, before the loan were granted, the Bank would require assurances that these airports would be available to all airlines on a free and non-discriminatory basis. The President observed that relations between Ecuador and Panagra had always been satisfactory and that he did not anticipate that there would be any difficulty in meeting the Bank’s wishes in this regard, which coincided with his own.6

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President Plaza then referred to an Ecuadoran project to develop hydroelectric power facilities to Rio Verde and said that studies were going forward by qualified engineers so that it could be presented in project form to the Bank at a later date. The President asserted that he doubted whether sufficient monies would remain under the earthquake loan to finance this project since it was estimated that it would cost $5,000,000. The five million dollar figure, the President explained, included sucre costs of the project. The President went on to say that he would prefer that the Bank make some public announcement of the fact that it was favorably disposed toward this project since it would be helpful to him in Ecuador. Mr. Gaston made a non-committal reply to both of these suggestions of the President. (Mention was made of the Rio Verde project in the Export-Import Bank’s press release of June 23.)

Mr. Gaston then asked the President what progress was being made on the grain storage program in Ecuador. The President said that FAO experts had been studying the problem and had assembled technical data on the requirements for grain storage facilities. The President observed that such facilities would be very useful in preventing speculation and added that grain prices now fluctuate violently between harvests. President Plaza said that he expected that sufficient information upon which to base a loan application would be available shortly and that he would see that it were placed in the hands of the Bank. Mr. Gaston observed that the financing of this project could be taken from the undisbursed portion of the earthquake loan.

The President then said that he had received disquieting information respecting the construction activities of the Nathan A. Moore Company in their building of the Quevedo-Manta Highway.7 He said that apparently the Company did not have the administrative ability properly to perform the work, but added that the Company had subcontracted a portion of the work to the Inca Construction Company. The latter company, he said, was a reliable local firm and had been doing a good job. Mr. Gaston said that he had heard reports confirming what the President had said respecting the Nathan A. Moore Company, and he added that it appeared to the Bank that the Company had not been constructing the road bed in accordance with specifications. Mr. Gaston observed that the construction of the highway had so far been performed solely with Ecuadoran funds but that the Bank wanted to be certain that the Nathan A. Moore Company could do a good job before it authorized disbursement from the credit established by the Bank for this purpose. Mr. Gaston said that the Bank was not only anxious to assure that loan funds were spent wisely but also that Ecuadoran monies were not wasted. He said he thought it might be a [Page 1402] good thing to have an engineer of the Bank visit Ecuador and examine the situation and report thereon to the Bank and to the Government of Ecuador. President Plaza readily agreed to this suggestion.

After an exchange of courtesies, the President departed with Ambassador Penaherrera.

  1. The representatives of the Export-Import Bank are identified as follows: Herbert E. Gaston, Hawthorne Arey, Lynn U. Stambaugh, Clarence E. Gauss, Walter C. Sauer, W. D. Whittemore, Sidney Sherwood, Wilson L. Townsend, and Elmer E. Chase.
  2. William L. Krieg, Officer in Charge, North and West Coast Affairs, Office of South American Affairs.
  3. Jerome J. Stenger, Assistant Chief Departmental Liaison with Eximbank, NAC, IMF, IBRD.
  4. For documentation on the use of servicios in Latin America, see pp. 1038 ff.
  5. Warren H. Cornwell, a member of the OAS Advisory Commission on Housing.
  6. On July 19, 1951, the Board of Directors of the Export-Import Bank approved a $1,000,000 credit for Ecuador to assist in financing the cost of improving and expanding the airports at Quito and Guayaquil (822.10/7–1951).
  7. For previous documentation on highway development in Ecuador, see Foreign Relations, 1948, vol. ix, p. 585.