722.56/6–2453

Memorandum of Conversation, by Charles W. Kempter of the Office of Financial and Development Policy

confidential

Subject:

  • Ecuador—Contingent Lend-Lease Debt
  • Participants: Mr. William F. Gray, ARA:OSA, State
  • Mr. Charles W. Kempter, OFD:LL, State

At my suggestion Mr. Gray, who will soon leave for Quito to assume the post of Economic Attaché at our Embassy in Ecuador, called this afternoon in order that he might become acquainted with the status of Ecuador’s lend-lease and surplus property accounts.1

I told him that a quick disposition could be made of the surplus property subject for, by coincidence, only yesterday LL had received notification from the Embassy of the final payment on principal account together with interest through March 31, leaving to be paid only a very small amount (about $551) representing interest which had accrued from April 1 to date of payment, June 16.2

In order to make clear the current lend-lease situation I reviewed Ecuador’s lend-lease history from the signing of the Agreement on April 6, 1942,3 to the eventual full payment on February 12, 1951 for aid furnished on “treaty” account.

The circumstances of the origin of the so-called “contingent” lendlease account were outlined to point out that, under Presidential authority, this Government provided on a cash reimbursable basis to lend-lease countries maintenance and repair equipment to keep in operation matériel previously supplied as lend-lease aid, also, the manner in which the Ecuadoran Military Attaché in Washington exceeded his purchasing authority and, how later, the Government of Ecuador finally admitted its responsibility for the obligation incurred for goods delivered, but not as yet paid for, and valued at about $545,000. Due to a variety of reasons, including political and economic crisis and a devastating earthquake, the efforts of the Department [Page 985] to work out settlement terms with the Ecuadoran authorities were, in each and every instance, nullified by recurring situations. Finally, due largely to the successful cooperation of our Embassy, payments on the surplus property debt were undertaken and it was tacitly agreed that, until its liquidation, no new approaches would be made for settlement of the lend-lease debt. Now that this, to all technical effect, has been accomplished the Department is prepared to renew negotiations as soon as expedient.4

[Here follows further discussion of matters related to Ecuador’s contingent lend-lease obligations.]

  1. As of June 1, 1952, Ecuador’s obligation to the United States under terms of the Surplus Property Agreement of June 27, 1947, as amended, amounted to $527,048.94 ($484,275.90 in principal; $42,773.04 in interest). The Ecuadoran Government liquidated most of this indebtedness, including additional interest accrued after June 1, 1952, in four installments of unequal amounts paid on July 8 and Sept. 12, 1952, and Mar. 10 and June 16, 1953. Pertinent documents are in file 722.56 for 1952 and 1953.
  2. ln despatch 184, from Quito, dated Sept. 24, 1953, the Embassy informed the Department of State that it had received payment in sucres to cover the balance of $551.76 on Ecuador’s surplus property account (722.56/9–2453).
  3. For text of the Lend-Lease Agreement, signed by the United States and Ecuador at Washington, Apr. 6, 1942, and entered into force on the same date, see Foreign Relations, 1942, vol. vi, p. 379.
  4. Department of State files indicate that no formal negotiations with Ecuador concerning its contingent lend-lease obligations were undertaken in 1954.