490. Memorandum of a Conversation, Department of State, Washington, November 25, 19571
SUBJECT
- Ecuadoran Ambassador Inquires as to Assistance under Development Loan Fund
PARTICIPANTS
- Ambassador Chiriboga of Ecuador
- E—Mr. Thomas C. Mann, Assistant Secretary of State
- OSA—Mr. John M. Perry
Ambassador Chiriboga said it gave him great personal satisfaction to see Mr. Mann here in Washington. The Ambassador went on to say that he would like to exchange impressions with Mr. Mann, not as an official but as a friend, on the economic situation of Ecuador. He added that he had no instructions from his Government in this regard.
According to Ambassador Chiriboga, the austerity program of President Ponce had resulted in a strengthening of the sucre with relation to the U.S. dollar. From a low of 20 to the dollar last year the sucre had lately regained its normal level of just over 17 to the dollar. Ecuador’s exports had also been on the increase lately.
The Ambassador noted that Ecuador had recently received loans from the World Bank for highways and electric power development,2 [Page 994] and that the bank was currently studying another loan to help finance the construction of a new port at Guayaquil. On the other hand, Ecuador’s relations with the Eximbank had been difficult and the Bank had moved very slowly on loan applications made by Ecuador. According to the Ambassador there was a lack of good will on the part of the Eximbank for Ecuador.
Mr. Mann asked the Ambassador what loan applications Ecuador had pending before the Eximbank at present. The Ambassador replied that there is now pending a relatively small loan application to finance importation of agricultural machinery. The Ambassador said this project was to assist poor farmers to purchase machinery through the Development Bank, and would be similar to a loan the IBRD had previously made to Peru. In response to Mr. Mann’s question, the Ambassador stated that outstanding loans to Ecuador amount to about $22 million. (Actually, the Eximbank has authorized credits totaling $38,746,900 for Ecuador, and outstanding loans now amount to $25,400,000). He explained that some credits such as those authorized for electric power in Ambato had lapsed without being used by Ecuador.
Ambassador Chiriboga said that Venezuela had offered financial assistance directly to Ecuador on good terms. Venezuela would lend $15 million to Ecuador. Mr. Mann asked what projects the Venezuelan loan would finance, and the Ambassador replied it would be used for agricultural development in the province of Manabi, development of a small port at Manta, and low-cost housing construction in Quito and Guayaquil.
Referring to Ecuador’s preparations for the XI Inter-American Conference, to be held at Quito in 1960, the Ambassador stated that Ecuador would have to purchase much equipment for hotel construction, improvement of streets, public buildings, and facilities, and other things necessary for the Conference. For such purposes Ecuador had recently obtained a loan from a London Bank amounting to about $8 million, at 8 per cent interest, for 20 years. However, this would not be sufficient to cover the construction of a new hotel needed in Quito.
The Ambassador pointed out that the above loans were long-term and would not affect Ecuador’s balance of payments.
Although he had no instructions from President Ponce, the Ambassador said, he would like to inquire as to the possibility of Ecuador’s obtaining some assistance from the Development Loan [Page 995] Fund.3 The Ambassador felt that the tourist trade should be developed in Ecuador through construction of hotels and similar projects, and that this would benefit the country’s over-all economy. Mr. Mann asked whether the Ambassador had discussed this with private business interests. The Ambassador said that the matter had been discussed with the Hilton Corporation and others but that nothing concrete had resulted. Mr. Mann inquired whether private capital was available in Ecuador at present for such purposes. Ambassador Chiriboga replied that while there were some 30 million sucres ($2 million dollars at the official rate of exchange) in the Social Security Fund, this money would not be available to finance the construction of a hotel. Mr. Mann observed that the policies governing administration of the Development Loan Fund are not yet clear, that a Loan Fund Committee of three had been set up but the Manager of the Fund had not yet arrived. Mr. Mann suggested, however, that it might be worthwhile for Ambassador Chiriboga to submit a modest project for the Fund’s consideration. The proposed project should be not too large because the resources of the Fund were limited. Also the application might be in preliminary form as long as it was clear. When the Ambassador indicated that he had a number of proposals in mind, Mr. Mann suggested that he submit several alternative projects. Mr. Mann made it clear that in making this suggestion he implied no commitment on the part of the Fund to give favorable consideration to the Ecuadoran applications.
With respect to construction of a new hotel in Quito Mr. Mann suggested that a hotel of not more than 200 rooms would be more feasible economically than a very large hotel which would be needed only during the Conference. Ambassador Chiriboga reaffirmed that in his opinion a new hotel would contribute to the development of the tourist industry in Ecuador which would benefit the economy in general.
In conclusion Mr. Mann observed to Ambassador Chiriboga that he hoped Latin American countries would not be disillusioned if they should not receive as much assistance as they might request from the Development Loan Fund. Mr. Mann explained that the amount of money available to the Fund for making loans was limited and that the enormous budgetary burden imposed upon the [Page 996] United States as a result of recent technological developments in the Soviet Union would of necessity limit our ability to help our friends as much as we might wish to.
- Source: Department of State, Central Files, 822.10/11–2557. Confidential. Drafted by Perry; initialed by Mann, indicating his approval.↩
- The World Bank loaned Ecuador $14.5 million for construction of 4 roads and for a 4-year road maintenance program, and $5 million to help finance the expansion of facilities to supply electric power to Quito. For further information on these loans, see International Bank for Reconstruction and Development Thirteenth Annual Report, 1957–1958, p. 40.↩
- The legislation which established the Development Loan Fund was passed by Congress on August 14 as part of the Mutual Security Act of 1957. For text, see 71 Stat. 355. By Executive Order 10742 of November 29, the President established the Development Loan Committee which was empowered to provide, from the Development Loan Fund, capital for economic development through long-term, low-interest loans that were to be repaid either in local currencies or in dollars. The Deputy Under Secretary of State for Economic Affairs was Chairman of the committee, which had as members the Director of the International Cooperation Administration and the Chairman of the Board of Directors of the Export-Import Bank.↩