The Acting Secretary of State to the Ecuadoran Minister ( Elizalde )

No. 45

Sir: I have the honor to acknowledge the receipt of your note No. 3 of February 5 last,18 stating that you have received a telegram [Page 186] from your Government that a final remittance of 35,000 pounds has been made as payment in full of the interest of the Guayaquil and Quito Railway Company for the year 1919 [1918?].

As you have been orally informed, however, by Mr. Johnson, the Acting Chief of the [Division of] Latin American Affairs of this Department, it would appear that the Ecuadoran Government has only paid 80,000 pounds as interest on the Guayaquil and Quito Railway bonds for the year 1918 and that the total interest on the bonds amounts to $859,740. You have informed Mr. Johnson that your Government may have misunderstood the agreement which you made to pay the sum of $859,740.

The Department does not understand how there could have been a mistake in this matter as a short recapitulation of the notes exchanged between your Legation, the American Legation in Quito and this Department would appear to leave no room for misunderstanding. In your memorandum to the Department, August 21, 1918,19 you informed the Department that the Government of Ecuador proposed that it be permitted to export to the United States all the Cacao which was actually stored in Ecuador, about 14,000 tons and that the price of the same, amounting to $859,740, would be used for the entire payment of the interest on the railroad bonds. Permission to export this Cacao was granted by the proper authorities of this Government and in a note to you dated January 10,20 the Department informed you that the entire 14,000 tons had been sold and asked if you would be so good as to inquire of your Government whether it had already made the entire payment of the sum of $859,740 on the bonds. In the meantime, on December 621 the Department had written an instruction to the American Minister in Quito directing him to give to the Minister for Foreign Affairs of Ecuador, a copy of your note to the Department of August 21, and of the Department’s note to you of November 29,22 and instructing the Minister to inquire of the Foreign Office whether the payment of $859,740 had been made. In your note to the Department of December 12, 1918,23 you said in part:

[Here follow the first three paragraphs of the note mentioned, to the word “agreed”.]

Moreover, in your note to the Department of January 924 you said in part referring to your Government “It has maintained and maintains its promise to pay the sum of $859,740 from the proceeds of the sale of those 14,000 tons.”

[Page 187]

The Department of State believes, therefore, that the Government of Ecuador clearly bound itself to pay the sum of $859,740 as interest on the bonds of the Guayaquil and Quito Railway Company, provided the permission to export 14,000 tons of Cacao was given. This permission was given and the Cacao was exported and sold. The Department is not inclined, however, at this time, to urge the Ecuadoran Government to complete the full payment in accordance with its promise, provided that the Ecuadoran Government will confirm to the Department of State, the statement which the Department understands the Ecuadoran Minister of Finances recently made to the authorities of the Guayaquil and Quito Railway Company, to the effect that the Ecuadoran Government will remit to London the additional sum of 80,000 pounds sterling during the month of June in order to meet payment on the coupon due next July and provided that this payment is actually made during the month of June.

The Department has come to this decision as a result of its desire not to press even so clear an obligation as that outlined above, where there is the remotest chance of there having been a misunderstanding which would cause embarrassment. The Department feels sure that you will be willing to cooperate with it in doing everything possible to secure the payment of the July coupon for the sake of the bettering of Ecuadoran credit and the improvement of our present very friendly relations.

Accept [etc.]

Frank L. Polk