422.11G93/1046
The Secretary of State to the Minister in Ecuador (Hartman)
Sir: Since the Ecuadorian Government has tacitly recognized the right of this Government to intervene in behalf of the Guayaquil and Quito Railway and its bondholders, as set forth in your No. 400, of July 9, 1919, you are instructed to advise the Minister of Foreign Affairs that the United States, while gratified by recent payments, nevertheless feels a growing concern over the continued failure of the Ecuadorian Government to adopt and carry out a definite program looking to the discharge of its cumulative obligations.
In view of the straightened [sic] situation in which this American enterprise finds itself as a consequence of such failure, and in [Page 197] view of the recently expressed desire of the Ecuadorian Government to observe faithfully its agreements and comply with its obligations, you may seek to ascertain whether the Ecuadorian Government has initiated or has in contemplation any plan sufficiently general in scope to discharge the various obligations growing out of its relations with the railroad and its bondholders. You are further instructed to renew your efforts to secure assurances from the Foreign Minister of definite action in the near future in fulfillment of the following obligations:
- One. The resumption of daily deposits of customs revenues in Ecuadorian banks to the credit of the Council of Foreign Bondholders, in accordance with the provisions of Article 17 of the Agreement of September 30, 1908, together with the payment of an amount sufficient to cover the arrears on the interest and sinking fund of the railway bonds.
- Two. Interest payments on 80,000 pounds of Condore Bonds issued by the Ecuadorian Government to the promoters of the Railway in exchange for their assumption of the foreign debt of Ecuador.
- Three. The deposit of money for interest and sinking fund on the Salt Bonds, issued to the bondholders in exchange for three coupons on the Railway Bonds of the General Series, in accordance with the provisions of Articles 1 and 2 of the Contract of September 30, 1908.
- Four. Sinking fund payments on the 6 per cent Prior Lien Bonds authorized and issued under Article 7 of the Contract of September 30, 1908, and carrying “a preferential mortgage on the Railway and all its belongings as well as on the customs revenues on which the Government has guaranteed the payment of the interest and sinking fund on the Railway Bonds”.
- Five. The unpaid balance of 80,000 pounds recently promised by the Ecuadorian Government from the sale of cocoa which was to be applied to the general bond service.
- Six. Payment of 68,000 sucres on July 2, 1919, an amount equal to the amount deposited by the Railway for remittance to London on its bond service in accordance with the terms of an agreement entered into with the Government on April 6, 1919, whereby the Government was to pay over to the Railroad for equipment and improvement of service an amount equal to the net earnings of the Railway deposited in Ecuadorian banks for application to the bond service.41
An itemized statement furnished by the railroad Company, showing the total amount due from the Government of Ecuador, as of July 2, 1919, is enclosed herewith for your information.42
Should you find that the Ecuadorian Government in good faith contemplates a plan for the discharge of the above obligations, you will endeavor to ascertain whether it involves the negotiation of a [Page 198] further loan, or an increase in revenues, and if the latter, whether the necessary legislation could be expected from the present Congress.
. . . . . . .
I am [etc.]