422.11 G 93/1239

The Minister in Ecuador (Bading) to the Secretary of State

No. 12

Sir: Referring to the Department’s telegraphic instruction No. 17, June 26, 4 P.M.,11 requesting me to forward a written report on the [Page 932] present status of the Guayaquil and Quito Railway case, I have the honor to transmit herewith copy of a letter dated July 3, 1922,13 with enclosures, from Mr. Archer Harman, President of the Railway Company, which gives the desired information in detail.

From this letter it appears that:

Of the outstanding debt of Ecuador the Prior Lien Bonds are the only ones on which the interest and sinking fund are up to date, while on the other issues there remains unpaid interest amounting to $5,799,520.48, and sinking fund amounting to $1,842,845.94, a total of $7,612,366.42.
The negotiations of the Railway Company with the Government for the purpose of waiving the unpaid sinking fund and refunding the unpaid interest resulted in failure since:
No method could be found of raising the sum necessary for the annual service;
The Government could discover no source of income to take the place of that lost through the suggested turning over of the salt monopoly to the management of the bondholders; and
Even if the necessary funds could be obtained, the conversion of the sucres into dollars would so raise the rate of exchange as to necessitate the finding of still larger sums.
Mr. Harman is now endeavoring to arouse public opinion in favor of a financial adviser for the purpose of bringing the Government out of its financial chaos. While the President is personally favorably inclined, he does not believe that such an appointment would meet with favor at the present time. Mr. Harman has, however, won over several influential Ecuadoreans to the plan, and they have started a movement for the purpose of bringing about the passage of a law to this effect at the next session of Congress in August.
The Railway Company is further endeavoring to influence exchange and increase its own income by creating a market for Ecuadorean food stuffs in Panama. The Manager of the Railway is about to go to Panama to exhibit sample food-stuffs and to obtain information as to the kinds and quantities which may be disposed of, and it is believed that in the first year $1,000,000. worth of foodstuffs should be exported. I would add that in the meantime questionnaires are being sent to the farmers of the interior for the purpose of obtaining statistics as to the amount of land available and the kinds and quantities of food-stuffs that may be raised.

I have [etc.]

G. A. Bading
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