422.11G93/1714: Telegram

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

37. I was formally notified yesterday evening that the President had issued orders to continue prosecuting the suit against the railway. [Page 547] As this was contrary to the assurances given me that all proceedings would remain in statu quo pending consultation with the Council reported in my despatch No. 446, July 16, I requested further information. The President stated that the Ecuadorean Minister had reported that the Department of State perceived no objection to continuing the suit.

An opinion of the Attorney General forwarded with my despatch No. 454 of July 2581 confirms my belief that this will permit throwing the railway into bankruptcy; that in the certain absence of a bidder at the auction sale the railway will be adjudicated to the mortgage creditors holding judgments; and that the claims of the bondholders not parties to the suit will be extinguished.

Then the Government may offer ex gratia in discharge of its moral obligation as guarantor the settlement it considers expedient.

How far the foregoing may be carried into execution I cannot say but with Avilés again actively engaged in directing proceedings, I am concerned. Minister of Public Works informed me that this new development is a source of surprise and embarrassment to him and he expressed an apprehension that the Ecuadorean Minister has misunderstood the Department. Instructions are urgently requested.

Gonzalez
  1. Not printed.