422.11G93/1732
The Minister in Ecuador (Gonzalez) to the Secretary of State
[Received August 18.]
Sir: I have the honor to confirm my telegram No. 41 of August 11, 7 p.m., 1936,85 reporting that no steps appear to have been taken by the President of the Republic to continue the bankruptcy proceedings against The Guayaquil and Quito Railway Company, notwithstanding that the Minister of Public Works informed me on the evening of August 5th that the President had then determined and directed the immediate continuation of those proceedings.
Inasmuch as I have carefully avoided making any reference to the subject, I am unable to explain the exact significance of this inactivity upon the part of the Government. It is possible that the President has delayed the continuation of the suit awaiting further information from the Ecuadorean Minister in Washington and Mr. Sherwell of the Manufacturers Trust Company of New York. On the other hand, the attention of the Government has been fully occupied during the past week with financial matters in connection with the recent establishment of a system of exchange control and the licensing of imports. I would add parenthetically that this measure is encountering resistance and that the corresponding regulations for its enforcement have not yet been issued. The Ecuadorean national holidays have also interrupted the conduct of Government business. The occasion was availed of by the commercial, industrial and agricultural interests of the country to manifest to the Government their adherence to the Lima Agreement providing for the immediate negotiation in Washington of the boundary question.86
However, I am inclined to believe that the matter of money is at least in part responsible for the apparent delay in the continuation of the legal proceedings. In my despatch No. 447 of July 16, 1936,85 I reported that the sum of 50,000 sucres, equivalent to US$5,000, had been appropriated for the expenses of the Manufacturers Trust Company in connection with the settlement of the Railway debt. On the morning of August 7th the Minister of Public Works informed me that the Government had just received a further request for US$5,000 for Mr. Sherwell and of US$20,000 for the attorneys in New York. While these amounts are small, they are important items in Ecuador. In view thereof it may be that the President is endeavoring to check up on certain details of the plan, especially with relation to the [Page 554] eventual cost to the Government of the services of Mr. Sherwell and the American attorneys.
I also reported in my telegram under reference that the British Minister in Quito, acting under instructions from his Government, was expressing the earnest hope that Ecuador would consult with the British Foreign Bondholders Council. This was communicated today in a formal note to the Ecuadorean Minister for Foreign Affairs. The Minister added that in the opinion of His Majesty’s Government the continuation of the suits against the Railway of the Central Bank and the Government would seem inopportune at this time. He availed himself of the occasion to express the satisfaction of his Government that Ecuador is giving serious consideration to the matter, but that it was also concerned because of the statements of the former Finance Minister, Mr. Avilés, to the effect that the object of the scheme was to oblige the bondholders to settle.
With reference to my despatch No. 473 of August 4, 1936, relative to the message of the Foreign Bondholders Protective Council communicated to the Foreign Minister, I have the honor to report that no reply has as yet been made. I assume that this question is being considered in connection with the Government’s general policy towards the Railway.
Respectfully yours,