822.796/333

The Chargé in Ecuador ( Drew ) to the Secretary of State

No. 1717

Sir: I have the honor to refer to my telegram No. 43 of March 24, 6 p.m.,47 reporting the instructions given to the Panagra attorney, Dr. Catón Cárdenas by Mr. Gustavo Vidal with regard to the elimination of Sedta.

I am informed by Colonel Flores Guerra48 that when Dr. Cárdenas discussed this subject with the President, offering Panagra’s cooperation to buy out Sedta, President Arroyo expressed his appreciation and said that would not be necessary as the continuance of that company in operation in Ecuador was dependent on the attitude of the International Petroleum Company49 in continuing to supply it with gasoline. I understand that the President expressed the view that as soon as this gasoline supply is cut off, the company will necessarily have to suspend operations and there will be no necessity for any action on the part of the Government. When asked if he felt that the company might demand an indemnity from the Government, he replied that, on the contrary, the Government would be in a position to demand reimbursement of part of the 800,000 sucres subsidy which had been given the company.

Colonel Flores Guerra believes that the Government would be pleased to see Sedta’s gasoline supply cut off as this would relieve it of the responsibility of taking any steps in the matter. It is his opinion, based on statements of the President, that the Government would [Page 274] be extremely reluctant to cancel the Sedta contract as it would establish an unfortunate precedent in the Government’s relations with other foreign companies operating under concessions with the Ecuadoran Government.

Sedta is committed to return to the Ecuadoran Government on April 15 the 200 drums of gasoline which it borrowed from the Air Corps supply. It is believed that the company will not be in a position to comply with this obligation, which may offer a justification for some action on the part of the Government.

I am hopeful that as soon as Sedta’s operations are suspended because of shortage of gasoline, the Government will feel justified in ordering the company to liquidate on grounds of non-compliance with its operating contract. It would not be satisfactory from our point of view for the company merely to cease flying operations if it were to continue to maintain offices and radio stations in the various cities which it serves in Ecuador. As soon as the occasion appears to be opportune, I shall bring these considerations to the attention of the Ecuadoran authorities.

I consider that the situation is developing satisfactorily and that it may not be over optimistic to hope that Sedta’s days are numbered.

Respectfully yours,

Gerald A. Drew
  1. Not printed.
  2. Panagra’s local representative in Ecuador.
  3. Of Toronto, Canada.