822.796/385: Telegram

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

212. From Morgan for Clayton.60 In interview this afternoon President informed American Minister and me that he would cancel Sedta mail contract with 8 days’ notice upon Panagra agreement to carry mails at Sedta rate. He would then study best method of canceling operating concession and taking over Sedta assets. He intimated expropriation proceeding with compensation under Ecuadoran law might require very large expenditure. Might possibly be able to cancel franchise for failure to live up to obligations. He asked me to submit a definite plan at the next conference. Please advise (1) whether you would be satisfied for the present with cancellation only, (2) whether I should now offer President conditional loan of $150,000 maximum for complete expropriation through acquisition of stock or acquisition of franchise and assets whichever most feasible. Mailing draft agreement today. [Morgan.]

  1. W. L. Clayton, Deputy Loan Administrator, Federal Loan Agency.