822.24/121

Contract Between the Government of Ecuador and the Defense Supplies Corporation, Signed October 1941 72

Know by this instrument that the Government of the Republic of Ecuador and the Defense Supplies Corporation have agreed upon the contract the articles of which are included in the Executive Decree which is inserted below.

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The Government of the Republic of Ecuador participates in this contract represented by Colonel Carlos Alberto Guerrero, Minister of National Defense, and Vicente Illingworth Yeaza, Minister of Finance, duly authorized by the President of the Republic, as set forth in Decree No. 163 of October 1, 1941. This decree, as said above, is transcribed in the present instrument. The appointments of the above mentioned Ministers are also herein transcribed.

The Government of the Republic of Ecuador proceeds to conclude this contract in accordance with its constitutional powers, especially the Legislative Decree passed on September 27, 1941. The first article of which grants, among other powers, to the Executive Power that of issuing decrees with the force of law concerning economic matters.

Moreover the Government signs this contract with favorable opinions previously rendered of the Comptroller General and Attorney General of the Nation, in order to comply with the provisions of Art. 55 of the Organic Law of Finance, and Art. 3 (e) of the Supreme Decree No. 188 of August 1, 1928 and Art. 12 of the Supreme Decree No. 23 of October 14, 1935.

The Defense Supplies Corporation, a corporation organized under the laws of the United States and whose entire stock is owned by the Government of that Republic through Reconstruction Finance Corporation participates in this contract represented by Stokeley Williams Morgan, accredited by the note addressed to the Minister for Foreign Affairs by the Legation of the United States in Quito, a copy of which is transcribed herein, and a cable sent by the Secretary of State of the United States to the same Legation, stating that Mr. Morgan is empowered to sign the present contract.

The Executive Decree which authorizes the conclusion of the present contract is as follows:

Presidency of the Republic
Reserved No. 163
Carlos A. Arroyo del Rio
Constitutional President of the Republic.

By virtue of the powers invested in him and

In view of the favorable reports submitted by the Comptroller General and the Attorney General of the Nation. Nos. 9855 and 386 of October 1 and September 30 of the present year and in view of the provisions of Art. 8 of the Law of Political and Administrative Organization.

Decrees:

Article 1. The Ministers of Defense and Finance and Public Credit are authorized to sign a contract in the following terms:

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Agreement

September 19, 1941

Between the Government of Ecuador represented by the Minister of National Defense and the Minister of Finance and Public Credit and the Defense Supplies Corporation (a corporation organized under the laws of the United States, the entire stock of which is owned, through Reconstruction Finance Corporation, by the Government of the United States) represented by Stokeley W. Morgan:

Whereas, The Government of Ecuador has requested the cooperation of the Government of the United States for the development of commercial aviation in Ecuador, and the Government of the United States is willing to afford such cooperation on the terms herein set forth;

Whereas, The Policy of the Government of Ecuador is to grant concessions for the operation of airlines only to native-born citizens of Ecuador or of any of the American Republics;

Whereas, The Government of Ecuador, as an initial step in furtherance of this policy, has taken steps to acquire the property of Sociedad Ecuatoriana de Transportes Aéreos (hereinafter referred to as Sedta) against payment of fair and reasonable compensation;

Whereas, Defense Supplies Corporation is willing to facilitate the furtherance of the aforesaid policy of the Government of Ecuador by making its funds available for use by the Government of Ecuador, upon the terms herein set forth, and

Whereas, Pan American–Grace Airways, Inc. has made arrangements with the Government of Ecuador satisfactory to said Government for the transportation of the domestic airmails of Ecuador between points in Ecuador;

Now, Therefore, In consideration of the foregoing and of the mutual covenants herein contained, it is agreed as follows:

I

The Government of Ecuador shall proceed immediately with the steps necessary under the laws of Ecuador to acquire the property of Sedta against payment of fair and reasonable compensation to the owners thereof.

The Government of Ecuador shall not permit the sale or transfer of the property so acquired by it to persons other than native-born citizens of Ecuador or of any of the American Republics or, in the case of corporate entities or organizations, other than those controlled by native-born citizens of Ecuador or any of the American Republics. The foregoing restrictions shall apply both to the nominal and the beneficial ownership.

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II

The Government of Ecuador shall not permit the resumption of operations by Sedta.

III

Upon commencement by the Government of Ecuador of the steps necessary to acquire the property of Sedta, as provided in Article I, and upon presentation by the Government of Ecuador to the Defense Supplies Corporation in Washington from time to time of itemized statements certifying that sums of money are required to defray necessary and reasonable expenses in connection with such acquisition, Defense Supplies Corporation shall advance to the Government of Ecuador the sums of money called for by such statements. The Government of Ecuador shall forthwith apply such advances to the payment of the items shown on the respective statements.

The aggregate amount of such advances shall not exceed one hundred and fifty thousand dollars ($150,000) and the obligation of Defense Supplies Corporation to make such advances shall terminate on March 31, 1942.

[IV]

The advances referred to in Article III shall be evidenced by notes (hereinafter called the Notes) substantially in the form annexed hereto, marked Exhibit A.74

(a)
The Notes shall mature ten years from their issuance and shall be renewable during the six months prior to their maturity for an additional period of ten years if at their maturity fifty percent of the principal and all interest has been paid. The Notes and renewals thereof shall be amortized by means of equal semiannual principal payments, each such payment to be two and one-half percent (2½%) of the face amount of the respective original Note; the first principal payment shall be due and payable six months after the issuance of the respective Note. The Notes shall bear interest upon the unpaid balance thereof at the rate of four percent (4%) per annum.
(b)
The Notes shall be secured by the equipment and other physical assets of Sedta, acquired by the Government of Ecuador and also by the stock of Sedta should that also be acquired.

V

Defense Supplies Corporation may, at its option to be exercised within one year from the date hereof, purchase the flying equipment [Page 289] of Sedta at the price of twenty thousand dollars ($20,000) per plane regardless of the value which may be fixed by the appraisers. Defense Supplies Corporation shall buy one or both of said planes at the price per plane aforesaid if requested to do so by the Government of Ecuador within three months after the signature of this Agreement. Such price shall be credited pro rata against the Notes or, at the election of the Government of Ecuador, against particular Notes.

VI

Defense Supplies Corporation shall cooperate with the Government of Ecuador in arrangements looking to the establishment and initial operation of an air transportation enterprise serving points within Ecuador, to be owned and managed by native-born citizens of Ecuador or of any of the other American Republics. To this end, Defense Supplies Corporation shall cause a survey of the economic and technical situation respecting domestic commercial aviation in Ecuador to be made by qualified experts at the expense of Defense Supplies Corporation. The Government of Ecuador shall cooperate with the personnel making this survey and assist them in every way. A report shall be submitted by these experts within six months from the execution hereof and shall form the basis for discussion between the Government of Ecuador and Defense Supplies Corporation regarding the nature and scope of such air transportation enterprise as it may appear feasible to establish in Ecuador to replace the services of Sedta.

If, after such discussion, it shall appear to Defense Supplies Corporation that the Government of Ecuador will provide arrangements assuring that such air transportation enterprise will operate successfully, Defense Supplies Corporation shall, within three months after an agreement has been reached, provide the Government of Ecuador with a loan sufficient to permit the purchase of suitable planes and equipment and the engaging of suitable technical personnel, the obligation of Defense Supplies Corporation in this respect being subject to the working out of a loan agreement mutually satisfactory to the Government of Ecuador and to Defense Supplies Corporation.

It is expressly agreed, however, that the reaching of such an agreement between the Government of Ecuador and Defense Supplies Corporation, or the failure to reach such an agreement, shall not in any way affect the validity of any of the other obligations of the parties hereto.

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VII

The obligations specified in the present agreement which have no definite fixed term shall remain in force so long as any indebtedness is outstanding upon the notes issuable under article IV and in any event for not less than ten years.

VIII

The present agreement, drafted in duplicate original in the Spanish and English languages, shall be formalized as a public instrument and signed by the persons hereinabove first described or their duly authorized representatives.

Done in the National Palace, in Quito, October 1, 1941.

(sgd) C. A. Arroyo del Rio

The Minister of National Defense

(sgd) C. A. Guerrero

The Minister of Finance and Public Credit

(sgd) V. Illingworth Y.

Here are inserted the text of the notes; the appointments, reports and other exhibits previously mentioned.

[Here follow the exhibits.]

Signed in duplicate a copy in English and another in Spanish, in Quito, October 2, 1941.

  • (Sgd) C. A. Guerrero
  • (Sgd) V. Illingworth
  • (Sgd) Stokeley Williams Morgan
  1. Copy transmitted to the Department by the Defense Supplies Corporation in its letter of November 25; received November 28.
  2. Not printed.