822.6176/37: Telegram

The Secretary of State to the Ambassador in Ecuador ( Scotten )

595. Embassy’s despatch 272, July 21,29 Lowry’s letter to Rubber Development of July 22.30 As outlined in Department’s telegram 379, May 18, it is understood here that this Government has no right under the rubber agreement with Ecuador to give prior approval or disapproval of expenditures of premium funds. However, under agreement with other countries containing similar provisions it has been considered desirable for the governments of the producing country and of this country to consult in advance in order to obviate any disagreement as to whether any proposed expenditure is within the terms of the agreement and hence not subject to objection from us. Since Illingworth while Minister of Finance had on several occasions consulted with Rubber Development representatives on expenditures of premium funds it was assumed that the Ecuadoran Government wished to follow a similar course, which appears obviously to be designed to promote harmony in the execution of the rubber agreement. Projects which may be undertaken are likely to require machinery and equipment and personnel from this country, and prior consultation with respect to proposed expenditures will elicit information as to their availability. Moreover, in view of their familiarity with the rubber program in Ecuador as a whole, Rubber Development representatives should be particularly fitted to advise as to the contribution which proposed projects may make to rubber production. If, however, it is the wish of the Ecuadoran Government that these funds should be spent without prior reference to the Embassy or the Rubber Development Corporation, naturally this Government will interpose no objection.

It is believed by Rubber Development that Illingworth may not have understood fully the point of view of Rubber Development as outlined in his conversations with its officers during his visit. Their inquiries were intended to be directed solely to the questions of the relation of the proposed Ibarra-Succumbios road to rubber production, [Page 295] of the effect of the road construction on the availability of labor for actual rubber tapping, and of the necessity for materials, equipment and personnel from this country. Such inquiries are natural under the system of prior consultation which Rubber Development understood was being followed. Mr. Illingworth’s original proposal contemplated that the surveying and construction would be undertaken by an United States firm, and this did not originate with Rubber Development. The Export-Import Bank came into the picture only because of Illingworth’s request that, after construction of the two proposed roads had been mutually agreed upon, Rubber Development should agree to permit the pledge of premium funds paid and to be paid to guarantee the interest on and amortization of a loan from the Export-Import Bank to finance the cost of construction of the Cuenca-Méndez and Ibarra-Succumbios roads.

It is suggested that you confer with the President along the lines of the foregoing, with which Rubber Development concurs. Please keep Lowry fully informed.

Hull
  1. Not printed.
  2. Presumably this refers to telegram No. 648, July 22, 1 p.m., in which Lowry requested information on negotiations by Illingworth on the premium fund (822.51/1027).