489. Memorandum From the President of the Export-Import Bank (Waugh) to the Director of the Office of South American Affairs (Bernbaum)1
SUBJECT
- Ecuadoran Relations with the Export-Import Bank
Thank you for your memorandum of July 27th reporting on your conversation with Ambassador Jose R. Chiriboga.2
Very frankly, we are not in any way, shape or form attempting to apply political pressure on Ecuador. What we are going to insist on from here on out is that Ecuador follow the fundamental a, b, c rules of good banking practice.
From the record it is clear that loans to Ecuador have been made under pressure from the Ecuadorans and upon promises of performance [Page 992] on their part which have not been kept, and this record goes back some fifteen years.
It is the responsibility of the Eximbank, as I see it, to protect the interests of American businessmen working in that area, at least to see that they get a square deal.
The problem before us is not alone the settlement with the Jones Construction Company, although according to written evidence the project was accepted last fall, as completed in accordance with the terms and specifications of the contract, by engineers as well as a special Ecuadoran commission.
The problem of the Bank with this particular highway goes back fifteen years, and our engineering staff has always been concerned with reference to the question of maintenance. In 1949 the Bank authorized a credit of $1.5 million for highway maintenance. Any settlement with the present contractors would only be temporary relief if this road is not adequately maintained; in other words, the initial investment of some $15 million in this project is in jeopardy.
Then too, the Bank loaned some $14 million for the construction of the water supply systems in Quito and Guayaquil with the agreement that sucres from receipts would be deposited in a special account, as collected. This has not been done in Quito, although the payments of interest and principal have been made when due. We are also deeply concerned over the lack of maintenance of the Quito system.3
The Bank has been confronted with additional problems in connection with the completion of the runways at both the Quito and Guayaquil airports as well as the construction of the airport buildings in both places. You know, of course, we have had to call in the surety company and are trying to work out those complicated problems.
For numerous reasons, and not limited in any way to the Jones matter, we feel that we should move very slowly in implementing any further credits to Ecuador.
This memorandum is not intended as a reflection on the present President or the Ecuadoran officials here negotiating at this time. It [Page 993] is not sufficient, however, from our standpoint, to merely brush aside the unresolved problems by saying they were inherited from the previous regime. Incidentally, Ambassador Chiriboga was a member of the previous regime.
We sincerely trust that when the Ambassador visits you in the Department this present week you will continue to support the decision that has been taken by the Directors of the Export-Import Bank. In the final analysis, in my opinion, it will be for the benefit of Ecuador to get some of these unresolved problems completed.
- Source: Department of State, Central Files, 822.10/7–3057.↩
- Not found in Department of State files.↩
- In a memorandum of conversation with Waugh and other officers of the Export-Import Bank, dated July 26, Perry stated: “The observation was made that the Public Works Minister [Sixto Duran Ballen] was expected to request the Bank to extend the $800,000 credit which had been authorized in 1952 for Ambato power faculties and which had actually expired on June 30, 1957 and also to extend the $335,000 credit which had been authorized for the Latacunga water supply system November 1, 1956 and had expired June 30, 1957. The general feeling seemed to be that Ecuador was remiss in not having begun work on these two projects to date and therefore the Bank should not extend the credits which had already expired in both cases.” (Department of State, Central Files, 822.10/7–2657)↩