1938: Ecuador

Political Situation.

The confused political situation in 1938 reflected not only the economic stress indicated by Ecuador's depreciated currency, increased unemployment and agricultural and business depression but certain internal political difficulties as well, to which is related the crisis in the border controversy with Peru. Gen. Alberto Enriquez and his military Cabinet resigned in June, and a civilian Cabinet was requested to conduct the election of a Constitutional Congress. On Aug. 10 such a Congress elected Dr. Manuel Maria Borrero, a Liberal, Provisional President to succeed General Enriquez. On Dec. 1 Borrero resigned, and the day following the Constitutional Congress gave its final approval to the new Constitution and elected as President Dr. Aurelio Mosquera Narvaez, titular head of the Liberal party and a physician with a distinguished record as Director General of Sanitation. The new President soon became engaged in a controversy with the Congress over the restoration to active service and promotion of Col. Larrea Alba, a former dictator, who had resigned as leader of the radical Vanguardia Revolucionaria party. A presidential decree dissolving the Congress led to a threat of armed hostilities, which were finally avoided by the President's acceptance of a provisional status and his agreement to the election of a new Congress on Jan. 15, 1939, which will choose a Constitutional President. A number of Leftist members of the Congress, including its Vice-President, Antonio José Borja, were arrested during the controversy. Extradition of the former President, Federíco Paez, whose arrest was ordered in May, was requested of Colombia, where he had taken refuge.

Border Dispute.

The century-old border dispute with Peru, the last major boundary controversy in Latin America and the only real threat to peace in the Americas, became critical in June over an unimportant frontier incident, said to have been fomented by General Enriquez to distract attention from his political difficulties. Negotiations in Washington, which have been going on since September 1936, reached an impasse in October and were 'suspended.' The disputants have been unable to agree on the scope of the questions to be arbitrated by President Roosevelt, Peru desiring only to delimit inexact boundaries, Ecuador wanting to reclaim certain provinces. Following the breakdown of the negotiations, Ecuador proposed mediation by the five nations that effected the Chaco settlement. Peru must advance a similar invitation before the United States will act. The unsatisfactory status of this dispute made it questionable for a while whether Ecuador would attend the Lima Conference.

Trade Agreements.

A reciprocal trade agreement with the United States was signed Aug. 6, and became effective on Oct. 23. This is the eighteenth such trade pact to be signed under the Hull program and the tenth with a Latin-American country. A barter treaty was signed with the Reich, during the year providing unlimited exports to Germany, with payment in Aski marks. A surplus of compensation marks, whose price Germany is now planning to control, according to instructions issued to local banks in November, led the Central Bank the following month to remove the official exchange rate for Aski and offer to sell them in the open market. A surcharge of 50 per cent on import duties from countries with which Ecuador has an unfavorable trade balance, especially affecting Japan, was decreed in August.

Internal Affairs.

Nationalistic measures involving foreign investments and properties in Ecuador indicate a growing hostility to foreign capital exploitation and 'Yankee imperialism.' The South American Development Company, a North American enterprise which operates gold mines in Ecuador, has had to accept a doubling of the tax on gross production, from 6 to 12 per cent, and the forfeiture of the privilege of importing materials for the mines duty-free, in settlement of the controversy over revision of its concession. General Enriquez. President at the time, declared that the gold and petroleum companies had never paid 'a percentage corresponding to the needs of the government,' and justified the tax increase as a measure to stabilize the sucre and increase the country's gold reserves. Other measures adopted this year include the creation of a government monopoly to control the sale of petroleum for domestic consumption (the government already had a monopoly on the sale of salt, matches and tobacco); a law requiring that foreign concessionaries exporting minerals and fruit invest 20 per cent of their proceeds in Ecuador; a decree providing that contracts with the Government for the exploitation of Ecuador's natural wealth do not have the same effect as civil contracts and can be revised when they injure national interests; and, finally, a recent act of the Congress forbidding anyone to assume the presidency who is legal counsel or agent of a foreign corporation in Ecuador. Due to increased living costs, an increase in the wages of all private employees receiving 500 sucres or less a month was decreed in January.

The budget for 1938 contemplated a balance of receipts and expenditures at 120,000,000 sucres, an increase of 50 per cent over the original budget for 1937.