1941: Ecuador

Boundary Dispute.

The century-old boundary dispute between Ecuador and Peru, involving the large tropical territory of Oriente, again reached the point of open hostilities in July 1941, when Peruvian troops, far superior in numbers and equipment to those of Ecuador, successfully invaded Ecuadorean territory. A mediation offer which had been made in May by Argentina, Brazil and the United States, was accepted by Ecuador, the weaker party, but only grudgingly and with reservations by Peru. Military observers of the three mediating powers were sent to the scene of the fighting. A military agreement, effective Oct. 5, establishing a demilitarized zone in the area in question, led to the cessation of fighting, which had practically been at a standstill since August. In December it was rumored that Chile would be admitted as a mediator and that a peace conference would be held in Buenos Aires. Peru fears that if Chile is permitted to join the mediators, Mexico may be included as well, which would be embarrassing to the Peruvian Government since it firmly rejected a Mexican proposal for joint Pan American mediation of the dispute early in the fall. Peru is also adverse to a general peace parley, preferring direct negotiations with Ecuador (See BRAZIL).

Foreign Relations.

Ecuador has been a center of active Nazi propaganda, which has caused anxiety to the United States because of the country's proximity to the Panama Canal. The administration of President Carlos Arroyo del Río has, on the whole, pursued a cautious policy regarding foreign affairs, although, in the fall, it pledged its full cooperation with the United States. This has not gone the length, however, of permitting a naval base to be established on the Galápagos Islands, 800 miles west of Ecuador and strategically placed with relation to the Canal. The operations, in September, of an Axis raider in waters near these islands, resulting in the sinking of at least one ship, a Netherlands' vessel, gave urgency to such a measure of continental defense. In August both houses of Congress approved a resolution endorsing the eight-point Atlantic doctrine formulated by President Roosevelt and Prime Minister Churchill. Following the entry of the United States into the War, Ecuador discontinued the contracts of Japanese petroleum technicians employed in the northern coastal region of Esmeraldas and shut down on Axis propaganda. It also declared sections along its Pacific coast military zones and ordered all aliens to leave them. The services of Sedta, a German-controlled air line in Ecuador, had already been suspended in September (see also BOLIVIA and PERU). All of Sedta's service had been duplicated by Panagra, a North American line.

Internal Affairs.

The military crisis with Peru had an unstabilizing effect on internal politics, which are chronically disturbed, as the rioting in early January at a public demonstration against the President and his policies indicated. The grant of 'extraordinary powers' to the Executive, now a common practice in Ecuador, was extended twice during the year. Congressional elections held on May 11, were a victory for the 'official wing' of the Liberal party, which is badly split. A new party, the Unión Nacional Ecuatoriana, represents all leading factions except the Conservatives. Its most prominent members are political enemies of the President, who is very unpopular both with the masses and the Army.

Economic Conditions.

General economic conditions improved somewhat in 1941, due to the recovery in coffee prices and the increased yield of cacao, which is Ecuador's main crop. Heavy trade balances favoring Japan led the President to put Japanese-Ecuadorean trade under strict government supervision in October. A new trade agreement was concluded with Canada, providing most-favored-nation treatment and tariff reciprocity. One step towards correcting the faulty economy of the country is the improvement of transportation facilities. The Export-Import Bank credit of $1,150,000, designed, in part, to promote completion of the Pan American highway, will contribute to the fulfillment of this need. A basic problem is the stimulation of agricultural production and stockraising in the sierras, to abolish the heavy dependence on imported foods and the subsequent drain on foreign exchange. See also PAN-AMERICAN AFFAIRS.