1942: Ecuador

A protocol signed at the Rio de Janeiro Conference on Jan. 29 (see BRAZIL) ended the long and troublesome boundary dispute between Peru and Ecuador which settled the last major dispute in the American hemisphere. The two countries agreed at Rio on a survey of the boundary and a procedure for adjusting the controversy. The frontier as finally settled meant large concessions on both sides. Ecuador yielded more territory than Peru but retained a greater part of the section bordering the Andes, a potential oil area. Peru got sovereignty of the upper Amazon and its major tributaries in the disputed area, although Ecuador retains the right of navigation on all tributaries rising in the section accorded to it. Although the agreement was ratified by both legislatures, and in the Ecuadorean Congress by a large majority, there was resentment within the country at the loss of so much territory, and the protocol became a political issue. Dissatisfaction over the frontier settlement led to an unsuccessful coup on May 28.

At the Rio Conference, Ecuador made its acceptance of any inter-American resolutions contingent upon an acceptable solution of this border dispute. At the same time that the protocol was concluded Ecuador signed the principal Act of the Conference and severed diplomatic relations with the three Axis powers. On Feb. 9 the Government froze the funds of Axis nationals and blocked foreign exchange transactions with firms on the United States blacklist. It also announced a number of measures to curb local Nazi agents and Nazi propaganda. Moreover, in March and again in September, permission was accorded the United States to construct air and naval bases at Salinas, on the Santa Elena peninsula at the entrance to Guayaquil Bay, and on the Galápagos Islands, which bases shall be turned over to Ecuador after the war. United States forces are now guarding these sites, which are very important in hemisphere defense; since located as they are, one 800 mi., the other 950 airline mi. from the Panama Canal, they protect the West approaches to the Canal. The Galápagos, which are 600 mi. off shore, put Ecuadorean territory nearer to the Solomon Islands than any part of continental United States. Bases located there may have, therefore, a distinct significance in the war in the Pacific. The whole-hearted cooperation with the United States which these measures suggest has been achieved by President Carlos Arroyo del Rio, who had to overcome strong pro-Nazi sentiment within the country.

Economic collaboration between the United States and Ecuador is indicated in (1) an exclusive rubber purchasing agreement, similar to those concluded with a number of Latin American countries, which removes the competition of Argentine bidders; (2) a $5,000,000 exchange stabilization agreement, signed Feb. 27; (3) a loan of $1,000,000 each to Guayaquil and Quito for sanitation purposes and the aid of a United States scientific and technical mission, sent in March as part of a widespread Latin American program of 'defense sanitation'; (4) another loan of $1,000,000 for rehabilitation of El Oro Province, once an important cattle-raising province, which had been devastated during the hostilities with Perú; and (5) finally, in the general agricultural and industrial development of Ecuador through the Ecuadorean Development Corporation, a joint venture of the two governments, backed by $10,000,000 which the Government of Ecuador was authorized to accept from the United States. Moreover, $900,000 loaned previously to Ecuador by the Export-Import Bank is being used to complete 75 miles of a 290-mile stretch of the Inter-American highway, the only unfinished part of the all-weather route from Buenos Aires to Santiago and north to the Caribbean.

Economic conditions in 1942 have been little changed, in spite of shipping difficulties. Customs receipts were higher than in 1941; the combined foreign exchange and gold holdings of the Banco Central have risen 60 per cent over the figure for August 1941 (in April 1942 they rose to 139,510,000 sucres), and both the coffee and cocoa situations seem to have improved. The war has created a demand for balsa, an Ecuadorean wood which is badly needed for airplane parts, life rafts and other war purposes. Oil exports were hit by the closing of certain markets but demand for petroleum has been created by the new United States naval and air bases. Moreover, under an inter-American pooling scheme designed to meet the problem of limited tanker space, Ecuador's oil now goes to Chile.