together with the increase due to import duties and revenue taxes, has heavily cut down imports, while domestic production has increased considerably; imported Spanish oils are also being used as substitutes. Dairy products have received protection, and two modernly equipped dairy farms are now producing butter and cheese of acceptable quality.

AGRICULTURAL LEGISLATION

The Government acted to further improve the quality of leading export crops by enacting legislation regulatory of the harvesting, grading, packing, and marketing of cacao, coffee, and tobacco.

IMPORTS AND COMMERCIAL POLICY

In spite of the enforcement of protective measures, preliminary estimates of imports in 1935 indicated that there was a small decline as compared with imports in 1934. The United States share of the trade declined, owing in part to severe competition from Germany and Japan, and in part to the fact that foodstuffs items of which the United States is the customary supplier have been hard hit by the new consumption taxes.

Law 891, of April 17, authorized the Executive to reduce revenue tax rates established by Law 854 by 5 to 90 percent in exchange for concessions from other countries. On the basis of this law, a commercial agreement with Spain was concluded in October.25

LABOR

The Dominican Republic has no unemployment problem. Laborers are brought in during the harvesting season for work on the sugar estates, but are repatriated at the close of the canegrinding period. A law enacted in 1934 requires that 70 percent of the employees of all enterprises be Dominican nationals.

Law 929, of June 29, established a maximum working day of 8 hours (48 hours a week) except for agricultural workers, domestic servants, executives, and persons holding positions of trust. The employment of minors under 14 years of age in industrial undertakings or in maritime ventures is forbidden.

ECUADOR

(Conversion rates for 1935: Imports, $1 equals 10.56 sucres (1 sucre equals $0.0947); exports, $1 equals 10.76 sucres (1 sucre equals $0.0930)) Although the first half of 1935 was marked by some uncertainty, the year as a whole was one of substantial progress in Ecuador. Large agricultural yields were disposed of at satisfactory prices, and domestic manufactures, particularly textiles, experienced an active year. Unemployment was practically nonexistent, owing to the increase in private and public construction and to the demands of mining and manufacturing. The stabilization of the sucre at 10.50 to the dollar and the repeal of the remaining exchange restrictions facilitated the commercial turnover. Foreign trade increased 23 percent, and internal trade made substantial gains.

25 Commerce Reports, Nov. 23, 1935, p. 375.

AGRICULTURE

Crops in all sections of the country were abundant and of good average quality. The complete removal of exchange restrictions stimulated agricultural production for export.

Cacao and coffee.-Exports of cacao, the most important product, amounted to 20,219,984 kilograms in 1935, of which the United States took 39 percent. Although the quantity exported was slightly greater than in 1934, the returns were 12.7 percent less, owing to lower average quotations during the year.

Estimates of the 1935 coffee crop range around 16,100,000 kilograms, or about 10 percent above the yield in 1934, while exports amounted to 12,441,641 kilograms. Quota restrictions in Italy and Spain further narrowed the European markets for Ecuadoran coffee, a loss which was partly offset by sales to the United States and Germany and an increase in domestic consumption.

Other crops.-The rice crop was somewhat less than in 1934, but exports in 1935 were 334 percent greater, chiefly as a result of demand from Peru. Banana exports increased considerably, and the United States took about 65 percent of the 1,770,173 stems exported. Cotton production in the 1934-35 season was favorable and practically all was consumed by domestic mills. Sugar output was below expectations, owing to early rains which handicapped grinding operations. Forest products were obtained in larger quantities than in 1934. The output of staple food crops in the sierra regions increased during the year.

MANUFACTURING AND MINING

Although industrial statistics are lacking, it is estimated that local production increased approximately 20 percent during 1935. The textile industry was active throughout the year and practically all the factories worked 24 hours a day. The shoe and leather industry improved its products and increased production. Owing to the boom in construction, the cement factory operated day and night throughout the year but was unable to supply the local demand.

The Government monopolies-alcohol, tobacco, matches, and salt— had a satisfactory year. The straw-hat industry was normally active, but the foreign demand was not so great as in 1934. Production of oil and gold was above 1934 levels.

UNEMPLOYMENT AND PRICES

Unemployment is not a problem in Ecuador, and in some of the more remote agricultural regions there was a shortage of labor. Wages have been increased, but the rising cost of living has offset such increases. Rough estimates place the rise in the cost of living as 50 percent. Foodstuffs increased 50 percent, clothing about 35 percent, and rentals between 50 and 100 percent.

TRANSPORTATION AND COMMUNICATION

There was an increase in shipping traffic during the year; services were rearranged and cargo facilities aided by the inauguration of a service to smaller ports by an American company. Except for the principal railroad, which experienced a notable improvement in earnings as compared with 1934, there were no significant develop

ments in rail transportation during the year. improved by the substitution of new-type planes.

FOREIGN TRADE

Air services were

Foreign trade increased 23 percent in 1935, imports being 54.9 and exports 4.7 percent over imports and exports in 1934. The United States continued to be the largest supplier of the Ecuadoran market, but its share of total imports was only 30 percent, as compared with 33.7 in 1934, principally as a result of competition from Japan and Germany, particularly the former. Japan increased its sales to Ecuador 96 percent in 1935 and furnished 17.5 percent of the total imports, as compared with 13.9 percent in 1934. Principal imports into Ecuador in 1935 were cotton goods, metals and metal manufactures, machinery and electrical appliances, food products (chiefly lard and flour), chemicals, paints, and automotive vehicles. Japanese competition was particularly active in textile lines and in

earthenware.

The United States was also the principal purchaser of Ecuadoran products, taking 46.6 percent in 1935 as compared with 44.9 in 1934. Great Britain, Germany, and Japan took slightly more Ecuadoran products during 1935, but shipments to France declined 62 percent. The United States took more Ecuadoran cacao, fruits, and cyanide precipitates, but less coffee in 1935. Petroleum exports increased 15.1 percent in value.

EXCHANGE AND FINANCE

The exchange situation was featured by the stability of the sucre and the practical repeal of all exchange restrictions in October. Effective February 6, the sucre was stabilized at 10.50 sucres to the dollar, selling rate, or 10.47 to 10.485 sucres, buying rate. In April, regulations were issued requiring importers to deposit in advance, in foreign currency, 25 percent of the value of their orders. On October 7, the requisitioning, at the rate of 5.95, of 25 percent of exchange arising from shipments of principal export products, was abolished. Requisitioned exchange which had not been distributed was made available for Government purchases after the date of the decree. Deposits in commercial banks which had been made by applicants for exchange at the previous official rate were ordered to be held for the disposal of foreign creditors.

Currency circulation was affected by a serious shortage of subsidiary silver coins as the price of silver rose on foreign markets. A decree of May 17 prohibited the exportation of silver in any form, but the situation was eased somewhat as silver prices steadied. A decree of December 18 ordered the revaluation of the gold reserves of the Central Bank at the world market rate, which was set at 9.968331 sucres per gram of fine gold. The book profit from this revaluation was assigned to the payment of a part of the Government's debts to the Central Bank, to the establishment of an agricultural bank, and any balance was to be set aside for the fund for payment of the foreign debt.

The budget for 1935 was 63,575,000 sucres, but owing to the substitution of a special budget for the last quarter amounting to 26,000,000 sucres, the total for the year was approximately 73,681,000 sucres.

The special budget for the last quarter considerably exceeded the amounts originally appropriated for that period. The budget for 1936 was placed at 80,100,000 sucres by a decree of January 23, 1936. An agreement was made with a New York bank, as representative of the holders of bonds of the Kreuger and Toll loan, providing that the bonds be redeemed at a rate of 22 percent of their face value.

A series of decrees increasing customs duties was issued.26 By two decrees of January 5 and March 17, duties were revised upwards on luxury and nonessential items. On April 30 a third substantial tariff increase was made and differential-duty surtaxes established. COMMERCIAL POLICY

27

Supplementary agreements were concluded with France and Germany. According to the agreement with France, the preferential tariff established by a decree of April 30, 1935, was conceded to France. The principal concession granted to Ecuador was a quota of 6,000,000 kilograms of coffee duty free. According to the agreement with Germany, 28 the unlimited importation of Ecuadoran raw materials is conceded, excepting cacao, for which an annual quota for the years 1936 and 1937 of 4,000 tons was granted. A 2-year quota on straw hats was also granted and it was provided that these imports into Germany would be liquidated through the ASKI mark or compensation system. In return, Ecuador granted Germany the same treatment accorded France, as provided for in the preferential tariff. The French agreement became effective July 13, 1935, and the German agreement on January 1, 1936.

Ecuadoran Foreign Trade by Principal Countries

[Values in thousands of sucres]

Source: Annual Report of Commerce and Industries, Ecuador. Consular Report No. 58888-Guayaquil, Feb. 1, 1936. American vice consul Philip K. Tattersall.

26 Commerce Reports, Feb. 9, 1935; Apr. 6 and Apr. 30, 1935; June 8, 1935.

27 Commerce Reports, Aug. 31, 1935; Sept. 14, 1935; and Dec. 14, 1935.

28 Commerce Reports of Feb. 15, 1936, p. 133.

(The Guatemalan unit of currency, the quetzal, has an exchange value of $1.)

A decline of 16 percent in the value of exports, primarily as a consequence of smaller coffee purchases by Germany, had a depressing effect on business generally, but this loss was largely offset by favorable developments in other quarters. The domestic food crops, particularly corn, were abundant. Tourist traffic doubled over that of the previous year. Banana shipments from west coast ports increased as a consequence of losses from storm damage to Honduran plantations.

An increase of approximately 19 percent in imports is explained in part by higher prices of manufactured goods, and in part by the necessity of accepting large shipments of German merchandise in exchange for Guatemalan coffee. Imports from Japan declined, following the imposition of double duties in January. The United

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