
THE HISTORY OF THE ECUADORIAN CORPORATION AND ITS CONTRIBUTION
TO THE ECONOMIC DEVELOPMENT OF ECUADOR: 1897-1986
Número 19 / ABRIL, 2023 (19-37) 206
interest in the Development company and
transfer the control to the American investors.
THE ECUADORIAN ASSOCIATION
Harman returned to London again in the winter
of 1899 where he made the acquaintance of Sir
James Sivewright, a wealthy Scotsman who had
made his fortune in South Africa. On April 4,
1899 Harman and Sivewright incorporated the
Ecuadorian Association in Edinburgh with an
initial capitalization of £70,000 pounds. Article
1 of the Memorandum of Association (1899)
makes clear that the intentions of the Ecuadorian
Association went far beyond that of building the
railroad:
To take, purchase, underwrite, or
otherwise acquire and hold any bonds,
stocks, obligations and securities of
any governments, states, or authorities,
supreme, municipal, local or otherwise,
and any bonds, debenture stocks, scrip,
obligations, shares, stocks, options or other
interests, in any trading or manufacturing
companies, or companies established for
the purposes of any railway, tramway,
railway or tramway construction, gas,
water, dock, shipping, telegraph, or other
undertaking of public utility. (Ecuadorian
Association Ltd. 1899:6)
On September 6, 1900 Harman and Norton
transferred the Ecuadorian Development
Company stock, the construction contract, and
all the rst mortgage bonds and the preferred
stock, to the Ecuadorian Association. The
stockholders of the Ecuador Development
company then exchanged their shares for shares
in the Ecuadorian Association.
On June 15, 1900, the Ecuadorian Association
assigned the construction contract to the James
P. McDonald company of Knoxville, Tennessee,
one of the most experienced railroad contracting
rms in the United States. The McDonald
company was given the section between Chimbo
and Alausí, the most dicult and challenging
section of the whole line.
On June 8, 1901 the Ecuadorian Association
oated an issue of £1,000,000 of 6% Debenture
Bonds to raise the capital to nish the line to Quito
(New York Times [NYT], 1901). According to
Harman, the high cost of construction around
the Devil’s Nose resulted in the bankruptcy of
the Ecuadorian Association and the dismissal of
the McDonald company.
In March of 1904 Archer Harman and his
associates, voted to liquidate the Association
over the protest of the minority shareholders.
To counter their opposition, the minority
shareholders were oered the opportunity to
exchange their shares in the Association for
shares in the Guayaquil and Quito Railway
company at the rate of 40% in preferred stock and
60% common stock in the railroad in exchange
for every share issued by the Ecuadorian
Association.
THE INCA COMPANY
After the Ecuadorian Association was liquidated,
Harman organized the Inca Company, with an
authorized capital of $150,000 divided into
150 shares of $1,000 each, 149 of which were
subscribed by Archer Harman personally (Inca
Company Articles of Incorporation, 1904). The
Guayaquil and Quito Railroad then assigned
the construction contract to the Inca Company,
which included the rights to $3,010,000 First
Mortgage Bonds and $2,100,000 shares of
Preferred Stock for a total compensation of
$5,110,000, making the Inca Company (i.e.
Archer Harman) the owner of the Guayaquil and
Quito Railway Company.
The Inca Company took charge of the
construction from the Laguna de Colta to Quito
and nished the construction by administration,
which meant that construction was carried out
by the railroad company and not by the Inca
company itself, which was merely a holding
company for the stocks and bonds of Archer
Harman. This led to a huge conict between the
company and the government, as the railroad
charged construction expenses to the operating