Benito Legarda Jr. on Cesar Virata

CROSSROADS (Toward Philippine Economic and Social Progress) - Gerardo P. Sicat (The Philippine Star) - September 10, 2014 - 12:00am

[Note: UP president Alfredo Pascual, ex-senator and UP president Edgardo Angara, Regent Magdaleno Albarracin, and Dr. Benito Legarda, Jr. spoke at the launch of my Cesar Virata: Life and Times Through Four Decades of Philippine Economic History at the Executive House of the University of the Philippines on August 22, 2014.  Below are excerpts from Dr. Legarda’s remarks which dealt with little known aspects of Cesar Virata’s contributions to economic diplomacy.]

Cesar Virata and I worked together when he was finance minister and later prime minister, and I was variously deputy governor for research at the Central Bank of the Philippines, adviser at the Ministry of Finance and alternate executive director at the International Monetary Fund.

In his biography, Gerry Sicat devotes a separate chapter on Cesar Virata’s contributions to economic diplomacy. Gerry attributes Cesar’s impact in this field to the high regard in which he was held by high officials of other countries. I would add to this the respect he commanded in the officialdom of the Fund (IMF) and the World Bank.

I would also add his strong advocacy of Third World interests vis-a-vis  those of the developed countries of the First World.

This was an uphill struggle waged partly in the U.N. Conference on Trade and Development (UNCTAD). Our main efforts in North-South dialogue were made in the Group of 24 that met at the semi-annual meetings of the Bank and Fund. We represented Southeast Asia. The Group had to keep insisting on the interests of the Third World. It had to do so despite its own mixed composition, with some members being oil-exporting countries whose financial ideas were closer to the First World than the Third World. In this Group Ernest Leung was particularly active.

In his book Gerry describes the internal regime of the Bank and the Fund, with country quotas (and therefore voting power) calculated on the basis of certain factors such as population, GDP, level of trade, reserve holdings, etc. Under this system some small European countries with high trade levels had rather high quotas and could act almost alone.

Cesar Virata departed from his predecessors in office in that he sought our participation in the governance of the international financial organizations when he assumed office in the Department of Finance.

In the Fund Gerry Sicat describes the various moves that were made. We wanted to form a Southeast Asian Group but as Gerry indicates this was frustrated by the Indonesian insistence that it occupy the Fund seat permanently.

Failing to get the rotation we wanted, Cesar Virata got us into the Australia-New Zealand group, which had just expelled South Africa and welcomed our joining them. Although the ED was reserved for Australia, we had a turn as alternate executive director and as technical assistants.

It was a learning experience for us to be exposed to the tough-minded British Treasury tradition that was followed. (I understand from today’s BSP officials that we are now in a South East Asian group where rotation is followed.)

In the World Bank we also managed to secure membership in the Latin-American group headed by Brazil which had a lock on the Fund ED and left the World Bank post open.

During our years of passivity this had been continuously occupied by Colombia, which, however, had a smaller quota than ours. Our new interest in Bank governance meant that we had to negotiate our way in.

The Latin American connection was beneficial to us because in effect we entered an Executive Board discussion with three votes in our pocket. The group met for caucuses before Fund- Bank annual meetings, and Cesar took pains to attend, and even to ride on sometimes cramped economy chartered flights for the delegates. Thus,  he became both liked and respected.

When we began negotiating for a turn at the directorship, we had one advantage: our votes ensured the viability of the constituency. Without us they were endangered.

Since most of the Latin officials were not fluent in English, we carried on our talks in Spanish, with myself speaking for Cesar. When I had to consult him, we would speak quietly in Tagalog so as not to give away our position. Eventually we got our turn at the directorship.

There was a further ramification. The time came to elect a chairman of the World Bank’s Development Committee. We represented Southeast Asia in the Group of 24, but as usual our Southeast Asian colleagues were ambivalent or disunited.

The Latin Americans, however, rallied behind Cesar, perhaps glad that they did not have to choose from among themselves and compete for primacy. So Cesar Virata, who speaks no Spanish, was elected chairman of the Development Committee as Latin America’s candidates.

Gerry can write at great length on analytical or administrative matters, but also shows an unsuspected capacity for fast paced narrative in discussing the end-game of the Marcos dictatorship: the murder at the airport of Benigno “Ninoy” Aquino; and the EDSA Revolution of 1986.

Gerry recounts what is not generally remembered, namely, Cesar’s Istanbul statement that “There were elements in the government that could be involved in Ninoy’s assassination.” Marcos was unhappy about this, and Cesar was asked twice to retract the statement and twice refused.

Gerry writes: “The fate of Marcos’ hold on political power had been sealed.” (p.-497)

Why did Cesar stay on? Crisis had turned into chaos, but if anybody could restore some semblance of order it was he. Quietly he and newly appointed CB Governor Jose B. “Jobo” Fernandez set about to put things in order. These entailed many painful fiscal and other measures.

When the Cory Aquino government took power, the transfer of financial administration was relatively smooth, with Jobo retained as CB Governor, and Cesar’s trusted assistants holding the fort at Finance.

Jobo told me when it was over that it was thanks to Cesar that we were able to straighten out our economic policy.

Jobo lamented that this was not commonly realized. But over time it has become more apparent, and Cesar Virata has retained an unblemished reputation for personal integrity both internationally and nationally. And I am among those honored to be counted among his friends.

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