Meritorious action

With the interest on the country’s mega-debts piling up and snatching money out of the country’s public jar, we are regaled by what I call a seasonal outcry to repudiate our debts. Predictably this comes from the left, religious sectors and other self-proclaimed saviors of the poor. Indeed, a case could be made for repudiation as the only way out. It is acknowledged that these debts began during the unlamented Marcos regime. It is said the debts were made with private rather than public interest in mind. In theory, repudiating these debts is seen as just and will naturally have its followers.

This is thinking within the box. So is it with the response from the Arroyo government which offers no alternative except to say that the Government will honor Marcos debts come hell or high water. The position is exacerbated by the government’s justice system which has failed to punish Imelda and other Marcos heirs. Except for the miniscule identified Swiss deposits now held in escrow by the Philippine National Bank, much of the loot remains unaccounted for to this day. Stories abound about Imelda continuing to live in luxury.

(It is said that she received P4 billion from the Cojuangcos as part of her share when PLDT was sold. Don’t expect an announcement, just look. She is back to unrestrained luxury living the life of the rich and famous that brought this country to its knees. Alas, if our justice system has failed, there is retribution elsewhere. One recently told tale is how Imelda, armed with her new wealth went to Shanghai and was swindled by a group of Chinese who offered her a ‘lucrative deal’. The money was only a million dollars but the enterprising Chinese are allegedly nowhere to be found. I hear that the Chinese Embassy made efforts to trace the swindlers but has so far been unsuccessful.)

So what are we to do? Contrary to self-proclaimed saviors, the onus of bringing relief to the Filipino nation will not come about from repudiation. The creditors may be part of the problem but they are also part of the solution. That is a given and we have to work out a solution around that fact unless we overthrow the entire world finance system. With this perspective, Speaker JDV has made a proposal for debt equity conversion that has been enthusiastically received in the UN, the IMF, the Paris Club and the OPEC. But the details and final assent are still to be worked out.

In the meantime, JDV is making the rounds of debtor countries to put together a strong lobby group. Recently he hosted a meeting with the Latin American countries to explain the debt equity conversion. Again it was enthusiastically received. The proposal does not call for debt repudiation or debt forgiveness. What it offers to creditors is equity for debt. Say a country like Indonesia, Argentina or the Philippines owes a million dollars from international financial institutions or banks. Under the scheme, 50 percent of the debt can be converted into equity of a chosen enterprise or $500,000 in the debtor country. The creditors become investors using their debt equity. It can be invested in projects of their choice, forestry, housing, roads, whatever.

Planting trees is a good example that increases the return on investment a hundred fold compared to measly interest – unbearable to the debtor but can be a bonanza to the creditor if properly invested.

During the meeting HE Juan Pitty, ambassador of Panama waxed lyrical and quoted Dante on hope as his response. The other ambassadors applauded when Pitty commended the de Venecia proposal as meritorious action. Paraphrasing Dante he said ‘hope will never be accomplished without meritorious action. The meritorious action in this case is to seek a consensus among debtor countries to put its case before their wealthy and powerful creditors. Moreover, it has been long admitted that only a massive transfer of capital can save the world economy and debt equity conversion may be just the right vehicle for that. Among the ambassadors present were HE Claudio Lyra of Brazil HE Jorge Montero of Chile, the ambassador from Mexico, Consul Fausto Presler of Costa Rica, Consul Ablaza of Guatemala, Consul Ozaeta of Uruguay, Honorary Consul Guerrero, Minister Jose Clavijo among others.

Mrs. Arroyo has asked Congress to pass the proposed P1.05 trillion national budget for 2006, a third of which will go to servicing interest payments alone. The President has rightly said an honorable borrower must pay his debtors. What she did not say is that some blame must go to the creditors who willingly extended loans to dubious regimes knowing the funds will be misused and would not be paid in the long run. It was fashionable then to splurge petrodollars as loans to developing countries because ‘country borrowers’ do not go bankrupt.’

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LOPEZ-MACAPAGAL RIFT ROUND 2. Of course, it must have been disconcerting to Panjee Lopez that the crowds did not turn up in EDSA. Citizen apathy or not, it might be helpful if she and others (myself included) were to trace one of the threads of conflict. It arose much earlier than today. And it is not because Vice-President Noli de Castro of ‘Magandang Gabi Bayan’ is a Lopez man who could be president if GMA is impeached.

In the book An Anarchy of Families historian Alfred McCoy traces the Macapagal-Lopez conflict in the past generation. "President Macapagal’s (the father) greatest concern in politics then was to prevent Senator Lopez from being elected president of the Senate. Apparently realizing the economic basis of his country’s rent seeking politics, Macapagal tried to weaken Fernando’s political position by attacking Eugenio’s corporations. "

At the time, the Lopezes owned the Manila Chronicle (of which I am an alumna) and politicians feared its vitriolic journalists. Sen. Lopez denied accusations that it was an instrument of propaganda and instead "invoked the legitimacy of familial continuity." An earlier generation printed Tiempo Times in Iloilo, he said. The Lopezes sold Manila Chronicle after martial law but retained the ABS-CBN radio and TV networks to promote the family’s political interests. So how will the present generation play out that conflict? It remains to be seen. But an analysis of the conflict has to factor in the historical background of a long standing enmity. Interestingly, Macapagal pere lost round 1 when the Lopezes teamed up with Marcos in what McCoy describes a ‘strategic blunder born of tactical necessity.’ They turned to Marcos to defeat incumbent President Macapagal. "Eugenio Lopez, McCoy adds, used his money, media, and machine to make Marcos president in 1965 and reelect him in 1969. The team broke up in 1971. Ironically, Marcos finally dealt the deadly blow to the Lopez empire. It was only after Cory Aquino became President that the Lopezes regained their money and power in what he called an ‘elite restoration’. That is where we are at now – with the Lopezes and Macapagal-Arroyo exactly as they were then, battling it out in round 2. Abangan.

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