Torn and Frayed has an extremely alarming entry, about the frightening alarming prospects of the Philippine economy doing a Titanic even as we all waltz away below decks. He points to an article in the British newspaper, The Economist, and then proceeds to enumerate some truly grisly scenarios: you always thought Imelda Marcos made a pretty poor Evita Peron, think of Manila doing a South East Asian imitation of Buenos Aires:
Let’s look at what might happen over the next few weeks.
If the Supreme Court junks EVAT again there will be an immediate full downgrade from the agencies (the guy from Fitch says that explicitly in the article).
The peso will fall, ironically making it even harder for the country to pay its dollar denominated debts. Quite apart from the exchange rate, borrowing costs will rise becasue of the downgrade.
At this stage, things may happen quite quickly. Gloria (or whoever replaces her) may decide that, since she can’t pay the debt anyway, she may as well make some political capital out of it and announce that she is not going to service this iniquitous mountain of debt entered into by her corrupt predecessors. This is technically a default. Much cheering (off stage) accompanied by the sound of the peso breaking through 100 to the dollar (unless fixed exchange rates are brought in).
You have to read his blog entry (and beg someone to buy you a subscription to The Economist. If you find that someone, tell them to send me a subscription, too).
The big news yesterday was of course the President’s unexpected declaration of intent: she will now convene some sort of “fact-finding commission,” in contrast to the civil-society demand for a “truth commission.” The Inquirer, in its editorial, looks askance at this development. Why now? why not earlier? it asks:
The commission idea was floated as a means to stave off a worsening crisis. However, the crisis is here, and not least because of the President’s refusal to take an active part in clearing her name through such a body. When she herself managed to control the situation by arguing for impeachment, here she comes now piously pleading for a commission. Where was she when the idea made the most sense?
The Star’s editorial attempts to answer the question of confusion:
Some quarters immediately raised fears that the truth commission could create confusion by duplicating the functions of other bodies such as Congress, the judiciary and law enforcement agencies that may handle the scandal that has implicated the President and a former election official in poll fraud.
But given the glacial pace of judicial investigation in this country and the political grandstanding that often cripples the legislature, a truth commission could help speed up the resolution of this crisis.
Success will depend on several factors. The commission must be composed of individuals known for probity and impartiality in the ongoing political scandals. If they are to show any bias, it should be for institutions rather than individuals. There must be members who are knowledgeable in the Constitution and the law.
PCIJ points out the President’s proposal changes the frame of reference on the issue:
But the President went beyond the bishops’ vision of a truth commission, expanding the body’s mandate to include investigating what she referred to as the “disturbing matter of various groups manipulating the situations to grab power.”
(For how the conspiracy card is being played, click on the link to Emil Jurado’s column, below). La Vida Lawyer thinks a commission is a mistake. Edwin Lacierda, who is thoroughly pro-impeachment (process, that is), says the President’s stealing the opposition’s thunder.
Jove observes the goings-on surrounding the President’s new proposal, and adds something I also observed, watching Ricky Carandang deferentially interviewing Ramos on ANC: FVR is ticked-off that all of a sudden, fewer and fewer are discussing his little scheme to solve all of life’s little problems. The signs were there: the Palace began to waffle on the FVR Solution quite soon, since it was political suicide to pursue it.
Newsstand takes a close look at the President’s proposal, and probes into the wording of her actual letter. At first blush, the letter seems wishy washy, but the public might buy it:
A commission or similar body? You mean she isn’t exactly sure yet? I am reminded of that unforgettable line from Raiders of the Lost Ark, when Indiana Jones looks about for a way to escape from the Nazis. Hey, he says, “I’m just making this up as I go along.” The vagueness will test the bishops’ patience, who surely expected something more detailed. But the public? Maybe they wouldn’t mind so much.
in his next entry, he says, it depends if people are to have confidence in the proposal, or not:
So I guess what I’m really saying is: It depends. It depends on the scope of work. It depends on the powers of the commission. Above all, it depends on the people who will be appointed to it.
Did Malacanang do something out of the ordinary and air the idea without benefit of a trial balloon? Well, this vaguely-worded proposal may well be the trial balloon.
Incidentally, former Senator John Osmeña has popped out of retirement to thunder about cheating in Cebu (allegedly out of spite, since he was “dropped” during the last campaign, which led to an unaccustomed loss for the veteran politico). Pulse Asia has a nationwide poll unfavorable to the President.
The America card comes to mind, with the conservative Heritage Foundation boiling down American interests in the “P.I.” to three. Terrorism, Business, and China. If you recall recent scuttlebutt about the supposed American position (support the FVR plan, go for charter change to loosen up economic provisions and make military cooperation much easier), and then consider slightly older scuttlebutt that Uncle Sam isn’t pleased by the President cozying up to China (as one correspondent put it, “Only the big boys get to play at geopolitics”), isn’t it very interesting that one of the charges to be levied against the President is treason? Recall, too, the loud proclamations of Chinese support for the beleaguered government. Since the North Rail project, financed by the Chinese government, is widely-mentioned as one of the contracts to be zeroed in on, then it might work this way: the President stands accused of conspiring to pocket billions of pesos through bribes payed by a foreign government, the People’s Republic of China, and in so doing, committed treason. At least I suspect this will be one of the arguments of the prosecutors. Note that no President of the Philippines, with the exception of Emilio Aguinaldo and Jose P. Laurel (the former decades after being president and the latter, who was only recognized as a president decades after his term) has ever been charged with treason (and that was after World War II).
The Pundit brigade features the following, today: Armando Doronila has come out strongly for impeachment as the best course; Emil Jurado claims that the Resign movement was -is- a conspiracy; Jojo Robles lashes out at Cesar Purisima; the unsinkable Carmen Guerrero-Nakpil takes a jaundiced look at the President’s recent tactics:
That photo we got on the front pages and videos screens of Mrs. Arroyo and her troupe, in office wear, excepting only the Secretary of Labor who chose a smart-casual, ladies lunch outfit, ambling on the Malacañang lawn, looked to me like a herd of sheep led by a midget shepherd to slaughter or worse. Is that why she was dressed like a head nurse?
In Davao, Patricio Diaz says society there is divided over politics, too; Rudy Romero praises the La Salle Brothers; Victor Villano (who is an up-and-coming pundit to watch), has another piece, in which he claims to see a silver lining in the country’s troubles. Howie Severino leaves politics aside, and delves into searching for Filipino film treasures. Cocktales describes the ratings war between the two major networks hitting American shores.
mlq3 – we have a subscription to the The Economist magazine. If I find the article, I will let you know.
Regards.
As an American, the thought of Philippines getting indebted to China makes my stomach turn, especially when I remember how many American fathers, brothers, husbands, uncles.. gave their lives for Vietnam.
Yeah, when GMA was making deals with China, I kept thinking the RP will soon be speaking Chinese.
Americans are no angels, but believe in freedom of religion and human rights. 🙂 and would fight for people to have that.
It is like a chess board……. one move today…….. will pay off years from now. Don’t sell long term religious freedom for temporary financial gains
I can’t believe GMA can be in prayer every day and be making deals with China, a country where God is not allowed.
Dear mlq3,
I’ve been following your blog since “freaky friday” and am very thankful for the insight and information I get from reading your entries.
I decided to de-lurk, because the “Argentina comparison” was actually brought up a week ago on Bloomberg Asia. In fact, I’m surprised there is no discussion about this on local media. The Bloomberg anchor interviewed a BBC financial analyst (forgot the name, sorry) and asked if the Philippines was set to be the “Argentina of Asia.” The analyst answered a bit safely that it was too soon to tell, but did say there was a real risk should the crisis not be resolved.
This is an article from the net (printed as early as March 2005) saying that the Philippines is following Argentina’s debt path: http://www.odiousdebts.org/odiousdebts/index.cfm?DSP=content&ContentID=12517, and saying that “social revolt is the driver of default.”
“One of the key reasons why economic growth slowed in Argentina was the gathering social revolt. Increasing social instability in Argentina, driven by increasing unemployment, rising taxes and non-payment of public-sector wages and pensions, created political instability, leading to the eventual collapse of the government and default. Notably, the International Monetary Fund dictated to Argentina the fiscal policies that resulted in social revolt.”
I’ll stop at that because I don’t want to paint anymore doomsday scenarios but it is indeed, rather alarming.
Thanks once again for the valuable insight and discussion.
Aurora.
Thanks, Aurora. I think we in media have a tough time with anything economics-oriented because well, it’s tough and alien to our interests. It’s tought to understand and explain. Articles like the one you linked to are very helpful, so many, many thanks.
My take on the commission is this: The fact-finding commission is meant to pre-empt the deliberation of the impeachment at the lower house. Malacanang would convince its allies to junk the complaint by all means foul and dangle the commission as an alternate venue to fend off social unrest. She would go,” andiyan naman ‘yang fact-finding commission para malaman ang katotohanan” or something to that effect. If successful, GMA would still have plenty of room to maneuver like the composition of the commission, the ground rules, and the extent of fact-finding. For instance, she could expand the area of investigation to cover ALL instances of cheating such that there would be enough to keep the commission busy until 2010 and beyond. We might indeed end up begging her for our rash judgment huh.
how come the last two finance chiefs jumped ship? did they see what was coming?
for the doom and gloomers. here is one big difference between argentina and rp.
argentina resorted to a fixed exchange rate to cure their hyperinflation. (technically called
a currency board)
it worked spectacularly at first. economy boomed, investment poured in, inflation cured at last. after the 1997
crisis. their neighbors such as brazil devalued their currencies. argentina not being able to do so became uncompetitive and their economy went into deep recession.
finally something just had to give.
so, there are enough dissimilarities that the
outcome may not be foreordained.
having said that, there are too many worrying similarities too.
as regards gma being motivated to default.
(from torn and frayed) I am not buying into that. the first to suffer from default would be our own local banks who are heavily invested in our own foreign debt.
but gma is really smart. she rolled over many of our foreign debt to mature to 2010 and 2015.
in effect, she kicked the can down the road for the next president/prime minister to solve.
here is an argentina link i found informative.
a study by commissioned by U.S. Congress.
http://www.house.gov/jec/imf/06-13-03long.pdf
Can’t agree more with the insight that this “Truth Commission” is just another quick fix on a rotten system.
Why are we so quick to place layers upon layers of ad hoc committees, commissions, and the like to do the job of EXISTING institutions such as congress and the judiciary. It’s because we are a people who have no concept of institutional effectiveness and the addressing of systemic issues using systemic solutions.
We are always going for shortcuts and tapal rather than fixing the system so that it serves us RELIABLY in a SUSTAINABLE manner.
Systems that require constant handholding yet continue to be built on are surefire candidates for IMPLOSION. Just like our economy — propped up by foreign remittances — is ONE BIG TIMEBOMB. These remittances are spent almost wholly on CONSUMPTION rather than on the expansion of our economy’s CAPITAL BASE — prime candidate for implosion our economy is.
A system of governance that is not supported by robust institutions but instead continuously usurped by STREET POLITICS and ad hoc commissions is on the way to implosion as well.
Doomsday stuff. But then again, we need to learn to HANDLE THE TRUTH.
http://www.getrealphilippines.com
Given the Philippines’ penchant to get lost, dazed and confused without a colonial mentor badgering it, I think China should be the next likely candidate of Master of the Filipinos.
The Economist is the best — I don’t need to read anything else (except these blogs of course) 🙂
‘freaky friday’
hey that’s good. i have heard it described elsewhere as ‘the longest friday’.
freaky hits the nail on the head.
Geez, th eus of P.I. by the Kanos is so unwittingly offensive!!! Sounds too much like _utang-_na!!!
Congratulation people for your very analytical insights on Philippine debt.
That the Philippines going the way of Argentina is not news anymore. The comparison have been pointed out even several years back. And If not for the “hello garci” issue stremlining the bureucracy was already in the can, in tandem with the expanded vat law, as part of the fiscal reform to avoid the Argentina pattern .
I have to agree with torn that the displaced governement employees might just spark another unrest this time of intensity that could look the previous ones incomparably tamed. the people are already squeezed to the last drop of their juice in the name of debt servicing. And it will look ironic that while the government boosts of its million job generation (count the pedicab drivers and the stevedore) it is cutting the governement workforce as an inevitable consequence to fiscal reform.
I wonder if we are better off economically in a leaner bureaucratic workforce but with more displaced former working class.
sorry, that should be “use”, of course.
me too, it should be boasts not boosts
Total debt service, which includes both interest and amortization of principal amounts to PHP646 billion for 2005. This represents PHP301B for interest and PHP345 B for principal amortization. This amount,according to latest estimates by DOF, is equivalent to 86% of total projected revenues of PHP 751 billion for the year 2005. You can actually get these numbers from the DOF and/or BSP websites (www.dof.gov.ph and http://www.bsp.gov.ph). This tells us that almost 9 out of every 10 pesos our government collects as revenues will just go to payment of our public debt. Only one peso is left for keeping the government operating, much less invest in infrastructure and social services for our future development! This is obviously not a sustainable situation, and that is
why it was foolish to declare the fiscal crisis over.