Archive for the ‘Cojuangcos’ Category


Smartmatic/TIM PCOS machines: Will they work to contract specifications today?

The Philippine Star reports today that “foreign investors have adopted a wait-and-see attitude, putting on hold or temporarily withdrawing their investments in the Philippines due to jitters over today’s elections, according to Bangko Sentral ng Pilipinas (BSP) Deputy Governor Diwa Guinigundo.

Gunigundo is quoted saying: “We continue to see inflows from the external markets. Perhaps if there will be – we don’t have the numbers yet – it is because of election jitters”.

He also pointed out that foreign investors could have adopted a wait-and-see attitude because of the uncertainties brought about by the May 10 elections.

Guinigundo said the jitters could have forced investors in the financial and equities markets to temporarily pull out their investments in the Philippines.

What Gunigundo had observed are signs of the political-business cycle in the Philippines, a phenomenon identified years earlier by UP School of Economics dean Noel de Dios.  Post-1987, the cycle theoretically repeats every six years, that is, every time a new president is elected.  Since the Philippine president is restricted to a single term, investors apparently adopt a wait-and-see stance in the early months of the term of the new president to discern his (or her) general policy preferences and programme.  Then as the policy landscape firms up, investments (including portfolio) will come back in.

Investors may also opt to exit before the presidential elections so they may not be forcibly locked in during the early term of the incoming national chief executive.  This is insurance in case the new president adopts policies unfriendly to capital.

It is an empirical matter whether the cycle was observed since the year 2000.  If we may recall, President Estrada’s grip on power started slipping when his erstwhile ally, Gov. Chavit Singson, started singing about jueteng payolas in late 2000.  Then it was almost a fast break to his derailed impeachment and his eventual ouster in January 2001.  I surmise that capital left the country in late 2000 and adopted a cautious attitude through the first three quarters 2001 as President Gloria Macapagal-Arroyo had to consolidate her grip on power in the light of the challenge of the poor people uprising of April-May 2001.

I also hypothesize that capital adopted the same wary stance prior to the May 2004 presidential elections.  It would be curious to find out how capital behaved in response to the 2003 Oakwood mutiny , the ‘Hello Garci’ revelations and the political crisis generated in the middle of 2005 and the attempted coup of February 2006.  May I call on Noel de Dios to do the appropriate study.

If today’s elections will be concluded successfully, investors will have no cause for alarm because a presidency either by Noynoy Aquino or Manny Villar will mean the adoption of orthodox or centrist business policy.  Investors may be quite wary of a new Estrada presidency given the latter’s demonstrated propensity to give preference to his midnight cronies.

To be fair, investors may also be cautious about allegations regarding Villar’s use of governmental powers in favor of his own business interests.  If Villar wins the presidency, he will have to assign his assets to a blind trust or to divest completely and convincingly to avoid tremendous conflict-of-interests issues.

Of course, if elected president, Noynoy must likewise disclose his assets, assign them to a blind trust or divest, and assure the electorate that he will not use or will not be used so his clan’s control over Hacienda Luisita will continue or that the Supreme Court will rule on the long-standing temporary restraining order against the Presidential Agrarian Reform Council’s ruling for distribution of Luisita land to its farm workers.

The last time we heard news about Hacienda Luisita is that it is heavily indebted.  Thus, we have to be assured by Noynoy that if he gets elected president, the estate will not get preferential credit especially from government financial institutions.

What exercises investors’ worries more than who will be the successor in the presidential palace are grave concerns regarding the automated electoral system adopted for the first time (without any piloting) amid all these news regarding malfunctioning PCOS machines, undelivered and untested flash cards, non-independently-verified machine source codes, and the like.

The worry list is quite long.

Hence the prudential behavior of capital.

A conflict of interest (COI) occurs when an individual or organization is involved in multiple interests, one of which could possibly corrupt the motivation for an act in the other.

The top two contenders for the presidency, Noynoy Aquino and Manny Villar (obviously in alphabetical order) must deal with ‘conflict of interest’ issues as the electoral campaign enters its most interesting stage.

For Noynoy, it is the Hacienda Luisita issue.  In this case, he has to navigate between the interests of the Cojuangco clan and the estate’s farmers and their dependents.  Tita Cory had managed to parry demands to honor her campaign promises regarding land reform by passing the buck to an eventually landlord-dominated legislature.  But not before issuing two orders outlining her reform program that included stock distribution options (SDO), a mode that did not involve the actual transfer of land ownership to farmers.  The option allows landowners to give farmers shares of stock in a corporation instead of land.  In effect, the Cojuangcos apparently took advantage of the powers of the Cory presidency to retain control of the estate.

Noynoy must face the tough questions regarding the estate’s future disposition given that the GMA government has revoked the SDO and ordered the distribution of land to the farmers.  While the Cojuangcos obtained a temporary restraining order (TRO) against the government order in 2006 (meaning, the TRO is in force for  more than three years to date), Noynoy (at the start of his presidential campaign) has recognized the sensitivity of the issue and had promised that the land will be distributed by 2014.  He was later embarrassed by his cousin (recently interviewed by New York Times; for the full story, read it at <;), who manages the estate,  that the family did not have any intention to give the land or sugar production.

Ultimately, Noynoy must convince the electorate that if he wins the presidency, he will not use the same to frustrate distribution of land to Luisita’s farmers, the original premise of the loan extended by government to the Cojuangcos to purchase the estate.

In Villar’s case, he has yet to respond to published reports in the Philippine Daily Inquirer (Jerry Esplanada, ‘The Villar Empire: Dream homes on farmlands’, July 24, 1998)  that conversion of many of his land-holdings from agricultural to residential use was made without the proper clearances from the Department of Agrarian Reform (DAR).

Premature or illegal conversion is a criminal act as mandated under the Comprehensive Agrarian Reform Law and the Agriculture and Fisheries Modernization Act.   Administrative sanctions are also spelled out in DAR Administrative Order No. 7 (Series of 1997) which states that petitions for conversion covering lands which have been prematurely converted shall be disapproved and the subject lands automatically placed under CARP coverage.

It is quite apparent that the two front runners have land issues.

The major business groups represented in the Makati Business Club are apparently not enamored with a Villar presidency presumably because of conflict of interest considerations.  Villar’s latest political ads had him explaining that he will not steal (magnanakaw) while in office because if he wanted to make more money, he would have remained being a businessman.  He also said that he was spending his own money for his political campaign, implying that was good since he will not owe anybody any big favor that must be repaid upon his election.

For businessmen engaged in the same line as Villar’s businesses, these words are not reassuring.  First, they must be convinced that Villar (and his relations up to the fourth degree of affinity or consanguinity) truly divest their corporate interests or at least put them in a blind trust to mitigate COI concerns.

In addition, there’s another angle to one’s spending one’s own money to win an election.  If Villar does not owe anybody but himself for his victory, what is to stop him from using his position not only to recoup his electoral expenses but to enrich himself and his relations further while in office?

Aquino and Villar (and all other candidates for high office) will do the electorate a favor by a public and full disclosure of their assets and liabilities as soon as possible.  I believe in fact that both are legally obligated to do so since they are incumbent senators.

I wish the electoral debate can touch and shed light on these COI issues.  I will discuss other important concerns in future blogs.