R.P. power, its financing and our ruin

DIE HARD III
Herman Tiu Laurel
4/25/2005



With the latest hikes Gloria Macapagal-Arroyo’s power rates now surpasses even Japan’s, according to the PhilExport News and Features of the Confederation of Filipino Exporters’ on the Internet last April 22. The rates, it argues, has “undermined their ability to fight back competition in the global market…” Meralco apologists are now blaming Napocor for these horrendous new increases, but the truth is more complex: Napocor is just catching up with the Lopezes’ IPP rates since 2001.

The PPA (now known as GRAM or generation rate adjustment mechanism) that Napocor didn’t charge in 2001, because Gloria was hiding her criminal acquiescence to it, will now be charged with interest to pay the IPPs (Independent Power Producers). Many people, including some nincompoop radio commentators, insist Napocor is at fault. Stupid! It goes all the way back to Ramos, and then now GMA and Edsa Dos.

The impact of the latest round of power rate increases, coupled with rising transport fares, water rates and commodities prices due to the new VAT to be passed, will devastate middle class lifestyles =while the masa will pushed towards even more primitive existence. Many more children will give up education. What thoughtless, heartless and soulless regime is this of GMA that can countenance this hardship on the nation. Any radical response to fight the regime is now absolutely justified!

Gloria Arroyo will make mollifying moves, but nothing enough to mitigate the damage. For all these she has earned the hate of the people. She survives by the support of the foreign and local oligarchs behind her in Edsa Dos, and tries to reinforce that support by showing how determined she can be to hurt the people for the oligarchs and demand of the Bicam the higher 12% VAT instead. That’s not going to save her, that’ll just kill the economy faster.

Only OFW remittances and an astounding $ 1.5-B in “hot money” is floating the economy. The “hot money” seems to be coming on in conjunction with a psywar to support VAT approval; threatening to leave the country with every news of possible disapproval; but “hot money” is like two birds on a tree and not a bird in hand. You’ll never have it. Celebrating “investments” from China is premature, they are long term project and do not bring infusion of huge cash, like the North Rail which will be in equipment and facilities or mining exploration.

Recently, the 7-11 chain declared a P 2.5-M loss, minimal but significant as a first. McDonald’s Shaw closed. In the same area a Kenny Roger’s closed. With new power rate hikes, how much impact will it be on the retail chains? The exporters have spoke, expect the other sectors to cry out soon. The new taxes won’t help either, if there’s anyone still stupid enough to believe that. They’ll be for debt repayment, and that won’t go to consumer pockets: a double whammy for Filipinos.

The unjust foreign and national debt remains the biggest monkey on our back and SC Reynaldo Puno, certainly for pogi points as Davide’s retiring, asked why the Bataan Nuclear Power Plant debt could not be repudiated. My brilliant forensic-economist friend Hero Vaswani e-mailed us:

“Mentong,… an associate justice of the SC talking about the BNPP debt. He mentions the fact that under U.S. statutes bankruptcy proceedings are an option. This is available for individuals, companies and even towns and states… Not many people know that the private banks that held the debt had already sold the debts on the secondary market for a deep discount. However the country debtor did not benefit in the debt reduction program. This was consolidated under the Brady debt workout.

“ ….it was primarily the outside dollar funds of the Philippine elite that bought the deep discount debt paper. They bought at .30 cents to the dollar but they were able to use this as collateral to get in pesos the full face value at the prevailing exchange rate. …This whole vulture buy out was organized by the local hit men led by Paeng Buenaventura who was one of the representatives of the foreign creditors during the debt crisis in 1984. Gabriel Singson was another hit men of note together with Cuisia. John Gokongwei was one of the largest vulture fund buyer …

“Most of the debt paper related to the BNPP has already been sold at deep discount and were already used as collateral to fund projects here … That was the first real estate boom in the late eighties and early nineties….(BNPP’ closure) caused the energy crisis in the early nineties … That set the stage for the IPP's. and Ramos liberalization of the financial markets (capital account) cause the bubble. We are paying for all that inside dealing and corruption today.

“… NAPOCOR is also going to be the recipient of ADB GUARANTEES TO INSURE THAT IPP'S GET PAID. That will also lower their interest rates. This is related to the transfer of custodial services to the transnational banks of the issuance of sovereign and corporate debt papers. … Our domestic banking system is technically insolvent. Almost all the income from the increase in government debt was meant to re-capitalize the domestic banking system.

“The multilateral institutions know the precedent set by Argentina is detrimental to their very existence. Here in the Philippines they are making sure we remain stuck to those illegitimate (Napocor) contracts. Also, increasing taxes to cover the budget deficit and increasing the cost of electricity and water and other government services to insure privatization. All these resting on the interest rate differential to make foreign capital invest in local sovereign and corporate bonds. The result is the complete destruction of the Philippine state.”

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