Cry poor me Argentina

WHILE the world was transfixed by the athletes of the Summer Olympic Games in Athens, and while Americans were preoccupied with the politics of the Democratic and Republican national conventions, Filipinos were arguing about the Philippines becoming the next Argentina.

No, they weren't talking about how the country's basketball team will win the Olympic gold medal in Beijing 2008 as Argentina did this year in Greece 2004 while trampling over the American Dream Team.

Argentina was on the minds of Filipinos when they heard President Gloria Macapagal-Arroyo announce last week that the Philippines was now in a "fiscal crisis."

The stark facts were bared for all to see: as of the end of 2003, the Philippine government owed 3.36 trillion pesos (60 billion dollars), the equivalent of over 70 percent of the gross national product or GNP of the country. A little less than half or 1.65 trillion pesos (29.7 billion dollars) is owed to foreign banks, while 1.7 trillion pesos is owed domestically.
Included in this enormous debt is the 2.3 billion dollars that Ferdinand Marcos borrowed in 1984 to build the Bataan Nuclear Power Plant, costing three times more than a comparable plant built in South Korea. After acquiring the money, Marcos fled the country in 1986 and later in that year, international inspectors examined the Bataan power plant and found it to be unsafe and inoperable. The plant was built along several earthquake fault lines, perilously close to the then dormant Mt. Pinatubo volcano. The Filipino people are stuck with paying interest in the amount of 155,000 dollars a day for this nefarious loan.

In 2003, the government paid 231 billion pesos (more than four billion dollars) just for the interest on the outstanding debts, representing about 28.4 percent of the entire government budget. This year, interest payments will zoom up to 272 billion dollars or 31.4 percent of the government budget. Add the interest payments to the principal this year which will be 271 billion dollars, up from last year's 195 billion pesos, and the grand total is a staggering 542.2 billion pesos (eight billion dollars) in debt payments for 2004, which will take up 81 percent of the government's revenues. This is the total of all the official money remitted to the Philippines annually by overseas Filipinos.

My high school classmate, Ciel Habito, a PhD in Economics from Harvard, explained that this means the Philippines is able to use less than one out of every five pesos of revenue collected by the government for current needs. "Think of the poor wage worker deep in debt who is met by his friendly neighborhood shark lender on payday who takes away FOUR-FIFTHS of his pay envelope."

Seven years ago, Ciel explained, "the total debt service was only 125.6 billion pesos, taking up just 26.6 percent or about one out of every four pesos of revenue collected, leaving us still three out of four pesos collected to spend for current needs. It was actually in the last three years when the debt service burden accelerated most rapidly, jumping from 44.3 percent in 2000, to 75 percent in 2003, and now 81 percent. Clearly, something has gone terribly wrong."

At this rate, UP economists warn, the Philippines will face the same fate as Argentina in 2 - 3 years.

In 2002, Argentina faced a "full-blown depression" with the country's output (real gross domestic product or GDP) falling 28 percent between 1998 and 2002. The Argentinean peso, held fixed by the government at one peso to one US dollar since 1991, was devalued in early 2002 to nearly 4 pesos to the dollar. (It would be the equivalent of the Philippine peso going from 50 pesos to a dollar to 200 pesos to a dollar.) Inflation, which had been low or even negative since the early1990s, shot up to 41 percent in 2002. Unemployment doubled from 12 percent in 1998 to 24 percent. Poverty incidence shot up from 25.9 percent in 1998 to 57.5 percent in 2002. These economic conditions led to bank runs which closed down Argentina's banking system.

The Philippines is not Argentina yet, my high school classmate assured me by pointing to the Argentine government's failed effort to artificially maintain the Argentine peso on par with the American dollar. The Philippines allows the market to determine the peso's relationship to the dollar. But alas, unless immediate steps are taken, the country can cry poor me, Argentina.
President Arroyo's declaration that the Philippines was in a fiscal crisis was probably aimed at winning support in Congress for new taxes to pay off the ballooning foreign debt. The proposed new taxes would raise an extra 80 billion pesos (1.4 billion pesos) in revenues a year while creating annual savings of 20 billion pesos.

But her announcement resulted in the Philippine exchange rate going up and the Philippine stock market going down, prompting the government's economic officials to scramble to play down the alarm sounded by the President's declaration. "We are not in a fiscal crisis," assured Secretary of Trade and Industry Cesar Purisima. "The President used the term rhetorically and not technically."

There is heavy pressure on the Congress to drastically pare down or eliminate altogether its "pork barrel" funds where each senator and congressman is allocated about 40 million pesos a year to spend with as he or she wishes for their constituents.

Filipinos in the US can help the Philippines by making plans to visit the country. A good time to come would be in January to attend the 3rd Global Filipino Networking Convention which will be held in Cebu City at the Waterfront Hotel on January 20-22, 2005.

The 3rd Global's theme is "Pinoy Power Worldwide: A Gathering of Heroes." The Convention is organized by the National Federation of the Filipino American Associations and its co-convenor, the Cebu Visitors and Convention Bureau.

Executive coordinator Lorna Lardizabal Dietz is working on a package of a round-trip fare from the US to Manila to Cebu with four days and three nights at the Waterfront Hotel and registration fee all for 999 dollars.

"We believe that honoring overseas Filipinos as models of empowerment and everyday heroes of achievement," Lorna declared in her e-mail, "is a festive, momentous event worthy of inclusion in your travel plans. Your side-trip to the Island of Cebu can prepare the group for your primary mission and acclimate them to the local scene or celebrate your accomplishments after the main goal is attained."

For more information, call +415 235 9884 US or +63 927 331 3879 Philippines or e-mail thirdglobalcebu@yahoo.com.

Send comments to rodel50@aol.com.