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(Article published in TODAY, Business Section)    

The handlers of President Gloria Macapagal Arroyo who incited her to take a negative view of Steve Brice’s “Philippines: A Tale of Two Pesos revisited” must be secretly working for the opposition.  They successfully diverted her focus from the main thrust of the paper of Standard Chartered Bank’s Chief Economist (SE Asia) and prompted her to make a defensive assurance that Argentina’s fate is “an extreme scenario” for the Philippines.  They thus prevented her from seeing the good things Brice had to say about our current situation.

Either that or they, as well as some benighted wannabes who considered the country study as “meddling” with affairs of the Philippines, need a lecture from the President, a good economics professor I hear, on how to read financial reports.

The Steve Brice analysis is a balanced and sober appraisal of where the country stands on the eve of the electoral campaign season.  It is must reading for estate planners who will be around long after the May elections, who will be left with the job of cleaning up the immediate clutter of the posters and the banners and who will have to get on with their lives and loves no matter who gets or does not get elected.

The question that Steve Brice tries to answer for those who have some stake in the Philippines is whether the country is likely to default in the foreseeable future on its external debt commitments, economese for whether the Philippines is likely to be unable to pay its foreign debt anytime soon.  Argentina, in Brice’s paper, served no more than as a theatric foil to make the central character look good.

His response is very clear: while the country’s situation deteriorated slowly in the last two years, default does not look imminent.  True, the country has become vulnerable to external shocks, another economese for major developments outside of the country’s control, still time is on its side. In other words, we can still remedy our weaknesses and avoid not paying our debts.

Compare that to the statement of former Finance Secretary Camacho’s disclosure, shortly after leaving office, that “we are in a financial crisis”.  If Brice is to be questioned on his study at all, it is why he thinks he knows better than the Secretary who was at the center of it all the last two years.

Brice arrives at his upbeat assessment of the Philippines in the near term after analyzing four key areas, namely, the economic outlook, the state of the public finances, the external position, and the political outlook. 

“The good news,” says Brice, “is the Philippines is a remarkably stable economy. In 2002, the economy expanded by 4.6% and by 4.5% in 2003.”  For this year, despite the unanimous feeling, articulated elsewhere by another former finance secretary who now heads the Asian Institute of Management, that investors will wait-and-see until after the elections, Brice expects the economy to grow by 4.8%.

The level of revenues in comparison with government spending is, of course, not a secret to anybody.  Despite the improved performance of the Bureau of Internal Revenue under my friend Commissioner Parayno and of the Bureau of Customs under my former student Bernardo, there is still much work to be done in increasing collections as a percentage of GDP.  But with elections to be over by this May, there is no reason why the next administration will not be able to buckle down seriously tackle this problem.

The external position of the country, though fragile, is not in danger.  Brice points to four reasons: (a) the Philippines is a open economy which makes it able to compete in the export market; (b) the BSP has been doing a good job in spreading over time, to around 13 years, the maturities of our debts thus avoiding the bunching of payments that cannot be all met at one time; (c) the Filipino overseas workers’ remittances have been continuously rising; and (d) the international financial market still looks kindly on Philippine debt, thus not imposing exorbitant costs on our borrowings.

The political situation is, of course, uncertain.  Brice would have had to be blind not to see what is obvious to all of us.  And he restates what is said all over the place: (a) “there are far too many uncertainties to judge the efficacy of a government under” FPJ’s leadership; and (b) an elected GMA, who is known to have a great desire to leave behind a pro-reform legacy, could be more focused in her second term that she was in her first and, “as an elected leader, rather than by default, she would likely become more confident in her mandate.”

Thus, Brice concludes that while dangers lurk in the wayside, the hazards can be avoided.  “There is still time to act.  But the clock is ticking.”   Brice’s paper is a calm call to awareness without sounding the alarm; a case for serious thought and meaningful measures and not for pessimism and abandoned hope. His study is in favor of no one.  It is only in favor of action.