Davao businessman Dennis Uy recently asked President Rodrigo Duterte for a sovereign guarantee[1] to cover a Php 700 million loan for Uy’s Chelsea Logistics[2]. Eyebrows rose, of course, including those of Bayan Muna chairperson Neri Colmenares[3].
A Sovereign Guarantee is a Government assurance that it will pay loans should the original debtor fail to pay them[4]. That is, a sovereign guarantee means taxpayers will pay Chelsea’s loans if Chelsea fails to, after all.
Yes, I do understand the uproar, but, but I believe it’s still premature. For one, Malacañang has not even considered Uy’s request yet. Uy asked for a sovereign guarantee, but the President has not yet given one.
Besides, I sincerely doubt that Uy is a Lopez.
Wait! What? ABS-CBN’s Lopezes again? Yes, those Lopezes again.
LOPEZ, BENPRES, AND NLEX
In an interview with DWIZ[5], former ABS-CBN journalist Jay Sonza accused the Lopezes of deliberately helping machinate the downfall of President Joseph “Erap” Estrada, after Erap declined the Lopezes’ request for a Sovereign Guarantee.Sonza said:
“Noong nakuha ng Benpres ang NLEX, itong North Luzon Expressway, kailangan nila (Lopezes) ng foreign funding para sa expansion, saka maintenance, modernization. E hindi sila makakuha ng funding kung hindi magkakaroon ng Sovereign Guarantee.”
TRANSLATION: After Benpres acquired NLEX, the North Luzon Expressway, [The Lopezes] needed foreign funding for its expansion, maintenance, and modernization. But they can’t get funding without a Sovereign Guarantee.Benpres Holdings Corporation, now known as Lopez Holdings Corporation, is the parent company of all Lopez-owned firms, including ABS-CBN Corporation[6].
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| The BenPres building in Ortigas Center |
According to Cruz, the Lopez Group defaulted on Php 1.6 billion worth of behest loans from the government-owned Development of the Philippines, namely:
1. Maynilad, when it borrowed Php 710.86 million in 2000 then defaulted in 2003 after Maynilad’s balance sheets went Php 5.2 billion in the red. Maynilad, at the time, was 59.1% owned by the Lopez Family via Benpres Holdings.
2. BayanTel, when it borrowed Php 591.81 million in 1995 then started failing to amortize in 2001, when the outstanding balance was at US$ 11.2 million.
3. SkyCable, when it borrowed Php 207.10 million in 1997 and became past due in 2001.
4. Benpres Holdings, when it borrowed Php 157.95 million in 1996 and went past due in 2002 when Benpres stopped paying.All these loans were written off. As to why, I’d rather reserve that discussion for another article because this one is already very lengthy as it is.
LOPEZ FIRMS ALMOST WENT BANKRUPT
As you can see, three of the four loans were secured on or before the 1997 Asian Financial Crisis, which resulted in massive currency devaluations throughout the region[8]. The Philippine Peso traded at 30 to a dollar[9] in August 1997, then it exploded to Php 42 just five months later in January 1998[10]. The peso continued to nosedive and by October 2000, the exchange rate was at Php 50[11].The Lopezes earned in pesos and not dollars, so the dismal exchange rate caused their dollar-denominated loans to balloon to levels that crippled Bayantel and Maynilad[12].
A firm that’s deep in the red in on a race against time: it has to start turning a profit before it goes totally bankrupt. Loans can give troubled companies more time to fix their act, but how can financial institutions lend to the broke?The answer is simple: sovereign guarantees. If a loan is has government-backing, then there’s little risk of default because taxpayers will, by law, shoulder the loan if the company defaults.
And according to Sonza, that’s precisely what the Lopezes aimed for.
In the same DWIZ Interview, Sonza said:
“Pinipilit si Erap na pumirma ng Sovereign Guarantee. Inayawan ni Erap. O e di inumpisahan si Erap hanggang matanggal.”
TRANSLATION: They were egging Erap to sign the Sovereign Guarantee. Erap refused, so they ‘started’ on Erap until he was deposed.
SONZA: LOPEZ ASKED ERAP FOR SOVEREIGN GUARANTEE
Sonza added:“Iniyawan niya yung Sovereign Guarantee diyan sa NLEx at sa Maynilad Water Services.”
TRANSLATION: Erap refused to give Sovereign Guarantee to NLEx and Maynila Water Services.While he was still in power, lots of companies pestered Erap for sovereign guarantees.
For example, while being cross-examined in his plunder trial, Erap told the Sandiganbayan[13]:
“I rejected that P40 million offered by Mark Jimenez because I did not want that sovereign guarantee provision in the contract. I knew that if Impsa fails to pay its debts, the government would assume its payment and that would badly affect the people."Erap was referring to the $470-million hydroelectric power contract between the Philippine government and Argentinian firm Industrias Metalurgica Pescarmona Sociedad Anonima (Impsa), where the prosecution alleged that businessman Mark Jimenez bribed the former president.
In a 2007 press statement about the plethora of sovereign guarantees issued by President Fidel Ramos to various power companies, Erap’s son Senator Jinggoy Estrada said[14]:
“Hindi nya tinanggap yon dahil may sovereign guarantee. Ibig sabihin ginagaratiyahan ng ating bansa ung kontrata, ayaw ni Pangulong Estrada.”
TRANSLATION: “He didn’t accept that because there’s a sovereign guarantee (requirement). That means the State is guaranteeing the contract, which President Estrada didn’t want.”Erap is no saint, but I cannot find a single record showing that Erap granted sovereign guarantees to anybody.
Moreover, the Estrada bio for the 2015 Most Outstanding Mayor Award (MOMA)[15] states:
“Determined to bring his pro-poor platform to every facet of the government’s operations, he immediately ordered the removal of all sovereign guarantees on contracts for public projects xxx Reconds will show that until January 20, 2001, he did not sign a single government contract with a sovereign guarantee.”Sans claims to the contrary, I think it’s safe to say that Erap really didn’t issue any sovereign guarantee. I’m not commenting on the wisdom of his governance (or the lack of it), but the hard fact is that he didn’t issue any sovereign guarantee.
ERAP VS THE LOPEZES ETC
Erap’s unaccommodating stance must have had a catastrophic effect on the Lopez Group, whose subsidiaries were slowly dying one by one.But a friendlier replacement may not come in time: Erap was still in the first half of his Presidency.
The Constitution states that only the President has the power to issue sovereign guarantees[16], so if I were someone who badly needs a major financial lifeline that only a President can give, then I’d convince the President to give me one.
But he won’t, so the next best thing is to wait for him to step down then ask the next president, but this one just got elected this year. Will my companies survive for the next six years?
It’s not just Sonza’s sovereign guarantee issue.
Erap in a 2006 speech said just three months into his presidential term, the Ayalas and Lopezes asked him to raise water rates by 80 percent.
Erap said:
“I gained their ire when I turned down their request xxx my slogan is Erap para sa Mahirap xxx If I approve their request the poor Filipinos might rephrase my slogan into Erap Pampahirap."A loan is a loan, but a water rate hike is basically free money from the People.
Erap added:
“Business is a gamble. If you lose in business, you cannot pass your losses to the people. If they win in their business, will they share it to the people?"Well, if I were in the Lopezes’ shoes at a time like that, I may have wished for his deposal. And obviously, I’d use ABS-CBN, which had a virtual monopoly on public opinion, to realize that goal.
Erap was deposed[17] a little over two years later in January 2001.
I guess even the 1999 wedding of scion Beaver Lopez and Erap daughter Jackie Ejercito did nothing to change Erap's mind.
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| It's still a problem up to this day. |
Yes, Erap made a lot of mistakes. But in as far as the possible motives for removing a president, I think money is most likely on the top of the list.
Sonza’s claim that Lopezes use media assets to attack competing interests is not really new, as a 2000 peer-reviewed paper published by Cambridge University Press shows that the Lopezes have a long history of using media assets to attack their political opponents.
In “Kinship Politics in Post-War Philippines: The Lopez Family, 1945-1989” [18], Mina Roces of the University of New South Wales narrated the Lopez Family’s ascent from a regional economic power in Ilo-ilo to the wealthiest clan in the country.
The story is quite long, so I’ll just focus on the parts that are immediately relevant to this discussion. Note that unless otherwise stated, all contents of the following sections are based on Roces’ paper.
THE MEDIA-POWERED RISE OF THE LOPEZES
The massive Lopez fortune started with two Lopez brothers: Fernando, who was involved in Politics, and Eugenio Sr., who focused on business. |
| Fernando Lopez |
Roces wrote:
“Thus began a symbiotic relationship between politics and business that thrived on the closeness of the two brothers. With one brother in politics, the Lopez family had the passkey to the realm of special privileges that gave them access to the credit and franchises sealed of to families deprived of political power. While one brother made political connections, the other was the shrewd and ruthless businessman who utilized these special privileges for the family business corporations.”The Lopezes bought the leading broadsheet The Manila Chronicle in September 1947, a critical juncture of Fernando’s budding political career.
Roces noted that The Manila Chronicle never turned a profit, so she wondered why a business-savvy Eugenio Sr. kept it running for 24 years.
The Lopezes used the newspaper to all political and business enemies, including the President of the Philippines. Using the newspaper’s power to shape public opinion, the Lopezes forced political and business enemies to yield to the Lopez Family’s demands.
Referring to The Manila Chronicle, Roces even said:
“The paper was notorious for biased reporting.”Sounds familiar? Mhm, I know.
Fernando Lopez became a senator just two years into his mayoralty and just three months after acquiring The Manila Chronicle, which praised him all the time.
At a time when taxes from the sugar industry made up 43% of government revenue, the very powerful Lopez-led sugar barons in 1949 convinced presidentiable Elpidio Quirino to pick Fernando as his running mate.
Quirino didn’t regret his decision, as The Manila Chronicle ran full-page ads for the Quirino-Lopez ticket while not placing any for rivals Laurel-Briones and Avelino-Francisco.
Backed by a major mass media company and the money of the all-powerful sugar bloc, Fernando became vice-president in 1949.
Fernando was Vice-president and Secretary of Agriculture and Natural Resources from 1949 to 1953 and from 1965 to 1971, and a senator in between.
While Fernando headed Agriculture and Natural Resources, Eugenio bought the following:
1: Binalbagan-Isabela Sugar Company (BISCOM), the largest sugar company in Southeast Asia that helped Sugar Bloc members expand their businesses
2: Pampanga Sugar Mill (PASUMIL), which became the Lopezes’ second sugar central
3: Philippine Portland Cement
4: Industrial Company, which made the jute packaging for sugar
5: ABS-CBN Broadcasting Corporation
6: Manila Electric Company (MERALCO)ABS-CBN is neither Agriculture nor Natural Resources, but I think it’s safe to say that the Lopezes learned from their ownership and control of The Manila Chronicle that mass media could do wonders.
BISCOM, PASUMIL, and Industrial Company fall under agriculture, while Philippine Portland Cement and MERALCO fall under Natural Resources.
And Fernando, at the time of their acquisition, was the Secretary of Agriculture and Natural Resources.
What a coincidence!
MACAPAGAL VS THE LOPEZ SUGAR BLOC
In the 1960s, President Diosdado Macapagal attacked the Lopez and what he called the “Lopez Sugar Bloc” when he argued that the Lopez and friends used their political connections to get loans from the government-owned DBP, Philippine National Bank (PNB), and Government Service Insurance System (GSIS). |
| Diosdado Macapagal with daughter Gloria |
BISCOM – Php 32.49 M from DBP, Php 3.5 M from PNB
PASUMIL – Php 4.788 M from DBP, Php 1.2 M from PNB
Philippine Portland Cement – Php 2.355 M from DBP
Industrial Company – P1.45 M from DBP
ABS-CBN – Php 2.875 M from DBP, Php 485 K from PNB, Php 500K from GSIS
Manila Chronicle – Php 2 M from PNB
MERALCO – Php 35 M from PNBAdding DBP and PNB loans of other Lopez companies, that’s Php 88.373 million as of 1962.
Just “how much” is Php 88.373 million?
A peso in 1962 is equal to USD 0.27[19] so that Php 88.373 million equals USD 23.96 million. Using an inflation calculator[20], USD 23.96 million in 1962 is equal to USD 204.67 million in 2020. With the 2020 USD:PHP exchange rate hovering at around 1:50, then that’s roughly Php 10.2335 billion pesos today.That is, Php 88.373 million in 1962 can buy as many things as Php 10.233 billion in 2020.
Needless to say, the Lopezes again used their TV, Radio, and Print assets to prevent Macapagal’s reelection in 1965, or the year Ferdinand Marcos ran for president with Fernando Lopez as running mate.
And they did, as Roces wrote:
“The Marcos-Lopez campaign was launched on January 6, 1965. During the entire year of 1965 The Manila Chronicle had almost daily reports on the activities and the speeches of both candidates, while the Macapagal Administration was continuously and ruthless attacked.”Macapagal and Pelaez stepped out, Marcos and Lopez stepped in.
Several years later, Marcos also tried to do what Macapagal did, i.e., wage war against the Lopezes. But this article is already running long, so let’s talk about that on another day.
Regardless, what’s clear is that based on this discussion, the Lopezes historically exploited their media assets to further their personal interests.
Amidst ABS-CBN’s franchise renewal issue, I encourage everyone to “keep it real”: Let us stop deluding ourselves into thinking that ABS-CBN did nothing but be “In the Service of the Filipino.”
Just like you, I sometimes get shocked about what other people say, especially when their words go against what I have believed for the longest time.
But then, our political consciousness is shaped mostly by what we see on TV. But then, who ultimately decides on most of what we get to see on TV?
The Lopezes.
[RJ Nieto / ThinkingPinoy]
SOURCES:
[1] Chelsea Logistics and Infrastructure Corporation. Information Statement. Corporate Disclosure. 10 February 2020. http://bit.ly/39DCReW[2] Chelsea Logistics and Infrastructure Corporation. Current Report under Section 17 of the Securities Regulation Code and SRC Rule 17.2(C) thereunder. Public Disclosure. 14 February 2020. http://bit.ly/2HxJLXb
[3] Inquirer. Colmenares asks PhilGuarantee to prioritize SMEs amid reports of Dennis Uy’s loan bid. 17 February 2020. http://bit.ly/3bX7FJM
[4] FindLaw. Sovereign Guarantees in Project Finance. http://bit.ly/37B4ROO
[5] DWIZ 882 AM. Tambayan sa DWIZ. 17 February 2020. https://youtu.be/ONQhTkP9Usk?t=822
[6] Lopez Holdings Corporation website (lopez-holdings.ph). About the Company. Retrieved 17 February 2020. http://bit.ly/3206Yuw
[7] Inquirer. DBP wrote off P1.6B in loans to Lopez group. 07 November 2011. http://bit.ly/325aAeI
[8] Chapelow, J. Asian Financial Crisis. Investopedia. 25 July 2019. http://bit.ly/2P5106g
[9] TradingEconomics. Philippine Peso: 1997-2020 Data. http://bit.ly/2HBnzeU
[10] Ibid.
[11] Ibid.
[12] ABS-CBN News. Lopez Holdings debt down to $7.5-M after buyback. 03 September 2011. http://bit.ly/37yA993
[13] GMA News. Lead prosecutor scolded for 'delaying' Estrada trial. 21 June 2006. http://bit.ly/2SASVbM
[14] Senate of the Philippines. Transcript of interview with Sen. Jinggoy Ejercito Estrada. Press Release. 06 November 2007. http://bit.ly/39Oym15
[14] Senate of the Philippines. Transcript of interview with Sen. Jinggoy Ejercito Estrada. Press Release. 06 November 2007. http://bit.ly/39Oym15
[15] Superbrand Marketing International. 2015 Most Outstanding Mayor Award. Page 36. http://bit.ly/2P49cUt
[16] Section 20, Article VII of the 1987 Philippine Constitution. http://bit.ly/324r7zC
[17] Philippine Star. There was already a coup in place against Erap, so the anti-GMA coup plot fizzled out. 24 January 2001. http://bit.ly/2V45DBo
[16] Section 20, Article VII of the 1987 Philippine Constitution. http://bit.ly/324r7zC
[17] Philippine Star. There was already a coup in place against Erap, so the anti-GMA coup plot fizzled out. 24 January 2001. http://bit.ly/2V45DBo
[18] Roces, M. (2000). Kinship Politics in Post-War Philippines: The Lopez Family, 1945-1989. Modern Asian Studies, 34(1), 181-221. Retrieved February 18, 2020, from www.jstor.org/stable/313115
[19] FXTop.com. Historical Currency Converter – Php to Usd on 01 January 1962. http://bit.ly/2SCMFA7
[20] USinflationcalculator.com
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