I was surprised that people were surprised about it, least of all government. I thought it was a foregone conclusion. The concession was going nowhere and the Lopez Group could no longer carry the continuing burden. Maynilad was ready to accept a government proposal to freeze water rates for two years, provided loan payments are restructured. But government withdrew its own proposal. In the end, Maynilad simply had to use the appropriate terms in the concession agreement to find relief, which is termination.
One of those who took me aside last Tuesday morning was Sen. Manny Villar. I found his comment interesting. The problems of the Lopez Group are just like the problems of the country, he observed. That reminded me of the good times when analysts loved to say that Benpres was a proxy of the economy because of the nature of our investments. Turns out, they weren’t kidding!
Manny Villar told me to tell the Lopezes they should fire their investment bankers. "I told President Arroyo she should fire hers," he added. Manny then went on to explain that he is familiar with really bad situations like this. "If I took the advice of my investment banker when I was having difficulties, I’d be begging in the streets today," he declared. Manny related that his investment banker advised him to give up his case and let the creditors decide his fate. "I fired my investment banker instead," he said.
The problem with these Harvard/Wharton types who cut their teeth in New York as investment bankers is that they are instinctively on the side of other banks, the senator said. He went on to say that these New York types are also like fish out of water in our business environment. "This is why when I realized that I had nothing to lose after my investment banker gave his advice, I decided to fight it out."
I asked him who was his investment banker. Manny smiled and said it was Deutsche Bank and Lito Camacho was the country head at that time. Actually, Manny is pretty open about his disgust with investment bankers. I heard a story some weeks ago that Manny said pretty much the same thing to President Arroyo and in the presence of Camacho when the senator was at the Palace for a meeting. He reportedly advised the President to get rid of her investment bankers if she does not want to go down with the economy.
Manny’s story got me thinking that he may be right. Maynilad Water’s financial adviser for the privatization bidding that it won was Bankers Trust. Maynilad accepted the terms of the concession agreement, which didn’t have the standard automatic foreign exchange recovery that utilities in this country normally enjoy. Even MWSS itself had this forex protection for the foreign loans Maynilad was assuming.
Having lived in this country since birth, I grew up to learn never to trust the peso. I remember questioning the absence of the forex adjustment clause. I couldn’t believe they were only providing for a two- to three-percent annual forex depreciation. So, when forex deteriorated 100 percent as a consequence of the Asian crisis, the concession agreement was not worth the paper it was written on.
The formula which required Maynilad to carry 90 percent of MWSS’s outstanding debt while Ayala carried 10 percent, was also part of that same agreement. I also remember asking the stupid question of why we must pay for 90 percent of MWSS’s debt and Ayala takes care of only 10 percent. I was told all that is based on a sophisticated formula I would not understand, or words to that effect.
The formula was devised by the International Finance Corp. (IFC), a World Bank subsidiary staffed by investment banker types. Among themselves, the sophisticated formula was a beauty. The only problem is, it didn't withstand the Asian financial crisis. What good are these sophisticated financial models and formulas if they don’t work in the real world.
Bankers Trust advised Maynilad it was okay to accept, what turned out to be fatal terms. But we must share the blame. Maynilad and Benpres had its own group of Harvard-type investment bankers on its staff who accepted the Bankers Trust recommendation. If this were the US, someone would probably sue Harvard and Wharton for graduating students who caused this mess.
Manny Villar, the self-made billionaire who almost became a pauper all over again, must be right about investment bankers. But I told him I don’t think the President is inclined to dismiss her investment bankers and neither are the Lopezes ready to take that drastic step. Well, the senator remarked, they do so at risk of losing the presidency and everything they have.
Oh yes, I almost forgot this curious detail. The country head of Bankers Trust at the time they were advising Maynilad was, Lito Camacho too. He should be defending his handiwork or why his bank advised Maynilad to accept the concession at those terms. They were, after all, paid good money for their advice.
Incidentally, it is Manny Villar’s birthday today. And Serge Osmeña, too. Happy Birthday, senators!
According to the World Bank’s Philippine Environment Monitor 2002, each Filipino spends at least P2,000 yearly for treatment of health-related illnesses such as respiratory ailments. Furthermore, fine particle emissions result in approximately 2,000 deaths each year, 9,000 cases of chronic bronchitis, and 51 million days of respiratory illnesses in the country’s largest cities, Metro Manila, Cebu, Davao, and Baguio.
To further boost efforts to improve the air quality, World Bank proposes the adoption of such measures as already provided for in the Clean Air Act. Other more specific proposals include an improvement in commercial vehicle maintenance; shift to four-stroke tricycles; require manufacturers to install exhaust catalysts for gasoline vehicles; reduce sulfur in diesel fuel and enforce the ban on waste burning.
The biggest contributors to urban air pollution are diesel emissions from buses, jeepneys, utility vehicles, and trucks. There must be a way of forcing operators of these vehicles to be more conscientious in maintaining their vehicles. Vehicles constantly overloaded beyond designed capacity and diesel engines that are not regularly maintained are responsible for polluting our air.
If there is one area where the Strong Republic should flex its muscle decisively, this is it. When she dropped by the Edsa Shangri-La Tuesday Club this week, DENR Secretary-designate ‘Bebet’ Gozun agreed that we must do something to clean the air we breathe. Hopefully, it remains as one of her priorities after she assumes office next week.
Q: How do you cancel an appointment with a sperm bank?
A. Simply call them up and tell them you can’t come.
(Boo Chanco's e-mail address is bchanco@bayantel.com.ph)