Lucio Tan bullish on RP prospects under new GMA administration

Even as the cash-strapped government contemplates a host of new taxes that could affect his business interests, beer and tobacco magnate Lucio Tan still expressed optimism yesterday about the country’s prospects under the new Arroyo administration.

After predicting some time ago that the peso could depreciate considerably against the dollar, Tan said yesterday that things were looking good enough for the peso to bounce back to 50 to $1.

Tan was caught by reporters at the anniversary party of the Philippine Deposit Insurance Corp. (PDIC) where he was invited as guest of honor along with Bangko Sentral ng Pilipinas (BSP) Governor Rafael Carlos Buenaventura and Rep. Jesli Lapuz.

While Congress had canvassed the votes for the May elections, the government’s enormous financial troubles had unraveled and various taxes on beer, tobacco and even softdrinks are now under serious consideration.

According to Tan, however, he remained optimistic that the economy could recover and despite the Arroyo administration’s plans to increase the taxes on almost all of his manufactured goods, he still supported the newly-elected president.

"I’m optimistic," said Tan who is known for being media-shy. Tan had predicted that because of the country’s crippling weaknesses in governance and political culture, the peso could drop to 100 to the dollar and even to as low as 120 to $1.

Yesterday, however, the unassuming taipan said the peso would recover soon. "Fifty to one", he said, indicating that he expected the peso to recover dramatically to 50 to $1 within the next six-year term of the Arroyo administration.

When asked whether he would support President Arroyo despite her plan to increase taxes on tobacco and alcoholic beverages, Tan was unequivocal.

"Yes, I will support her," Tan replied although he declined to elaborate.

Over the years, various administrations have tried and failed to adjust the excise taxes on alcohol and tobacco by indexing them to inflation to provide an automatic mechanism for adjustment because the current specific excise taxation has stopped working.

The Arroyo administration is expected to push Congress to pass the long-delayed indexation of excise taxes and if passed, this would affect Tan’s alcohol and tobacco businesses under Asia Brewery and Fortune Tobacco.

Buenaventura, for his part, said a 50 to $1 scenario was not entirely impossible if the government shows it can handle its mammoth problems.

"Just because we have big problems doesn’t mean they’re unsolvable," Buenaventura said.

"It’s only a matter of will," Buenaventura added. "Our planners already have a good idea of how to deal with the debt, the deficit, revenue problems and improving the investment climate."

Even after Congress concluded its canvassing of votes, however, the expected recovery of the peso has not materialized to the level predicted even by currency traders.

After hitting a new all-time low earlier this week, the peso has only recovered up to P56.224 to the dollar, suffering under the weight of weak regional currencies and the strength of the dollar itself.