It must have been the similarities that struck him. Brazil’s President Luiz Inácio Lula da Silva is also in the midst of a serious political crisis. His political allies have been caught with their fingers in the cookie jar, so to speak, engaged in a campaign to buy votes from allied politicians. (Sounds like Ate Glue and the congressmen during the impeachment debate).
Brazilians are holding Lula responsible and massive demonstrations against Lula are a common sight in the streets of Sao Paolo. Lula’s popularity rating has also plummeted. He is in trouble with his legislature and it is clear that Lula’s power has eroded even among members of his own Worker’s Party.
But, Mr. Pesek observed, investors have, so far, not panicked. There is the 16 percent increase in the Bovespa index this year, a gain matched by the rise in the nation’s currency against the US dollar. Mr. Pesek noted "an improved fiscal position also has inspired confidence and led to more foreign investment, regardless of Lula’s woes." The irony is, Brazil’s economy is forecast to grow slower than that of the Philippines, yet it is winning more foreign capital.
The Bloomberg opinion writer wondered, "if the Philippines read from a similar playbook, it also might get the benefit of doubt from investors." Mr. Pesek thinks an important lesson we should learn from Lula is the merits of fiscal austerity.
Ah, it is that "F" word again. And that "A" word too. "Amid rising pressure to loosen spending, Lula is holding to the country’s target for a budget surplus… The policy is keeping a lid on Brazilian debt yields, strengthening stocks and the currency."
Brazil’s healthier fiscal position, Pesek says, explains the investment disparity with the Philippines. Pesek calls it a responsibility dividend. "In recent months, Brazil, the biggest debtor among developing nations, paid less interest on its debt." In our case, our officials are proud to announce over subscription of our debt bond offerings but neglect to tell us that we offered some of the highest interest rates in the market. That means we are paying through the nose.
And that’s because we don’t have a choice. Next year promises to be the same. Malacañang submitted a budget proposal to Congress that exceeds a trillion pesos for the first time. And it seems estimates of government’s ability to collect revenues to support the budget proposal may be too optimistic. That could only mean more borrowings would be required.
One other difference between Ate Glue and Lula explains why Brazil, also equally prone to crises as we are, seems to be getting a better reception from markets. That difference has to do with accomplishments in spite of the problems. "Scandals would get less traction if Arroyo had done more to spread the benefits of rapid gross domestic product growth."
In conversations with Filipinos these days, Pesek relates, one senses little outrage over allegations that Arroyo rigged last year’s election. "Even though she was caught on tape appearing to conspire with election officials, Filipinos seem more outraged by her failure to create jobs, reduce poverty and curb national debt."
Pesek concludes that "guilty or innocent, Arroyo must answer for not restoring investor confidence in a nation that has the second-highest jobless rate in the Asia-Pacific region and where a third of its 85 million people live on less than 60 US cents a day." Her failure, he says, feeds concerns that the Philippines will default on debt – again. Investors do not forget when governments renege on debt payments, as the Philippines did 20 years ago.
His prognosis? "Reducing corruption and increasing bureaucratic efficiency is difficult in the best of times, never mind amid a political crisis. It’s imperative that the growth of government debt, which has tripled since 1997, be curbed… Political ferment is the big wild card."
In other words, folks, expect a wild ride ahead.
Yet, it would seem that the developing world now has a new advocate in the corridors of power, not just in Washington but also in rest of the developed world. He worked hard to get debt relief for the poorest African countries. Last week, according to a story in the Financial Times, he also called on nations that harbor money looted by corrupt African dictators to return it to the countries of origin.
Directing his call to countries like Switzerland, Mr. Wolfowitz correctly observed "corruption is not just the problem of developing countries. Developed countries have a responsibility too and part of that responsibility is to make it as hard as possible for corrupt officials to hide the money that they steal."
Strangely enough, Jean-Daniel Gerber, the Swiss secretary of state was reported in the same story as having agreed with Wolfowitz that repatriating illegally acquired funds, was an important tool in the fight against corruption. "The involvement of the World Bank as the third party can be very helpful, as it creates confidence among key stakeholders about effective use of the repatriated funds."
Wolfowitz is at the forefront of efforts to return to Nigeria some $458 million siphoned into Swiss bank accounts by the country’s former dictator, Sani Abacha. Someone should call up Wolfowitz right away and ask that he include in his effort, the similarly siphoned ill-gotten wealth of our very own Mr. Marcos and his cronies. He should be familiar with our case. After all, he proudly pointed out in an interview for another Financial Times article, the key role he played in ending the Marcos dictatorship.
It is also a good idea for Ate Glue to ring him up for another reason. He might just reiterate to her, the message he gave in his first address during the WB-IMF meeting the other week, calling for better leadership and more accountability in developing countries as key priorities.
More specifically, he called on leaders like Ate Glue to address corruption and strengthen checks and balances on government, including civil society groups and the free press. "Sustainable development depends as much on leadership and accountability, on civil society and women, on the private sector and on the rule of law, as much as it does on labor or capital."
Amen to that. He also called on rich countries to keep their side of the bargain by honoring their commitments to increase development aid… and we might add, access to their markets.
First stop is Munich. Abner joins the colorful Oktoberfest celebration, the biggest public festival in the world with over six million visitors every year. Then he visits the birthplace of Pope Benedict XVI (Joseph Ratzinger) in Marktl (southern Bavaria). Abner traces back the roots of the new Pope, and reveals the interesting facets of his hometown.
En route to Berlin and Hamburg, "The Correspondents" stops over to meet Filipinos living in Germany. How has life been in Germany? Karen and Abner unveil the stories of the successes and failures that these Filipinos have endured – a croissant chain owner, Miss Saigon artists, and German-wed Filipina women.
Travel through Germany via "The Correspondents" on Oct. 3 and 10, right after Insider on ABS-CBN. Replays on ANC at 7a.m. on Saturdays and 1 a.m. on Mondays.
What’s the difference among Cory, Ate Glue and Erap?
Cory can’t tell a lie.
Ate Glue can’t tell the truth.
And Erap can’t tell the difference.
Boo Chanco’s e-mail address is bchanco@gmail.com