The buyers or the developers?

Today Pag-Ibig gives out less than market rates for its home loans to its members. These are in turn converted to asset backed securities and sold in the financial markets as bonds with government guarantees. Is that illegal or improper? That is part and parcel of the financial business.

What do you think is driving the demand of mid-price and low priced housing and creating millions of jobs? Credit and the secondary markets creating long term funds for housing.

SECURITIZATION. The state cannot survive if it does securitize its future tax income in the form of T-bills and notes.

No real estate industry without it.

Creating a secondary mortgage market in the Philippines should be considered a crime?

In case of default

The government through the NHMC gets the collateral and they have been reselling these homes.

Look at Fannie Mae and Freddie Mac in the U.S. They do not originate loans but they buy them in the secondary market.

Was there any charge that Villar sold to bogus buyers or sold the government fake mortgages?

Mortgage rates are higher in the Philippines as it is the BSP that keeps the cost of money higher here in the country as a policy measure as a draw for financial investors. (Higher rates of interest)

The Asian crisis in 1997 created a huge hole in financial markets in Asia and when you have a sudden withdrawal of liquidity in the market you have collapse.

Villar got hit where it hurt. There is no doubt that in the Philippines debtor in possession rules do help debtors more than they do creditors.

Are you gonna blame the structure and system in laws on Villar. The Lopezes, Copuangcos including the Gokongwies all prospered after the crisis.

Villar was smart enough to use the system to restructure. For the love of God the BSP suspended mark to market rules to enable our local banks to survive (most especially the universal banks) like RCBS who was saved by the DBS of Lee Kwan Yew. RCBC took over the bank owned by the Villars.

The boom you are witnessing today in the real estate markets are all these properties held by universal banks that are now being developed purely with buyer financing. Villar was one of the prime instigators of this development.

Post 1997 unofficially all domestic banks including BPI were technically insolvent as if they had to mark to market their collaterals on their books the state would have had to nationalize the banks. The BSP on advice of the multilaterals moved to forced consolidation of banks and the SPAV law.

Today through the BSP the requirements for credit for construction loans and mortgage loans have been toughened. We have had our real estate crisis post 1997. The U.S. has just had theirs.

All those realty assets sitting on banks books today have healthy valuations. Look at how the cycle has turned. In 1997 everyone was looking at Php60-Php100 to the dollar. Today some sectors are screaming at the BSP for allowing the peso to move towards Php 40 to $1.

How dumb can people get???

In fact the US used the lessons learned in the Philippines 40 years earlier when it successfully implemented land reform in Taiwan, Korea and Japan after the War. In the RP, the high cost of establishing property rights and acquiring Spanish friar lands for redistribution made it difficult for farmers to pay it off. This led to an uneven distribution of land, which was fully exploited by the caciques who were the subject of a policy of attraction away from the revolutionary forces.

Social equality in East Asia was important for the establishment of corrupt-free governance through an autonomous bureaucracy in which in turn brought about developmental policies producing economic growth which was felt by the wider populace.

This debate just highlights the complexity of dealing with problems created by those initial conditions a century ago. Should we just let the past go, cut our losses and forge some other way to bring about inclusive growth? Or should we try and find “closure” through some just settlement as well?

In the first place you are dealing not with a mill but an integrated operation, knowing the great divide in attitude and methods between planters and millers and with a third factor being the traders actively disliked by both.

Even if one assumes (as I do) that the years of fat quota profits made the sugar industry uninnovative and this was made worse by the attempt to create a national sugar monopoly that foundered on speculation during the marcos years (pp. 242-243 in Larkin) , there would still be a hierarchy of competence among the sugar planters and millers. In one sense Luisita was increasingly an anomaly in being a large plantation (p. 78 in Billig’s book) becuse of “natural land reform” as estates became subdivided among heirs and the effects of corporate taxes. On p. 121 Billig says that a consolidation of the industry -closing the divide between planters and millers- has been small, localized, and not generally succesful, “the one major exception” being Luisita, “the most integrated operation in the nation,” composed of farm, mill, refinery, and trading operation and on p. 222 the author again mentions that within the industry the benefits of consolidation were pointed out in terms of the example of Luisita:

And yet, for years planters have argued that industry consolidation would be a positive step toward the rationalization of the industry. Many cite the Cojuangco-owned Hacienda Luisita in Tarlac as a shining example of a succesful, rationalized, integrated operation. But of course the planters always assumed that it would be the planters who would be doing the consolidating, and that has become a purely quixotic possibility now that they cannot afford to purchase mills. Thus planters have come to regard consolidation with fear and loathing. It seems even less likely that consolidation might come from the mills, some of which had in the past purchased large tracts of sugar land. The mills have largely had to stop buying land because of CARP and their own liquidity problems.

So the book then looks into the demise of the old sugar barons and the rise of more efficient Chinese traders and how a more “modern” attitude is increasingly attractive to some in the industry. All this ignores the people actually farming the land, the Social Justice concern, and how there is a tug of war going on between radicals and moderates to find a tipping point one way or another with Social Justice in mind.

First of all, the Cojuangcos of Central Azucarera de Tarlac and Hacienda Luisita are abysmal managers. Unlike the Roxases of Central Azucarera Don Pedro or the Chans of Central Azucarera de San Antonio and Binalbagan-Isabela Sugar, Jose Cojuangco and Sons milked the business for what it was worth and drove it down to the ground.

Just to bring a opposing balance to accusation of poor management, HLI was able to mechanize sugar cane farming so much so that they were letting go of 2500 of the 5000 farmers because machines of mechanization. That’s not poor management by any standard. Even Maoists are for farm mechanization. Funny, when mechanization is achieved by “oligarchs”, you don’t hear praises by the lefties.

Regarding driving the company down to the ground, weren’t the financial woes of the estate exacerbated by political externalities only in the early 2000s? The successful astroturf campaign by CPP that burned crops and destroyed machinery put a big dent to their cash flow position. All businesses borrows money to invest in their business, but HLI is no ordinary company. Why is it that people don’t mention good investment strategies like land use diversification via business parks and mixed residential and industrial and mechanization but keep hammering the debt situation, while conveniently censoring the fact that it was the commie astroturf campaign that bankrupted the company?

I don’t know if that sale and loan contract in the 1950s was of a commercial or social nature, but either way, you’re talking 50 years that has lapsed since a violation of that agreement (if there was such) to handover the land to the farmers has occurred. In commercial law, a court could very well void that contract if parties don’t bring a suit to contract breaches. Social contracts are different. I feel that it is stubborn and stupid to stick by a social contract that was made in very different circumstances.

CARL was made when our national budgets could afford landlord compensation and our dollar deficits were not anemic and when the population is lower and land more plentiful.

Now, we have a situation where our oil expenditure outpace our agricultural exports receipts, perennial budget deficits and huge debt repayments characterize our government finances, and our population of farmers dwarf the millions of urban poor.

It’s folly to stick by a social contract that says compensate landlords for land redistribution and overhaul a business model which contributes significantly to our already paltry dollar exports. We shouldn’t be too inflexible and devoid of imagination-let’s be open to compromises that are more suited to our current circumstances than just by bullheadedly hammering a dogma. Land redistribution is a archaic dogma that doesn’t suit our times. Let’s debate on a new social contract.

You have an entire issue that includes massacres and salvaging and you point out business efficiency?

…Besides, your point is highly debatable. The dead bodies aren’t, the contract for Luisita principals to distribute the land isn’t…I think communism blurs the real issue and the real issue is modern slavery.

Your points are as debatable as mine. First, massacres and salvaging-wasn’t the 2004 massacre a component of the overall military strategy of Palparan in the 2000′s? It’s propaganda to fault Luisita Inc. for those deaths. The Melo commission clearly stated that anti-commie murders, of which the Luisita deaths were a part of, were instigated as an overall military strategy of GMAs army against communists. It’s not a corporate strategy of the Cojuangco clan, so it’s hysterical on your part to frown on debate on business efficiency just because of a law and order issue.

Regarding your comparison to cotton slavery—slavery is the ownership of human beings, like chattel. The Philippines never had a tradition of western slavery, nor do we have now. Slavery does exist in some pockets of the world now and before, but not in Luisita or the Philippines. Those “slaves” there are free to come and go as they please, so technically they’re not slaves. They may be exploited workers, but hardly slaves.

And if they are slaves, somebody ought to file anti-slavery charges against Luisita Inc. There’s no law for this I think, but even if there was, no judge in the Philippines would define the conditions of Luisita farmers as slaves. Real slaves are owned, traded, and sold by slave owners. Luisita farmers can leave that Hacienda if they wish.

If anything, the best suit that can be made against Luisita Inc is for violation of the minimum wage law. If indeed those farmers are being paid 18 pesos per hour, organizations that sympathize with their situation should use the proper channels, ie the minimum wage board and the courts, to file suit against HLI.

Pambihira talaga. Hindi mo ba naiintindihan sinasabi ko?

Villar’s corruption is high Third World (in the level with Malaysian and Thai corruption) while the Luisita corruption is comparable to cotton slavery.