The Long View: Social justice

The Long View
Social justice
By Manuel L. Quezon III
Philippine Daily Inquirer
First Posted 00:22:00 03/08/2010

SOCIAL justice, a President once said, “Is far more beneficial when applied as a matter of sentiment and not of law.” Point XI in the Nacionalista Coalition platform in 1935 was, “When the resources of the country so permit, we shall begin the expropriation of great estates, so that they may be divided into lots and sold to private citizens, preferably their actual occupants. We shall encourage the formation of small land-ownership, which is the bulwark of democracy, the guarantee of public order, and a stabilizing force. It is our desire that every Filipino shall own his own land, the house in which he lives, and the farm which he tills.”

But the devil, as they say, is in the details. On the one hand, there was the active hostility of landlords to state expropriation; in the middle was the state itself, far more dependent in those days on the income generated by the sugar industry than it is now; and on the other, the conservatism of the peasantry itself even as radicalism made inroads among the peasantry. In his classic book, “The Huk Rebellion,” Benedict Kerkvliet says the problem arose when traditional expectations among farmers clashed with the businesslike attitudes of a new generation of landlords: “To the modern landlords, their relationship to their tenants was a business proposition – the peasants were laborers who would be employed as long as they helped turn land into profits.”

However, Kerkvliet continued, “The peasantry, meanwhile, wanted traditional patronage more than ever, lest they succumb not only to such usual hazards as poor harvests and sickness, but also [because] – Progress’ had not brought even modest economic gains to the peasantry, while at the same time severing numerous ties with their landlords that peasants wanted to retain and to which they felt entitled. The traditional landlord-tenant relationship included far more than a simple exchange of labor for money, so peasants wanted to keep it. They wanted the landed elites to acknowledge those ties and the obligations entailed. The stage was thus set for a conflict.”

In the first State of the Nation Address in 1936, a modification of the Coalition Platform was announced. In brief, land would be opened up for settlement in Mindanao and other relatively underpopulated areas, while the redistribution of land would be limited to “the expropriation of those portions of the large – haciendas’ which are urban in character and are occupied by the houses of the tenants. With the opportunity to own their own homes thus assured, the settlement of the present difficulties of the tenants relative to their farm lands might no longer be of urgent necessity.”

This did not turn out to be the case. The same President told an American communist, Sol Auerbach, in 1937, that he had warned landlords, “I tell them, if you know what’s good for you better improve the conditions of your tenants. You do not have enough sons for the army, so we must conscript our soldiers from the poor. We put guns in their hands and teach them how to use them. If you are not careful they will use those guns against you. If you want to save what you have, give them 10 percent of it or they will take it all.”

By the late 1960s, agrarian unrest, effectively crushed in the early 1950s, resumed on a large scale, as population growth closed off the social safety valve of resettlement (and sparked new problems in Mindanao between Christians and Muslims). Macapagal attempted land reform but was foiled by the landlords; Benigno Aquino Jr. proposed corporate collectivization as a middle path: preserve economies of scale for sugar while transferring ownership to farmers and landlords proportionally by means of shares of stock.

President Marcos aimed to score propaganda points at the onset of the New Society when he proclaimed the entire country under land reform. But he decreed the redistribution of rice and corn lands and left the sugar estates alone, focusing, instead, on creating a state sugar cartel which led to the collapse of the sugar industry in 1984.

After Edsa, radicals demanded the immediate expropriation of estates while landlords threatened civil war if this was done. President Aquino in her last days of full lawmaking powers issued two executive issuances, the first placing all lands under land reform (thus removing the Marcos-era exemption for sugar land); the second, giving 10 years for redistribution to take place: but the details were left to the incoming Congress. Civil war was prevented by giving landlords a seat at the bargaining table, but rebellion was perpetuated by giving radicals a justification for confrontation.

From 1987 to 1992 a total of 898,420 landless tenants and farm workers became legitimate recipients of either land titles or free patents and support services. Under President Aquino, 2.6 million hectares or 33.3 percent of the total CARP scope of 7.8 million hectares were redistributed. But Hacienda Luisita submitted, instead, to another kind of redistribution, which was the Stock Distribution Option or SDO.

Overlooked in the debate over this scheme is that it represented one alternative to outright redistribution among tenant-farmers of hacienda lands and, at the time it was proposed, a possible way forward to preserve economies of scale while attending to Social Justice concerns. Other landlords such as the Arroyos were more clever: they promised to redistribute but bogged down the process in legal red tape, ensuring neither stock option schemes nor redistribution. For the middle path, the situation finally came to a head when both radicals and the government clashed on Luisita, eliminating SDO as a viable option in terms of public opinion for what is now “sunset industry.”

See also my entries, Planters and Millers (2006) and The Return of the Sugar Bloc (2007) and my 2007 Arab News column, Philippine Economy: A Cautionary Tale.

Manuel L. Quezon III.

32 thoughts on “The Long View: Social justice

  1. Re: Sunset Industry

    I wonder how much knee dip in debts shit Luisita Corp is given their reluctance to just take the government deal and redistribute the estate in exchange for a certain amount per hectarage.

    This lump sum of X amount of hectares times X peso amount per hectare(to be paid by us tax payers by the way) – minus their debts to the bank, certainly must mean their net balance is somewhere between negative and a few million pesos to be divided by the 40 or so Aquinos and Cojuangco brood. Meaning Noynoy will end up somewhere between owing the bank or being some peso amount richer if CARP is pursued.

    I sense Noynoy is waiting for the reigns of presidency and use the seat to get the government to pay for the debts as well.

    If anyone can give me details of which banks are owed by Luisita please post a reply.

  2. There are no takers for a sale proposal for Luisitia Corp. The estate was hit by a trifecta of:

    1. Successful CPP AstroTurf campaign in the noughties which resulted in burned fields, destroyed machinery, radicalization of pliant sugar workers, the end result of which is lower sugar output when dollar per kilo of sugar was historically high (really bad timing for them and a good “operational success” by the CPP). And worst of all, bad PR for the family.
    2. Rising socialized medical costs due to the aging of the hacienda workers and fraudulent use of medical privileges.
    3. Unpaid debts from farmers who take their personal loan repayments lightly.

    Although most of the blame would be on the CPP for getting Luisita in a negative balance sheet position, it’s the public who will do in “society” in general. The public’s insistence on implementing CARP will mean we’re gonna have to take on the debts eventually, paid for by our taxes, when a “private solution” should prove more effective (given sugar prices are projected to still be high in the next few years) if we just give it a few years.

  3. Kerkvliet (in his book ‘Everyday Politics) is the one who chronicled how the Vietnamese peasants resisted collectivization in favor of family farms. When the Communist government of Vietnam finally acceeded to this aspiration, it paved the way for the economic boom in Vietnam. Collectivization (whether ‘corporate’ or by the State) is more akin to the ways of Stalin/Lenin/Mao.

  4. Manolo, if this is another justification for Luisita, you should know that the hacienda is different from the others because of a contract. The money that paid for the 6,000+ hectares came from the tax payers.

    I heard somewhere the CIA funded the CPP for two reasons:
    1. hijack genuine armed revolt, control the damage of CPP revolt to mere collateral
    2. Justify the presence of the bases

    The NPA even now is a very ineffective insurgency. All the dead bodies for absolutely nothing. The HUK made their point plain and clear and brought fear to the landlords.

    Anyone all these points are usually as the conversation is being watered-down by middle men, the paid media owned by the landlords.

    Civil war? You honestly think the hacendados of Negros capable of civil war? Besides, where are they going to go when they lose? Abroad where we can easily get them? One thing I know about these people, they made their fortunes by bluffing.

    Give up the land first, then we’ll discuss the historical consequences. Ito ang mali sa mga discussion na ito. How do we tell genuine thought from mere rationalizations?

  5. “aquino himself has said passing the problem to government would actually be easier for them financially, with debts in mind. so this early on he has staked a private sector solution and not access to the reins of the presidency.”

    So much BS. You mean for 3 decades, they were thinking of the farmers?

  6. 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.

    The Cojuangco family charged huge “management fees”, supposedly for running the farms and the mill and lived high on the hog, with estates in Manila and the U.S. Typical of landed oligarchs of this country.

    Aside from the management fees, the Cojuangcos also had a central purchasing company which took in commissions from the enterprise’s procurements of equipment, fertilizers and other inputs to keep the business running.

    Yes, the Cojuangcos have left banks, creditors and minority stockholders holding the bag, as they squeezed every drop from the business. At this time, family members already set aside their own fortunes, derived from milking Luisita, and have little at stake in the business anymore.

    Review the history of Luisita, and one will see why this is a classic case of Filipino oligarchs practicing booty capitalism. Luisita was purchased by the Cojuangcos via political connections, after the Spanish firm Tabacalera wanted out due to harassment from the Huks and what would later be the core of the NPA (not incidentally, fomented by Ninoy Aquino who was a politician in nearby Concepcion, Tarlac). The tale of Luisita is a sordid one, typical of how our oligarchy has brought down our country via their greed and short-sightedness.

    Incidentally, the concept of consolidation of land among land reform beneficiaries was carried out with great success by Malaysia. Malaysian land reform has been highly organized and development oriented. It tries to promote social and economic objectives by emphasizing productivity. Unlike the Philippines, where land would be haphazardly distributed, Malaysia made sure that factors of production were in place. Roads, bridges, equipment, irrigation facilities, seeds, fertilizers, markets.

    If Mr. Quezon would like to cite the number of hectares Corazon Aquino’s administration had directed for distribution, they are meaningless statistics in the face of the severe lack of infrastructure, and support services. That goes to the heart of the controversy over CARL. Is it redistribution of land simply to score political points and to placate some sectors, including the American big brothers who were demanding some kind of reform as a return for ousting Ferdinand Marcos? Being so superficial, this would not classify as reform. It is a phony. A sham.

  7. Manolo, your rationalizing and “his” rationalizing of cojuangcos’ continued “ownership” of Luisita demeans the suffering of the people there. The deaths by salvage and by massacre are the biggest proof against Noynoy.

    Hacienda heirs in general are brainwashed to protect their property. It is in their upbringing. The failures and obstacles you cited above might as well have been invented by the landlords themselves, so embedded they are in our business and political sectors they can fabricate just about anything.

    At this time land reform is a convoluted mess, meant more for lawyers than for simple farmers. Who made it so convoluted, who complicated the issues? They own the media, the academics, the legislative, executive and even the judiciary. They own the military. You criticize the poor for voting for Erap, Villar, et al? Why, these men, though corrupt, are the only ones capable of standing against the oligarchy.

  8. Malaysia created The Federal Land Development Authority (FELDA) in order to form land reform beneficiaries into a cooperative that would own, not just the land where agricultural crops would be grown, but the factories, transport facilities and the downstream enterprises as well. Today, FELDA is a huge enterprise with annual turnover of over RM 15 Billion (about 200 Billion Philippine Pesos!) and 19,000 employees. It operates about 800,000 hectares of productive farmland and owns interests in some major banks. It has greatly helped to uplift the standard of living in the Malaysian rural countryside and to make poor Malaysians stakeholders in the economy.

    Besides, FELDA, there is the Federal Land Consolidation and Rehabilitation Authority (FELCRA) as well. FELCRA also helps to consolidate lands of small landholders and to provide financial, managerial and infrastructural assistance. Together, these institutions have managed to raise the standards of the Malaysian countryside. Unlike the Philippines, where only lip service is given to land reform and social justice, Malaysia has taken concrete steps to advance the plight of the rural masses.

    And it is mainly because of the apathy and greed of our oligarchy that the poor in our country have fewer and fewer options, while the upper classes are presented with all kinds of opportunities. Including becoming President.

  9. What amazes me about this whole Luisita debable is that we’re willing to overturn a relatively efficient operation inside out for the benefit of a mere 5,000 farmers, whose lives may or may not improve by being granted a few hectares of land.

    Compare this figure with the 10 million OFWs overseas, a majority of whom are living an isolated, lonely existence away from their families. And not in comfortable, “monied” circumstances too. A lot of OFW are getting subsistence pay for dumb occupations.

    You may argue that the 5000 farmers have it a lot worse, what with figures like 18 pesos a day wage being bandied about (mostly by leftist bloggers, media, and organizations). But what are less disputed are the medical and housing benefits they receive as well as the personal loan privileges they get.

    Compare this with your typical urban poor numbering in the tens of millions (way more than the 20-30,000 Luisita farmers which includes their children and spouses) who have it a lot worse, living in squalid conditions in makeshift homes (if you can call a cardboard box a home) near dirty rivers, under bridges, in mountains of garbage, literally eating out of garbage.

    Gee, those farmers and their commie brainwashers should take a break once in a while and smell the fresh air of the country side and appreciate the edible food to be had in the homely bahay kubo.

    Is it really worth changing the lives of 5000 farmers in exchange for the uncertainty of overturning an efficient operation which affords our country sugar dollar receipts on top of other ancillary benefits such as jobs for non-farm workers (who certainly number more than 5000 farm workers) who work in Luisita Industrial Park?

  10. You have an entire issue that includes massacres and salvaging and you point out business efficiency? You forget Luisita wasn’t the only monster size hacienda in RP. You have the Ayalas in batnggas, Roxases in Capiz, etc.

    Besides, your point is highly debatable. The dead bodies aren’t, the contract for Luisita principals to distribute the land isn’t.

    The communists are actually in the way of true mass revolt. Landlords frequently use them as alibi. With the commies as alibi, landlords can hold their head high. I think communism blurs the real issue and the real issue is modern slavery.

  11. “And it is mainly because of the apathy and greed of our oligarchy that the poor in our country have fewer and fewer options, while the upper classes are presented with all kinds of opportunities. Including becoming President”

    That’s why good ideas don’t get anywhere here. The oligarchy will try to sabotage it every inch of the way.

  12. Benigno Aquino Jr. proposed corporate collectivization as a middle path: preserve economies of scale for sugar while transferring ownership to farmers and landlords proportionally by means of shares of stock.

    – A bright idea gone to waste. Reason? Leadership, or lack of it. Is this the man whom we are asked to entrust the problems of our country?

    I am not blaming him for his failure to rise to the occasion
    though. It’s a big job really. Too big for him.

  13. How does one arbitrate the political economy of a landlord-tenant farmer power relationship to to Noynoy’s credentials as having taken up macro- economics.

    The reality of the social format is a totally different universe to what he was trained for.

    We have a landlord/merchant class elite now joined by a criminal elite (gambling/ illegal drug based) that are all competing for power to run the state.

    Manny Villar is an outsider who brought his business skills and undoubtedly used the system to propel his interests forward.

    Villar is an outsider to the landlord/merchant class as he learned to use asset inflation and the financial markets (capital gains) to his advantage.

    The financial markets rewarded him for his efforts. Raising Php 20 billion in the equity markets was a tried and tested election system. Institutions and individuals voted with their money. He concentrated on the lower and middle class niches in the real estate market. Now all the rest of the developers have followed his business model. He set the stage for the establishment of a secondary market securitization for mortgages for financing home purchases in a country that is still in the midst of capital market development.

    Pag-Ibig, developers and other banks originate mortgages that are later packaged into securities and sold in the wholesale financial markets. The embryo of mortgage financing. No sub-prime there. There are strict parameters for mortgage financing today after the Asian crisis.

    No doubts the running of the Philippine State is a more complex matter.

    Looking at the rest of the pack – Noynoy, Erap, Gibo what have they accomplished?

    Noynoy and Gibo are charter members of as someone once put it the “Lucky Sperm Club.”

  14. There are three items that put forward a different view to the one you put forward.

    The first is by Tony Hidalgo:

    From: Antonio Hidalgo
    To: [email protected]
    Sent: Saturday, February 27, 2010 2:26 PM
    Subject: On Villar


    Whatever the merits of your abstract argument about the presumption of innocence, let me assure you and the brods that Manny Villar is far from innocent. He is as crooked and greedy as they come.
    Winnie Monsod has made a very good case about his crookedness in the Paranaque road projects that passed through his properties at his behest as a lawmaker, enabling him to sell some of his land to the government at much more than market prices and to reap many millions in property appreciation from the government roads.
    He is also guilty of making billions out of government funds for socialized housing through a questionable, unsustainable scheme that nearly destroyed our financial system in the 90’s.
    It’s a bit complicated, but I was right there, trying to stop what was essentially Villar’s scheme as Secretary General of HUDCC (housing). Fortunately, we succeeded (Dept. of Finance, Pag-Ibig Fund, SSS, GSIS, HUDCC, HIGC-I was head of the multi-agency Task Force that did this) and avoided a financial disaster in the Philippines that would have preceded the similar one that recently hit the US and hurt the world economy.
    It started when Cory became president. Villar, through the CREBA he controlled, drafted a socialized housing law to spur low-cost housing in the country. Cory approved it with her emergency powers, not seeing through Villar’s scheme.
    To oversimplify, the law required the SSS, GSIS, and Pag-Ibig Fund to put billions of pesos of their funds each year into a fund for mortgages for low-cost housing (defined initially as 150T max, later going up to 250T through the years). This fund would be managed by the National Home Mortgage Finance Corp. (NHMFC – an agency of HUDCC). The NHMFC then established quotas for allocating the annual common funds of SSS, Pag-Ibig, and GSIS based on the building capacities of registered developers. The largest quotas every year were for the Camelia and Palmera (C & P) company of Villar which got a very large chunk of the funds for their home mortgages.
    Within the annual quotas under the law, builders could submit completed mortgages and NHMFC would promptly buy them at their face amounts and pay the builder. It was the builders actively sold mortgages in the malls and everywhere else, approved the papers, and submitted them to NHMFC. NHMFC only checked to see that the amounts of mortgages submitted by the builders were within their annual quotas before paying, it did not check the credit-worthiness of the borrower or even if the papers were genuine in that the stated borrower was a real person and the house being mortgaged actually existed.
    The situation the law created was unique in the entire world. The pooled funds of SSS, Pag-Ibig, and GSIS were effectively put into the hands of developers, who built the houses, found buyers willing to take out mortgages, approved the mortgages, submitted them to the NHMFC, and got the money in a few months. In effect, the builder controlled the credit funds and approved the loans using funds that were not theirs but were funds of SSS, Pag-Ibig, and GSIS.
    This was a clear conflict of interest, for the builder would maximize his profits from easy credit and would not bear the cost of mortgage defaults. Naturally, lots of problems arose in just a few years — fake mortgages to ficititious borrowers, nonexistent houses sold to noexistent buyers, and the more common case: real, but substandard, houses, hastily sold to buyers who clearly did not have the capacity to pay back the loan during the agreed loan period. By the time HUDCC took action to correct the anomalous situation in 1996 under my coordination, some 42 billion had been disbursed in mortgages under the Villar scheme. Only a little more than 20 percent of the loans were being repaid by borrowers, more than 70 percent of the mortgages had been defaulted or were in serious arrears.
    This drew the attention of the World Bank and the Dept. of Finance, for the SSS, GSIS, and Pag-Ibig Funds are retirement funds. The funds are commtted to future returement obligations to the contributing members. If the housing mess continued, the SSS, GSIS, and Pag-Ibig would default on its retirement obligations, creating a financial crisis for the country.
    All of us who changed the housing program to give the control over their housing funds back to the SSS, GSIS, and Pag-Ibig, who would be more careful in screening mortgages to make sure they would be paid for they would bear the penalties of mortgage defaults — we were all harrassed by Villar and his minions in the CREBA who slapped law suits on us and attacked us in the radio, TV, newspapers, etc.
    The Makati regional trial court found in our favor and threw out the CREBA-Villar law suit. For a long while, we lost in the media wars and were painted as anti-poor bureaucrats. But the furor eventually died down and the reformed housing program we fashioned has stood the test of time. Since 1997, the repayment rates of socialized and low-cost housing mortgages have high enough to make the program sustainable. The looming financial crisis was averted and we are now in better shape than the US, which did nothing to reform its own defective housing mortgage system.
    Of course, the share prices of C & P homes of Villar collapsed, for everyone knew that the company was profitable only for as long as it could bilk government funds. But then Villar found other rackets and the rest, as they say, is history.

    Tony Hidalgo

    Another e-mail of his:

    From: Antonio Hidalgo
    To: KKKapuputahan@yahoogroups. com
    Sent: Thursday, March 04, 2010 9:06 AM
    Subject: Villlar and low-cost housing

    Dear Tong,

    To believe in Manny Villar’s “cause”, whatever that may be, is certainly your prerogative, brod. But it does not allow you to distort the facts—to say that black is white or that greed is good.

    Winnie Monsod’s writings on Villar’s anomalies on the Paranaque road projects are pretty clear. I don’t need to comment further on them.

    But I will answer as briefly as I can the downright false and sometimes outrageous claims you make concerning Villar’s “heroic” role in the government’s low-cost housing program.

    True, Villar built many thousands of low-cost houses over more than a decade under the Unified Home Lending Scheme (UHLP) of the socialized housing law (E.O. 90) that he and his CREBA minions drafted and got Cory to sign in 1986, during her emergency government when she had legislative powers, by promising the pie in the sky of solving homelessness in the Philippines once and for all. But he did this to rake in billions in profits at the expense of the government, not out of a concern for the homeless poor.

    Look at the results of Villar’s thousands of houses under the UHLP from 1986 to 1997 (when we reformed the UHLP to prevent Villar from bankrupting the country). Villar became a billionaire. NHMFC, the financial coordinator of the program, was bankrupted. The funders (SSS, GSIS, Pag-Ibig) were stuck with billions in bad home mortgages covering Villar’s houses and flirted with bankruptcy for a while. Eventually, these bad mortgages had to be covered by the national government using its tax revenues (including your taxes and mine) because the funders were covered by a sovereign guarantee. Subsequently (beginning 2003 or 2004), the losses on the bad mortgages had to be written off by selling them through special purpose asset vehicles (SPAVS) at a fraction of their face value.

    Meanwhile, look around you. Nearly half of the residents of Metro Manila still live in squatter areas!

    I repeat: Villar became a billionaire while the funders and the national government suffered many billions in losses and the housing problem is still there, as intractable as ever. Consequently, I strongly disagree with your admiration of Villar’s record in low-cost housing. It was motivated by greed and, in the end, enriched only himself and his cohorts at the expense of the government and, ultimately, the taxpayers.

    These outcomes were inevitable because of how Villar and his buddies designed the UHLP. The roles of lenders, builders, and financing agencies were jumbled up on purpose to benefit only the developers. Billions were taken annually from the SSS, GSIS, and Pag-Ibig and given to the NHMFC to disburse. The owners of the funds lost all control over how they were lent out. But this control was not given to the NHMFC, which just allocated mortgage quotas to developers (the Villar companies had the biggest quotas) from the annual funds of the lenders and automatically released the face amount of mortgages to the lenders upon submission of the mortgage papers. No one checked the creditworthiness of the home buyers. The developers were “originators” of mortgages—meaning that they went around the malls with blank mortgage papers, waylaid passersby and enticed them to sign the papers, and then went to the NHMFC to cash in.

    This diabolical system without any financial controls was designed by developers like Villar to rake in the profits. It resulted in default rates of more than 70% in the mortgages and nearly caused a Philippine economic crisis. It required the coordinated intervention of HUDCC, the Dept. of Finance, SSS, GSIS, Pag-Ibig, and HIGC to prevent a financial collapse. This was a very real danger then: we need only look at the recent US financial crisis to see how bad home mortgages can drive even the world’s largest economy to its knees.

    Naging bilyonaryo si Villar sa low-cost housing at the expense of Filipino taxpayers. Kumita na siya, Tong. Huwag mo nang bigyan ng medalya.

    Finally, you imply that I am inconsistent in my position on Villar’s role in this program because you say that HUDCC had “boasted” of its production of low-cost houses thanks to Villar’s “vision.”

    This is not true. I was always critical of Villar’s profiteering in low-cost housing and never claimed credit for the houses his companies built. I was appointed HUDCC Secretary General by President Ramos in June, 1995. I spent a few months going through the documentation of the housing program and holding intensive discussions with the developers’ organizations, lenders, the Dept. of Finance, and the HUDCC financial agencies. Then I wrote a series of memos to President Ramos that explained the hopelessly flawed nature of the program, the extent of the financial problems it had created, and what needed to be done to prevent financial collapse. After getting the President’s instructions to proceed in 1996, I set up the inter-agency task force to reform the UHLP and we completed our work and stopped the profiteering of the developers in 1997.

    Your brod,

    Tony Hidalgo

    The third is this item from a book, Rohan Douglas, Credit Derivative Strategies: New Thinking on Managing Risk and Return, ( Villar’s cited on page 30):

    One example was C&P Homes (C&P), a Philippine corporate property developer of low-end housing. The company owned a substantial amount of land around Manila and had issued dollar-denominated debt to finance its land purchases and to develop the land. However, when the Asia crisis occurred, land values collapsed and the company ran out of cash. The company suggested a restructuring under which creditors would have taken a large haircut. Creditors explored legal avenues to foreclose on C&P’s holdings. However, despite spending substantial time and legal fees on these efforts, creditors were unable to gain control of company property or force liquidation because of the lack of reliable bankruptcy laws in the Philippines. C&P’s controlling shareholder was Senator Manuel Villar who was able to use his position to further stymie creditor efforts to force a restructuring or foreclose on C&P properties. It was an example of the downside of investing in corporations in countries without reliable bankruptcy laws. Creditors were powerless to enforce their rights and were left with nearly valueless securities.

  15. Sorry. So it’s Pa’s idea after all! Has the son any?

    Tony Hidalgo practically told us that Villar will win. The latter knows what we wants, goes for it and gets it. Noynoy was never in want, not even the presidency. It was forced on him by the outpourings of emotion at Cory’s death, a fleeting thing.

    Gold rules. No money, no honey. Honesty and sincerity do not a winner make. Nakakasuka, pero ito ang totoo.

  16. Hacienda Luisita was not an “efficient operation”. It was milked by the Cojuangcos for personal gain. Creditors and minority stockholders lost money on it. Employees did not prosper or get rich from it. However, the Cojuangcos did enrich themselves from it. And gained tremendous political clout as well.

    Compare Luisita to efficient operations like Central Azucarera Don Pedro, and it is obvious that the Cojuangcos exploited Luisita for nobody’s gain but their own. The proof of the pudding is in the eating: Don Pedro continues to thrive and is even listed in the PSE. Luisita is virtually bankrupt. It’s shares are worth nothing. Don Pedro has won awards from the Business and Human Rights Resource Center for contributions to corporate responsibility and measures against global epidemics and diseases, won awards for its environmental, safety and health standards, and for measures to mitigate the impact of climate change and addressing poverty in their areas of responsibility. Luisita, on the other hand, has been accused of human rights violations and for exploiting and oppressing its workers.

  17. The yard stick Hidalgo use to measure Villar is way too high in comparison with the yard stick you are using with Noynoy and family. Are you saying that using government appropriation to provide good access to Camella home owners (lower middle class home owners) is worse than Hacienda Luisita?

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

  18. That’s not even the point I’m making. As Jugo pointed out wrongly, Villar is also a rent-seeker. But the kind of rent-seeker that doesn’t kill or fill the poorer populace with dread. Imagine yourself as a sakada in Luisita, Manolo. Tell me if it isn’t worth all the economics and common sense to relieve those people from the shadow cast by Noynoy’s family.

    Pambihira talaga. Hindi mo ba naiintindihan sinasabi ko?

  19. Brian Brotarlo on Wed, 10th Mar 2010 1:31 am

    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.

  20. Brian Brotarlo on Wed, 10th Mar 2010 1:31 am
    …Besides, your point is highly debatable…the contract for Luisita principals to distribute the land isn’t.

    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.

  21. Erineo on Tue, 9th Mar 2010 7:59 pm

    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?

  22. Dread happens to be what’s felt by those who’ve surfaced with regards to land cases such as Paradise Park, Laguna. due to Villat’s corporate security types. On the ther hand some months ago there were comments here by someone who said they didn’t participate n the strikes and went to work because they preferred working with management to the radical unins. Consider the half a century of peace in the community including the period of martial law when the landowners were not only in bad odor with the government but disarmed, and only in recent years when on one hand the radical unions insts unions flexed their muscle and the government went in and pursued its palparan policy, that matters got bloody. blood having been spilled, it’s accomplished on one hand, the radical objective of finishing off SDO as any sort of alternative to outright rdistribution; but it does not dissolve the problems inherent in dismantling SDO, which seemsto be where the situation is. the shadow you speak of could be the kind cast by any prominent family but isn’t likely to be the aggressively maintained and patrolled armed clout verging on terrorism practiced by other hacenderos; if that were the case the cojuangcos would never have lost elections based on the kind of massive fear you assume exists.

  23. It still begs the question: Was Hacienda Luisita really a model of good corporate governance? Its track record definitely points to extremely poor corporate and social responsibility. It was poorly managed. And it was a model of booty capitalism at its worst. In contrast to exemplary sugar mills, it has an abysmal record.

  24. My reading on this is limited, Sugar and the Origins of Modern Philippine Society for the quota days and and Barons, brokers, and buyers: the institutions and cultures of Philippine sugar for the more recent past as well as some discussions. Overall I don’t know how you can make the assertion above.

    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.

  25. Contrary to what the opening narration implies, the purchase and redistribution of estates was first attempted by the Americans along with the establishment of a formal system of land titles and a homestead program for public lands during the first two decades of colonial rule (which also invalidates the claim that it is a communist inspired program).

    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?

  26. Who defaulted home mortgages or on home loans of Pagibig, SSS and GSIS.

    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???

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