Asiaweek.com | The Elites Vs. Estrada

NOVEMBER 17, 2000 VOL. 26 NO. 45 | SEARCH ASIAWEEK

The Elites Vs. Estrada
Galvanized by the business community, leading citizens have joined forces against the president. Will the upshot be a bitter class war?
By ALEJANDRO REYES and KRISTINA LUZ Manila

ALSO
• The Poor: They were promised much, but now many of them are fed up with Estrada too
• Interview: Business leader Ricardo Romulo says that the president must go

In late October in leafy Forbes Park, the neighborhood of choice for Manila's well-heeled, businessman Cesar Buenaventura welcomed six guests to his cozy residence. They were all members of the country's elite — the Ivy League crowd, from the families that have long dominated the Philippines' economy. There were two senior officials — the central bank governor, Buenaventura's brother Rafael, and Trade Secretary Manuel Roxas. Roxas dismissed his bodyguards and chauffeur. There were no wives. This dinner was strictly business.

The other guests weren't known for political activism. But President Joseph "Erap" Estrada, caught in a gambling scandal, was struggling to prop up the peso. The central bank was pushing up interest rates — threatening the country's already shaky economy. "The moment that happened, everybody got spooked," says one of the guests. So the cautious titans of the Philippines' old-line businesses decided to take a stand. After dining on Hainanese chicken rice, freshly baked onion bread, and red and white wine, the seven men — ties off and in their shirtsleeves — repaired to the living room to discuss the political storm lashing the country. Jaime Augusto and Fernando Zobel, the heads of the country's most blue-blooded corporation, Ayala Corp., were particularly outspoken. Estrada must resign, they said. Jaime Augusto expressed concern that the populist president might stir up a class war to rally his supporters, pitting rich against poor. That could lead to public disturbances in tony Makati, an exclusive residential and business district that Ayala Corp. developed. Roxas assured his companions that would not happen.The others prodded him to quit as soon as possible. "It's no longer a question of whether or not I resign, but of how and when," the somber ex-congressman answered. Days later, Roxas informed the president he was leaving the cabinet.

Two weeks later, Estrada himself is still president, but the Philippines' business elite are maneuvering behind the scenes to get him out. Despite the fact that he is accused of pocketing millions of dollars through an illegal gambling syndicate (an allegation he denies), Estrada insists he won't resign. But the departures of Vice President Gloria Macapagal Arroyo and Trade Secretary Roxas from the cabinet set off a raft of defections from the president's ruling LaMP coalition. They also prompted the disaffected business elite — many of whom never supported Estrada anyway — to mobilize against the president. With the political sands shifting, many of Estrada's foes among the privileged classes have started a behind-the-scenes campaign to pressure the self-styled "man of the masa [masses]" to resign. They reckon that a long-drawn out impeachment trial will only plunge the country's stalled economy into a deeper hole. Foreign investment has already dried up. Export earnings in September fell for the first time in nearly six years. Interest rates could rise again as the government fights to keep the peso from tumbling further.

Not surprisingly, members of the Makati Business Club, an influential association of top corporations, have taken a lead, as they did during the waning years of the dictatorship of former president Ferdinand Marcos. Chairman Ricardo Romulo, a prominent lawyer, has been a particularly outspoken Estrada critic. Vice Chairman Jaime Augusto Zobel, known as JAZA, last week was among five business figures to resign from a panel of presidential economic advisers. His father Don Jaime was among the first tycoons to mobilize the business sector against Marcos. Cesar Buenaventura, 69, who previously headed the Philippine operations of petroleum multinational Shell, is a Makati Business Club trustee. Since the Marcos years, he has been an adviser to former president Corazon Aquino, the People Power icon who has emerged as the inspiration for the anti-Estrada opposition.

The Makati business elite has been quietly appealing to Estrada ministers through relatives and friends to leave the cabinet, though with limited success. The Makati magnates and many of their spouses have also been instrumental in organizing protest rallies. On Nov. 4, about 100,000 people gathered at the shrine to the 1986 People Power uprising against Marcos for a prayer rally led by Aquino and Roman Catholic church leader Cardinal Jaime Sin, who delivered a stinging attack on Estrada. Prominent among the VIPs attending: the Zobel family and other top businessmen, including Cesar Buenaventura and Manuel Pangilinan, the head of local telephone company PLDT, who had previously been regarded as pro-Estrada.

The business elite's activism counts. Despite its People Power legacy, the Philippines is still a semi-feudal society: socio-economic power remains in the manicured hands of the commercial and political aristocracy. "It is elite interaction that will bring down the president," reckons columnist and veteran political analyst Amando Doronila.

The "Makati crowd" never warmed to Estrada and his man-of-the-people style in the first place. After all, he wasn't their type of guy. In the 1998 election, many Makati Business Club members bankrolled Renato de Villa, defense secretary under then-president Fidel Ramos. The Philippine economy seemed to have turned the corner under Ramos's stewardship. Investors were impressed by the former general's business-like approach and reformist zeal. For the first time in years, the Philippines was looking like it was poised to be Asia's next economic tiger.

When Estrada won, the elite questioned whether the college dropout was up to running the country and scoffed at his reputation as a bumbling public speaker, bon vivant and serial womanizer. Still, many, including the CEOs of big corporations like the Zobels, gave him the benefit of the doubt, thinking that he would buckle down and change his ways. They were badly disappointed.

Over the 28 months of his administration, Estrada faced a string of scandals that raised concerns about cronyism and corruption. Estrada seemed to prefer the counsel of a group of drinking pals and mahjong buddies, known as the "Midnight Cabinet." These informal advisers included crony dealmakers such as Mark Jimenez, whom the U.S. government wants extradited to face charges of violating campaign contribution laws. Though the Philippines weathered the 1997-98 financial crisis better than many of its neighbors, it has failed to recover as sharply as other economies. The stock market has tanked, shrinking the fortunes of the business elite — and scaring off further investment. Concludes a top Makati executive: "Estrada has single-handedly dragged our country into a tailspin. The masses can't see the danger signs, but businessmen who know the implications are freaking out."

For his part, Estrada dismisses the Makati elite as a privileged cabal of grandees who don't have the interests of the poor at heart. In a radio interview following the Nov. 4 demonstration, the president was typically derisive of his opponents. "They pretended it was a prayer rally, but it wasn't," he crowed. "It was all the handiwork of big capitalists in Makati who contributed money." The president also argues that the economy is not in as bad shape as his critics say. He points out that growth is still at 4.5%.

Buoyed by a survey that had a majority of respondents supporting the president's staying in offices, Estrada is digging in his heels. While the opposition may have the numbers needed to prevail when Congress decides on Nov. 13 whether to request an impeachment trial in the Senate, Estrada insists he will prove his innocence.

The business elite fear that a messy, prolonged trial will only do more damage to the country. Rafael Buenaventura, the central bank governor, has warned of a recession early next year if the illegal gambling money scandal drags on. "Dollar outflows have dried up because foreign fund managers are worried the country could become a banana republic," he says. For Cristina Infante, country risk head for ABN AMRO Bank in the Philippines, the nation is already something of a laughing stock: "Foreign banks are holding their loans and credit lines. The president's resignation is what they are waiting for. There is absolutely no confidence in his administration to govern."

Businessmen are searching for quick solutions. A day after a Senate committee opened hearings on the corruption allegations against Estrada, members of the local chapter of the Young Presidents Organization, an international group of corporate leaders under 50 years old, held a closed-door breakfast meeting in a small function room in Makati's Shangri-La Hotel. The group listened to columnist Doronila and another veteran political analyst, Randy David, deliver their take on the crisis. The attendees asked what constitutional options were available to get Estrada out.

The elite have good reason to oppose Estrada; they have been locked out of his presidency. Back-room deals and crony favoritism have made life difficult for them, particularly those with foreign investor partners and associates who have soured on the Philippines. While Makati businessmen got along well with former president Ramos, under Estrada, many have complained that Midnight Cabinet regulars like Jimenez, as well as presidential supporters among the Chinese community, now have an inside track. Take the following example. The share price of BW Resources, owned by Estrada pal Dante Tan, surged after the company won a lucrative bingo franchise. After the price collapsed, Tan was investigated for manipulating the market. The case was dropped. The Securities and Exchange Commission chief later accused Estrada of personally intervening in the case — a charge Estrada denies.

What now troubles the legitimate business community most is the possibility that Estrada may stoke the flames of class struggle for his own political ends. "His language has become more shrill in its condemnation of the rich and the elite of Makati as the principal causes of our problems," academic David warned during a special briefing he gave senior businessmen. Estrada, the University of the Philippines professor said, "has placed the blame for the country's bad reputation on the opposition. He is instigating a class war."

If Estrada convinces his grassroots supporters that the elite are intent on doing their idol in, the poor could turn against the commercial mandarins. If Estrada steps down, what will happen to the Makati crowd? Their economic dominance surely will continue — the feudal Philippines won't fade away any time soon. But what the Makati business leaders want is transparency and predictable policies — the foundations for real economic recovery. It's the only hope for helping the elites and the have-nots. It might also be an end to the Philippines' long-brewing class struggle.

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