Lavish Marcos Drive Adds to Economic Woes

The two-month campaign that returned President Ferdinand E. Marcos to power was, by far, the most lavish and expensive in the history of the Philippines--so expensive that it forced the recent devaluation of the nation’s currency, fueled the national inflation rate and, some economists say, actually may drain the country’s already dwindling foreign exchange reserves.

Economic analysts now say that the hundreds of millions of dollars that Marcos’ ruling party spread around the country in pre-election bribes to buy votes already have left the devastated national economy in even worse shape than it was before the Feb. 7 election.

Almost overnight, everything from chickens to computers jumped in price.

As a cost-cutting measure, Philippines citizens, worried about their financial future in the wake of Marcos’ costly campaign, have stayed away from dance halls, movie houses and restaurants even on Valentine’s Day, a venerated national holiday in a culture that loves to love.

And there were allegations from several economists that Marcos’ government may have even officially counterfeited millions of pesos during the campaign to create the president’s war chest, a charge that banking officials say may delay a much-needed International Monetary Fund allocation earmarked to help ease the Philippine’s $25 billion international debt.

At the heart of the election’s short-term economic damage is a Filipino tradition known here as utang na loob. It means “debt from the heart,” but, at election time, it means anywhere from 10 pesos (50 cents) to 500 pesos ($25) in cash bribes doled out to millions of voters by Marcos’ loyal party officials.

During the presidential campaign, the vote-buying tradition--denounced by the Roman Catholic Church Friday as “a cynical exploiting of the people’s poverty”--took on epic proportions, Altogether, it totaled at least the equivalent of $250 million, according to experts’ estimates.

The exact figure that the ruling party distributed, sometimes brazenly, during the campaign is almost impossible to gauge, economists say. But, based on a macro-economic study of vote-buying patterns in the election, a private think tank in Manila announced during a symposium last week that the figure actually could have reached as high as $500 million in December and January alone.

The study concluded that the immediate impact was the recent 3.2% devaluation of the nation’s currency, triggering higher prices for food, clothing and shelter, and an anticipated sharp increase in interest rates that will further damage lagging investment in Philippine business and industry.

That occurred in an economy already producing at just 30% of capacity, where per capita income has dropped to $625 a year and the national growth rate has declined in each of the last five years.

The bottom line, according to Omar Cruz, chief economic forecaster for the think tank, the Center for Research and Communication, will be another year of negative national growth, rising unemployment, soaring interest rates and stagnant investment.

A Hong Kong consultancy firm put it even stronger on Thursday, amid widespread reports of fraud and massive vote buying.

Calling the conduct of the special election “the most savage assault in the country’s history on the right of suffrage and democracy,” the Political and Economic Risk Consultancy Ltd. declared that the devaluation of the peso was the direct result of the ruling party’s cash bribes. It warned that this payola alone “could push the faltering economy close to the brink of collapse.”

Here, according to forecaster Cruz’s vote-buying analysis, is how massive bribes for votes translated into a national economic disaster:

Most of the bribes, which neither Marcos nor the ruling party deny were paid out on election day and earlier during the 57-day campaign, went to impoverished Filipinos already living on a tight margin.

Economists had hoped it would bring a short-term economic gain, but, they said, the size of the individual handouts were too small to make a difference, and the distribution was on so vast a scale, it diluted any positive impact.

Most of the voters simply used the money to buy food, clothing or other essential goods, and, in each case, the money then went to a retailer, who passed it on to the wholesaler. And rather than invest the new money in inventory or increased production, which could help revitalize the economy, the wholesalers and producers, now wary about what six more years of Marcos may mean, are saving it for security or converting it into safer currency such as dollars.

In addition, the massive infusion of so much money over so short a period of time has made the currency that is already in circulation worth less, Cruz said.

“There’s no question this is the biggest-ever vote buying in our history,” Cruz said in an interview Saturday. “In the short term, it seems to help. There’s more money available for buying clothes and food. But in the Philippine context now, more money in the system simply means more money for buying dollars and for speculation. Eventually, that takes even more money out of the system, and you end up with something worse than stagnation.”

New Money Questioned

More mysterious is the question of the ruling party’s source of the new money--a question that raises serious, long-term questions.

According to several economists and ruling party sources who asked not to be identified by name, Marcos’ political party, the New Society Movement, secured some of its campaign war chest from donations by Marcos loyalists here and abroad.

But Cruz and others said there is also evidence that much of the money simply came off the presses at the government mint, which one source at the Philippine Central Bank said were working overtime during the month before the election.

The evidence: crisp, new, 100-peso bills began appearing recently on the streets of Manila with identical serial numbers.

The Philippine Central Bank is required to keep a record of every peso it prints under agreements with its international lenders. The record is kept by the serial numbers of each note, which then tells the lenders how much money is in circulation in the Philippines.

When the apparently counterfeit bills--flawed only by their identical serial numbers--surfaced, economic forecaster Cruz said: “To get around the law of keeping track, the government may be releasing several currency notes with the same number to make it appear they’ve put less money into circulation than they actually have.”

So widespread was the suspicion last week that the Central Bank governor, Jose B. Fernandez, issued a lengthy statement explaining that the bank’s currency presses are not capable of such an operation.

Nonetheless, Cruz noted that the International Monetary Fund is due to release another $400 million in desperately needed aid to the Philippines in the next two to three months. He added that the mere suggestion of such deception in understating the country’s money supply “is just the kind of thing that drives the IMF crazy.”

Even beyond the impact of the party’s massive vote buying, which one of Marcos’ Cabinet ministers described as “something that’s just expected here in the Philippines,” is the long-term economic impact of Marcos’ proclamation as president amid unprecedented polarization within Philippine society.

Blow to Credibility

The Hong Kong risk consultancy firm said in its report last week that the fraud surrounding the election and the president’s partisan use of his official election machinery during the vote-counting process dealt a major blow to Marcos’ crisis of credibility, which was a prime motive in his call for the special presidential election.

With Marcos’ mandate from his people even deeper in doubt and calls by opposition candidate Corazon Aquino for a civil disobedience movement that could further disrupt business, the firm projected that the Philippine gross national product would decline another full percentage point this year, unemployment would go up as high as 42% and inflation would reach 15%, while the nation’s exports would decline.

At a news conference Sunday, Marcos said important decisions on the nation’s economy will be made this week, specifically on money supply, foreign exchange rates and interest rates.

“The times call for further sacrifice,” Marcos said.

Cruz noted that Filipino economists had been almost unanimous in support of an Aquino presidency as a long-term solution to the country’s economic woes. “What we are left with now,” he said, “is a crumbling and isolated regime ruling over a desolate and crumbling economy.”

There was ample sign of both last week as the Marcos-controlled National Assembly counted its way down to Marcos’ victory. In the crowd of protesters outside the ultramodern assembly building, dozens of street beggars tugged on sleeves for a peso, and even some members of the president’s riot squad said they could not afford a bottle of Coca-Cola.