December 01, 2006

‘Erap classmate’ almost got the boot

RAFAEL B. Buenaventura was possibly one of the most controversial central bank governors in Philippine history. No less than a president and her aides had tried, not once, but twice, to push him out of his position, never mind that he had security of tenure, and that the Bangko Sentral is an agency independent of the national government.

Buenaventura was appointed in July 1999 by a former Ateneo classmate, then President Joseph Estrada. When the Arroyo administration came to power in January 2001, as part of efforts to get rid of vestiges of Estrada’s mark on the government, the BSP chief’s post was targeted. It was an exercise in futility. Who’d have known that Buenaventura had so many friends and admirers, even outside of the banking community and overseas, who lobbied high and low for him to be retained as central bank governor? In a rare moment, the Bankers Association of the Philippines, Financial Executives Association of the Philippines, Makati Business Club, and Management Association of the Philippines, closed ranks behind Buenaventura.

Buenaventura himself acknowledged the importance of those friendships at a testimonial lunch tendered him November 17, 2002. “I have become more introspective about the importance of relationships and the meaning of loyal friendship…especially throughout the rough, tough times.” The testimonial was held in honor of his inclusion by Global Finance magazine among four top central bankers that year. He even edged out Federal Reserve chairman Alan Greenspan in that distinction.

It seemed that the entire business community was there at the ballroom of Peninsula Manila that day, earlier roasting him and taking potshots at his monetary policies and idiosyncracies, and now giving their full attention to his speech.

Still, his job had not been easy, despite those friendships. He has had to make difficult decisions “for the greater good,” even as he assured that those decisions “are made objectively and in the interest of the country.”

Buenaventura’s retention as Bangko Sentral governor was probably the best decision President Arroyo ever made for this country, as proven by the acclaim the Philippines reaped over those years. Despite the peso dropping to almost P55 to a dollar in those years, inflation was at a historic low at 3 percent and interest rates were stable, encouraging the public to make housing and auto loans.

William Pesek, a columnist for Bloomberg, hit the nail on the head when he said that Buenaventura has “proven to be the glue holding together one of Asia’s most fractured economies.” Pesek also called Buenaventura the only “adult in the room,” which the Philippines needed the most.

He would best be remembered for helping the country finally get its anti-money laundering measure approved by the Financial Action Task Force, thus preventing untold catastrophe for the economy. Without the FATF’s approval of that measure, billions of dollars in remittances by overseas Filipino workers would probably be stuck in foreign banks.

He would also be remembered for shepherding the passage of the Special Purpose Vehicles Act which helped banks get rid of their nonperforming assets and lowered the percentage of their bad loans.

Despite his nimble management of some aspects of the economy, Buenaventura could only do so much. When the Philippines’s credit rating was downgraded two notches down in February 2005, he was crestfallen, yet pragmatic. “Despite all that we have accomplished so far, it is our lack of track record of sustainability that did it," he said in an interview. All he could do was push for the sustainability of the reforms.

Until his retirement in July 2005, the BSP was a consistent top notcher in the Makati Business Club’s Executive Outlook Survey. Its respondents credited Buenaventura for keeping interest rates low and the exchange rate, relatively stable.

(This is the unabridged version of the piece I wrote for the BusinessMirror published on Dec. 1, 2006.)

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