GMA TO BAIL OUT THE LOPEZ EMPIRE Taxpayers to Shoulder 8 Billion Pesos in MAYNILAD Debts

The BANTAY TUBIG NETWORK has gathered information from reliable sources that points to a multi-billion deal being struck between the government of President Gloria Macapagal-Arroyo and the Lopez family for the bailout of the financially troubled Maynilad Water Services Inc. (Maynilad) and its parent company, Benpres. This company, which has provided horrendous service to its west zone clients over the last seven years, has not been paying its debts (in concession fees) to the government (represented by the Metropolitan Waterworks and Sewerage System or MWSS) for the last three years, now amounting to about 8 BILLION PESOS. All the while, it has raised water prices by 400%, failed to provide 24-hour water service and universal connection and failed to reduce system losses or maintain the pipe network in its coverage area-a factor in the November 2003 gastroenteritis outbreak in Tondo, Manila which killed 7 people and sickened over 700.

Despite these grave breaches, the Arroyo government is now entering into a debt-to-equity deal with Maynilad. This means that the government will forego the 8 billion due to the MWSS from Maynilad. This 8 billion will be converted into virtually worthless shares in Maynilad, which will give government 60% ownership of a financially insolvent company. Furthermore, it will absorb an additional 10 billion of the private debt of Maynilad and its parent company Benpres. This, at a time when the fiscal deficit is already at crisis levels, being in the vicinity of 200BILLION pesos, and the national debt is already at 3.36 trillion pesos! The MWSS has in fact borrowed $220 M from various banks to cover for the unpaid loans of Maynilad, adding even more to the government’s crisis-level borrowings.

This bailout, however, should not be interpreted as a “government takeover” of Maynilad. Government, while acquiring 60% of the shares, effectively allows the Lopezes and their French partner, Ondeo, to maintain control of the firm because it appointed Fiorello “Toto” Estuar as the president of this “new” Maynilad. Mr. Estuar was until recently the president of First Balfour, also a Lopez company.

We in BANTAY TUBIG would like to ask the following questions :

1) Why is the Arroyo government entering into this “amicable settlement” with Maynilad when it has every right to collect the 8 billion in Maynilad debts? The Arbitration Panel that heard Maynilad’s petition to terminate its contract ruled last November 7, 2003 that Maynilad must pay its concession fees within 15 days of the decision. The Panel also authorized the MWSS to draw on Maynilad’s performance bond of $120 million-a ruling that Maynilad challenged in the Regional Trial Court and is now pending at the Supreme Court.

2) Why have the MWSS and the Regulatory Office not declared a “concessionaire event” and served Maynilad a notice of termination? The Concession Agreement says that filing for receivership IS a concessionaire event, whereupon the government only has to reimburse the concessionaire 75% of its capital expenditures (around 4 billion pesos). Instead, government seems ready and willing to gift Maynilad with 8 billion pesos. Who is instructing these government agencies to pursue actions inimical to government and public interest?

3) Why is the Arroyo government giving away 8 billion pesos in taxpayers’ money to a Lopez company when the national coffers are hemorrhaging from tremendous financial pressures? We wonder what President Arroyo has gotten in return for saving the Lopez firm from sure financial ruin at the expense of taxpayers? Was Sen. Noli de Castro, a known Lopez asset, the prize in this trade-off?

This deal, if finalized, would be treason of the highest order. It is clearly disadvantageous to government, to Maynilad consumers and to Filipino taxpayers, while rewarding the Lopezes for financial failure and gross mismanagement. Moreover, it subjects Metro Manilans to greater danger and hardship as the bailout will not resolve the pathetic condition of the west zone, which is now threatened with water shortages and possible repeats of the Tondo epidemic during the coming summer months.

BANTAY TUBIG denounces this bailout and demands that President Arroyo and all the government agencies involved explain this crooked deal to the Filipino public. We challenge her and her running mate, Sen. Noli de Castro, as well as all the presidential candidates and their running mates to make clear their stand on this anomalous transaction. Tell us why we should vote for those who favor big business conglomerates over the welfare of the Filipino public.

BANTAY TUBIG NETWORK: AKBAYAN Party-list* Alliance of Progressive Labor* CIBAC Party-list* FOCUS on the Global South* Freedom from Debt Coalition* Institute for Popular Democracy* Tambuyog Development Center* Ma. Teresa Diokno-Pascual

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