Consumers Domain
By Ian Seruelo

JDV’s debt swap, another debt trap

"One of the simple but genuine pleasures in life is getting up in the morning and hurrying to a mousetrap you set the night before.”
—Kin Hubbard

This column would like to give this space to a statement from the Freedom from Debt Coalition (FDC) on the debt-for-equity proposal of Speaker Joe de Venecia. He asserts that his proposal is a move towards the solution of the country’s debt problem. But is it? Please read below. 

Debt-for-Equity in MDG Investment: JDV’s Debt Swap Ploy
Last year, House Speaker Jose de Venecia (JDV) came out very strongly in lamenting the devastating impact of the Philippine debt problem on the poor, especially to basic needs such as health care, education etc.  This, coming from someone who had no qualms about passing on the burden of his P560 million debt to the government, which meant that we taxpayers paid for his private debt.

Now he would have us believe that he has come out with the solution to the debt crisis, his “Debt for Equity” scheme which is aimed at converting “50% of agreed upon portion of debt service due” into equities to be invested in anti-poverty and development projects”
The De Venecia proposal contains no new ideas and will not bring the “substantial debt relief” he is claiming in his letter to UN Secretary General Kofi Annan.

1. The proposal will not mean we will be paying less for debt services. We will continue to pay debt service obligations as we have been in the past.
2. The proposal does not mean our debt stock will be reduced by other means other than us paying for the principal.
3. As admitted in the paper, the proposal is not asking for debt cancellation, debt forgiveness nor debt discounts.

So what "breathing spell" and "fiscal space" is JDV talking about? The most the proposal can actually bring about, that is if creditors will agree, is that part of the interest we pay them, they will invest in so-called anti-poverty and development projects. Thus, it is one way to get foreign investors to put in capital for these projects.
This is not even necessarily positive – as there are evidences and experiences to show that foreign and private investments in services has led to increase in the cost and price of these services.

The proposal listed various anti-poverty and development projects to be financed by the debt-for-equity proposal and surreptitiously includes projects such as mining, reclamation and other natural resources development.
The proposal clearly reveals the servile attitude of government towards its creditors. If creditors agree to the proposal, the possibility of looking into the nature of the debts prior to the application of the scheme becomes nil.  It takes away the option of illegitimate debts and putting a stop to payment of debts found to be fraudulent, onerous and odious.

JDV’s proposal comes as a stab in the back of countries experiencing debt problems, and undermine global campaigning efforts for debt cancellation.  The proposal is a clever ploy to ensure debt repayment to creditors and advance the neoliberal agenda. This in order to boost JDV’s political ambitions and help prop up the Arroyo regime. (For comments and reactions send SMS to 0919-348-6337 or email to ianseruelo@yahoo.com.)