US embassy cable - 05MANILA2887

C O N F I D E N T I A L SECTION 01 OF 03 MANILA 002887 
 
SIPDIS 
 
DEPT FOR EAP, EAP/PMBS, INR/EAP 
 
E.O. 12958: DECL: 06/24/2015 
TAGS: PGOV, PINS, ECON, ASEC, RP 
SUBJECT: CONTINUED POLITICAL WOES FOR PRESIDENT ARROYO 
 
REF: A. MANILA 2840 
 
     B. MANILA 2815 
     C. MANILA 2777 
     D. MANILA 2731 
     E. MANILA 2730 
     F. MANILA 2689 
 
Classified By: Political Officer Timothy Cipullo for 
reasons 1.4 (b) and (d). 
 
1.  (C) Summary:  An anti-GMA protest march on June 24 failed 
to gather significant momentum, but police blocked access to 
downtown Manila City.  As of COB, the crowds had yet to 
disperse entirely, however.  President Arroyo delayed the 
retirement of Armed Forces of the Philippines Chief of Staff 
General Abu, expected on June 24, reportedly out of concern 
that the security situation might worsen.  The Philippine 
House of Representatives began hearings into audiotapes 
allegedly containing presidential conversations about the May 
2004 elections.  Defending herself, President Arroyo attacked 
"destructive politics" and "backstabbing."  Political jitters 
are adding negatively to the economic scene, with upcoming 
VAT and energy price increases apt to create more public 
dissatisfaction.  The death of Cardinal Sin has provided some 
distraction from the woes of the President, along with the 
release and return to the Philippines of Filipino hostage 
Robert Tarongoy from Iraq.    While tense and sometimes 
turbulent, the situation does not appear likely to worsen 
suddenly or dramatically in the near future, absent a new and 
more meaningful scandal.  End Summary. 
 
--------------------- 
Let the marches begin 
--------------------- 
 
2.  (SBU)  In an apparent effort to stimulate a new People 
Power-like movement, mainstream, opposition, leftist, and 
anti-PGMA groups organized a joint "National Day of Protest 
for Truth and Justice" on June 24, beginning with a rally in 
Quezon City and followed by a march by approximately 10,000 
people toward neighboring Manila City.  Citing the importance 
of planned events to commemorate the 434th anniversary of the 
founding of Manila, Manila Mayor Lito Atienza (a PGMA 
supporter who has repeatedly called for national unity to 
promote political stability) on June 23 had banned issuance 
of permits for this rally to enter his city and called on 
police to enforce a "no permit, no rally" order.  At least 
800 Philippine National Police (PNP) met the crowd at the 
border of the two cities in an orderly and restrained 
fashion.  As of COB, the face-off continued, with no reports 
of violence or use of water cannons.  Speakers continued to 
denounce PGMA and calling for her ouster, amid extensive 
media coverage.  Poloffs have been on the scene to monitor. 
 
3.    (U)  "The Coalition for National Salvation" of former 
defense secretary and PGMA opponent Fortunato Abat postponed 
a rally scheduled for June 25 in deference to the death of 
Cardinal Sin.  The group announced that it would instead hold 
a mass.  Separately, former presidential candidate and leader 
of the "Jesus is Lord" movement, Brother Eddie Villanueva, is 
organizing an anti-PGMA prayer rally on July 1.  Other groups 
have said they also plan public demonstrations in the days 
and weeks ahead. 
 
---------------- 
When in doubt... 
---------------- 
 
4.  (SBU)  Despite the issuance of invitations for a change 
of command for the AFP COS on June 24, Defense Secretary 
Avelino Cruz announced on June 22 that the GRP had postponed 
the ceremony indefinitely, even though current COS Chief of 
Staff Gen. Effren Abu reached his mandatory retirement age of 
56.  Initial reports indicated that Abu might stay on at 
least three additional months.  Mid-day on June 24, however, 
Malacanang announced that Lt. General Generoso Senga, 
currently the Commanding General of the Philippine Army, 
would become the next AFP COS in August. 
 
-------------- 
Hearings Begin 
-------------- 
 
5.  (U) On June 21, a Joint Committee of the Philippine House 
of Representatives began hearings into audiotapes alleged to 
contain wiretaps of a conversation between President Arroyo 
and former COMELEC commissioner for Mindanao Virgilio 
Garcillano (reftels).  The joint committee plans to continue 
its nationally televised hearings next week, with the 
possibility of additional sessions in following weeks.  When 
called as a witness, Malacanang Spokesman Ignacio Bunye 
declined to confirm that it was the President's voice on the 
tape, which he had admitted in earlier interviews.  He 
claimed that he had initially made public the tapes on June 6 
to defend the President from "destabilization forces" who 
were trying to use them in a plot "to destroy" the President. 
 Reynaldo Wycoco, the Director of the National Bureau of 
Investigation (NBI), told the hearing that the NBI had not 
yet located the original version of the audiotape, adding 
that the NBI continued to investigate the matter.  The NBI's 
Samuel Ong, who had claimed in the press that he has in his 
possession the "mother of all tapes," failed to appear at the 
hearings, although he promised to attend next week, according 
to press reports. 
 
6.  (C) In the Senate, the minority opposition bloc headed by 
Senator Aquilino Pimentel demanded an immediate investigation 
into the controversy.  Senator Rodolfo Biazon, a defense 
committee chairman and PGMA ally, predicted privately that 
Senate hearings probably would take place only after the 
House completed its hearings.  The Senate nonetheless is 
continuing its hearings on allegations that members of PGMA's 
family received payoffs from jueting (illegal gambling) 
operations (ref F).  Archbishop Oscar Cruz, a vocal opponent 
of jueting, told the media that he has additional witnesses 
who can incriminate members of PGMA's family. 
 
--------------- 
Arroyo Hits Out 
--------------- 
 
7.  (U) PGMA on June 23 publicly attacked "destructive 
politics" and "backstabbing," calling her detractors "no 
better than economic saboteurs" for plotting against the 
government at this time of "clear danger from external 
factors."  The President called on Filipinos to thwart any 
coup attempts and vowed to continue efforts "to uplift the 
poor" and fulfill her "agenda for reform."  PGMA continued 
neither to confirm nor deny the authenticity of the 
recordings.  In a media roundtable on June 20 in Hong Kong, 
she said:  "I will make the appropriate statements on the 
issues at the appropriate time.  But this is not the 
appropriate time when the air is poisoned with political heat 
and extensive speculation."  She reaffirmed that she won the 
2004 presidential election. 
 
8.  (C) According to Presidential political adviser Gabriel 
"Gabby" Claudio, Malacanang's position remains that the tapes 
were not authentic and, even if they were, there was nothing 
illegal on them, while admitting that PGMA's conversation 
with a COMELEC official could be construed as "an 
impropriety."   He expressed doubt that PGMA would address 
the issue squarely in public, but he indicated that some 
elements in Malacanang had called for this approach.  Acting 
Pol/C stressed that the USG supported democracy, stability, 
and the rule of law, and urged that Malacanang must not 
over-react or consider any sort of emergency rule, martial 
law, etc.  Claudio confirmed that Malacanang was no in any 
way considering such steps. 
 
------------------- 
Making things worse 
------------------- 
 
9.  (SBU) In the wake of the latest political turbulence, 
there has been a slight depreciation in the peso, which 
slipped below 55 per dollar on June 10 for the first time 
since mid-February and has remained below that mark ever 
since.  The peso hit an intra-day low of 55.94 per dollar on 
June 21, the weakest rate since mid-January.  On the 
downtrend for several months, domestic interest rates also 
have come under pressure the past two weeks.  Despite excess 
financial market liquidity and perceptions of improved fiscal 
prospects, securities dealers jacked up bid rates for the 
GRP's treasury bills, particularly for the longer-term 
papers, prompting the GRP to reject most of the bids offered. 
 The Philippine Stock Price Index (Phisix) lost 7.5% of its 
value within a three-day period in early June.  The Phisix 
has since partially recovered on bargain hunting and 
generally favorable first-quarter corporate-profit reports. 
Traders noted, however, that foreign investors have become 
net sellers in the stock market in recent days, after fifteen 
consecutive sessions of net foreign purchases.  Although net 
foreign sales have been minimal thus far, observers noted 
that this development reflected increasing investor jitters. 
 
10.  (U)  Commentators have also begun to warn of the 
possible consequences for public order and political 
stability of the implementation of higher Value Added Tax 
(VAT) rates on July 1.  Rising fuel, electricity, and 
transport costs will likely spark new rounds of protests and 
possible short-term transport strikes as well. 
 
-------------- 
Some good news 
-------------- 
 
11.  (SBU)  The only welcome distractions from PGMA's 
political woes have been the death of esteemed Cardinal Sin 
-- along with the almost week-long wake and series of Masses 
for him, which will cumulate in a large public funeral on 
June 28 at the Manila Cathedral (with no procession, since he 
will be buried in its crypt) -- and the return to Manila on 
June 23 of released hostage in Iraq Robert Tarongoy.  PGMA 
held a photo op with Tarongoy at Malacanang, where he thanked 
her profusely for her help and support in winning his 
release.  GRP officials have insisted that the GRP paid no 
ransom, but did not otherwise explain how they won his 
release.  The Sin and Tarongoy stories have helped push the 
jueteng and tape scandals mostly below the front page center 
front page or on inside pages of major newspapers. 
 
------- 
Comment 
------- 
 
12.  (C) While her political woes are far from over, PGMA has 
weathered the latest turbulence, which appears to be 
dissipating.  Significant pressure -- among her own advisers 
as well as from the opposition -- remains for Arroyo to 
explain the tapes and her family's ties or lack thereof to 
jueteng.  Any new and possibly more important scandal, added 
to heightened tensions from greater economic pressures, could 
revive momentum in seeking her ouster or force her into 
public confessions that would further weaken the political 
standing of an already unpopular president. 
 
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