CONTINUED POLITICAL WOES FOR PRESIDENT ARROYO

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.

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Let the marches begin
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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.

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When in doubt...
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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.

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Hearings Begin
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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.

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Arroyo Hits Out
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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.

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Making things worse
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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.

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Some good news
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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.

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Comment
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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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