BUSINESS GROUPS JOIN CALLS FOR ARROYO'S RESIGNATION

C O N F I D E N T I A L SECTION 01 OF 02 MANILA 003163

SIPDIS

STATE FOR EAP/EP, EAP/PMBS, EB/IFD, EB/TPP/BTA/ANA
STATE PASS USTR FOR BWEISEL AND DKATZ
STATE PASS USAID AND OPIC
TREASURY FOR OASIA FOR AJEWELL
USDOJ FOR MCRAWFORD
USDOC FOR 4430/ITA/MAC/DBISBEE

E.O. 12958: DECL: 07/08/2015
TAGS: PINS PGOV ECON RP
SUBJECT: BUSINESS GROUPS JOIN CALLS FOR ARROYO'S RESIGNATION

REF: MANILA 3061

Classified By: Classified by Shawn Waddoups, Acting Economic
Counselor. Reason: 1.4(b) and (d).


1. (SBU) Summary: Business leaders in Manila continue to
call for a Constitutionally consistent resolution to the
current political situation, but now have added their
voices to the chorus calling for Arroyo to leave office.
On July 8, three key business groups, including the
highly influential Makati Business Club (MBC),issued
a statement urging President Macapagal Arroyo (PGMA)
to step down. This reflected an abrupt change in
posture for the business community which, until then,
had been relatively steadfast in its support for her.
In press statements calling for her now to relinquish
power, major business groups stressed the importance
of strictly following the constitution. End Summary.

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Landing could be hard or soft
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2. (C) Charge met with former Foreign Secretary Roberto
"Bobby" Romulo, an influential business leader and
advisor to PGMA, on the afternoon of July 7. Romulo
said that he and other business leaders "must admit
their disenchantment" with PGMA and said that this
weekend is the crucial moment for her presidency. He
predicted either a "hard landing" in which Arroyo would
be forced out of office or a "soft landing" where she
would be allowed "gracefully" to leave office. He
expressed optimism that either resolution would be both
constitutional and acceptable to business leaders. He
and his associates had hoped they would not have to
face either scenario, but said that it is now clear she
will have to leave eventually. Thus, they favor a
transition that will allow her to exit with minimum
disruption to on-going reforms. He was concerned,
however, that something "untoward" will happen before
either scenario had time to unfold, and expressed worry
about leftist forces trying to capitalize on the current
instability. He emphasized that the country must
avoid another "People Power" at all costs.

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Makati Business Club, Finex call for PGMA's resignation
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3. (U) The Makati Business Club (MBC),comprised of the
most powerful and influential business people in the
country, and the Financial Executives Institute of the
Philippines (Finex) on July 8 jointly called on PGMA to
relinquish her post for the sake of national unity and to
enable the country to move forward. They said the
resignation earlier in the day of "key Cabinet members
representing the core of the President's social and
economic team" was "a grave loss to the government."
Concluding that "the President's ability to effectively
manage the affairs of state has been seriously
impaired," and that "national interest" did not appear
to lie above Arroyo's "personal, political interest,"
they asked PGMA to "relinquish her position as
President," stressing that "all moves for change must
take place firmly within the context of the
Constitution." The MBC's members formed one of the key
constituencies propelling PGMA to power in 2001.

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MAP joins the fray
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4. (U) The Management Association of the Philippines
(MAP),composed of over 700 small, medium and large
companies, also called for PGMA to step down on July 8.
Noting that the country faced "a potential fiscal
crisis that has been exacerbated by the Supreme
Court's recent issuance of a Temporary Restraining Order"
(TRO) on the VAT law as well as corruption, MAP said "the
events of the past weeks ... seriously impaired" PGMA's
ability to address the problems of the country. Like
the MBC/Finex statement, the MAP statement also referred
to the "resignations today of the most respected members
of her cabinet." Arguing that "the longer the President
stays in office under a cloud of doubt and mistrust, the
greater the damage to the economy... (a)nd the greater
the vulnerability to forces seeking extra-constitutional
means to grab power," MAP said "she must now ...
relinquish the Presidency to her Constitutionally-
mandated successor."


5. (C) MAP President Simon Paterno told econoff on
July 8, just after the release of the MAP statement, that
the morning press conference in which DOF Secretary
Purisima and nine other key cabinet members resigned en
masse and called for PGMA to step down caused the
business groups to do an about-face and fall in line
with the increasing number of individuals and groups
calling for her resignation. Paterno explained that the
growing tensions have created too many opportunities for
extra-constitutional political adventurism, noting that
the last thing the country needs is a coup d'etat. He
said that although the business community is concerned
about constitutional successor Vice President De
Castro's lack of political experience and economic
expertise, they consider a De Castro presidency
preferable to any extra-constitutional change of power.


6. (C) Paterno made it clear that the business
community had a great deal of respect for the skills
and integrity of Purisima, as well as Bureau of Internal
Revenue Commissioner Guillermo Payrano, and that these key
economic advisors' loss of confidence in PGMA had a major
impact on turning the sentiments of the general business
community more sharply negative towards her. He added
that the Supreme Court's TRO against implementation of
the E-VAT law (reftel) "had (PGMA's) fingerprints all
over it." This, he said, showed that she valued her
political survival over the interests of the nation. As
news of the business community's call for PGMA to resign
flashed across the television screen beneath former
President Cory Aquino as Aquino began her televised
statement at 3 p.m., Paterno noted that "Cory is the
queen of this country." When Aquino called for
PGMA to step down, Paterno said "it's all over for her
(PGMA)."


7. (SBU) Comment: The elite, rich and powerful members of
the MBC and MAP were a core constituency supporting
PGMA's ascendancy to the Presidency during EDSA II in
2001 and again in the 2004 election. Their unequivocal
call for her to step down, sandwiched between the
morning's en masse resignations by her most widely
respected economic advisors and this afternoon's
televised plea by former President Cory Aquino for PGMA
to resign, is a powerful blow to her chances for
survival. Most of her closest supporters were relying on
this "sensible middle class" to continue to lend her
legitimacy. With this gone, it will be increasingly
difficult for her to hold on.
MUSSOMELI