Loose canon, Environment and Natural Resources Secretary, Gina Lopez (photo), who blasted the Philippines mining sector last week with enough shot to knock out most of the pit props that support it – with her unilateral declaration to close down 56% of the country’s mines – has been temporarily restrained as the damage from her decision continues to linger.
Thankfully, the President Rodrigo Duterte and the Cabinet moved quickly to calm fears and put a block on the order. They want to hear from the other side and take a closer look at the findings on which her conclusions are based.
Malacañang Palace issued the following statement: “Members of the Cabinet have expressed their full support behind President Duterte’s decision to observe due process before implementing a directive of the Department of the Environment and Natural Resources (DENR) to shut down or suspend 28 mining sites across the country”.
It pointed out that the DENR’s move “has triggered outrage in communities hosting mining sites, as some 195,000 direct and indirect workers and their families, or a total of some 1.2 million people, would be adversely affected by the closure and suspensions of the mine sites”.
Meanwhile, the Department of Finance, which had led the Cabinet challenge to Lopez’s order, issued the following statement. “Malacañang has swiftly moved to calm fears of massive layoffs in communities affected by Lopez’s sudden move to close down or suspend mining operations in 10 provinces across the country, after several Cabinet officials expressed concern over the detrimental impact of her decision, which she had apparently kept to herself and even excluded members of the Mines and Geosciences Bureau (MGB) team that conducted the audit, as well as the panel that reviewed the audit findings”.
All this will reduce the inflammation around the wound, but the problem is some damage has already been done.
The fallout has not just hit the mining companies en bloc through the suspension of their operations. Those among them that are publically listed on the Philippine Stock Exchange (PSE) have seen their stock prices plunge and their shareholders – mostly Filipino individuals – have lost what for many would have been their savings. The PSE is predominantly traded by retail investors; they account for more than 95% of total trades. And so the little guy, whom Lopez claims to be looking out for, loses again.
This was the immediate result of Lopez’s much-publicised seven-month-long nationwide audit of Philippine mines – her flagship policy that seems to have been rooted in some form of hippie economics and an emotional and zealous mission to rid the country of miners.
The eco-warrior princess – Regina Paz L. López (now plain Gina Lopez) whose siblings run the family’s media, telecoms, power, energy, real-estate, infrastructure and manufacturing interests through the vast Lopez Group, who hit the ashram circuit in her late teens and became a yoga missionary – was saving the planet for her grandchildren’s grandchildren and striking a blow against big business and its brutal rape of the Philippine countryside. Secretary Lopez was “healing the hurt”. That’s how she sold it, and it’s easy to see why she was cheered on by her organically grown fans.
However, in making her announcement, she had failed first to directly inform the gazetted companies that the mining bans were now in effect. No formal notice was issued by the DENR. Consequently, mine owners and operators didn’t know whether they’d been closed or suspended or in fact anything else about Lopez’s decree. And up until yesterday – a full 10 days after the announcement – the Chamber of Mines of the Philippines says its members still haven’t received any order from the DENR.
They weren’t the only ones baffled, however. The PSE was also left in the dark. As global nickel prices shot north by around 8% – and prices for mining stocks on the exchange fled sharply in the opposite direction – they couldn’t cross-check with the mining companies listed on the bourse to decide whether to suspend trading or continue. In the end, the listed mining firms asked the PSE for a voluntary halt to trading in their shares; but of course by then the horse had already bolted.
But Lopez’s announcement was beyond irregular; it was grossly irresponsible. This was restricted government information which Lopez made available to members of the public even before the mining companies had been officially informed. In other words, this could have been used as insider information and could have been acted on – and for all we know it was – to make a quick killing; loading up on borrowed stock and shorting it, for example. Holders of mining stock could also have been alerted, allowing them to offload before the price dropped further. As a friend pointed out, “if a government official did that in Hong Kong, he’d be hanged, drawn and quartered”.
Also, because of the way the PSE operates, the Philippine regulator isn’t able to determine whether there’ve been short sells – they can’t capture them. Also, while on other bourses short selling can only take place on an uptick in the share price, on the PSE, because there’s no way of knowing if they took place, it seems they can happen on a down tick. That said, we’re sure that the Securities and Exchange Commission will be looking for trading irregularities concerning mining shares around the time of the announcement.
The point in all this is that anything put out by the government – or in this case, one of its ministers – can have a direct impact on the trading value of shares. That’s something that governments everywhere – banana republics excluded – take pains to avoid. It leaves them open to all sorts of charges, from naïveté (which we’d like to believe is the case here) to insider trading and market manipulation.
And none of that helps the PSE. For a start, it’s unlikely overseas investors will be stirred to put more money in the Philippine stock market right now, even though like everywhere else it could do with more foreign cash. Admittedly, the PSE – to put it crudely – is a domestic investors’ club and foreign investors have little exposure. In 2015, a whopping 98.5% of all investment – retail and institutional – came from local players. Just 1.5% came from overseas. Lopez’s actions certainly won’t improve that ratio. But then maybe she doesn’t want to as we shall see a little later.
But there could be a far bigger bill to pay for Lopez’s extraordinary mine-closures announcement. As The Volatilian™ stated – Minefield for investors [8 February] – “… this could end up being one of the most costly pieces of ‘green policy’ ever attempted as aftershocks threaten to reverberate across the entire Philippine economy”. Hopefully now, following the swift move by Duterte and his Cabinet to staunch the bleeding, those dangers have now been minimised.
The stock market aside, overseas-investors’ perceptions matter. You know – the country’s image as a fair place to put your money; as a place that runs on the rule of law; a place where government doesn’t influence the outcome of transactions. Transparency, governance, all that stuff. Actually, all the stuff this administration has been working hard to promote.
But there is likely to be concern. If an individual department head can act independently and make a unilateral decision that affects an entire industry – without any reference to the wider economic ramifications – the stability of the system as a hole is seriously compromised. Furthermore, if it can happen in one government department, who’s to say it won’t happen in another?
Recently, The Volatilian™ met with Secretary of Trade and Industry, Ramon Lopez – no relation to Gina, we hasten to add – at the Board of Investments building in Makati. It was a good meeting and a very reassuring one. We were left in no doubt that this administration is free-market driven and that it’s doing all in its power to quickly establish the Philippines as place where foreign investors can safely put their money; where foreign firms can come and be a part of a growing economic landscape. Absolutely no doubt.
Lopez is an impressive man; he’s on top of his game and his department is a major cog in the wheel that’s driving the government’s bold socio-economic agenda. In short, R. Lopez knows which way is up; G. Lopez doesn’t seem to care.
But there might be other problems with DENR Lopez’s order – more specifically the data on which she based it. Apparently, she involved anti-mining activists in helping to compile the audit. The question then is, just how reliable is the data? Really, how likely is it that their input was unprejudiced? Certainly it needs to be independently appraised; but if it’s found to be faulty or skewed in favour of the closures, then the government has a bigger problem. In short, that would amount to gross manipulation of the industry and Lopez’s position would be untenable.
She also hired former Mines and Geosciences Bureau chief, Leo Jasareno, under whose watch environmental violations went unchecked. He was DENR Senior Undersecretary for Environment in the former Benigno “Noynoy” Aquino administration, whom Duterte had told to “vacate” his position.
But this is a Lopez policy rather than a government policy and the Cabinet are never going to sign off on it. Other than her ‘green dream’ and hitting the mining bosses hard, Lopez seems to have taken account of little else. The workers who could lose their jobs – the little guys again – weren’t even mentioned when she made her announcement. What were they, acceptable collateral damage so we could get a few more butterflies?
The well-run Department of Social Welfare and Development (DSWD) will undoubtedly step into the breach and take care of their immediate needs. But the fact is, if this goes ahead the mine workers have no work. They’re unemployed. They’re demoralised. But Lopez now has a solution for that. She says the government will spend PHP8 billion to create “blue lagoons and enchanted rivers” in ecology zones which will hire the jobless miners. In the meantime, maybe she could help them out with yoga. Which planet are we on right now? Anybody?
There seems to be more to this than Lopez’s hate of mining, though, as this very telling remark from her shows: “… the fact is, mining money funds political campaigns. You know that. But I know that when you are funded by whoever [sic], then you are indebted to that person. And so what happens is the decisions those people make are, by and large, always in favor of the people who funded their campaign”.
First of all that’s a very rich statement coming from someone who was born with a silver spoon –from where we’re sitting it sounds like someone suffering from pathological guilt – but it shows that her mine-closure decree was not solely based on environmental grounds. It was also based on her perception of how the mine owners spend there money and her resentment of them.
Some of them may well contribute to political campaigns – but that’s not an offence. And why single out miners. Does she think players in, for example, the telecommunications industry don’t contribute to political campaigns? How do we deal with them, shut down the country’s telecommunications? This is beyond naïve; this is bordering on vindictiveness. And that is not a quality anyone wants to see in a government minister.
Then there’s the US$22 billion of mining investment. What happens to that? How can that be used in the mining industry if there is no mining industry? Does any of this make any sense to anyone other that Gina Lopez?
Everything basically is now left on hold until the government can untangle this mess. And while the pit workers are wondering if at the end of it they’ll be able to put rice on the table for their families, Gina Lopez no doubt will be spending the time in Ánanda Márga meditation – or as we would say, fiddling while someone else is trying to stop Rome burning.