Cesar Purisima is not afraid to stick to what he believes in. In July 2005, his first term as the Philippines’ finance secretary came to an abrupt end when news broke that president Gloria Macapagal-Arroyo had allegedly rigged the 2004 election in her favour. Purisima, along with nine other cabinet ministers, resigned from their posts.
Fast forward to 2012 and Purisima is back in place as finance minister, two years into his second term. President Benigno Aquino is the architect of the new administration’s anti-corruption drive, but Purisima is his main co-conspirator, championing the idea that "good governance leads to good economics".
Bankers in the country say he has stuck to his guns, and the country is reaping the rewards.
"The public was initially sceptical of Purisima’s slogan," says Consuelo D Garcia, country manager and managing director of ING in the Philippines. "Many just didn’t believe that this administration would be any different from the last."
Recent data compiled by Euromoney Country Risk highlight that the Philippines’ economic fundamentals have improved since the beginning of the year: its score has risen by more than 10%, one of the biggest improvements among global economies.
Corruption remains an issue for economists that cover the Philippines, but bankers say perception is lagging reality. "There is an acknowledged improvement at the top, but this culture change will take time to trickle down to all sectors of society," says Garcia.
Together with the Bureau of Internal Revenue, which sits within the finance ministry, Purisima has unleashed an unforgiving strategy to combat tax evasion and maximize revenue from corporates without introducing any new taxes or reforms.
|Cesar Purisima, Philippines’ finance secretary and Euromoney's finance minister of the year|
Purisima has filed charges in court against private individuals and government officials suspected of tax evasion and corruption.
The Philippine growth story stands out against the challenging global macro-economic backdrop. Under Purisima’s guidance, and fighting back after storms and flash floods devastated the country in 2011, GDP growth reached 5.9% in the second quarter of this year – up from 3.6% the previous year – and brought the first-half GDP average growth to 6.1%, showing some of the strongest growth rates in Asia.
Purisima took gutsy measures to protect the Philippines’ economy, as developed markets in the west crumbled under pressure. In December 2010, he orchestrated the exchange of short- and medium-tenor local government securities for P39.5 billion ($940 million) 10-year peso bonds, and P181 billion 25-year peso bonds. There was a similar exchange in July 2011, when short- and medium-tenor local government securities were exchanged for P67.6 billion 10-year bonds and P255 billion 20-year bonds.
Through the debt-domestication initiative, the external debt ratio of the country dropped to 27.4% in the first quarter of 2012 from 29.5% for the same period last year. "Investors are comfortable with long-term rates because they are confident Purisima and the economic team will continue to manage spending and bring down public debt," says Garcia.
Purisima has worked hard to improve the Philippines’ debt profile. The debt-to-GDP ratio fell to 51.2% in the first quarter of 2012 from 53.9% in 2011. "Debt swaps implemented under Purisima’s leadership have allowed the government to extend its average debt maturity to 8.8 years from 7.9 years in June 2011 and have delivered significant savings," says Veloso.
And there are added benefits to all of this: higher tax revenues and interest savings have been channelled into improving social services, including health care, education and infrastructure.
Since Purisima’s reappointment in 2010, the Philippines has moved up the ranks of all three main international ratings agencies, with six credit upgrades. And analysts and economists alike are confident the Philippines will reach investment grade by 2013.
Purisima is relentless in delivering a consistent message, of good governance translating to good economics. And the international community is beginning to recognize his diligence, vision and steady success in straightening out the Philippines’ finances.
As Manuel V Pangilinan, CEO and managing director of First Pacific Company in the Philippines, says: "Purisima is the epitome of a public servant. We only wish he could have fulfilled his duties in this post sooner."
For an in-depth interview with finance minister Purisims, read Euromoney’s October issue.