261. Memorandum of Conversation1

SUBJECT

  • President Marcos and the Philippine Investment Climate

PARTICIPANTS

  • Tristan Beplat, Vice President Manufacturers Trust and President Philippine American Chamber, New York
  • Harold Smith, Hanover Manufacturers Trust
  • Max Ansbach, Colgate
  • Harding Williams, Del Monte
  • Herman Barger, Deputy Assistant Secretary for East Asian and Pacific Affairs
  • Shepard C. Lowman, EA/PHL

At their request, a delegation from the Philippine American Chamber of Commerce in New York called on Mr. Barger to express their concern and views with reference to recent events in the Philippines. Mr. Beplat was the primary spokesman for the group.

Beplat first sketched briefly the recent events affecting the business climate in Manila. These included the Quasha case, the Lusteveco case, and the threat to declare the oil companies a public utility. He sees all of these actions as essentially political in nature, designed to bring pressure on the US to be responsive to President Marcos’ requirements. Beplat does not, however, believe that the Philippines desires to drive away American business. To the contrary, he and others have been talking with senior Philippine officials recently, including Executive Secretary Melchor, Secretary of Finance Virata and Governor [Page 559]of the Central Bank Licaros, who are presently in the US. As a result of these conversations, he believes the GOP continues to desire American investment. Chamber members will be meeting with these technocrats in New York next week to discuss current problems. Governor Licaros specifically requested that Beplat invite representatives of 30 banks, with loans to the Philippines totalling $225 million, in order that he might have an opportunity to reassure them as to the future course of the Philippines.

Nevertheless, Beplat feels we have problems, arising from President Marcos’ problems which include 1) how to continue in office after 1973, 2) growing levels of communist terrorist activities, and 3) a recalcitrant Congress which frustrates Marcos’ efforts to obtain reform legislation.

Beplat believes that Marcos has now made the decision to carry out a program against communist subversion; that this decision will be a major fact of life in the Philippines, regardless of our assessment of the necessity for such a decision; that Marcos will be expecting and demanding various forms of US assistance in carrying out such a program to include additional military assistance, perhaps in the form of helicopters and other aircraft, as well as increased economic assistance to underpin the social reforms which Marcos plans to undertake as a part of his overall program to deal with the insurgency. Given the Philippine balance-of-payments problems, Beplat suggests that US aid might be necessary for the success of such reforms.

During this meeting, Beplat repeatedly reverted to the theme that Marcos expects to get additional assistance from the US because his need is great and because he believes that we are paying much larger sums for base rights to countries such as Spain, Portugal and Ethiopia. Regardless of whether the US feels it may be supplying adequate assistance to the Philippines at this time, the fact is that Marcos feels that the Philippines is being treated badly. It is given a separate aid category from base rights countries. It is shortchanged with respect to availabilities of excess defense articles and, generally, the Philippines insurgency is not taken seriously. Marcos had noted that when he sent his brother-in-law, Governor Ben “Kokoy” Romualdez, to the US to discuss such matters that Kokoy had returned with the report he had been given a run around; that nobody believes him.

Beplat said he presumed discussions were under way in Manila on these subjects. He alluded to the fact that Marcos had spoken very frankly and bluntly to some US business representatives in Manila. Marcos is deadly serious in his intent to stay and play his hand out in the Philippines and the economic aspects of US-Philippine relationship will not be settled unless the political aspects are. If Marcos goes down or things get rough in the Philippines, US business will suffer and other US interests will suffer as well. If we want to stay in the [Page 560]Philippines, we must pay the price and quickly. While Marcos understands politics and would not press for a final resolution of these questions before the US elections, we should be prepared to be forthcoming within a short time thereafter.

Beplat closed his presentation by stating that US business wishes to express its strong concern about the drift of events in the Philippines and to express its belief that the USG has to take action on these matters; something must be done and the USG would make a very serious error if it tried to handle these problems in a passive manner. If something is not done soon, the Chamber is going to form a delegation of their senior officials from senior companies and come back to Washington to see President Nixon.

Mr. Barger asked Mr. Beplat if what he was making was a specific policy recommendation to which Mr. Beplat replied in the negative. Mr. Barger pointed out that an expression of strong concern was one thing but a specific recommendation that we must accede to the demands of President Marcos would be something else again. In response to this, Mr. Beplat reiterated that he was not making such a policy recommendation; that it was up to the State Department how to best handle this matter, but that something must be done soon.

Mr. Barger pointed out that a major concern of ours was that the Philippines not reach a point of no return through acts which might cause US companies to bring pressure on the Congress to cut off aid or the Philippine sugar quota or through actions by the GOP which would trigger such automatic legal sanctions as those in the Hickenlooper and Gonzales amendments and sugar legislation with respect to expropriatory situations. He felt that this was a message which US business might usefully convey to the technocrats. Mr. Barger added that it seemed to him that we would not wish to get into a stance where the expectation in the Philippines is that the way to do business with the US is to squeeze the US investors in the country to obtain ever new US Government concessions. In the long run, such a situation would be in no one’s best interest.

In closing, there was a brief discussion of why Marcos would jeopardize the major interests that the Philippines has in its close economic relationships with the US for the sake of gaining necessarily limited marginal increments to US assistance. In this connection it was pointed out that the United States already provides very substantial levels of aid, both for regular programs and in response to emergencies such as the flood.

In response to the query, Beplat seemed to be saying that Marcos understood the value of the economic relationship with the US, but that he would have to go all out on the difficult course on which he was embarked and that, if he failed, chaos would follow which would be bad for all.

  1. Source: National Archives, RG 59, Central Files 1970–73, FN 9 PHIL–US. Secret. Drafted by Lowman and approved by Barger. The meeting was held in Deputy Assistant Secretary Barger’s office.