The BSP man

The newly-named governor of the Bangko Sentral Ng Pilipinas (BSP) sits on the other end of the couch, hands on his knees, looking relaxed and very benign.

"If you were to look at it like a yield curve," he is saying, "the belly of the curve would be between the second and the seventh."

He gestures with his hands, long encompassing motions describing the curve in the space between him and the coffee table. "The ages are very close together, a difference of probably a year and a few months," he concludes.

Blink blink. Then he bursts out laughing.

Amando "Say" Tetangco Jr. is not talking about the spreads of Philippine bonds or debt maturities. He is discussing his eight other siblings and the age gaps between each child. The yield is indeed high and the maturities did, in fact, bunch up to an extent that would have driven the BSP to panic if the subject had been debt maturities.

Tetangco’s deadpan description of the size and configuration of his childhood family might have succeeded if he wasn’t chortling.

"Someone told me I’m not supposed to smile," he says. "Apparently, central bankers don’t smile."

Born in rural Apalit, Pampanga, Tetangco was the fifth of nine children, growing up in the dead center of the gaggle of children at a time before Voltes V and Doom.

"I can’t believe how expensive yoyos have become! Softdrink companies used to just give those things away," he says. "We had turumpo and those things could cause serious injury if you didn’t know how to use them."

Tetangco describes his childhood with a keen appreciation of balance. He grew up with an old grandmother who was religious and made sure everyone’s soul was taken care of. So everyone had to be home at 6:00 in the evening in time for the Angelus and the rosary. Then, with spiritual duties over, the house exploded with the chaos of nine children stampeding for dinner.

"Takbuhan na ’yun. Kapag mabagal ka, wala kang aabutan," he recalls.

As a matter of necessity, the senior Tetangco had to be strict. With nine children to raise, he had to run a tight ship. "He was the disciplinarian and the enforcer of rules," the son says. "My mother watched out for us and made sure we did the right thing but my father was the rule-maker."

If anyone broke the rule, Tetangco’s mother interceded on behalf of the kids. "She was the court of appeals," he explains.

Contrary to rumor, however, the quintessential central banker did not grow up looking at the moon and wishing he would grow up and become the central bank governor. He wanted to be a doctor. "But it would have taken a long time, kawawa naman ang tatay ko, eh siyam kami," he says.

So Tetangco went from high school to Ateneo de Manila University and took up economics. In the early 70s, economics was new and the in-thing.

It was during this time, Tetangco shares, that he was exposed to the work of Jeremias Montemayor, who was to the social democratic movement what Jose Maria Sison was to the national democratic movement in its early days.

"I read his book on Philippine social economic problems. I was heavily influenced by it," he reveals. "It was a yellow and red book." Right up there with Joma’s Philippine Society and Revolution and Muammar Qaddafi’s Green Book.

While majoring in economics, Tetangco joined the Federation of Free Farmers, a mass organization founded by Montemayor. In the heat of the First Quarter Storm, he was working directly with farmers and their agrarian reform cases.

"We would talk to them and help them deal with their lawyers, "he recalls. "We went on immersion trips and spent weeks with them to learn and to help."

With some prodding, Tetangco owns up to participating in the student rallies that decorated the historical accounts of the period. So, did he ever get hit by a truncheon?

"Ay, hindi, maaga kami umuwi eh. Gabi na yung mga ’yun a," he says, laughing. "Our work was mostly in Bulacan with the farmers there."

But Tetangco’s family was not spared from the difficulties of Martial Law. His oldest brother became mayor of Apalit in his twenties at the time when the entire Central Luzon was the hotbed of the rebel movement, including the Hukbalahap led by Jose Taruc and Antonio Lava.

Because the Tetangcos were not aligned with the political kingpins that took orders from beside the Pasig River, his brother was subjected to extraordinarily vicious political attacks.

"My brother was detained in Camp Olivas in San Fernando and he even went through a military tribunal, accused of everything from terrorism to murder, multiple murder and what-not," he says. "He was ultimately acquitted."

Tetangco finally graduated from Ateneo with a degree in economics, missing magna cum laude by a fraction of a percent. "Napa-barkada ako eh," he admits. "I wanted balance–I wanted to do well and finish with some distinction but I didn’t want to be a fanatic about it."

After college, Tetangco joined SGV for a year, working for its economic research department before ultimately moving to the BSP, then known as the Central Bank of the Philippines.

In 1974, Tetangco became a researcher in the CB’s Department of Economic Research (DER). "We had calculators so big they occupied one third of the desk," he laughs at the recollection. "The thing could add and subtract, that’s it."

In the CB, Tetangco began his gradual ascent, punctuated only by a couple of years when he went to the US for his master’s degree in development economics.

It was while completing his masters that Tetangco first heard of Elvira Plana, who had just graduated from the Ateneo and joined the DER. "My friends were writing to me and told me there was someone new in DER, that she was pretty and intelligent," he says.

Plana would later become Ms. Central Bank, a title known for the unusual requirement of being both beautiful and intelligent. Smart was not enough; the title holder had to actually be intelligent.

"We got married in 1982," Tetangco reveals. "A year before the moratorium in 1983."

Recalling the two momentous events in his life side by side were not surprising considering that the young and upwardly mobile Tetangco landed in the midst of what was probably the worst time in the country’s post-war history.

Tetangco was working as researcher and later director of the DER’s international group which monitored the country’s balance of payments and made projections that were used by banks and creditors.

After the debt moratorium in 1983, the Philippines was put under the program of the International Monetary Fund (IMF). "The DER was the department that negotiated the ceilings with the IMF and monitored these ceilings," he explains. "It was when I was associate director that we declared the moratorium."

The Philippines had missed two quarterly pay-ments on its debts, sending its creditors into crisis mode. A bank advisory committee (BAC) was created, consisting of the 10 major creditor banks that talked to the government on a regular basis.

Current BSP governor Rafael Buenaventura, in fact, was a member of this BAC. "He was on the other side, the creditor side," Tetangco says. "I was on the government side."

Under the BAC was an economic sub-committee whose main job was to estimate the gap between the country’s dollar reserves and its dollar requirements.

"This gap was the basis of the debt restructuring," he explains. "The restructuring was needed to extend the maturity of our debts so that we won’t have to use up our foreign exchange and instead use it for other more immediate requirements."

This is the moment that both Tetangco and Buenaventura recall with horror and trepidation. "We met everyday and the decision-making process was down to the level of having to pick between milk and medicine."

As expected, following a debt moratorium, the country’s lines of credit were all cut. Importers could not open letters of credit in order to pay for their imports. Everything had to be paid for in cash so the banks had to set up a foreign exchange pool. This pool, at the time, amounted to no more than tens of millions of dollars on a daily basis. In contrast, the country’s international reserves now stood at around $15 billion.

"Every day we would meet and we had to prioritize payments," Tetangcon recalls. "It came down to deciding which one we would import first: oil or medicine or milk. It was terrifying."

After going through the fire, Tetangco was far from unscathed. You wouldn’t guess by looking at his benign expression but the subject of the 1983 moratorium is one of the very few subjects that still elicits a shudder from him.

"I had sleepless nights," he admits. When Malacañang announced the appointment of Tetangco as the next governor of the BSP, there was an audible sigh of relief throughout the banking sector.

Considering the number of names that have been floating around the industry for months, it was almost anti-climactic, except for the people who knew that Tetangco was a long shot in light of the horse-trading that went on prior to the announcement.

Tetangco’s appointment ended months of speculation over one of the most critical positions in the Arroyo administration as the government struggles to usher itself towards a balanced budget, stable exchange rate and interest rates.

Arroyo had been keeping the selection process secret although several names had been short-listed before the actual announcement was made.

Included in the list of candidates were former finance secretary Edgardo Espiritu whose testimony in the impeachment proceedings against former president Joseph Estrada was critical in ushering Arroyo into power in 2001.

Also on the list were Octavio Espiritu, former president of Far East Bank and Trust Co., veteran banker Peter Favila who was president of the Philippine National Bank and even Cesar Purisima who was ultimately appointed finance secretary. Arroyo picked Tetangco, who was described as the "Solomonic choice".

"He’s perfectly qualified for the position and appointing him will ruffle the least number of feathers," says a bank executive who spoke on condition of anonymity. "Unlike other government agencies, it is especially critical for the BSP to have a clear mark of independence and Tetangco carries that mark."

Starting July 4, 2005, Tetangco will take over from Buenaventura who has carefully and successfully nurtured a reputation for fierce independence in the midst of heavy political pressure.

Tetangco also sent clear signals to the banking industry that he intends to continue the reforms started by Buenaventura at the BOdÆ "In a larger sense, my designation also represents a validation that BSP is on the right track insofar as implementing responsive monetary policy," he says.

Buenaventura, for his part, was visibly elated over Tetangco’s appointment, saying that the 52-year-old veteran central banker was the "wise choice".

"Tetangco is one of the principal architects of the far-reaching reforms BSP is spearheading," Buenaventura said following the announcement. "Equally important, he is a professional central banker with extensive exposure here and abroad."

Tetangco himself, of course, lobbied for nothing. The whole governor business was something that was either going to happen or not. The only bone of contention, as far as he was concerned, was how to get the job done. And even that, to listen to him, is easy as pie.

"If you look at the mandate of BSP, dalawa lang yan eh: price stability and sound banking system," he points out. "Any threat to price stability is a threat to the banking system. You have to be able to respond adequately."

Fortunately for the BSP and the country, Tetangco is no stranger to the reforms that have been unfolding in the country’s monetary and banking systems.

Together with Buenaventura and deputy governor Alberto V. Reyes, Tetangco has been in the middle of the often painful adjustments that the BSP has had to make in order to integrate the Philippine financial system with the rest of the world.

"There are still many changes going on and risks we have to manage," Tetangco points out. "There are products and practices that are possible now that were not possible before–we have to deal with those."

But Tetangco is unfazed.

"We have a clear agenda," he emphasizes. "Setting up inflation targets and being able to anticipate the effects of new developments from external and internal factors‚ that is what we need to do.

"Before, we only needed to look at monetary aggregates and that was pretty much it. We believed that if money supply went up by so much and growth by so much then we can expect such inflation," he explains. "But that’s not reflective of present realities anymore. Things are more complex and it doesn’t always follow."

Tetangco is expected to usher the BSP into the realm of the Basle 2 Convention, the global effort intended to internationalize and harmonize global banking practices.

"That’s going to be the major agenda item over the next several years," he says. "Even that should not be complicated. It’s not like we will go to jail if we don’t comply but it will be costly for us if we don’t."

To Tetangco, however, the principles of sound and rational risk management are beyond punitive actions and unnecessary cost implications. It’s a matter of aesthetics. Medieval banking is unaesthetic.

"These are good principles that will be good for everyone all around," he says. "That is simply sound banking practice. That should be easy for everyone to get."

The difference now is that in four months, Tetangco will be the man to blame or congratulate at the BSP. When asked if he was even just a little bit scared, he blinks the Tetangco Blink. The thought clearly never occurred to him.

Tetangco, after all, has always been the BSP man.