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Six Quotas, 1935-1941
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Sugar Society

Gauging precise changes in Philippine sugar society for so short a period as seven years represents a formidable task; however, events and actions in the period from 1935 through 1941 do indicate some ways in which people in the industry responded to the quota system. Limitations on production and declining prices after 1936 provided opportunities for the wealthy entrepreneur to expand his holdings, while they supplied incentives for others to bail out and to seek alternative investments. For smaller planters, mill workers, and farmhands, only the option to stay and fight for a share of dwindling industry profits remained.

With nearly stagnant sales, businessmen found it expedient to expand by acquiring the market share of others, and some consolidation occurred in the sugar industry. Four centrals changed hands in 1935 and early 1936: Bataan Sugar Company and Ormoc Sugar Company (Leyte) became the property of Gil Montilla's family, owners of Lopez Central in Sagay purchased Central Santos-Lopez in Iloilo Province, and control of Bacolod Central passed from the de la Ramas to the Lizares family. None of the first three acquisitions constituted more than a small fraction of the quota, but the latter mill ground a significant 4.41 percent, and coupled with the Lizareses' other centrals, Talisay and Danao (Negros Occidental), gave them almost 10 percent of the total Philippine export quota. By 1937 seven family groups or corporations dominated practically two-thirds of all sugar milling. Other attempts at takeover did not reach completion in the prewar period. Jose Yulo proposed purchasing Calamba Sugar Estate from the Ehrman-Spreckels conglomerate, both the Lopez family and Gil Montilla expressed interest in buying Binalbagan from the government, and the Ledesmas tried to obtain San Carlos. Although these bids proved unsuccessful, they confirm the rush toward agglomeration that pervaded the commonwealth years.[16]

Consolidation of mill ownership represented not only the enhancement of family holdings, but also an effort to put the industry on a more rational and efficient footing. Sugarmen emphasized making production more cost-


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efficient so that Philippine sugar could compete in future unprotected world markets, and the technical answer espoused by such experts as Carlos Locsin stressed better productivity through improved corporate organization. A younger scion of the Lizares family, Placido Mapa, an executive comfortable in English and trained in high finance, engineered the Bacolod acquisition. Mapa took over as manager from Rafael Alunan, who spoke mainly Spanish, always enjoyed provincial and national politics, and preferred to leave actual supervision at the central to others. The Lizareses added to their board of directors Cesar Ledesma, who had earned a solid reputation in sugar management. At other mills, too, rising young executives with technical expertise began to assume top management positions, individuals like Jose Tapia at Pasudeco. In 1937 Mapa succeeded Alunan as president of PSA, a move that severed the latter's major remaining tie to milling.[17]

Commenting on the Bacolod takeover, Nicholas Lizares noted that he purchased 23,000 shares from American sugarman Atherton Lee, who had earlier tried to buy the mill. Lizares also observed that his family had procured Danao from Spanish Friars.[18] The attempts to acquire San Carlos and Canlubang also fit the pattern of Filipinos looking to acquire foreign holdings, not just in sugar but in other industries as well. No doubt the approach of independence encouraged native entrepreneurs to invest in lal industry and foreign sugarmen to consider divestment.

Not content to remain strictly in the sugar business, the Lizareses, like the Lopezes and others, continued to diversify their enterprises. To describe fully the flight of capital from the Philippine sugar industry into other investments in the archipelago would entail writing a lengthy business history of the commonwealth period; hence, only major trends appear here. Sugarmen put their money into gold, copper, iron, manganese, and chromite mining; urban, particularly Manila, commercial and residential real estate; film houses, Tagalog film making, newspaper publishing, and broadcasting; hotels and horse-racing tracks; all kinds of small manufacturing projects from stoves to fertilizer; food canning; commercial banking; financial services; and sea and air transportation. Negrenses increased their plantings of rice, and some of them experimented with new crops such as ramie, cotton, and rubber. To start raising the latter three, entrepreneurs from Negros and Pampanga started acquiring land in Mindanao, in such areas as Davao and the Koronadal Valley of southern Cotabato Province. In short, sugar money permeated virtually every area of insular business activity and provided sugarmen with considerable control over the commonwealth economy.

As the Philippines prepared for independence, the financial elite that occupied the board rooms of emerging companies included such sugar tycoons or former sugarmen as Juan Elizalde, Eugenio Lopez, Jorge Araneta,


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Enrique Montilla, Jose de Leon, Benigno Today Toledo, and Alunan. While some families still operated as separate investing units, increasingly Negrenses and Capampangan participated in ventures as part of mixed groups involving individuals from diverse backgrounds. Americans including former Governor-general Francis Burton Harrison, General Douglas MacArthur, Binalbagan Central manager John Dumas, and John Stevenot, president of Philippine Long Distance Telephone; Philippine Chinese such as Alfonso Sycip; leading native politicians like Manuel Roxas, Claro M. Recto, Benigno Aquino, Sr., and Sotero Baluyut as well as Spanish mogul Jacobo Zobel all joined with sugarmen in different corporate enterprises.

With the market declining, room within the ranks of sugar's leadership shrank. To remain economically atop sugar society required considerable business acumen, for even within the industry, investors could now participate in a variety of ways. Sugarmen purchased and sold not only plantations, but also domestic, reserve, and export sugar; sugar futures; quotas; and shares in centrals. The wealthiest and most astute constructed a diversified portfolio of sugar and nonsugar investments. High finance entailed considerable risks—the de la Ramas, for instance, appear to have suffered severe reverses at this time—but remaining exclusively in sugar during a transitional period represented an even riskier proposition.[19]

Evidence abounded of the prosperity that lingered in sugarlandia, even as other indicators began to accumulate revealing that the wealth was becoming more unevenly distributed. Sugar barons behaved in the usual extravagant fashion: the University Club continued as the center of social activity for the Negrense "four hundred," while fancy-dress balls brightened the scene in more rural towns. Even though some of the wealthiest sugarmen removed to Manila, Bacolod persisted as the favorite playground of planters and millers with money. Amidst great pomp it became an incorporated city in 1938, and the government spent one million pesos to construct a spacious, well-appointed capitol. A new pier situated to the south promised to bring greater boat traffic to its door, and in 1936 the University of the Philippines began operating a campus in town.[20]

Pampanga bustled too. Townsfolk carried on a busy round of dances, receptions, and meetings, frequently under the auspices of such local social and political groups as Limbagan Club (San Fernando), Sociedad Pampangueña, Mountain Side Club (Magalang), Spider's Web, and Club Mekeni (Bacolor). The most renowned event of the season remained the Mancomunidad Pampangueña's annual ball, which drew distinguished guests from as far away as the Visayas. In 1941 a new college, St. Michael's, began offering classes in liberal arts and teacher training, and provincianos pointed proudly to the fact that Benvenido Gonzalez, a director at Pasudeco,


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became in 1939 the second Capampangan to serve as president of the University of the Philippines. The province had its own bar association, and to it belonged Diosdado Macapagal, 1936 insular bar topnotcher and rising young attorney whose local fame derived from his ability in poetic jousts with such other stars as author Amado Yuson.[21]

But the active social scene in sugarlandia belied the deteriorating economic conditions and tensions that now plagued hacendero life. Conditions remained so poor that between 1934 and 1938 automobile registrations in Negros Occidental dropped from 2,917 to 1,924; a number of big stores in Bacolod closed in 1940, and in that year Makinaugalingon started appearing only once instead of three times a week. The price of individual sugar quotas fell, and the value of sugar land dropped appreciably in both Luzon and Negros, as buyers preferred to invest in paddy fields. Between 1933 and 1941 rice production in Pampanga increased by 58 percent, in western Negros, by some 237 percent.[22]

Planters who depended exclusively or overwhelmingly on their farm income now confronted the reality of strictly limited production and falling prices, a situation that showed no promise of improvement in either the short or long run. Large hacenderos and landowners possessed sufficient cushion to ensure a good livelihood at least until tariffs became too high but the majority found themselves in more marginal, even desperate circumstances. All the big mills save Binalbagan continued to pay good dividends to shareholders during most of the commonwealth years, but planters who held only a minor fraction of the quota had to contemplate abandoning sugar production in favor of other food crops.

In August 1938 President Quezon ordered the just-created National Sugar Board to study the industry with the aim of making it more competitive. The board subsequently carried out a survey of conditions, the most thorough of its kind ever, made possible by new statistical information available through the Philippine Sugar Administration and through local studies conducted in each mill district. The report revealed much about the structure of sugar society under quotas: that a number of planters, particularly smaller ones, had left the industry; that the income disparity between big and lesser planters was enormous; and that mills did much better financially than did planters.

When the U.S. Sugar Administration prepared rosters of those with a fraction of the 1936 U.S. quota, they identified some 21,594 plantations with attached shares; however, three years later when the National Sugar Board conducted their survey, they listed only 18,823, a drop of 2,771. Presumably the loss came chiefly because many smaller owners and lessees sold or lost their quota and switched to another crop, usually rice or corn.


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Farmers unloaded quotas separately and as part of land transfers, but the sales recorded in notarial registers did not ordinarily list the size of the allotment. Board statisticians, however, observed that the costs of production proved highest among the smallest planters, and they were most vulnerable under the new market conditions. The Tribune noted in 1937 that of the 389 planters in the Cadiz-Manapla area, 70 percent qualified as small planters, and many of those had given up raising sugar for want of funds. The progressive ownership at Victorias Milling Company began leasing modest (one hectare or so) plots of its plantations to encourage its own small farmers to raise rice. Large deals were still transacted—or instance, Emilio Lizares purchased lands and a 15,000-picul quota from Tabacalera—but the little farmer had more to gain by moving to another crop.[23]

The Tribune also reported as early as 1935:

Secretary Torres declared that in Negros, as a result of the expiration of lease contracts between landowners and planters in sugar cane plantations, planters who merely cultivate the lands under lease agreement would be forced to quit and to look for new lands to develop. Mr. Torres said that the growing tendency among landowners in Negros is not to renew the lease but to cultivate the lands themselves. Landowners have been forced to work on their haciendas under new prevailing conditions, as a result of crop limitation and reduction in their income.[24]

Richer landlords and hacenderos consolidated their holdings and retrieved valuable quotas in the process. As a Department of Labor survey of 1936 noted:

There seems to be no limit to the ambition of sugar planters to produce more and more. Whereas in the past a farmer who raised 10,000 piculs of sugar annually was a big hacendero, now he looks like a pigmy beside many a producer of 20,000 piculs, 30,000 piculs, 40,000 piculs, 50,000 piculs, 60,000 piculs, nay, 100,000 piculs and over annually.[25]

Other landowners chose to raise profits by charging lessees up to 50 percent more rent to continue farming.

Table 16, reproduced from the National Sugar Board's report, indicates just how quota size affected the lives of the individual hacenderos and the enormous disparity of wealth that existed within the industry. The board statisticians selected categories arbitrarily, and the data do not invite comparison with other periods; nevertheless, they do reveal the large number of people at the bottom of the socioeconomic pyramid and the small number


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Table 16.
Distribution of All Philippine Hacenderos by Quota Share and Income, 1938-39




Range of Quota (piculs)




Number of Plantations




Percent of Total

Total Plantation Share of 55.23% (Piculs)a


Average Share per Plantation (piculs)



Net Income Plantation (pesos)b

1-100

9,992

53.1

175,479

17.56

41.09

101-300

3,346

17.8

297,695

88.97

208.19

301-500

1,226

6.5

230,200

187. 77

439.38

501-1,000

1,342

7.1

428,757

319.49

747.61

1,001-3,000

1,504

8.0

1,161,567

772.32

1,807.23

3,001-5,000

492

2.6

830,743

1,688.50

3,951.09

5,001-10,000

468

2.5

1,484,445

3,171.89

7,422.22

10,001 +

453

2.4

4,300,996

9,494.47

22,217.06

Totals and averages

18,823

100

8,909,882

473.35

1,107.64

Source: Report of the National Sugar Board to His Excellency the President of the Philippines, August 2, 1939, Roxas Papers, National Library of the Philippines, Manila, p. 22.

a 55.23% represents average planter's share at all Philippine centrals.

b Based on P2.34 per picul, which represents planter's profit after average planter's production cost.

at the top who qualified as sugar barons. The figures are confounded by the fact that some planters owned or leased more than one plantation, for the survey team counted 15,848 planters working the 18,823 plantations. Furthermore, lessees who constituted a majority of the hacendero population on Negros paid rent from their share. Finally, landowners in Pampanga divided their harvest with casamac, further confusing the income picture. Still, the table makes it clear how close to the edge the small sugar farmer lived. While annual wages in this period prove difficult to deter-mine, one source estimated that Philippine factory workers earned a top annual wage of P240 per year and the average agricultural family earned P200. The vast majority of sugar planters, if they depended chiefly on their field income, earned the same or little more.[26]

To relieve their plight, planters in both Pampanga and Negros continued to agitate for a bigger share of participation in their milling contracts. Through their very vocal planters' groups, they argued that the mills showed fat profits while they struggled along at the survival level. Evidence seemed to support their claims. The National Sugar Board compiled statistics on returns on investment that showed centrals faring far better than planters (see table 17). Only at newer mills such as Tarlac and smaller ones


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Table 17.
Average Return on Investment, Planters and Centrals, Crop Year 1936-37

   

Participation (%)

Return on Investment (%)

 

Mill District

Planter

Central

Planter

Central

Pampanga/Tarlac

 

Arayat

53.07

46.93

9.86

10.18

 

Barnban

50.00

50.00

10.20

9.81

 

Del Carmen

50.00

50.00

7.13

41.45

 

Mabalacat

55.00

45.00

10.78

8.44

 

Pasudeco

54.57

45.43

14.74

41.49

 

Tarlac

50.00

50.00

12.12

11.92

Negros Occidental

 

Bacolod

59.44

40.56

12.43

14.26

 

Bearin

55.00

45.00

11.74

7.79

 

Binalbagan

60.00

40.00

14.55

23.73

 

Danao

55.00

45.00

13.71

8.78

 

Silay-Hawaiian

55.00

45.00

11.75

40.13

 

Isabela

60.00

40.00

13.64

20.32

 

La Carlota

59.25

40.75

15.56

14.44

 

Lopez

56.62

43.38

13.77

19.44

 

Ma-ao

60.00

40.00

12.29

19.07

 

Manapla

55.00

45.00

11.17

30.30

 

Palma

60.80

39.20

15.23

12.40

 

San Carlos

58.24

41.76

21.53

31.36

 

San Isidro

57.09

41.91

14.57

17.81

 

Talisay

55.00

45.00

9.60

32.32

 

Victorias

55.00

45.00

10.65

21.08

Source: Report of the National Sugar Board to His Excellency the President of the Philippines, August 2, 1939, Roxas Papers, National Library of the Philippines, Manila, pp. 16-17.

like Danao and Mabalacat did the rates equalize or favor the planters; and with the exception of La CarIota, at older, private plants the scale tipped heavily toward the mills. The rate of participation also bore some relation to the disparity in income, with six of the most profitable nine mills having a rate of from 50 to 55 percent.

Millers countered with the argument about the sanctity of contracts and further pointed out that, in Negros at least, planters suffered more because so many of them had to pay rent to landowners. Centralistas could not resist boasting that they paid higher wages and provided their workers with more benefits than did hacenderos. As far as their own profitability was concerned, millers reminded their antagonists that during the early years they took the risks in construction costs and paid no dividends to their


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stockholders. Finally, they pointed out that they profited more because their plants and operations employed modern technology. The National Sugar Board report confirmed this last contention, showing that millers did have lower production costs than planters and marketed their sugar better. Debate persisted between hacenderos and centralistas throughout the commonwealth period with only modest changes in contracts occurring. Talisay and Binalbagan raised their planters' share, and Pasudeco started giving higher rates when it renegotiated contracts as they came due. Otherwise central operators moved slowly in altering existing arrangements, fearing as they did the demise of the industry in 1946.[27]

In the struggles over participation, the planters' associations became powerful spokesmen for the hacenderos and inaugurated other programs as well. Planters' groups fought for the continuation of benefit payments after the original processing tax proceeds had been distributed. Through the strengthened Confederation of Sugar Cane Planters, they met and organized political action committees to affect legislation in the National Assembly and launched campaigns to increase domestic consumption and to encourage Philippine-American trade reciprocity. The Negros Sugar Planters' Federation sought to form an alliance with coconut and tobacco farmers to improve the overall marketing of Philippine products. In January 1939 hacenderos, under the leadership of Juan Ledesma, considered erecting their own plant to compete with the intransigent San Carlos Central.[28]

In Negros the tensions spilled over into the political arena as well. Two groups dominated politics in the sugar province during the commonwealth years: one led by Jose Yulo and Gil Montilla included leading centralistas such as Mapa and Lizares; the other, headed by Alunan, represented hacendero interests. Leading activist in the latter faction was young Alfredo Montelibano, first mayor of Bacolod City, then president of the Bacolod-Murcia Planters' Association, and in 1941 head of the Confederation of Sugar Cane Planters. In violence-marred campaigns the two groups battled over almost every office—mayoral, assemblymatic, senatorial, and gubernatorial. The real victor turned out to be Manuel Quezon, who used his arbitration to strengthen his hold over the industry leadership. Even Quezon, however, could not bring peace. He understood that tensions would subside only if centrals offered greater concessions, and he altered contracts at Binalbagan to encourage central generosity to planters and hacendero largesse toward farm workers. In neither instance did he succeed.[29]

The most dramatic event in the planter-miller struggle occurred in San Fernando, Pampanga, where on July 12, 1939, Gregorio and Carmelino Timbol gunned down Jose de Leon, Augusto Gonzalez, and constabulary captain Julian Olivas at the administrative offices of Pasudeco. The murder followed an argument over participation, which at the Pampanga central


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mostly remained at a low fifty-fifty. This incident and the subsequent trial created a sensation throughout the Philippines and prompted numerous editorials in local papers about the need to enhance planter shares of sugar profits. The two brothers belonged to a large, wealthy family from Angeles, although neither of them personally possessed a great fortune. Gregorio held a quota of a thousand piculs and at the time served as president of the Pasudeco Planters' Association. Both Timbols exhibited a violent streak: Carmelino was already facing indictment for shooting a tenant, and subsequently, Gregorio threatened to kill anyone who gave false testimony against him. Eventually, the two planters received death sentences, while their nephew Dalmacio Timbol earned a prison sentence of twelve years for complicity in the crime.

De Leon and Gonzalez, the two richest men in Pampanga and biggest Pasudeco shareholders, possessed fortunes at the time of their deaths of P2,500,000 and P1,300,000 to P1,500,000 respectively. Together they had made that central perhaps the most successful and progressively operated one in the archipelago (see table 17). Employees of the plant enjoyed excellent working conditions by contemporary standards including eight-hour work days, good housing, health facilities, and Christmas and off-season bonus programs. The company built at its own expense a school-house, and de Leon personally contributed a chapel. Uniquely, management formed the Pasudeco Employees' Savings Fund that served workers and offered small mortgage loans. De Leon in particular earned a reputation as a generous boss and farseeing administrator.

Nevertheless, the Timbol brothers arrived at Pasudeco prepared to plead the case for higher participation. With the inauguration of quotas both had had to lease a farm to make ends meet. As sugar slipped through the P7 per picul barrier that July, they and other Pampangan farmers must have experienced a sense of desperation and frustration that only a better milling share could alleviate. Change, however, came too slowly.[30]


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Six Quotas, 1935-1941
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