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Arroyo was furious at the soldiers' revolt, say Cabinet members. "I feel so betrayed," she said on TV Saturday night, "I have bent backwards and listened to the legitimate grievances of some of the young officers." She announced that the mutineers, when captured, would be court-martialed. "They have broken the law."
Until the mutiny in Manila, Arroyo saw her biggest challenge in the country's south, where she describes the possibility of striking a deal with the Moro Islamic Liberation Front (MILF) as "a defining moment" for her presidency. Talks are scheduled to begin in Kuala Lumpur on Aug. 8. Peace, she told TIME correspondents during an interview in a dim study within the sprawling Malacañang Palace "is now within grasp." The U.S. is strongly backing the talks and has promised $30 million in development aid for Mindanao, the southern island at the center of the MILF insurgency, if a peace deal is inked. Though admitting the need for caution, the U.S. Ambassador to the Philippines, Francis Joseph Ricciardone, says, "the stars are in alignment for a workable and genuine peace."
It would certainly be a sterling achievement. But a TIME investigation shows that a deal with the MILF could be more risky than Arroyo admits publicly. The MILF is not the only troublemaker on that island. For decades, international terrorists—including Osama bin Laden's al-Qaeda and members of Jemaah Islamiah (JI), the Southeast Asian terror gang thought to be responsible for the Bali bomb blasts of last October—have used Mindanao for weapons and bomb training. Arroyo's negotiations with the MILF separatists, who have called for an independent Islamic state, might do nothing to rid the Philippines of jihadis who want to blow up embassies and attack Western targets. The escape last month of Fathur Rohman al-Ghozi from a military jail in the middle of Manila was a reminder of JI's reach. Al-Ghozi trained with the MILF, but his allegiance is to JI. He was arrested for possessing one ton of TNT and confessed to carrying out a bomb blast in Manila that killed 22 and injured more than 100 on Dec. 30, 2000. Al-Ghozi was almost certainly sprung from jail with inside help; three weeks ago, Arroyo announced that she would form a commission to undertake a total overhaul of the national police.
Arroyo is clearly gunning for achievements these days—exactly what was expected of the country's first baby-boomer President. The 56-year-old economist was supposed to usher in a younger, cleaner, smarter administration than the Philip-pines had seen in the past. But after replacing the bumbling but democratically elected Joseph Estrada in January 2001, Arroyo found her presidency dogged by legitimacy issues. In response, her handlers came up with often laughable attempts to bolster her image, such as placing her on a magazine cover dressed in Men In Black-style shades and suit in an effort to portray her as tough on terrorism. "You felt like saying: Will the real Gloria please stand up?" says one former Cabinet minister.
Over the past year, the real Gloria—a hard-nosed technocrat—has finally arisen, and some strong results have followed. On the economy: unemployment and interest rates are declining. So is the budget deficit, which had reached a worrisome level last year. In the first six months of this year, the deficit was 33% lower than during the same period in 2002. A big reason is an anticorruption drive at the notoriously lax Bureau of Internal Revenue. Its chief, the reformer Guillermo Parayno, has weeded out wrongdoers and introduced more efficient computer systems to decrease opportunities for graft. The result: a 14.7% increase in taxes collected in June compared with a year earlier.