Pacquiao took the WBO welterweight crown from Cotto in Las Vegas on Saturday night when the referee stopped the fight in the 12th round.
The victory, which followed Pacquiao's stunning second-round knock out of Ricky Hatton in May, gave a morale boost to the country. The Philippines has been wracked by terrorism, Muslim and communist rebellions and recent back-to-back storms that caused the worst flooding in and around the capital in more than four decades.
"It was like a small respite for my townmates and it created a spirit of bonding and a little rest after the series of storms," said Mayor Joric Gacula of lakeside Taytay township, which was inundated in the September floods.
He said he paid 72,000 pesos (about $1,500) in pay-per-view from his own pocket to show the fight to more than 2,500 residents, mostly flood victims, who packed the town gymnasium.
"The people were very excited. It was like they were not affected by the storm," he said.
The crowd watched the bout as they munched on biscuits - food aid from the World Food Program - and peanuts, which they washed down with bottled water donated by a mall owner.
Gelyn Cruz said her husband, a motorcycle taxi driver, left for work before dawn so they could watch the fight with their 4-year-old son and neighbors.
"I am really very happy because our idol won again," she said. "I hope he could visit our town so he could help us."
From Singapore where she is attending the Asia-Pacific Economic Cooperation forum, President Gloria Macapagal Arroyo said Pacquiao's victory showed that "Filipino grit and determination triumphed over great odds."
At the Manila bayside international Christmas bazaar, shoppers cheered after a woman made "a very important announcement" over the public address system that Pacquiao had won.
In Zamboanga city, which is at the front line of anti-terror campaign in the volatile southern Mindanao region, people packed roadside canteens chanting "Manny, Manny!" as Pacquiao pummeled Cotto. Many were motorcycle taxi drivers and vendors who emptied the streets during the fight.
Driver Domingo Angeles said he stopped plying his route to just watch the match.
"I wish there would be many more like him who will bring honor to us, and I hope Manny will be able to help the poor people of Mindanao," Angeles said.
In northern Baguio city, which was hit by massive landslides and floods by another storm in early October, one collector had to return 200,000 pesos ($8,400) to bettors because not one placed a wager on Cotto.
Southern Davao city's streets were virtually deserted and Mayor Rodrigo Duterte canceled his regular radio program to watch the fight.
Soldiers also took a rest from chasing rebels to watch in camp gyms. Muslim and communist rebels have said they also watched Pacquiao's previous fights but there was no immediate word from them.
At Manila's suburban armed forces headquarters, Defense Secretary Gilberto Teodoro and his son took the front seats at the army gym to watch the fight with thousands of officers and soldiers and their family members.
"That's what I call a war," Teodoro said after the fight. "The tenacity of Manny Pacquiao is really admirable."
The Rev. Michael Sinnott, the 79-year-old Irish missionary priest who was recently released from a month of jungle captivity in the south by suspected Muslim rebels, said his kidnappers had been eager to set him free because they wanted to also watch the Pacquio-Cotto match.
"'Your freedom is our freedom. We don't want to be here for a long time, too, and we want to watch Pacquiao's fight,"' Sinnott told the CBCPNews, the news service of the Catholic Bishops' Conference of the Philippines (CBCP), quoting his kidnappers.
