Is Pardo dreaming of P45 to $1? - DEMAND AND SUPPLY by Boo Chanco

BSP Governor Paeng Buenaventura is saying the peso should recover soon to P48-$1. I guess that is possible in the short term, as in December, when the OFWs are cashing in their dollars for Christmas. But Finance Secretary Jose Pardo is making an even bolder pitch: The peso will make a strong comeback at P45-$1. In fact, Pardo said government will stick to its earlier budget assumption that the peso will average P44.50-$1 in 2001.

If I have to believe anyone, I choose Paeng Buenaventura. I think Pardo is day dreaming if he thinks we will get back to P44.50 or even P45 anytime soon. Actually, Pardo should put money where his mouth is and start providing forward covers at P45 to $1. Companies with dollar payables will love to peg their liabilities at this rate, if at all possible.

But the truth is, we may be lucky to keep the exchange rate at P50 to $1. The political uncertainties are just too much in the coming months. In fact, noted economist Sixto K. Roxas is even talking of exchange controls as a worse case scenario. Mr. Roxas feels that exchange control is the only way government can contain the repercussion of an acquittal of President Estrada.

Of course the Binondo Central Bank will become very active again. But Roxas feels exchange control is not that bad as a temporary measure to see Erap through the last three years of his term. However, that will slam the door shut to foreign investors other than those who were caught within the country when the exchange control was imposed.

Come to think of it, even if Erap is thrown out of office by the Senate or if he leaves by voluntary resignation, his successor will have a difficult time setting the economy right. The only advantage of a new person in Malacañang is that we can start the rehab process going. If the Senate vindicates Erap, we will just flounder along up to 2004. Or at worse, prepare for chaos and anarchy as street protests escalate.

Secretary Pardo should be careful about his rosy projections. Given the reality of our economic difficulties today, such dreamlike statements only tend to worsen the finance chief’s credibility. On the other hand, there aren’t too many people in the business sector who are impressed with Pardo’s capability. I guess it does not really make a lot of difference what he says.

Retail sector

The retail sector will experience its supreme test this Christmas season. In a recent review of the sector, an economist from the University of Asia and the Pacific (UAP) observed that "contrary to the belief that the Filipino customer is saving his hard-earned peso for fear that the rainy days aren’t over, consumers have actually been spending." Up until the first semester of the year, the industry’s gross value added, an indicator of real profit growth has been on the rise.

UAP economist Romelia Neri reports that "the industry grew by an impressive 5.1 percent during the first quarter, a big boost compared to the measly three-percent growth during the same period last year. It should also be mentioned that the industry has been growing at a rate of around five to seven percent in constant terms in the past three quarters." Neri was impressed with how the sector disproved apprehensions that the recent bombings in Metro Manila would hurt store sales.

Well, we shall see soon enough. The UAP paper was based on data covering the first and second quarters of 2000 BC (or Before Chavit). Things have dramatically changed since then. In the BC era, the exchange rate and the interest rate had not yet devastated many businesses to the point of desperation. Now we hear open discussion of layoffs or downsizing.

Bonuses beyond the mandatory 13th month pay may also not be as generous as firms batten down for the financial storm expected in the first quarter of next year. It remains to be seen if the Christmas spirit will survive the impeachment trial.

For now, however, the UAP economist may be right. Last Friday, Rockwell Land’s Power Plant mall had what is best described as a "soft opening". No wide publicity, just word of mouth. But people came anyway to inspect the shops that managed to open on schedule and to watch movies in two of the six theaters.

Appropriately enough, one of the movies was Dr. Seuss’s classic nursery tale, ‘The Grinch Who Stole Christmas.’ Someone is stealing ours. In the movie, the Grinch gave back the Christmas he stole. In real life in this country today, it isn’t likely the Grinch in Malacañang will give back our Christmas by resigning.

But it is a great movie. It is very philosophical about how we can make the season happy and meaningful even if someone steals the commercial side of it. Make sure you see it in the world-class Power Plant cinema at Rockwell. Makes you think you are watching a movie abroad. Such escapism certainly warms the heart at times like this.

Child’s wisdom

Kat Legarda forwarded these statements, supposedly written by children, about their faith. I thought they were wise beyond their years.

– The Jews were a proud people and throughout history they had trouble with the unsympathetic Genitals.

— The first commandment was when Eve told Adam to eat the apple.

– The seventh commandment is thou shalt not admit adultery.

– St. Paul cavorted to Christianity. He preached holy acrimony, which is another name for marriage.

– A Christian should have only one spouse. This is called monotomy.

(Boo Chanco’s e-mail address is [email protected])