DBP’s $1-B hedging facility a boon to exporters

CAGAYAN DE ORO CITY – As the peso climbs to new seven-and-a-half year highs, the $1-billion hedging program offered by the Development Bank of the Philippines (DBP) is becoming more and more attractive to exporters.

The hedging program was introduced last month when the peso was trading at an average level of 46 to the dollar. Yesterday, the local currency closed at 41.40 to the greenback.

DBP president and chief executive officer Reynaldo G. David said exporters are now finding the hedging facility a safe haven from the weakening dollar; thus protecting their products.

The hedging program gives exporters the flexibility to manage their foreign exchange risk.

“Our hedging program is attractive in the face of a strong peso, after exporters somewhat dilly-dallied when the peso was still in the 46 range,” David said.

The state-run bank has so far covered $4.1-million involving about 35 transactions to exporters of seaweeds, textiles, furniture makers and food manufacturers.

DBP senior vice president Jose Gonzaga Jr. said the bank has been aggressive in providing the hedging facility particularly to exporters in Mindanao.

Exporters of banana chips, coconut fruit and castor oil from Davao have accessed the window. In Gen. Santos City, an aquaculture exporter  has tapped the forward facility, as well as a carageenan exporter in Zamboanga City.

The most preferred hedging facility thus far is the forward foreign exchange rate protection, known as non-deliverable forwards (NDFs) with a one-month tenor.

The forward facility is a contract between the exporter and DBP, with no dollar changing hands. The entire amount of the contract is not settled but instead only the net difference between the contracted forward rate and the market rate upon maturity.