Problems of plenty

It was a pretty cheerful Bangko Sentral Governor who joined us last Tuesday for breakfast at the EDSA Shangri-La coffee shop. The peso seemed unstoppable as it opened the week in the high 40s, and by mid-week was in the mid-40s. Inflation was relatively tame when BSP economists last checked it and the balance in our gross international reserves was good for six months import cover.

Gov Say Tetangco was eager to share with us the good news that the economy delivered one of the best macroeconomic fundamentals in two decades. “We achieved the ideal convergence of high growth and low inflation,” Say beamed. GDP growth of 7.1 percent in the first three quarters last year was the highest in 30 years while inflation at 3.2 percent last November, was comparable to those in developed economies.

The much detested strong peso ought to be appreciated more, he clarified, because it is shielding us from the inflationary impact of record high oil prices and generates savings in terms of debt service. Interest rate is the other good news, as it remained low. The $33.7-billion GIR is a record and so is the BOP surplus of $7.8 billion for January to November last year.

Our banking system, Gov Say proudly pointed out, continued to be sound with record high resources and deposits. And because our financial system isn’t sophisticated enough, we didn’t venture into the unknown world of new fangled investment vehicles, thus insulating us from the subprime chaos. Something like that happened in the 90s which also made us least affected by the Asian Financial Crisis. Being late for the party or not being invited at all could indeed be a blessing.

So, we asked him, how does 2008 look like?

Looks good, the governor replied, but we have to face some headwinds from the world economic environment. He called the challenges of 2008 problems of plenty.

Because of our favorable macroeconomic performance, Say explained, there will be continued strong capital inflows. This poses an important problem of plenty, the BSP governor said. “While these inflows provide an opportunity to boost long-term growth, they also pose substantial short term macroeconomic challenges.”

The BSP Governor explained we have to manage the critical lag between the inflow of foreign exchange and its eventual use to control inflation. A further challenge, he pointed out, is devising the appropriate mix of measures to channel this liquidity to more productive investments like infrastructure.

Gov Say welcomes recent plans of ODA organizations to float peso bonds and use the proceeds to finance their project assistance here rather than bringing in the foreign exchange and end up aggravating our problems with the strong peso and system liquidity. The Governor said these peso bond offerings will have the additional positive effect of developing our domestic capital market beyond government bonds. ADB, IFC and KfW have all announced plans of such bond offerings. The governor is also positive about plans to float peso bonds to finance government infrastructure projects as well as the much talked about OFW bonds.

If the economy is as good and as record breaking as the BSP Governor says it is, I guess the biggest challenge for 2008 is how to make the common man feel the excitement of macroeconomists. Most Pinoys don’t see Say Tetangco’s problems of plenty… just plenty of problems. If only the man on the street can look as cheerful as the BSP Governor, all will be well in our world. Plenty, after all, is supposed to be a blessing and not a problem.

Bukidnon farmers

In a column last week, I expressed hope that “there should be more than enough land in the same province which can be given to the farmers with the additional benefit of having San Miguel buy all that they can produce, maybe even at a special price.” I had just been told that indeed, San Miguel is thinking of such a win-win solution.

Sources in the company told me the other day that San Miguel is proposing to buy 150 hectares of land adjacent to the contested 144-hectare property, to be distributed to the farmers for free. In addition, the farmers and their family will have employment in the San Miguel development and their produce will also be bought by San Miguel at a guaranteed price that is several times higher than what traditional traders will normally pay.

For background, San Miguel is building a P2.4- billion fully-integrated agro-industrial complex in Sumilao with state-of-the-art feed mills, poultry and piggery farms, waste water treatment facilities, reservoir and provisions for forest development. San Miguel is also offering a partnership agreement with the Sumilao farmers which will allow them to participate in operating the estate, specifically its hog farms and post harvest facilities.

San Miguel will also offer the farmers access to affordable credit, seed money, technical and skills training, assured market and stable pricing for produce. All these are what government should be giving agrarian reform beneficiaries so that they can succeed in being successful farmers. The absence of these support services is the main reason for agrarian reform’s failure all these years.

That sounds like a good way of resolving this headline grabbing problem. Then again, those farmers couldn’t have gone as far they have without forces in the background giving more than moral support. I suspect the traditional traders who live off the farmers are egging the farmers to make enough trouble to drive San Miguel away. The food conglomerate is a threat to the financial interests of the traditional traders who always buy produce from farmers at a low price and then turn around to profit immensely.

It also isn’t as if the San Miguel model of working directly with farmers to the detriment of the traditional traders is something new. I am told this is something San Miguel has successfully done in many parts of the country. San Miguel effectively supplies the missing component of support services that will give our agrarian reform program a better chance to succeed.

The question now is, does this government have the political will to do what it should to improve the economic lives of these farmers or just play along with the emotional demands that had been well orchestrated by traditional vested interests keeping our farmers from going beyond subsistence farming?

Politics as usual

We have been hearing a lot of trial balloons for defeated senatorial and other candidates who want to get plum cabinet and other positions in government. Some of the names being floated just want to make you vomit.

Former Rep. Prospero Pichay is reported to be interested in taking over Energy. Former Sen. Ralph Recto is said to be preparing to assume the Finance portfolio from Gary Teves. The worse bit of news is about the supposed appointment of Tessie Aquino Oreta as Education Secretary to replace Jesli Lapus.

If there is one cabinet member who brings honor to an otherwise mediocre cabinet, it is Jesli Lapus. Taking aside his misguided advocacy of CyberEd (which I suspect is being done under orders), Jesli is using the management expertise he honed in the private sector to clean up and upgrade our almost hopelessly inadequate public educational system. The last thing our education bureaucracy needs is a new boss with new policies and work style.

I cannot believe that even with just two and a half years to go, Ate Glue will choose to still play politics. Tell us it isn’t so, Ate Glue!

  Business

If a fireman’s business can go up in smoke, and a plumber’s business can go down the drain, can a hooker get layed off?

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