$earner, $investor

Every morning, former Bangko Sentral Governor Gabriel Singson looks at the same peso-dollar rate as Rolando Reyes, whose Hong Kong-based wife regularly sends home $200 a month.

Singson looks at the daily foreign exchange movement out of habit while Reyes wants to know if he can get a few more pesos out of every dollar that he exchanges at the back of a nearby dress shop.

Interestingly, not all families of overseas Filipino workers have dollar accounts in the bank. Those who maintain a savings account use it as a second wallet rather than as an investment. They are not interested in the interest rate earned by their deposit.

Interest rates on dollar deposits currently hover at between 3% and 3.5%, minus a 7.5% withholding tax, not significantly higher than peso deposit rates.

In terms of sheer number of accounts, OFWs unquestionably account for the bulk of dollar depositors. In terms of value, however, the reverse is true, with OFWs maintaining small balances. Bigger balances are held by individuals with dollar expenses such as a son or daughter studying abroad or a wife undergoing shopping therapy.

Under the country’s strict banking laws, details of an FCDU account cannot be given to anybody, including the wife and the Internal Revenue Commissioner, without the written consent of the depositor. A bank, however, can refuse to accept a dollar deposit equivalent to at least P4 million if there is doubt on how the depositor got hold of such a huge amount of money.

Dollar investments

Based on the most recent Bangko Sentral data, total dollar deposits or foreign currency deposit units have been going down, standing at $12.576 billion as of end-November 2001. The continued drop could be traced to withdrawals of at least $50,000 by big dollar depositors to invest in dollar bonds, which currently bring a minimum net return of between 8% and 8.5%.

One of the most popular dollar bonds currently in the market is a direct obligation and, therefore, risk-free loan of the Philippine government, which goes under the acronym ROP-24/06P. ROP, of course, stands for the Republic of the Philippines. The number 24 represents the maturity of the bond and the 06P refers to the put feature of the bond, which allows buyers to redeem their investment in 2006 instead of the original maturity of 2024.

As of Oct. 31, 2001, the bid or selling price of the bond was $99.13 while the offer or buying price was $100.13. The bond has performed well in the last three months and is currently going at a premium. As of last Friday, the selling price was $105.75 and the buying price was $106.50.

"The objective of dollar investments is to maximize income," said Singson, who gets the daily buy and sell prices of dollar bonds issued by countries as diverse as the Philippines and Russia.

For those with few dollars to spare, the alternatives are not many. The easier option of keeping the money in a dollar account is safe but will not make the depositor wealthy beyond his dreams. The riskier option is to pool the dollars of family and friends and invest, either by doing it themselves or leaving it to the professionals.