Weak peso:  Answered prayer?

Not long ago, whether in barbershop talks or economic briefings, we don’t hear anything but complaints about the strengthening of the peso.  When it was at its strongest on February 28, 2008 at P40.40460 to a dollar (per OANDA), calls for civil disobedience was even floated.  The complaints were not just within us but with other nationalities as well who have relationships with Filipinos.  In fact, I received a reaction from an American in one of my past columns on the same topic, which was sent via his email address [email protected] as follows:

“As a husband of a Filipina I find it rather ironic because by sending billions of dollars to their families, Filipinos living in the U.S. have strengthened the peso causing a reduction in the funds delivered to the families.

If they want to devalue the peso, they should desist from sending any funds to the Phil. for one month.

Very sad situation, what?”

On the other hand, on July 17, 2006, when the peso was at its weakest at P54.8620 to a dollar, critics have become instant prophets of doom.  These doomsayers were trumpeting here and there that the country was holed into a bottomless pit, a hopeless situation.

This is nothing unusual though.  The fact is, wherever our peso goes, we will always hear complaints.  In every fall, some sectors gain while others are in pain.  In its rise, the sector that rejoices in its fall complains. Frankly, Erap aptly said it, weather-weather lang.  

Then, these reactions were not difficult to understand.  We didn’t even have to earn an MBA or a doctorate degree in economics to really comprehend it.  Almost always, it all boils down to preferences.  Similarities can be attributed to a saltbed owner and a rice farmer. A saltbed owner rejoices in droughts but gripes on extended rainy seasons because long dry spell give him tons of salt while wet seasons melt it.  The rice farmer, on the other hand, feels exactly the opposite because droughts empty his barn and rainy days bring him bags of grain.

Recently, the peso is shifting again.  From a high of P40.40460 to a dollar in February 28, 2008, it stood at P44.6090 to a dollar on June 8, 2008 (per OANDA).  Worst, all economic indicators are pointing to its continued decline. 

Surprisingly, however, we don’t hear rejoicing from the supposedly favored sectors.   Presumably, some sectors should have benefited from it.  The exporters of both goods and services and the OFWs must have shouted to high heavens about this development.  This is what they’ve always prayed for.

Instead, what we hear and feel right now are the grumbling of importers and the agonizing pain of the entire consuming public. As if, nobody is benefiting from it.

If these exporters and OFWs are not benefiting from what they are praying for, so who are rejoicing from it?   Honestly, if they claimed they aren’t favored by it, then, there is no one.  Unfortunately, it could even mean that the lives of the entire population are getting worst.

Why are supposedly favored sectors not rejoicing is not difficult to comprehend.  Simply put, we are importers of our very basic needs.  Principally, rice and oil.  Certainly, this is not the best time for importers.

Yes, it is a fact that the price of the main staple is soaring.  It is aggravated by the way we handle the situation.  NFA’s rice is pegged at P18.25 per kilo while the commercial stuff (depending on the quality) is drifting between P30.00 and P50.00 per kilo.  In addressing this problem, the government opted for a temporary solution by subsidizing its cost through the National Food Authority (NFA).  Unknown to many, the government has been subsidizing NFA rice for decades now.  If we take a look at how rice prices have moved these days, we will surely find it not just alarming but horrible.  Thailand, our biggest supplier, quoted US$900.00-US$920.00 per ton, free on board (FOB), last month.  This price range was even a rosy development considering that in the last week of April they quoted US$990.00-US$998.00 per ton, FOB.  Should we use the June 8th exchange rate of PhP44.6090, it means that the government is subsidizing more than one-half of the cost per kilo.  As the peso depreciates, expect that the government will subsidize two-thirds of its cost very soon.   More subsidies can only mean more demand from the government’s treasury for importation. 

The oil prices also aggravated the situation.   With the price expected to breach US$150.00 per barrel in a month from now, expect the oil prices skyrocketing to a level we’ve never seen.  LPG too will be exorbitantly priced.  As exporters and OFWs dependents are main users of oil and its products, they too are feeling the pain.

The country’s foreign debt is a main concern too.  As our currency continues to slide, the demand for more pesos will be more intense.  It simply means that our debt servicing allocation will eat much of our tax collections.  Other significant programs will more likely be set aside.

Precariously, with all these adverse developments, the government is still opting for temporary solutions like dole outs and subsidies.  These are solutions, which are, in essence, one-way expense and without any benefit at all.  These are dole outs that do not translate into productivity but encourages mendicancy.  As this approach demand more pesos without expected returns, the government will be hard-pressed to even borrow to sustain it.  This is a situation that will also lead to another currency crisis.

Clearly, the currency rate is just a window of our economic conditions.  The lack of the main staple and soaring prices of oil are the main culprits of these miseries.  Therefore, it is about time that we should abandon the weather-weather lang notion.  It is now imperative for our government executives to use all available options to having a stable economic condition.  This way, instead of worrying so much on a very erratic currency, companies will rather spend more time enhancing their competencies. Instead of predicting peso’s direction, they’d rather look for ways in outwitting global competition.

Indeed, we need to find a WIN-WIN situation, or else, we find ourselves like drifters who embrace the “dole out dependence” and weather-weather lang syndromes.

For your comments and suggestions, please email to [email protected].