Exporters seek government help on strengthening peso

CEBU, Philippines - The export sector has once again call on the government to intervene on the strengthening foreign exchange in the Philippines, while 80 million of Filipino people are depending on the dollar-denominated earnings.

“The stronger the peso, the bad it is for the majority of Filipinos,” said PhilExport president Sergio Ortiz-Luis, Jr., adding that the export sector alone could only live with the P42.50 foreign exchange level, beyond that could mean for export companies to close shop.

Besides, he said it is not only the exporters who will suffer from a strong peso, but also the majority of the Filipino people, as millions of families are depending on the remittances from their OFW (Overseas Filipino Workers) relatives. The growing 600 thousand workers in the Business Process Outsourcing (BPO) sector are also largely affected by the exchange rate.

Although the government through the Bangko Sentral Ng Pilipinas (BSP) is conscious of this effect, it should also make stronger implementations to prevent the peso from gaining more strength in the future.

Earlier, a Filipino international banker has warned that the Philippines will stay poor and its poor people will become poorer under a strong peso.

International banker and economist Victor S. Barrios, said that the strong peso is behind what he called a distorted growth crisis inflicted on the country. “The crisis’ main feature is growth that is consumption driven, not growth as a result of investments and robust exports.”

Intervening the movement of the peso and make it stable is a very important move, Ortiz-Luis said as tourism, BPO, exporters, OFW families will be affected by the strengthening if the peso, if not being intervened by the BSP.

In his report, Barrios explained that the biggest single loser is the BSP that lost no less than P109 billion in 2010 which is half its total assets, and more in 2011 to keep the dollar from diving in value against the peso.

Barrios warned that BSP, that if it continues mopping up excess dollars entering the country and keeping in its values as Special Deposit Accounts (SDA) the peso proceeds of those dollars, the BSP could go bankrupt by 2014.

The onshore families of OFWs who make up majority of the population have also been the victims of the strong peso, losing P25 for every P100 equivalent of their dollar earnings in the past five years.

Meanwhile, Barrios further explained that the BPO sector, known as one of the country’s economic backbones have also been the hurting and is losing out to competitors. The strengthening peso is one of the factors that also discouraged some BPO investors to expand or establish operations in the Philippines.

Significantly, according to Ortiz-Luis the most companies in the export sector now do not accept orders if they see that the peso is going stronger beyond the P42.50 per US dollar. He said foreign exchange beyond this level is no longer profitable for exporters.

Moreover, Barrios said all other productive segments of the economy like domestic industries that compete with imports made cheaper by the strong peso, have also be penalized by the strong peso policy.

Barrios therefore suggested that at least seven policy decisions that need to be adopted to correct the situation, the most radical of which is the gradual depreciation of the peso to a target level where local goods can compete comfortably with imports.

International borrowing is not good as of this moment, the economist said saying the government must borrow locally all the money that covers its yearly deficit plus funds to prepay its foreign loans.