P60:$1

Last week, our peso broke through the P59:$1 level. It was its lowest ever. Most analysts believe our currency – already among the worst performing in the region – will cross the psychologically important P60:$1 over the next few weeks.

Before the week ended, the peso clawed back some of its losses and moved up to the P58:$1 level. This is not an indication of a trend, however. It is a pathetic measure of how little our BSP could do to defend the currency.

At this point, it will be futile for the BSP to burn its capital defending the peso. The costs of doing so is unaffordable. Every other factor – macroeconomic fundamentals, adept policymaking and public sentiment – runs against the peso.

It used to be that, whenever the peso went through a downgrading, there was always a public discussion of winners and losers of a weaker currency.

A weaker peso, it used to be be argued, improved the disposable incomes of families dependent on remittances. That argument has lost its convincingness. Whatever meager nominal increase remittance families gain will be quickly eaten up by inflation – especially food inflation that disproportionally hurts the poor.

Since we are now importing more of the food we need to keep our people fed, a weaker peso translates into food inflation even more quickly.

It also used to be said that a weaker currency will help our export industries. That, too, has lost its convincingness. We have hardly any export industries left. At any rate, the many inefficiencies of our logistics system quickly cancel out whatever competition benefits a weaker peso brings. Blame myopic government planning and the corruption-ridden DPWH.

It used to be that a devaluation was supposed to help our business processing industries. That is no longer true. Punitive duties imposed by the Trump administration makes offshoring US business operations less attractive. Then there is the looming impact of artificial intelligence on the whole business.

Our two largest sources of foreign exchange – migrant labor and BPOs – are both sunset sectors.

Over the years, we have exported millions of Filipinos to work as migrant labor. But we did not build the industries that will enable us to re-shore the trained labor returning home.We did not build the education system that will raise the skills profile of our human capital and make Filipino knowledge industries global champions.

In fact, we have consistently failed to reverse the hollowing out of our manufacturing sector. All empirical studies show that nations progress to higher income status only after they have successfully employed a critical mass of workers in the manufacturing sectors.

We never had an effective industrial policy. Not even for agro-industry. Therefore we do not have a competitive industrial base.

Check out our national exhibit at Osaka. Our main selling point is home-woven fabrics. The National Cottage Industry Development Authority was doing this three generations ago.

The only technological breakthroughs we have had is to transform the lowly pili nut as a source of oil for beauty products. Well, maybe we could add turmeric capsules. But we have miles to go catching up with the Korean beauty industry and Japanese pharmaceuticals.

The ever-careful BSP was forced to admit that the peso’s current weakness goes beyond our history of policy failures. Public anger over the blatant corruption has shaken confidence in our economy.

They were careful not to mention the heavy buying pressure in the dollar black market. From the BSP’s point of view, the market does not exist. But there seems to be a rush both by the legitimately rich and those who hold large amounts of ill-gotten wealth to launder money abroad.

Our systems are responding too late to catch the billions held by the flood control Mafia attempting to flee the economy. Our people were punished many times over: first by defective public works, then by poor logistics networks, then by the costs of political tumult and, finally, by higher fuel prices due to a weaker peso exchange.

Government has cancelled the flood control spending program in a frantic effort to blunt rising public anger. Then President BBM began issuing rather strange market-bending orders: no price increases for staples until Christmas and reduction by 50 percent of materials for other public works projects.

We have relapsed into the old habits that screwed up our economy in the first place: putting policymaking in the hands of public relations professionals.

The flood control scandals have blossomed to include other public works projects. If we keep cancelling public spending, although this might be dictated by a failed public procurement system, this will create a large hole in overall public spending. This, in turn, will force down our economic expansion and multiply miseries for the unemployed.

In the quiet panic of a political establishment that is, to begin with, economically semiliterate, we will end up postponing progress even more.

Our political leaders forget that rebuilding our institutions of governance is doubly more important than penalizing the looters for crimes already done. Retribution is important; nurturing sustained good governance is doubly so. Good governance is our bridge to a less traumatic future.

It is a wonder that this far into the investigations, the really big culprits have managed to keep themselves well insulated. Congress, the biggest waste of taxpayer money, has not reviewed its own budget.