Strong Peso, weak call

(Note: I could not get the name behind this article. But upon reading, I immediately sensed the need to include this. One of the important issues for OFWs this year is the continuous appreciation of peso against the dollar with non-expected consequences of increased prices of commodities and lack of job or business opportunities in the country.
The article offers insights and directly points to the real culprit to the mess that we are in. Personally, I find it an awakening to the reality that this attitude of non-confidence in our own country and the preference of most Pinoys to work abroad are starting to set their drawbacks against our economy. Once again, we are challenged to do our share in shaping the future of our country. Spend those dollars wisely, be real heroes, create business in the Philippines. - Ed)


There are two pragmatic schools of thought on the strengthening of the peso against the dollar: 1) the dollar has been sliding down steadily in the international market and 2) the Philippine treasury is enjoying a cache of dollar reserves.

The international phenomenon is a domino effect of US’ internal economic policies, and there is not much that we can do about it.

A strong currency should generally indicate a thriving economy. The expected ripple effect should reflect growth in investments, vibrant export trade and generation of new jobs at the very least.

But the imbalance in the equation, tipping the scale heavily in favor of the dollar reserves, results to artificial growth of the economy that leads to overvaluation of the currency.

The United Nations Conference on Trade and Development (UNCTAD) released its report on global trends in investment flows, saying that the Philippines is not attracting investments, specifically foreign direct investments (FDIs), compared with its neighbors despite its huge potentials.

Many of investment pledges never materialized after Board of Investments (BOI) and Philippine Economic Zone Authority (PEZA) gave the investors fiscal perks, including tax holidays and duty-free importation of machines, among many others.

Despite the exuberant numbers from both, the country’s figures on capital formation hardly improved in the last several years. Imports, likewise, have not been rising, an indication that business managers and factory owners are not investing in new machines. Nor are they upgrading their office equipment or buying new ones.

That’s the same reason why we have an overvalued peso that is hurting the country’s bread and butter: the exporters and OFWs.

The problem lies with the business sector. Factories and importers are not using much of those dollars due to “political uncertainties.” Thus, the accumulation of those dollars within the borders is causing the peso’s overvaluation. Adding to the equation is OFW’s remittances in increasing amounts.

In fairness, FDI figures, released by the Bangko Sentral ng Pilipinas, have also been posting encouraging trends.

But it’s likely that those figures simply reflect intercompany transfers that do not translate to the building of factories.

Proof: the job pictures have not been improving despite the tremendous hype about a 7%+ growth rate in the last two quarters. Statistically, a number of Filipinos accepting job offers abroad continues to surge.

Why? It’s because of “lack of investor confidence.” Despite some good economic statistics, investors are holding back.

Many economists advocate a ‘free float’ (letting the international market determine the value of a country’s currency), but such a policy often leads to rapid and radical fluctuations in the currency.

Considering that many business transactions are negotiated with contracts, an unpredictable peso deters investors from coming to us.
After all, who wants to invest in a country when that investment could become worthless overnight?

On one hand, a campaign to boycott the banks with remittances on a certain number of days has its drawbacks and is doomed to fail.

The measure could do more harm to OFWs than serve its noble purpose. Certainly, OFW’s could not hold their dollars for the longest period of time, lest to the suffering of their own families back home.

Logically, a sudden avalanche of dollars going into the Philippine coffers will result to further strengthening of the peso and push the dollar exchange further down.

So while we cannot stop the migration of Filipinos abroad, there are creative and useful ways to mitigate if not totally alter for the better the effect of this dollar accumulation.
All we have to do is believe once again, come up with a well-thought plan, and start realizing that nobody will help our own country but us.(S)