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Opinion

Edible

FIRST PERSON - Alex Magno - The Philippine Star

When three European countries included Lucky Me instant noodles in a long list of products they ordered recalled, there was some amount of distress in our market. That happens when panic overtakes science.

Monde Nissin, the giant food manufacturer making the instant noodle brand, saw its stock retreat under selling pressure. The constantly shrill leftist spokesmen demanded all Monde Nissin products be withdrawn. They conveniently forgot that instant noodles are now the staple fare of the poor and withdrawal will spell serious food shortages.

The Makabayan Consumer Watch demanded our authorities issue a transparent and objective report on the use of ethylene oxide as a preservative in the production of instant noodles. In their rush to grab media space, the group overlooked the facts. Ethylene oxide is not used as a preservative. It is present as residue from the fumigation of vegetables.

Our Food and Drug Administration (FDA) issued a statement on the matter. Those unduly distressed by the news ought to read the statement carefully.

According to the FDA, ethylene oxide is used as a fumigant to destroy salmonella. Residues of the fumigant are sometimes retained in vegetables, including those used in processed food such as instant noodles.

The FDA clarifies residual ethylene oxide in processed food “does not pose an acute risk to health.” There could, however, be concern over “continued exposure beyond the tolerable level over a long period of time may result in health issues.”

In plain language, the FDA advises us that if you consume instant noodles today, you are not likely to die tomorrow. Keep calm and carry on.

In fact, a 1982 US study found that vegetables could convert naturally occurring ethylene into ethylene oxide. It is found in much of the food we consume.

The European Union Rapid Alert System for Food and Feed (EU-RASFF) that included Lucky Me in its warning list tested instant noodles that were produced in Thailand. Their list includes savory biscuits, sweet cookies, burgers, food supplements, desserts, spices, cheeses and flour products. There was no specific mention of ethylene oxide levels found in the instant noodles.

Lucky Me noodles tested locally found ethylene oxide levels at about three parts per million (ppm). This is way below US and Canadian limits of 7 ppm and Singapore’s limit of 50 ppm.

We are not sure what the EU limits are. They must be some impossible number close to zero. In which case, most products from Asia would fail to meet their standards. The impossible standards could qualify as some form of discreet protectionism.

Three European jurisdictions – France, Ireland and Malta – are enforcing the recall of Lucky Me noodles. These three jurisdictions should account for a minuscule share of Monde Nissin’s global market. Nevertheless, the company should seek a more precise statement of product standards from the authorities in these three jurisdictions so that our processed food manufacturers could respond accordingly.

European limits on ethylene oxide residual levels became part of EU regulations only in 2015. In September 2020, Belgium reported a concerning amount of ethylene oxide in sesame seed products from India. There should be room for Asian exporters to negotiate for more reasonable EU standards.

Meanwhile, the market appears to have been reassured by the available scientific information on the issue of ethylene oxide. The stock prices for Monde Nissin began to stabilize.

Reputational risks are particularly abundant for food manufacturers. Alarmist groups driven by an ideological agenda often immune to scientific facts can magnify those risks.

Hawk

For months, analysts have been describing the BSP’s attitude towards interest rates as “dovish.” Our Monetary Board consistently raised policy rates below market expectation even as signs of growing inflationary pressure mounted.

Last Thursday, in an unscheduled decision, the BSP surprised analysts by raising rates sharply, above market expectation. Policy rates were raised by 75 basis points, responding both to public opinion and government policy prioritizing the taming of inflation.

Our monetary authority is responding to several signals. Our inflation rate climbed to slightly above the 6 percent threshold considered “elevated.” Maintenance of our comparatively benign interest rate regime has contributed to the rapid erosion of the peso’s exchange value.

More immediate, the US just reported its June inflation rate at 9.1 percent, matching Britain’s inflation rate. It is the highest rate in over four decades and almost certainly invites a strong interest rate move by the US Fed. If we maintained our relatively soft interest rate regime, the peso will be overwhelmed by the surging dollar.

The BSP’s decision, therefore, is both intended to cool inflationary trends as well as defend the peso. The domestic inflation rate and the peso’s value are intertwined. The higher the inflation rate, the more the tendency for the peso’s exchange value to fall.

The latest interest rate decision will likely be a drag on our stock market. When interest rates escalate, investors tend to sell volatile equities and convert to fixed income instruments.

The same decision will likely make our GDP expansion goals unattainable. Early in the year, we were setting fighting targets of 7 to 9 percent growth as we recover from the pandemic. Given the global slowdown, the almost universal use of the higher interest rates to tame inflation and breakages in the international supply chain, we will be fortunate to achieve a 6 percent growth for the year.

A recent survey shows inflation to be the most urgent concern of our people. We might have to tame growth to moderate inflation risks.

EUROPEAN

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