Peso’s weakness: Good & bad consequences
FULL DISCLOSURE - Fidel O. Abalos (The Freeman) - September 10, 2018 - 12:00am

Recently, among professionals and businessmen, whether in the board room, coffee shops or barbershops, the peso’s weakness, oil prices and the inevitable price increases of basic commodities will either top or end their discussions.

Same is true among peddlers and street vendors, as they try to think and argue to justify their existence in sidewalks and gutters.  Amusingly, almost everyone had become instant economic pundits brandishing their in-depth analysis on the nation’s current financial health.

Indeed, we can’t help but agree on that aphorism that Filipinos have very short memory.  To recall, about a decade ago, whether in the same informal talks or discussions or economic briefings, we didn’t hear anything but complaints about the strength of the peso.  As if, nobody is happy, not anyone gained. In fact, when it was at its strongest on February 28, 2008 at P40.40460 to a dollar (per OANDA), calls for civil disobedience were even floated.

Likewise, about twelve years ago (on July 17 2006), when the exchange rate was a seemingly uncontrollable P54.8620 to a dollar, both educated and unschooled critics became instant prophets of doom. Doomsayers, as they have always been, were trumpeting here and there that the country was holed into a bottomless pit, a hopeless situation.

Then, inflation rate was also high.  Gasoline prices were so unreachable. Consequently, fares went up. Basic commodities seemed as valuable as gold for the underprivileged Filipinos. Poverty-stricken, most of our brother Filipinos settled for crumbs just to fulfill their modest desires to half-fill their empty stomachs.

Generally, strength is always viewed as power, a strong point. Weakness, on the other hand, is taken as powerlessness, a flaw. While this could be true in most situations, in currencies, perceptions are different. Some rejoice in its weakness while others embrace its strength. Undeniably, recipients (exporters) and users (importers) of foreign currencies have different preferences. There is just no universal remedy that can please both. Either way, there will always be advocates and critics.

This is not something unusual though. It doesn’t mean too that we are hard to please. The fact is, wherever our peso goes, we will always hear complaints. In every abrupt fall, a sector (dollar earners or exporters) gains and another (peso earners and importers) losses. When it goes up sharply, more often, the sector that rejoices in its fall complains. Frankly, Erap aptly said it, “weather-weather lang.”

However, as serious as the situation that we are in right now, we can’t just simply agree with Erap. Remember that the USA’s economy is improving. As it continues to improve, their demand for more oil will continue to rise. While this development is good for the world, to the non-oil producing countries, this is bad news.

Why? With the rise in USA’s demand for oil comes corresponding hikes in oil prices. Likewise, with USA’s economy rising, their dollar will further strengthen and our peso, if we won’t do anything, will naturally retreat. Thus, for us, a double whammy, as basically, more than 90% of our oil needs are imported and are dollar denominated. Not only that, as we see signs that the government seems to give up on its initiatives in improving the agriculture sector and opts for importation of agricultural produce (like rice and galunggong), our currency may further retreat.

Worse, debt-servicing will put a lot of pressure on our treasury. As more of our foreign debts were obtained when we had a stronger peso, it would mean that we have to demand from our treasury several pesos more per US$1 debt. Knowing fully well that our foreign debts run into several billions of dollars, then, this government will have no recourse but to exact money from our already overburdened taxpayers. Then, these taxpayers shall pass the burden to the consumers.

When that happens, we should know that even illiterates and the poverty-stricken can anticipate what kind of malady they’ll suffer next.

foabalos@yahoo.com

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