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There was a time in 2004 when a dollar could fetch as much as P56.04
in the money market. Overseas Filipino workers were getting so much
for their dollar earnings at the time under the prevailing
dollar-peso exchange rate.
Today, about three years later, the exchange
rate fell to P45.72 per dollar, signifying a strong surge of the
peso by more than 18 percent. If an OFW remits $1,000, its peso
value will fall to P45,720 as against P56,040 its value in 2004—or
a loss of more than P10,000.
This is a problem now facing the OFWs—the
progressive decline in the peso value of their dollar-denominated
earnings. Should they conserve their dollars until the peso weakens
as it did at the height of the country’s financial crisis a few
years back?
Many overseas workers have been effectively
doing that by limiting their dollar remittances to their families in
the Philippines. They are pinning on their hope that the peso will
weaken anew. That is the time, they tell themselves, to release
their dollar savings into the money market to maximize their gain.
The Trade Union Congress of the Philippines (TUCP)
has advised the OFWs to start exchanging their dollars for pesos and
save in the local currency. It predicts that the peso will grow
stronger than weaker against the greenback in the months ahead.
“There is definitely less risk and greater
potential reward in peso investments. OFWs and their families here
stand to lose more value for their money if they continue to stash
whatever savings they have in dollars,” said TUCP president
Democrito Mendoza.
Mendoza’s statement seems to be backed up by
JP Morgan Chase and Co., which has told its clients to buy the peso,
and the Development Bank of Singapore, which has predicted a
“stronger-than-expected peso over the next 18 months.” The DBS
sees the peso closing at P44.50 against the dollar by year-end and
at P42.50 by the end of 2008.
The economic factors going for a strong peso are
the government’s improved financial position, increased tourist
spending, more inflow of foreign investments and the continuing
yearly OFWs’ remittances estimated at $10 billion. It is also
claimed that the greater world supply of dollars has been
responsible for the weakening of the foreign currency.
Mendoza says there is no sense keeping dollars
now. “This is not just about the peso getting basically stronger
but it is more about the dollar getting fundamentally weaker versos
most other currencies,” he adds.
The OFWs are, indeed, in a big quandary. Will
they listen to Mendoza ’s unsolicited advice and the forecasts of
the financial experts, like the JP Morgan Chase and Co. and the DBS?
If the peso continues to surge stronger as predicted, their dollar
earnings will continue to sink deeper in value in the money market.
Former Ambassador Roy Señeres, who had worked
closely with OFWs as one-time labor attaché, has proposed a special
exchange rate for OFWs’ dollar remittances to ease their mind
about keeping their dollars. But this was scuttled by the Bangko
Sentral ng Pilipinas (BSP) which says that it cannot allow any
preferential exchange rate for any particular group.
To help OFWs cope with the rising peso, Mendoza
suggests lower remittance charges for their money. He explains that
this is a “concrete way by which the government can intervene in
terms of creating a regulatory environment that will drive down
excessive money transfer charges.”
It is estimated that out of the yearly
$10-billion remittances of OFWs, about $1.3 billion goes to charges
imposed by banks and other private companies engaged in the
remittance market. There is a good reason for lowering remittance
fees.
Not only OFWs but also the country’s exporters
are complaining against the rising value of the peso. Under the
present exchange rate, exporters’ dollar earnings from the sale of
their products have also gone down in peso value.
A strong peso is definitely good for the
economy. But something somehow has to be done to help the OFWs and
exporters, who make up the social base of the nation, to resolve
their common problem.
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