[merged] Improving Peso-Dollar Exchange Rate

[Automahn]

Hi. I'm just wondering, what's the government or the business sector seem to be doing right to make this happen? Any economist, businessman, or someone simply in the know out there?

[nugundam93]

it's the influx of OFW dollars.

[mazdamazda]

here's a nice article related to that:

Philippine peso… No. 1 in Asia, No. 5 in the world
PHILEQUITY CORNER By Ignacio B. Gimenez
The Philippine Star 01/02/2006

The Philippine peso finished 2005 as the best performing currency in Asia and the 5th strongest currency in the world. It gained six percent year-on-year against the dollar to close at 53.09 as at end-2005 from 56.28 as at end-2004.

The Brazilian real was the best performing currency in the world, strengthening by 13.7 percent against the dollar in 2005. The second was the Kenyan shilling which gained 8.7 percent against the greenback. The Chilean peso and the Egyptian pound finished 3rd and 4th place by appreciating by 8.5 percent and 7.2 percent, respectively.

While the dollar weakened against the Philippine peso last year (including the currencies mentioned above), it was a different story for the rest. Generally, the dollar was strong last year. It gained 14.5 percent against the euro and 12.8 percent against the yen.

Meanwhile, Asian currencies – led by the Philippine peso – performed relatively well against the dollar, depreciating by only 0.9 percent on average.
Lessons from Latin America
The Philippines and most countries in Latin America shared similar problems in the past: ballooning fiscal and current account deficits, unsustainable public sector debt, high inflation, high interest rates and volatile exchange rates. In fact, whenever the Department of Finance would report the country’s fiscal figures, the headlines in the following day’s news would tag the Philippines as the next Brazil or the next Argentina saying that the country is on the brink of default.

But much has changed in Latin America in the last couple of years… and much can be learned from the region’s recent economic success. Many countries have reduced their public debt by implementing significant fiscal reforms. Current accounts are in surplus, cutting down the dependence on external capital inflows and resulting in higher reserve positions. Governments have taken advantage of the benign financial conditions to pre-finance external debt service obligations and strengthen the maturity profiles of their debt. And despite, high oil prices, inflation has remained relatively stable.

Strengthened macroeconomic policies and economic fundamentals have expanded the government’s access to domestic currency bond markets. Several countries – notably Brazil, Chile, Mexico, Columbia, and Peru – have increased their reliance on domestic issuance, reducing their vulnerability to exchange rate risk and increasing liquidity in local currency markets. Brazil and Columbia have taken it a step further by issuing external bonds denominated in local currencies. The increased investor confidence in these countries has resulted in exchange rate appreciations. It’s no wonder that four of the top 10 currencies (in terms of end-2005 year-on-year appreciation) come from Latin America, including the Brazilian real which is the best performing currency last year.

Brazil’s currency, the real, is now so strong (up as much as 22 percent against the US dollar last month) that its central bank had to weaken it by purchasing US dollars and selling so-called currency swap contracts. According to news reports, the central bank bought $3.5 billion in the foreign exchange markets for the month of December alone – and as much as $21 billion for the whole of 2005 – in order to weaken the real.

With reserves now reaching $54 billion, Brazil is now in a position make an early repayment of its entire obligations to the International Monetary Fund (IMF) amounting to $15.46 billion drawn in 2002. Under the original schedule, the final repayment of outstanding loans would have taken place in 2007.
Will the Philippines be the next Brazil?
The year that passed was a remarkable year for the Philippine peso and it marked a turning point towards fiscal sustainability and improved investor confidence in the country.

Going forward, it is vital to build on the foundations for higher sustained growth to insure against external risks of high oil prices and sudden shifts in global capital market conditions. On this regard, we look upon the lessons learned in the recent economic success in Latin America, and in particular, Brazil.

Just as Brazil did, we should take advantage of our strengths and work on our weaknesses. Our policymakers should continue to focus on:

1) Strengthening fiscal positions and lower public debt. It is crucial that the Philippines continue to push through with fiscal reforms. The implementation of the second phase of EVAT or raising the VAT rate to 12 percent by Feb. 1 is imperative in order to reduce the deficit to GDP ratio to 1.8 percent by end-2006. Fast-tracking the privatization of big-ticket government assets (Transco, Calaca, PNOC-EDC, etc.) will be a big help in reducing public debt.

2) Improving external positions. If Brazil has its commodity exports (steel, iron ore, cellulose, beef, sugar, soybeans, etc.) as its source of dollars, the Philippines has the advantage in OFW remittances.

Other sources of hard currency which the Philippines can capitalize on are the tourism and mining industries. The opening of the NAIA 3 this year would certainly provide a boost to tourism. Meanwhile, the slated initial public offerings (IPOs) of several mining companies is a step towards revitalizing the industry.

3) Developing alternative sources of energy in the face of high oil prices. The Philippines also has a chance to turn a weakness (of being a net oil importer) into strength by developing alternative sources of energy (geothermal, wind, bio-fuels, etc.) similar to what was done in Brazil, the world’s leading producer of ethanol-based fuels.

Recently, Ford Motors announced a $20-million investment to build a flexible fuel engine plant in the Philippines for the use of bio-ethanol to complement the government program to develop bio-diesel in the petroleum industry. This would not only generate foreign exchange savings, but also provide new markets for our agricultural products and expand the livelihood of our farmers.

Therefore, if we play our cards right, 2006 will be a banner year for the Philippine economy, another remarkable year for the Philippine peso, and the right time to get that elusive credit rating upgrade. Who knows… the Bangko Sentral may now face the problem of defending the US dollar against a strong peso this year, just as Brazil’s central bank did with the Brazilian real in 2005.

For comments and inquiries, you can email us at gime10000*yahoo.com or info*philequity.net

[konde]

mainly because of the remittances from abroad most notably during the yuletide season (pang shopping ng mga kapamilya).

[boybi]

malalaman natin by april to june kung driven by OFW remittances or by the government ang pagstrengthen ng peso.

[mfo]

Mukhang nag iimprove ang economy ng Philippines :cheers:

[konde]

Mukhang nag iimprove ang economy ng Philippines :cheers:

sana nga. ngunit ang tunay na sukatan nito ay kung mararamdaman ito ng tiyan ni ordinaryong juan dela cruz.

[mazdamazda]

sana nga. ngunit ang tunay na sukatan nito ay kung mararamdaman ito ng tiyan ni ordinaryong juan dela cruz.

kung magtrabaho lang sila nang mabuti ang i-prioritize nila ang spendings nila bakit hindi.

nung isang araw... napadaan ako sa isang bakanteng lote sa ma amin... napakaraming tricycle na nakaparada sa tabi. anong meron? sabong!

[van_wilder]

sana nga. ngunit ang tunay na sukatan nito ay kung mararamdaman ito ng tiyan ni ordinaryong juan dela cruz.

i dont think so... eh kahit anong ganda ng economy niyo kung ayaw magtrabaho ni juan magugutom talaga siya... being born rich or poor is given... but living your life in poverty is a choice...

[badkuk]

mga sarili ko lang pong mga theories:


1. OFW remittances -- our government has consistently been able to make this place such a s#!thole that a lot of pinoys are going abroad for work -- who in turn remit more money back home.

2. the US economy isn't doing that well.

3. the Iraq War -- $1 billion a month nagagastos. that'll screw up any country's economy, guaranteed

4. the strong peso -- medyo may pagka chicken and egg problem to. OFWs realize that the peso is getting stronger. or, put in another way, they get less pesos for every dollar they remit. so, might as well remit as much as they can before the peso gets any stronger. problem is, oversupply naman ng dollar ngayon, which makes it cheaper/weaker. lather, rinse, repeat


5. e-vat law -- while implementation/enforcement/collection is still up in the air, and there's a good chance na makukurakot lang ung pera, we're giving the impression that we're really serious about solving the fiscal problems. that in turn makes foreigners more bullish about the philippines


6. weak demand for dollars -- mas matibay peso e, why should i buy dollars? lugi pa ako! and, people might not have that much money to buy dollars anyways

7. weak dollar -- because of the US economy. so, the peso is not getting stronger per se; it just looks that way because the dollar is weakening.


one caveat though: a strong currency usually means that exports will take a hit. that, in turn, affects our economy, which in turn affects the peso...you get the drift. magbabalanse yan eventually.

[mazdamazda]

7. weak dollar -- because of the US economy. so, the peso is not getting stronger per se; it just looks that way because the dollar is weakening.

I'll disagree with this.

Major currencies on the average fell back by 11% to the USD this year.

Major Asian currencies on the average fell back by 9% to the USD this year.

===

As one analyst said, the PHP is just correcting itself (from all those political b.s. ). I project that it'll stabilize in the low 50s.

===

Aside from electronics (which is our major export product) - the Business Process / Contact Point Outsourcing business here in the Philippines is booming.

Support, sales, back-end operations, etc. of major companies are being relocated here in the Philippines (mainly due to relatively cheap but skilled workers).

[mfo]

I'll disagree with this.

Major currencies on the average fell back by 11% to the USD this year.

Major Asian currencies on the average fell back by 9% to the USD this year.

===

As one analyst said, the PHP is just correcting itself (from all those political b.s. ). I project that it'll stabilize in the low 50s.

===

Aside from electronics (which is our major export product) - the Business Process / Contact Point Outsourcing business here in the Philippines is booming.

Support, sales, back-end operations, etc. of major companies are being relocated here in the Philippines (mainly due to relatively cheap but skilled workers).

Mazda Mazda is Right

[heightdeprived]

I'll disagree with this.

Major currencies on the average fell back by 11% to the USD this year.

Major Asian currencies on the average fell back by 9% to the USD this year.

===

As one analyst said, the PHP is just correcting itself (from all those political b.s. ). I project that it'll stabilize in the low 50s.

===

Aside from electronics (which is our major export product) - the Business Process / Contact Point Outsourcing business here in the Philippines is booming.

Support, sales, back-end operations, etc. of major companies are being relocated here in the Philippines (mainly due to relatively cheap but skilled workers).

I was thinking on the other hand that the good economy right now is a benefit of the country from the mutiny that took place in Thailand, I may be wrong but I have assumed this to happen after the political turmoil there and it appears to me that it's happening, not only to the Philippines but to other southeast asian countries as well.

As for the column of Esposo, again, that is the media bringing in the bad news. Instead of being optimistic, he rather be pessimistic and blame somebody for their problems.

Actually it's one example of hopelessness, there's no hope in a country with hopeless people so there's no reason to fret but instead be hopeful in more things to come.

May napanood ako sa news tungkol dito sabi nga nun dahil sa OFW ito hindi rin maganda yun kase ibig sabihin marami ang nagOOFW instead na magtrabaho dito.
Sana magimprove na ang economy para hindi kami mag U.S...

I'm an OFW and usually peso appreciation during pre-school-opening months of april to may and near-december appreciations of the peso in the months of october to december were usually attributed to OFW remittances in to the country respectively for opening of school and to have something for Christmas but I think it's not only solely due to our remittances, look after such periods the peso didn't went down same thing happened last year, I have always thought that it will go down again after such periods but it didn't...

kung anu man reason ng malakas na peso eh sana naman may effect ito sa pagbaba ng presyo ng gasolina considering other factors like lowering of the crude oil prices in the world market and the decrease in the demand for oil products from the temperate countries in the coming months (spring to summer).

I hope people will stop sounding this way, it's a sign of hopelessness, there will be an effect, but it won't happen overnight siyempre...

i really don't feel the effect of the peso appreciation (yet) .. hindi naman bumababa yung presyo ng mga bilihin .. ang sinasabi lang ng mga finance dept eh liliit yung foreign debt natin .. pero wala naman nagsasabi kung may increase sa budget allocations in the other sectors of society .. baka pork barrel lang yung itaas nila ..

ang na-feel ko lang impact eh medyo nawalan ng value yung $$ accounts and investments ko .. at least mas mura na pumunta sa HK Disney .. hehe ..

I think this is because malaki pa rin foreign debt natin...

i think the real gauge for an improving economy is not in the stock market or the peso-dollar exchange rate.. The real gauge is in the REAL ECONOMY, meaning the imrovement of the lives of those in the lower classes. We shouldnt forget that there are still the majority of people in our country who cant even afford to eat three times a day..i think that this is where we should gauge if whether or not our economy is improving..the cost of living here is too high when we look at the point of how much majority of the filipino people earn per day..

Usually things being requested here just comes along without us knowing since things come in gradually and it doesn't improve over night, as time passes by we tend to have increasing standards of our wants and what we want yesterday may not suffice for our wants tomorrow reason why the gains we're having for today is not as significant as when we want it yesterday...

filipinos analyst are quite pessimistic... hehehe... they base their predictions about past trends lang... they should read time magazine, newsweek, and observe in the real trading market (not stocks ah... import export manufacturing business ibig sabihin)... although marami pa rin imports, slowly tayo nagiging independent, kasi dumadami na ang local alternatives na same quality or even better tapos lower price pa... from wood floorings to steel, from clothing to personal goods... may local brands of whey protein na nga na pwede makipagcompete with the top nutrition brands sa US...

Actually a lot of people who compose the Philippines feel they are so messed up while the foreigners on the other hand is having a good impression of the country, I'm starting to have a conclusion that people will always have the government they have.

Malaysia is a highly industrialized country and surely a richer country than ours but still it's people also has whines in it...

ayos lang din naman na tumaas ang value ng piso para magdalawang isip na ang mga ofw na umalis at ang iba magbalikan na sa pinas. malaki ang social impact ng hiwahiwalay na pamilya, kung minsan kahit malaki ang kita sa pag aabroad hindi kayang palitan ng pera ang negative effect nito lalo na sa pamilya palagay ko.

Yeah I'm looking forward to the day when I'm earning enough without going beyond it's borders again, hirap ng ganitong tema, yatttaaappp!!!!

isip natin scenario bigla naging 10:1 dollar:peso yun sumusweldo ng $350 like DH automatic maging P3500 na lang. yun sumusuweldo sa oilfiled ng $6000 maging P60000.

syempre nakakapikon yun. tapos lahat dito retain sweldo like minimum wage of P8,000 tapos yun average yuppie salary of P10k to P30k. pero malamang lahat ng imported like Mcdonald's (P30 to P50 per meal), M&M chocolates (P20 per pack), ipod (P3999 wow!), dell laptop (P9000) halos presyong US na din. d'ba sarap nun. yun minimum wager laborer dito ng P260 a day. more than 10 days lang trabaho makakabili na ng Ipod hehehe


kahit P60000 na lang sahod mo abroad, laki pa din purchasing power mo dito. yun nga lang mas malakas na nga lang kumita mga local employees. so syempre magsisi-uwi na lahat ng OFW for greener pastures here naman.

ano kaya maganda gawin ng gobyerno para hindi na ma-reverse yun. sayang eh 10:1. I'm sure it will benefit the entire Filipino race and the next generations in the long run ... instead na yun direction na P100 = $1.

Superwages has been suggested for this to happen pero 'di ko rin maisip kung pa'no isasakatuparan yung superwages na yun pero sana nga tumaas pa ang peso.

nanaginip si oldblue, as if bababa ang prices ehehehehe!

ina-assume mo din na yung mga nagwo-work sa export oriented industries e meron pa din work. pag naging P45/$1 ang exchange rate baka lahat ng mga export manufactureres magsarado na. at the present rate na P51/1$ e hirap na nga yung mga nag-e-export e. imagine based ang sweldo sa P55/1$ tapos magiging P10/1$!

it's happening...

if the peso-dollar rate improves more then definitely those companies who have persevered to stay in the philippines will pack their bags and go. fedex left subic free port last year because the wages are high, remember?

In business usually we care about those who are able to spend, well if they can't afford let them go, sure enough due to the increased purchasing power of the people somebody better is going to replace them given sound economic policies and a stable economy. Usually companies who really has the dough go for those countries who has got better purchasing power and the cheap labor has always been the reason why majority of the businesses investing in the country are just the Small-to-Medium enterprises.

Theoretically, what will happen to the economy if $1:Php1 ang conversion? less than P200,000 na lang ang exotic cars?

ayaw mo nu'n? :D

Kita nyo ung china... its currency should be stronger than it is right now. but the chinese govt wont allow it to strengthen... coz it will make chinese exports more expensive. a weak currency is good for export economies.

kasi naman 'no, panay gaya ng gaya sa orig products wala naman silang R&D

but here's the major difference:

the Japanese are very loyal to their country. They went abroad to study western technology, and brought that knowledge back to japan. With that knowledge, they made products that are far more superior than the western products. Like cars and TVs. Toyota and Sony are the best examples i can think of.

i cant say the same for the Phils.

Malay mo rin naman, some of the pinoys may well be able to bring in technologies they have gained from experienced abroad. Specially when convinced that staying outside the country is no longer that great of an option.

does the improved peso-dollar translate into higher purchasing power for us?

yeah should be, but it won't happen overnight, actually I went outside the country Dec. 10 last year I was surprised unleaded went down as low as 35 pesos. Look at the post below

Hindi lang dollar bumababa but pati oil prices, pero yun mga oil companies di pa din nagbaba ng presyo. Dati nasa $69 isang barrel ng oil and yun gas is P43 per liter, ngayon nasa $58 na isang barrel ng oil pero yun unleaded nasa 35 pesos pa din. Considering na at that time the peso was 54 = $1.

[badsekktor]

di ko alam kung matutuwa ako o hindi sa paglakas ng piso, sayang din katumbas ng isang sasakyan.... pero sa isang banda tingin ko dahil sa resulta na rin nung nakaraang eleksyon kaya lumakas ang piso. Sa tingin ko naging matalino na rin (kahit papano) ang mga botante at nagkaroon na ng kumpyansa mga mamumuhunan sa mga mamamayan ng bansa... yun lang ang tingin ko....

[CPY61]

Originally Posted by C24
Theoretically, what will happen to the economy if $1:Php1 ang conversion? less than P200,000 na lang ang exotic cars?

Well, that would be nice...even ferraris would be within reach...

[CVT]

one caveat though: a strong currency usually means that exports will take a hit. that, in turn, affects our economy, which in turn affects the peso...you get the drift. magbabalanse yan eventually.

The multinational companies are threatened, because their costs are getting higher, without even lifting a finger....

In this time where margin is king and it is usually cheaper to go somewhere else,- this is bad news for us in the industry....

2801:clap:

[explorer]

it has been mentioned in the business news many times last december that the influx of OFW remitances (always very high during november and december, dec. 2005 is the highest, a record in OFW remitances in history) is the main factor of the peso appreciation.

as mentioned by William Esposo in his coulmn in the inquirer entitled "When ‘good news’ is worse than bad news" on the Dec 26, 2005 issue:

Good samplings of these recent attempts to mislead us are as follows:

1. “Her administration’s sound fiscal policies have resulted in the rally of the peso.” Nothing is farthest from the truth. The peso rallied with the arrival of the Christmas season because of the remittances of overseas Filipino workers (OFWs). Moreover, analysts say that the reluctance of Filipinos to spend due to their anticipation of worsening times also has a boosting effect on the peso. OFW remittances are indications of bad economic management and are not really good news. The reason why there are more remittances lately is because the economy is so bad that people have no choice but to leave the country, even risking the loss of life and limb by working in such danger zones as Iraq. No Filipino who can earn that money here would want to work overseas, separated from his loved ones and coping with the social costs of a divided family. 2. “E-Vat is another Macapagal-Arroyo ‘landmark fiscal policy’ achievement.” E-Vat in truth is the result of Macapagal-Arroyo’s fiscal mismanagement, a good part of which had to do with her misuse and abuse of public funds for her 2004 election campaign. Because she overspent, Filipinos now need to pay more taxes and have less money for their personal needs. 3. “Opposition to her administration is what is derailing the economy and destabilizing the country.” It is the crime of stealing the people’s mandate in 2004 that is destabilizing the country and eroding the economy. Madame Arroyo’s protestations are no different from that of a serial rapist claiming violation of his rights when the justice system seeks to make him account for the crimes that he committed.

Media does not make the bad news – Gloria Macapagal-Arroyo does. Media does not steal elections and subvert constitutional processes in order to hide the truth. But media will be remiss in its duty to serve the people’s right to know if media reneges on its responsibility to convey the truth.

We may not want to hear the truth about our cancer, but not knowing it will do us a lot more damage. The fact that media is still capable of exposing the truth should be welcomed by society, no matter how unsavory the truth may be. After all, feeling pain is proof that one is still alive. Pain, much like bad news that is related by media, alerts the body to take corrective or remedial action. If we instead choose to talk about how nicely manicured our toes are instead of telling the truth about the beginning gangrene on the big toe, we are only leading ourselves to the destination of all our delusions – our own ultimate and collective nightmare.

[EL Chicane]

Di ko alam kung matutuwa ako dito. Pano na yung mga dollars ko? Inimbak ko nung P56 per dollar, ngayon P52 na lang????? Anak ng daga talagang buhay 'to.

[ranod55]

sa akin kahit alam kung agrabyado na sa palitan ng $ dollar-sa tulad kung OFW eh,masaya narin ako! kasi,ibig sabihin gumaganda ang economy nating ,inspite of politics and scam/corruption etc...

[mfo]

sa akin kahit alam kung agrabyado na sa palitan ng $ dollar-sa tulad kung OFW eh,masaya narin ako! kasi,ibig sabihin gumaganda ang economy nating ,inspite of politics and scam/corruption etc...

Correct ka dyn