Happiness is $21 billion in foreign reserves

BSP Governor Say Tetangco couldn’t have looked happier when I saw him at the German Unity Day reception last Tuesday evening. The peso closed at 49.88 to the dollar that day and showing a lot more strength to establish new records in the days to come. He smiled when I asked him when he expects the peso to hit 48. I figured that could only mean I was on the right track.

The BSP Governor then said a number of factors are really pushing the peso up against the dollar. The weakening dollar for one, OFW remittances for the second semester school enrollment season and the recent Robinson’s Land additional primary and secondary offerings (which I later on found out, raised $220 million, 95 percent from foreign sources) are reasons enough for the strong peso.

Say pointed out that the biggest reason for the strong peso is the weak dollar. Currencies across the region also surged across the board Tuesday, reversing the downtrend seen the previous day. The market is reacting to reports that US manufacturing growth slowed to its weakest in 16 months in September. The sluggish factory output in the US led to speculation that the US Federal Reserve would not only end its monetary tightening but even start cutting interest rates soon. I think someone should disabuse Toting Bunye’s mind that the strong peso is solely the result of something good Ate Glue did.

So I asked Say another question: how does it feel to have over $20 billion in gross international reserves? He smiled again… in pride and satisfaction, I guess. It is definitely a long way from the $5 to $7 billion we used to have. It is good to have a lot of buffer in these uncertain times, he finally said. We now have cover for 4.3 months of imports plus something to help us in case something happens again… We now have something to defend the peso with, still limited but at least more than usual.

Will the BSP fatten the reserves some more? The opportunity to do that is available under today’s environment. Besides, even at today’s level, our GIR is not that big compared with Thailand which is at the level of $56 billion or Indonesia at $38 billion. We are more aligned with Latin American countries like Venezuela at $23 billion, Argentina at $24.4 billion and Chile at $17 billion. Let us not even think of China at $1 trillion.

Well, Gov Say T is non committal on BSP’s next moves. But he also expressed worries that every time the central bank buys dollars from the market, they unleash a lot of pesos into the system. That could be inflationary if not handled well. They may have to mop up excess liquidity from the system by getting back those pesos with promise of attractive interest rates. There would be a cost to do that.

In a briefing of Ateneo’s Dr. Ciel Habito I attended this week, he said that the peso has indeed been strong yet the worrisome thing is the sluggish growth of imports which could mean slower exports down the line. Dr. Habito also acknowledged growth in foreign investment but lamented that domestic investors have thus far found no confidence to risk resources in their own economy. With the strong peso, domestic investors, notably small to medium scale entrepreneurs in the export sector will find reason to stay in the sidelines.

Philippine Exporters Confederation president Sergio Ortiz-Luis Jr. said SMEs exporting indigenous products will no longer remain competitive once the peso-dollar exchange rate falls below the P51 level. Some of these companies will only ship at P51 or P52 to the dollar. So now, they are starting to refuse orders, Ortiz-Luis said.

That’s the kind of bad news that Toting Bunye will shunt aside. As Ortiz-Luis said, the effect would be bad since these indigenous exporters employ about 80 percent of the total jobs generated by the sector.

As it is, we have a serious unemployment problem. Even as the government statisticians tweaked the unemployment figures to exclude those who have stopped looking for employment out of sheer frustration, there are still three million without jobs. If we included those excluded in the new accounting system, there would be some five million unemployed.

Dr. Habito, in fact, expressed concern that while it is true, as Ate Glue and Toting claim, that the economy is growing at a reasonable rate, unemployment has turned for the worse. The labor force grew by 2.6 percent while jobs grew by only 2.3 percent. And let’s not even talk of underemployment, which remains high. What we are seeing now is jobless growth and that cannot be good.

Anyway, Ortiz-Luis said the exporters recognize that the movement of the peso is market-driven so the government should take other means to help the small exporters survive. Some concrete actions that they want the government to take, he said, are more assistance in trade promotions here and abroad, better access to credit and most importantly, lowering of the cost of doing business. In other words, wag na sanang kokotongan yung mga exporters when they deal with government agencies like customs, highway "checkpoints", etc.

That’s a tall order, if recent international ratings on the state of corruption here is any indication.

Making patol

Incidentally, I don’t know who is the speechwriter who made Ate Glue declare that we are no longer third world… that we are already second world. That is plainly stupid and I don’t know why Ate Glue read that part of the speech. This way of classifying countries has Cold War roots and nothing to do with national income. Second World does not refer to middle income countries. A quick Google check would have told them that.

For a refresher, First World refers to the Western economies like the US and Western Europe and of course, Japan. Second World refers to the communist or centrally planned economies, mostly no longer in existence with only Cuba and North Korea still around. Third World is the rest of us in Asia, Africa and Latin America with so called developing economies.

Countries don’t go from Third World to Second World unless Ate Glue thinks the NDF of JoeMa Sison will soon take control of government. Like Singapore and South Korea, countries go from Third World to First World. Malaysia also talks about becoming First World. Not Second World. Our problem is we think second best is puede na, kaya siguro the speechwriter thought a way of dramatizing progress under Ate Glue’s watch is to report that we are now Second World. Segunda manong pag-iisip!

In the same way, Bunye must realize that his ecstatic announcement about the country’s per capita income rising to $1,400 is nothing but pure unadulterated spin. Sa Pilipino, napaka bilog na bola. Siyempre naman ano… with a stronger peso, that’s simply the conversion effect to dollars… smaller divisor via-a-vis the exchange rate. That OFW rushing to the money changer to convert his dollars to pesos before the peso strengthens some more could have told him that. The higher per capita income in dollar terms is also meaningless in the light of record high hunger and self rated poverty rates.

Gaya nga ng sabi ni Ate Glue, " maganda ang litrato ng economiya" (the economic picture looks good) ngunit "kailangan tignan muna natin ang malawak na litrato" (we have to look at the bigger picture…) kahit na "gumaganda ang hula ng mga financial institutions sa atin" (even if the forecasts of financial institutions are getting better).

Kung ako si Ate Glue, "kailangan iguhit ang makipot na linya" (need to draw a fine line) between reality and fantasy, between propaganda and truth and henceforth instruct her speechwriters not to embarrass her with stupid literal translations from technical English to street Tagalog. Then again, Ate Glue should know better than to mouth them too. She shouldn’t "make patol". Kadiri to death kasi, lalo na nung sabihin niyang si Pacquiao ay may matulis na utak (sharp mind). Agad tuloy naiisip ng mga nakikinig na di lang yun ang matulis kay Manny.

Based on what I heard Tuesday evening, the German ambassador speaks better Tagalog than Ate Glue. Or maybe he just has a more literate translator/speechwriter. Siguro, di galing sa Asumption.

Three’s company

Here’s something from Fe dela Cruz.

May bagong kasal.

Mrs: Honey, malapit na tayo maging tatlo dito sa bahay.

Mr: Talaga, Honey? Pinasaya mo ko sa balita mo!

Mrs: Oo. Dito na titira ang nanay ko!

Boo Chanco’s e-mail address is [email protected]