Credibility lack cripples Ate Glue
My dear ol’ Ate Glue may be able to cling on to the presidency as her national insecurity adviser says, but her ability to function effectively as the country’s chief executive has been seriously impaired. There is also little hope that she will be able to recover enough credibility to make tough decisions between now and 2010, specially as she is expected to continue to stonewall efforts to get NEDA documents and minutes that provide answers on her role in the ZTE-NBN mess.
This is a pity because the country is also expected to face some pretty serious crisis situations in the next two years. The impact of the worsening world economic environment, specially with regard to oil and grains prices in the world market, will definitely hit the
The oil price crisis, with oil quotes topping the $108 a barrel mark, is the first to cause significant political problems. The rice situation is expected to come next. Both situations require creative solutions that cannot be carried out unless the administration has a vast reservoir of public goodwill. As it will happen, we can expect Ate Glue to just aim to survive on a day to day basis with a hope and prayer that the problems will blow away soon. As Albay Governor Joey Salceda will probably put it, oil and rice prices will test just how lucky this b—ch is.
Her problems are now starting to show. Take the peso exchange rate for example. At a time when other currencies are continuing their upward trajectory against the US dollar, the peso has started to retreat. The peso’s retreating because foreign portfolio managers are continuing their sell out at the local stock market. Locals with money to protect are doing just that by moving to safe harbors abroad. No one wants to be stuck here just in case the political noise over the various corruption scandals becomes a roar loud enough to change the government. I do not believe such a thing is going to happen soon, but those with money tend to be more paranoid than ordinary mortals like me.
This is one time Ate Glue can claim credit for the peso decline. It is her failure of leadership that has caused this crisis of confidence in recent weeks, one major reason for the peso’s retreat. But she’s not claiming credit for the now weakening peso even if that would make some OFWs happy because she knows better.
And don’t talk about fresh foreign investments coming over with dollars to convert to pesos. I don’t think we have seen their shadows for a while. Even as many emerging economies seem to be weathering the American economic downturn pretty well, we may not be as lucky… thanks to our banana republic kind of political milieu.
High oil prices are bad enough but we also have to worry now about high rice prices. International rice prices have breached the $700 a ton mark… if you can get supply. In our case, we had to use diplomatic channels to convince
This brings us to our next problem. How will we pay for our rice imports? Imported rice is expected to be more expensive than local rice and once government sells them at the usual lower than market price, the taxpayer picks up the difference by battering the books of the National Food Authority (NFA). At the price of just $600 per metric ton, Secretary Yap expects a P16 billion trading loss or plainly, subsidy from the treasury, and that’s even net of tariff which will be waived.
The NFA borrows extensively to finance its imports and other programs and the debt is not paid but the National Treasury is expected to eventually pick it up. Rep Junie Cua revealed during a congressional hearing that at the end of 2006, NFA would have incurred an outstanding debt amounting to P76.7 billion with P5.6 billion in yearly interest expense alone. It must be approaching P100 billion by now. Cua said these borrowings are secured without Congress having the opportunity to scrutinize them.
In the same hearing during the last Congress, then NFA Administrator Gregorio Tan Jr. said that stabilizing the price of rice to make it affordable to the low income consumers is provided in the agency’s charter. He, however, agreed with the observation of Rep. Cua that this function of selling rice below market value falls under the category of poverty alleviation and could be given to the DSWD.
Then Batanes Rep. Henedina Abad, for her part, opined that the NFA’s job of selling rice at prices below market value may be a strategy to help low income consumers, but technically, it is a food subsidy program. “Such practice is not stabilization but in effect a subsidy program,” she said. Offering another point of view, Rep. Eduardo Veloso (3rd District,
Well, two years later, the problem persists and no remedial legislation from Congress saw the light of day. Last month, NFA announced plans to auction P8 billion worth of bonds to finance their operations. Again, because this is being done outside of the annual budget process, NFA need not seek Congress clearance on how it will spend that large sum of money.
The issuance is set at P8 billion, but underwriters are given the greenshoe option — the choice to sell 15%, or up to P2 billion, more than the original amount set by the NFA. The notes will mature in 2018, but the government has a call option to redeem all the issued notes in 2013. The issue could be used by banks to meet a rule requiring that a quarter of their portfolio be set aside for lending to agriculture and agrarian reform-related activities.
NFA’s Mr. Navarro said “Our corporate budget is P56 billion for operations, domestic procurement and importation. Aside from the bond proceeds, we have internally generated receipts and short-term loans from other banks.” Mr. Navarro added that NFA also expects some P16 billion in subsidy from the national government. Proceeds of the NFA issuance will also be used to refinance the agency’s maturing obligations. NFA debts include seven-year P16.5-billion zero-coupon bonds issued with an 11% interest in 2003.
The Finance department earlier cited NFA operations as a major factor in the depletion of government funds. And while its deficit is nowhere near the level of Napocor, it is not peanuts either. It incurs annual losses due to tariff payments on rice imports and interest payments from borrowings, which in turn finance grains acquisitions. NFA is one of the biggest rice importers in
There are other issues that now come to the fore. A leading economist pointed out that “The world market price of rice used to be much lower than its domestic price. Thus, a freer market used to be anti-rice-farmer but was pro-consumer.”
The economist continued: “We kept on telling the rice farmers that the reason for importing rice is that foreign rice is cheaper (and thus good for consumers, workers and our global competitiveness) and that rice farmers should not protest too much should the government let market forces work. Now that the shoe is on the other foot, NFA won’t stop importing rice. Indeed, it seems that NFA will import rice at high prices and sell it at a loss to prevent the domestic price from rising. Thus, the message to rice farmers is that the market should be allowed to work only if it is working against them.”
The economist concludes: “Given the politics, it is unlikely that rice farmers will be allowed to benefit from high world prices in the short run. The question is: what should be done in the long run if world prices remain high? When will the farmers finally benefit from high world prices? It is quite likely that some of the people, whose greed Neri wanted Lozada to moderate, will benefit from the kickbacks from the rice imports.”
Entertaining
Neto Natingtingbo sent this to me.
After listening to the sinner’s confession, the father confessor asked, “Did you entertain impure thoughts, my son?”
Sinner: “No, father. It’s the other way around, they entertained me.”
Boo Chanco’s e-mail address is [email protected]
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