Strong peso can harm export growth, says export leader

MANILA, Philippines - The head of the umbrella organization of exporters cautioned exporters not to be lulled by the sector’s rapid recovery which could easily turn to rapid decline.

Addressing members of the Philippine Exporters Confederation Inc. (Philexport) during a national membership meeting in Manila recently, Sergio R. Ortiz-Luis Jr., president, lauded individual exporters for the high double-digit recovery in export sales for the first seven months of the year.

If sustained until the year ends, the rate of recovery could bring exports to equal sales in 2007, the peak year in exports before the global recession.

The big challenge today, he said, is to transform rapid recovery to sustained growth.

“A major stumbling block in sustaining export growth is an exchange rate policy that has always been biased in favor of a strong peso,” Ortiz-Luis said.

The peso-dollar rate hovered a few centavos above 44 this week from 48 to the dollar when export recovery began in January.

He urged the Aquino administration to take a second, harder look at the exchange rate policies of China and Vietnam that gave them the vitality to sustain their bid to become newly industrializing economies.

“Both countries have deliberately made their currencies weak to keep their exports cheap in the global marketplace,” Ortiz-Luis pointed out.

“After the irresponsible investment bankers in the US and Europe almost ground to a halt the global economy, old assumptions like equating a strong peso with a strong economy is no longer gospel truth,” said the export leader.

“What we have seen for decades is that, a strong peso equals a stagnant economy,” he added.

He further called on policy makers to weigh the losers and winners under a strong peso policy regime.

Among the winners, he said, are the traders of imported goods and their principals, the smugglers, and the government that has to pay its ballooning dollar loans.

The rest of the country, he pointed out, turned out losers. These include the lowly rice and onion farmers and domestic industries that have to compete with smuggled goods and cheaper imports, the call centers, families of overseas Filipino workers and exporters.

“It is ironic that the biggest losers in this unequal equation are the very people bringing in the dollars, the OFWs and the exporters,” he observed.