A crisis of prices

The surge of the price of crude to beyond US$75 over the weekend instantly brought to mind a remark Energy Secretary Popo Lotilla made a few weeks back in his typically reassuring, unruffled, unflappable manner that our oil crisis was not a crisis of supply, but a crisis of prices.

Popo was not kidding. US$75 – and still skyrocketing! When all it takes is about US$18 to extract a barrel of the unctuous goop and then that same plain, unvarnished goop is sold at 400 percent – that is a little excessive, don’t you think?

But such is life. So when midweek’s passel of good news about a better-than-projected budget deficit, about successful revenue collections, about the peso strengthening to P48 to US$ by year-end – when all this is supplanted by headlines screaming all-time highs for oil futures, the threat of a UN embargo on Iran (which supplies one fourth of this country’s oil and gas), the fall of the peso to 51-81 on the frantic scramble for US dollars to pay higher import bills, my heart – which is attached, not to my arteries, but to my purse strings – begins to flutter like a sparrow in a paper bag.

The timing couldn’t have been more ironic.

Thursday, forex traders were saying the worst was over on the fiscal front, and the government was in a much better financial position to boost infrastructure spending. At a press briefing, ACI Philippines president and Banco de Oro private banking treasurer Jose Emmanuel Hilado said, "We used to be called the ‘Argentina of Asia’ because we were following Argentina’s pre-default debt path. Now, we have shaken the tag off and emerged as the new darling of the global financial market. Everybody is very upbeat on the Philippines. We are pleasantly surprised the peso steadied despite the political disturbances of the past months. This signifies the growing confidence of investors in the Philippine financial markets, much of which is the result of the government’s bullish attitude when it comes to solving the fiscal crisis.

The Philippines has the distinction of being the first Asian member-country of the ACI, a Paris-based international association of currency traders from 65 countries, which it joined in 1963 when it was still a leading financial center in the region. Manila is set to host the annual ACI World Congress for the first time next month.

Thursday, the International Monetary Fund (IMF) raised its forecast for the Philippine economy on a robust inflow of funds from OFWs and painted an even rosier portrait for 2007. In its latest World Economic Outlook, the IMF created the country’s gross domestic product (GDP) expansion with burgeoning remittances, a record US$10.7 billion, up 25 percent from the year previous, and predicted that this year, the remittances will most likely swell to US$11.8 billion.

Thursday, Moody’s Investors Service, the debt-rating agency, said that it may upgrade the country’s debt ratings outlook to stable from negative if the government meets its value-added-tax target and narrows the budget shortfall within the P125 billion estimate. Analysts and experts foresaw a better-than-expected first quarter deficit, largely due to improved collections, and watched keenly government’s policy shift from belt-tightening to pump-priming, another favorable sign of increasing revenues.

That same Thursday, Finance Secretary Gary Teves described an upbeat scenario for the economy in a private briefing hosted by Merrill Lynch in New York for members of the Philippine-American Chamber of Commerce, one of the oldest bilateral business organizations in the US. At the briefing, the secretary told of how the government had managed to improve its finances due to the impact of the E-VAT and the effective revenue collections by all major agencies.

Thursday, too, even exporters, those most adversely affected by the pesos’ rise, had reason to feel good. The Bangko Sentral ng Pilipinas (BSP) projected double-digit growth for them next year, 11 percent in 2007 from 8 percent in 2006, from 3.9 percent in 2005, as they adjust to the pesos’ exchange rate.

Then came the weekend’s whammy.

Straightaway, oil companies upped gasoline, diesel and kerosene prices by 50 centavos a liter. A major public utility transport union, comprising 65,000 operators of jeepneys, sought a fare hike of P1.50. The BSP intervened on the pesos’ erosion against the greenback, selling at least US$20 million at the Philippine Dealing System to cushion its slide.

Then the Supreme Court’s strike on EO 464 emboldened the Senate to resume its suspended probes: Northrail, Hello Garci, and open new ones – the role of the DILG in the proposed Charter change, the Mayuga Report.

The plot sickens.

Didn’t US Ambassador Kirstie Kenney get a dressing-down for her candid remarks to the American Chamber of Commerce last week – that "compared to some of the dynamic, fast moving economies in Asia the Philippines is not where it ought to be" because of politics? Why? Because she spoke the plain, unvarnished truth?

An onlooker made much of the fact that the president of the Republic, at Earth Day’s long-drawn-out mass officiated by Gaudencio Cardinal Rosales in the methane-infused surroundings of Smokey Mountain on Saturday morning, refused an umbrella despite being directly in the sun’s blinding gaze. The symbolism wasn’t lost on him. True grit and determination, he said. She can take the heat, that’s why she stays in the kitchen.

Just what we need to get us through this crisis of prices.

* * *

CHIEF OF STAFF. In my last column, I wrote that Environment Secretary Angelo T. Reyes had previously served as chief of staff of the armed forces, and that former Environment Secretary Mike Defensor is now chief of staff – a reversal of roles for each of them. My mistake. Mike is presidential chief of staff. Mea culpa.

* * *

My e-mail: [email protected]