The diminishing power of our peso

TWO weeks ago, I attended a seminar on foreign exchange or speculative trading of fluctuating currencies, basically pitting one currency against another.

The lecturer started “catching” the audience with the sad reality that keeping money in the bank does not grow more money because its miniscule interest – at most 0.50 percent per annum on savings account – could not cover its loss to inflation. Investing in forex could be also risky, but one with winning chances.

It is essentially the process of buying and selling currencies pooled through a licensed broker with the aim of making a profit. The difference in price is where an investor may profit or lose.

So, if one invests in the US dollar market at P51 to a dollar over time and the price goes up to P55, he may earn four pesos per dollar. Whereas, if the peso gets stronger – say P49 against the dollar – he loses two pesos.

No doubt dollar earners or their beneficiaries would wish for a weaker peso.

Unfortunately, it’s no good news in the long run. In reality, the gradual “increase” of the dollar from only two pesos in the 1950s to P51 today has greatly diminished the buying power of our local currency.

In the 1950s when the dollar was worth only two pesos, the Philippines was the second most prosperous nation in Asia – second only to Japan. The minimum wage was only P120 per month, but it was worth much more than today’s P12,000.

Even in the 1960s, the Philippines was still way ahead of Taiwan. One peso at that time was worth seven new Taiwan dollars (NTD). Today, the latter is stronger at one NTD to P1.70.

President Carlos P. Garcia – whose term covered the 1957-61 period – implemented his “Filipino First policy,” which restricted imports of products that were locally available and encouraged exports.

An Ilonggo entrepreneur responded to the challenge by putting up a canning industry, Lix Products, in Mandurriao, Iloilo City. It canned home-style pork and beef delicacies such as adobo, menudo, sarciado and mechado. Those products sold like hotcakes nationwide.

After Garcia came President Diosdado Macapagal, who imposed “de-control” – a policy that pegged price ceilings on basic commodities, thus minimizing monetary inflation.

The imposition of martial rule by President Ferdinand Marcos in 1972 coincided with the global oil crisis which, coupled with the scarcity of rice, caused sudden increases in prices.

The assassination of Senator Benigno “Ninoy” Aquino in 1983 further drove the peso weaker at P13 against the dollar. That started the downtrend.

The People Power or EDSA Revolution that restored democracy in 1986 and installed widowed Cory Aquino to the presidency, unfortunately, did not live up to its promise of economic rebound.

We did not do as South Korea had done. You see, South Korea had relied heavily on foreign assistance for survival. However, realizing that dependence on richer countries was also stalling their growth, they marshaled their technocrats for the development of industrial zones. Today, South Korea no longer imports but exports locally-built cars and heavy equipment.

In contrast, our politicians and economic managers still look forward to more foreign loans and dole-outs, from which they could earn kickbacks.

Hundreds of thousands of Filipinos – whether skilled or unskilled – still have to work abroad to ensure comfortable life for their loved ones.

It is ironic that in our country known for rich natural resources, we cite “lack of capital” as excuse for not exploiting them. What could be more ironic than selling fertile rice farms to subdivision developers? ([email protected]/PN)


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