Thursday, October 05, 2006 Severino: You win some, you lose some (1) By Gil Alfredo Severino Think Economics
THIS used to be the words of President Fidel V. Ramos whenever he perceived some policy set backs or court cases he cannot win. It sounds "fatalistic" but at least honest and realistic. I am not a fan of FVR, his speeches are boring but his acumen in the National Income Accounting is unprecedented. It was during his time when National Income jargons like GNP, GDP, BOP, ratios, debt servicing, the likes began to hit the headlines, courtesy of Academician Dr. Cielito Habito.
This is not to mention the catapulting of Family Planning and especially condoms into the national broadsheets, courtesy of then Secretary, now lethargic Senator, Dr. Juan Flavier. I have good reasons to believe, too, that because of FVR's economics inclination, controversial policies like tariff reductions were positioned as strategies for the Philippines entrance to globalization, courtesy of then Senator now beleaguered President Gloria Macapagal-Arroyo in the Senate.
I remembered quite well how FVR turned on the very first internet in his library (?) and his first chat mate was Prime Minister Mahathir. The oil deregulation law was fully implemented at about this time.
All these underwent hiatus when Thailand fell victim to portfolio speculators and the Philippines were among the fallen domino. This was in 1997; FVR was rather silent then as his Vice-President Joseph Estrada slowly gained popularity among the masses that attributed the Thai fiasco to elitist economic management reinforced by the populists that capitalized on the Mexican Salinas downfall.
Nevertheless, stood his ground on liberalization and continued to give high regards for the BSP's independence in pursuing market-oriented monetary policies among them was the currency mobility management.
My memory now fails as to what level did the Peso plunged, but I am definite that it depreciated more than 20% (Professor Alex Magno differentiated depreciation from devaluation and it was a long story, this I am definite, too).
It is not without reason that FVR and BSP stood the grounds of market orientation in currency mobility management. First, it was BSP's clear mandate and it will take a lifetime to repeal this. Second, there will be market winners when the Peso plunged. The kind of indigenized export pursued by our very own Association of Negros Producers (ANP) is sure winners. Peso plunged means cheaper export vis-à-vis our keenest competitor, China.
Sadly, import dependent electronics, garments and traditional exports may achieve "a little over minimal" margin. Traditional export like sugar is import dependent, was experiencing high production cost in the 90s compared today and world sugar prices were down. Unestimated margins could have been gained by the most efficient ones. Third, families of our modern day heroes, then called OCWs, were the most benefited sector. Imagine increasing their Peso income equivalent by 20% or more! Many of them became sophisticated players, in fact, because of speculation which slowed the currency recovery.
There are losers when the Peso plunges. These are motorists considering the price of gasoline and multiplier effects on land, air and water transport fares; agricultural productivity due to increases in the prices of inputs such as fertilizers; "colonially" inclined consumers fond of anything imported -- generally anything imported are sure losers. Is it healthy to reverse this situation?
For how long can we do it? Remember, survey shows that inflation is one of the bitterest pills a Filipino is forced to swallow.
These past few weeks, it was not Peso plunge but US Dollars plunge; a phenomenal reversal. Neither is this Peso strength. What shall we call this now? Who won, who lost?
For questions and comments, please email gil_severino@yahoo.com
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