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Purisima’s peso sabotage DIE HARD III Herman Tiu Laurel 09/19/2011

Monday, September 19, 2011

Purisima’s peso sabotage

Herman Tiu Laurel
Just when the Bangko Sentral ng Pilipinas (BSP) has finally found its bearings, certain quarters are again dead set on pushing it off track. Misgivings aside, I have lately begun to appreciate certain BSP top officials’ burgeoning initiative to get the management of our currency and debt back along the lines of national welfare and interest. The BSP just recently recommended to Malacañang its preference for borrowing locally (instead of internationally) to accelerate the prepayment of debts and to “help temper the appreciation of the peso” vis-à-vis stimulating demand for the dollar.

The country’s Gross International Reserves (GIR) jumped 51 percent from $49.95 billion to $75.6 billion year-on-year, with our foreign debt standing at around $60 billion. The Philippines is thus awash with dollars as well as in loanable funds in the Special Deposit Account (SDA) maintained by the BSP, all waiting to be mobilized in lieu of more foreign borrowings in the rolling over of debts or in the funding of PeNoy’s public-private partnership (PPP) projects in infrastructure and others.

The BSP is picking up the wisdom of the way in which many in the private sector are handling their own dollar debts. While the PeNoy government’s prepayment of foreign loans slipped in the first half of the year, with prepayments of medium and long-term foreign loans summed up to $530.9 million or 3.19 percent lower than the $548.4 million recorded in the same period last year, newspapers report that “All prepayments were made by the private sector.”

We have been reading of different major private corporations prepaying foreign loans. And for anyone seeking to avoid the burden and volatility of interest payments amid the currency crisis, this is the only way to go.

Unfortunately, Cesar Purisima (PeNoy’s Finance secretary and also Gloria Arroyo’s), gave the already scheduled prepayment of debts his “thumbs down.” How are we then to perceive such stonewalling of the proposal that many concerned sectors of our economy, led by the BSP, push for?

OFWs, being the largest contributors to the survival and viability of the Philippine economy, have remitted up to $21 billion annually as of last count. Yet the dollars they send to their families, coursed through the BSP, are yielding fewer and fewer pesos; this, as the US currency is being propped up by Purisima’s policy of accumulating more dollars in our vaults.

The export sector, which has just lost another 10 percent in value in the latest reported data, has also been howling in pain over the massive weakening of exports due to the strengthening peso. The BPOs, including call centers and other service providers, have also lost half of their income due to the peso’s appreciation.
Purisima, in his defense, remarked, “Of course we are amenable to debt prepayments but it is a question of opportunity because bulk of our debts is publicly traded already and if their prices are very high it will not make sense for us to prepay… All of these are long-term and very low cost, so it does not make sense at this point to prepay also.”

In response, this was what our Wednesday radio co-host Liza Gaspar, a young UP finance graduate, had to say: “Purisima seems to be looking at the issue only in financial terms; he seems to forget the more positive and concrete impact of cutting the debt (is) in terms of savings on interest payments and principal that could be redirected toward productive enterprises.”

Gaspar clearly makes more sense than the one-time SGV and Hyatt 10 head. Still, we shouldn’t fault Purisima too much as he recognizes only the foreign financial interests as his bosses.

If PeNoy has any idea on the matter at all, which isn’t likely, the conflict from within his financial team seems to be erupting right under his nose. Well, it’s not like he has taken any interest in it at all, which is tragic, as the matter of finance has become the central component in the governance of nations.

Former President Joseph Estrada, who admits to being a novice on international finance, says he resolved such issues during his time by getting members of his financial team face each other off in serious debate while he listened. Then, if a consensus is not achieved, a vote is soon called. But for PeNoy, it seems that, like many other things under his governance, he has allowed Purisima to simply call the shots, even as the Finance secretary already seems to be sabotaging the Philippine peso in the course of propping up the US dollar.

Of course, there is another dimension to the financial and currency issue that is beyond the scope of this column — the restoration of “currency and capital controls” as well as the “nationalization” of the entire banking sector, which the country had in the time of President Carlos Garcia. It is the final solution to the perennial problem of peso volatility that perpetually rocks the economy. That will be the next stage of the debate.

(Tune in to Sulo ng Pilipino/Radyo OpinYon, Monday to Friday, 5 to 6 p.m. on 1098AM; Talk News TV with HTL, Saturday, 8:15 to 9 p.m., with replay at 11 p.m., on GNN, Destiny Cable Channel 8 on “WTC’s Building 7: The Key to Exposing the ‘Inside Job’”; visit http://newkatipunero.blogspot.com for our articles plus TV and radio archives)

(Reprinted with permission from Mr. Herman Tiu-Laurel)

SourceThe Daily Tribune

URL: http://www.tribuneonline.org/commentary/20110919com5.html


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