Peso’s Gain Is OFW’s Bane

By LEO J. SANTIAGO, JR. & JULIE JAVELLANA-SANTOS

IN A remittance slip, there was an additional US$50 that Cesar Dimasupil’s daughter Arlene sent from London. But he remained stoic.
"That [money] would just even things out," Dimasupil said of the dilemma that most families of overseas Filipino workers are facing under a stronger peso and a record-low inflation rate.
Dimasupil, like most Filipinos brought up in a male-as-strong society, said he does not know if he should celebrate for getting the added money from something he said he shouldn’t have asked from his daughter in the first place.
"But what can I do? They said the strong peso could lead to lower prices. That hasn’t happened in the past months," Dimasupil said.
The Dimasupil family shares the conundrum of a Philippine economy that a recent World Bank (WB) report said has been growing, in part because of the cash sent by nearly eight million Filipinos temporarily or permanently working or living abroad.
In a report released by the WB last month, it noted that the stronger peso helped inflation rates to fall to 4.3 percent by end-2006 and to 2.6 percent by February this year. Food and oil prices remained "relatively" stable, the WB said.
Pummeled in recent years by political shocks to the economy and macro-economic anxieties, the peso appreciated by nearly eight percent against the US dollar in 2006, and strengthened further in early this year.
It’s a cause celebre for most businesses, especially importers who can pay less from products they’re bringing in from abroad.
But for an economy that the WB said is relying on consumption, the celebration isn’t felt yet by OFW families in the Philippines whose remittance receipt is boosting consumption.
According to economist Fernando Aldaba, herein lies the risk of an economy relying much on remittances since many OFWs could also hedge on a possible uptick of the dollar.
Hedge
BUT with the expected spending this May up to June, particularly on tuition and school expenses, the hedge couldn’t be applied despite the peso gaining further against the greenback on a two-month high of P47 (per US$) exchange rate.
"That enrolment is just around the corner prompted me to ask for the additional money," Dimasupil said whose two other children are also studying to be nurses like Arlene.
Indeed, low inflation rate may have abated prices of basic commodities from pushing up but the cost of education, something held dearly by most Filipino families, remain expensive.
Beth Realubid said, she "also asked her husband Lando in Bahrain to hike what he sends monthly." They have three children who are all studying in college.
According to Jose Alfonso, a seafarer, aside from tuition, the higher cost of his brother’s clothing requirements in a maritime school also caused him to send an additional hundred dollars a month.
"My brother asked that his monthly dollar allowance be raised because the peso equivalent of what I used to send him has gone down," Alfonso said.
Before, Alfonso sent US$150 a month, which was equivalent to around P8,400. But with the appreciation of the peso, that amount is now just a few change above P7,000.
"I feel like losing a thousand pesos every month," he added.
Alfonso’s brother Michael also needs an additional US$25 in allowance to be able to pay rent and eat three times a day. He lives in a Manila dormitory and goes to their home in the province of Cavite on weekends.
Arlene’s parents, on the other hand, used to get the equivalent of around P28,000 from her US$500 monthly remittance.
Now, her parents said they get only a little more than P23,500, a difference of P4,500 since the exchange rate of P56 to US$1 in 2005.
"Yung ibinaba ay sapat na para sa allowance ng isang bata sa isang buwan." (The difference is already equivalent to a month’s allowance of one kid going to college), Flavia, Arlene’s mother, said.
Uptick
STILL, not all Filipinos sending money home are pessimistic. Take US-based overseas Filipino-turned-exporter Robert Ceralvo. He expects a stronger peso to "gradually –and hopefully not very long– translate to lower prices of utilities, commodities and many other day-to-day needs that the OFW family regularly purchases and consumes."
"A lower exchange rate, which at the onset translates to lower domestic purchasing power for OFW beneficiary families, will, in time, translate to a general increase in the real purchasing power, i.e. it will be cheaper to buy imported goods, cheaper to travel abroad, etc.," Ceralvo said in reply to questions sent by electronic mail.
Indeed, the average inflation has fallen substantially from 7.6 percent in 2005 to 6.2 percent in 2006 as the dollar weakened against the peso.
Ceralvo added a stronger peso spells "good news for businesses that rely on imported input or raw materials and for those who are investing on call centers, telecoms and BPOs who are buying and bringing in new technology from other countries."
But from an exporter’s point of view, Ceralvo said they share the same sentiments as the OFWs have.
"Right now our handicrafts, woodcrafts, toys, gifts and collectibles, home furnishings, Christmas décor, apparel and garments industries are gasping their last breathe, trying to survive from stiff competition from China, Vietnam, Indonesia, new republics from eastern Europe and Africa," he explained.
"A strong currency … will make our exports more expensive, and a fall in exports has a negative effect on our economic growth," he added.
For some OFWs like Arlene, however, sending the additional remittance amount meant additional work hours or securing additional sources of income.
Her father said their daughter has asked the administrator of the hospital she’s working for to increase her weekly overtime by at least five hours.
"She cannot just increase my remittances without increasing her monthly income," Arlene’s father said.
On the other continent, Lando Realubid began repairing appliances for fees lower than licensed repair shops.
His wife Beth said, Lando does this on his off-hours working in the docks of Bahrain as a port-based third engineer.
"He makes an additional US$100 to US$200 a month doing appliance repairs," Beth said. However, this is seasonal since she said there are months when no one asks for repairs.
Joseph, likewise, had to work extra hours. From a 52-hour workweek, including overtime, he is now breaking his back 12 hours more, or two additional hours everyday on a six-day workweek on board a tanker.
"For a fragile, ‘strange’ economy like ours, there are certainly losers and winners in the fluctuation of the exchange rates, both short-term and long-term," Ceralvo said.
Still, he added that the OFW family has more leverage and hedging abilities than the rest of the population, to offset the negative effects of a strong currency.
"They can still fully enjoy the positive effects of a deteriorating peso exchange rate," because they can rely on our dollars, he said. /MP