Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

Archive for December, 2007

Celebrating Christmas and our birthdays in Cebu

Posted by butalidnl on 30 December 2007

Yesterday, my wife and I celebrated our 50th birthdays together with a party in Cebu. Our birthdays are only a week apart – hers on the 23rd and mine on the 31st of December.  We held our party at Cebu’s Golden Prince Hotel, with a hundred guests.
We don’t usually do this sort of thing – i.e. hold birthday parties, but this time was special. The 50th birthday is a landmark event, especially in the Netherlands, where we now live. The Dutch call it “meeting Abraham” for men , and “meeting Sarah” for women. This is supposed to signify that we are now old and wise – since in the past, very few people lived to be 50; and thus you must be wise to be able to have done so.

The celebration was particularly significant also since it was done in Cebu, where we were able to spend our Christmas season this year. We don’t usually spend Christmas in the Philippines because it is usually difficult to get permission to be away from work (and studies) for long.  July-August is the preferred time for vacation, since we could manage to have about 4 weeks vacation in the Philippines; while in Christmas it would usually have to be only a bit over 2 weeks.

For many of our kababayans abroad, Christmas could be one of the most lonely and sad times of the year. We know that our Philippine-based relatives are together, and that we are “alone” in our cold countries with only our immediate family with us. Of course, we find ways of coping – for example, our small family (4 in total) agree to set our schedules so that we spend all our time together from the 23rd till the 31st – all work and outside appointments are not allowed. So, we play board games, cook, shop, etc. together, in a yearly bonding ritual. Most of the year we are so busy with our various schedules, that we are only complete for a few hours a week. Other Filipinos attend various Christmas parties, masses and such.. if one wants, it is quite possible to fill up your Christmas holidays with such events.

Even if we’ve been abroad for more than 24 years, we miss the Philippines, or more accurately, we miss our family and friends in the Philippines quite a lot. For us the Philippines is not a place or a nation, but people whom we love, and whom we only see once every few years. We miss being “normal” again – my daughter Elena remarked upon leaving the airport that it is nice being around people that look like her – that she is not anymore a short, black haired, Asian in a sea of tall, blond/brown haired Dutch. It’s indeed nice. It’s so nice we don’t need to flaunt being balikbayans – being inconspicuous and unnoticed is too nice to waste.

Coming to the Philippines is a time to touch base, to again feel the pulse of our family, friends, our people. It is more about what we are able to save up as baon for our years far away. Unlike many balikbayans, we are fortunate to have family and friends who don’t expect us to treat them every time, or things like that. We pay for meals just as often as they would. I explained to a Pinoy abroad that when I go home, my friends are genuinely happy to see me. I suppose that would mean that I have sincere, real friends, who see me for who I am and not for what I can spend for. I guess that is why I am really here on a vacation, and can relax during our whole stay here.

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Will the peso appreciate this December?

Posted by butalidnl on 13 December 2007

Some years ago, when I was involved in a money-transfer business to the Philippines (from the Netherlands), I noticed that the Philippine peso would appreciate during enrollment times (June and October), Christmas and elections. The peak during enrollment times and Christmas is due to the surge in Overseas Filipino (OF) remittances. As for elections, I suppose this is because the various candidates are sending back dollars from their foreign bank accounts to help finance their campaigns.

With the peso appreciating all year already, it is now a question whether Christmas this year will see it appreciate even more, with the expected increase in OF remittances. Maybe this year would be different. One of the effects (and at the same time, a contributing cause) of the steady appreciation of the peso is that foreign companies in the Philippines have been postponing the transmission of their profits to their head offices in the expectation that these would be worth more later. At the end of the year (i.e. assuming that their fiscal year is the same as the calendar year), these companies would have to transmit their profits home.

At the same time, international portfolio investors (i.e. those who buy stocks, bonds or derivatives) who invested in the Philippines in 2007 would also be conducting their end-of-year “window dressing” operations. This happens when, at the end of a year, investors sell off some of their investments and buy others in the hope of making their year-end report more “presentable”. In the stock market, this means that smaller-cap stocks will be sold and blue-chip stocks bought. In the international framework of the portfolio investor, it may be that their Philippine investments would be seen as second-class, and this would mean that these would be sold and replaced with what they see as first-class investments.

If both of these things indeed happen, there will be a surge of “remittances” going outwards this December.

I don’t know how much the outward remittances would be in comparison to the inward surge of OF remittances; and thus, I can’t say for sure whether the net result would be that the peso would appreciate, or depreciate, in relation to the dollar. But whatever happens this December, I expect a return to the “normal” trend come January.

see also Peso-Dollar Rate

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A Deeper Look into the Stronger Peso

Posted by butalidnl on 6 December 2007

In an earlier post, I pointed out that the peso-dollar exchange rate is basically a result of the dollar’s deteriorating value internationally. This happens in various ways:

First, there is what we could call the monetary effect. When Overseas Filipinos (OFs) who work in countries whose currencies (e.g. the Euro area) have appreciated vis-a-vis the dollar remit constant amounts in those currencies to the Philippines. Since a constant amount in these currencies would translate into a higher dollar amount, the amount of dollars that enter the Philippines would increase as a result.

Second, comes the effect of “hedging”. This happens when people take action in response to the expected fall in the dollar’s value. Foreign companies in the Philippines, for example, could delay their transfer of funds to the US (and the whole “dollar area”) for as long as possible; in the expectation of getting more dollars for their pesos later on.
Individuals or corporations with dollar accounts could draw down on these, preferring to keep more pesos rather than dollars.
Or companies could protect themselves from currency fluctuation by buying currency options or warrants. These instruments would ensure for instance that they would get an assured amount of pesos for their dollar income.
While these actions would be beneficial for the individuals or the companies themselves, these actions would contribute to the dollar’s devaluation vis-a-vis the peso.

Hedging, of course, could also be done by international “hedge funds”. These companies are quite adept at exploiting currency trends and interest rate differentials. With the peso appreciating vis-a-vis the dollar, and with the Philippine interest rates higher than those in the US, it pays for them to borrow dollars and invest these in Philippine peso bonds.

Third, is the so-called “budget” effect. Since a given amount of dollars would fetch a smaller and smaller amount in pesos, foreign-based entities (companies or individuals) who need to transfer a given amount of pesos would need to increase the amount of dollars that are sent to the Philippines. Thus, if a foreign company wants to invest in the Philippines, it may need to send more investment dollars inwards. [This does not necessarily mean that they will decide not to invest in the Philippines, since the dollar is deteriorating against most currencies anyway.] Some Overseas Filipinos will need to remit more dollars inwards if their recipients need specific amounts in pesos, e.g. for tuition fees.

The strength of the peso is also due, at least partly, to the increased stability of the Philippine economy. From an outsider’s point of view, the Philippines would indeed look like a good place to invest in – either in terms of direct investments or in stocks & bonds. The government tax revenues have increased, and the regular large inflow of money from OFs is also a big stabilizing force to the economy.
There are also no significant political threats to the economy’s stability. The so-called “armed threats” are all neutralized. The Moro rebels are now talking peace. Military rebels are pathetically ill-organized and ineffective. And the CPP-NPA is now effectively co-opted into the existing political system (with their sweetheart deals with local landlords/warlords, and their dependence on congressional pork-barrel funds). No section of the political/economic elite is advocating radical changes in the country’s economic policies.

see also Peso-Dollar Rate

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Peso:dollar rate due to weak dollar, not remittances

Posted by butalidnl on 4 December 2007

The so-called “appreciation” of the value of the peso with respect to the dollar (from 55:1 to about 45:1) has caused problems for families of many Overseas Filipinos. This is obvious – if the salary of the Overseas Filipino is denominated in US dollars, or in a currency pegged to the US dollar (e.g. that of Saudi Arabia), then an appreciation of the peso to the dollar will mean that the peso equivalent of the money sent to relatives (assuming that the remitter sends the same amount of dollars home) will be less.

However, the cause of this problem of peso appreciation lies beyond the Philippines, and is beyond the control of the Philippine government. It is not true that OF remittances are the cause why the peso is appreciating. What is happening is that the US dollar is depreciating in relation with most currencies in the world. Thus, the supposed “strength” of the Philippine peso is a myth; it is the dollar that is weak, and many Filipinos are now in effect victimized by the bad economic policies of America.

The Philippine government is trying to get credit for something it had nothing to do with. This is probably an ill-advised effort on their part to claim successes in its economic policies. At the same time, Overseas Filipinos (OFs) would be wrong to claim that the peso is strong because of remittances. In fact, we could even claim the opposite – that the remittances have increased significantly because of the dollar’s drop in value. Why so? Since the remittances are counted in dollars, the amount remitted by OFs from the US and countries whose currencies are pegged to the dollar remain constant; while the dollar amount remitted from OFs in other countries would increase (since if they remitted in constant amounts for their local currency, they will fetch more dollars).

In other words, there is nothing either the Philippine government or the OFs could do about the peso:dollar exchange rate. It would be wrong, and futile, to ask for Philippine government intervention to make the peso “weaker” – they just couldn’t do it, even if they wanted to do so. At the same time, it would be downright pathetic for OFs to try to weaken the peso by limiting remittances – the only effect this action will have will be to make things even worse for their relatives.

The economic forces at work are much to massive for us to tackle. We can only hope that countries like Saudi Arabia decide to end their currency’s peg with the dollar, so that OFs there would be relieved from problems with the dollar’s weakness.

see also Peso-Dollar Rate

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