Carlo's Think Pieces

Reflections of a Filipino in the Netherlands

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

4 Responses to “Peso:dollar rate due to weak dollar, not remittances”

  1. Richard said

    Finally someone writing with some common sense.

  2. Jofert said

    i agree. Mabuhay ang rebolusyon!

  3. Remitter said

    Thanks a lot for this wonderful insight. I have also seen how the remittances are held responsible for the peso-dollar rate. In a country like India which is expected to emerge as the next super power in the years to come, the problme is quite similar. The devaluating dollar is a worry for every overseas worker irrespective of color or caste. But what’s different is that many Indians living in countries like the UAE and USA are now returning to their native land because the salaries are better and the standard of living has improved considerably, the Filipinos however are not doing something like this. Though organisations like Migrante are calling for a return back home. Do you see any possible reason behind this trend?

  4. Hydrus said

    It’s very interesting to know that you people really make sense.. Do you remember last year where they circulated an email lobbying for a stop of OFW remittances around the Holy Week season? Well. i got one and i didn’t stopped myself from sending my hard earned money to my family because i know it is very important and it is my obligation to support them no matter what’s the cause. Even if it’s the dollar weakening or the OFW remittances shifting the trend..

    I do believe that we as a country cannot make it, in the sense that no matter how we, the OFWs send Billions of dollars, we still cannot get rid of the corruption that the government is born with.

    Take for example, now that the USA is on recession, they still have the money to bailout their ailing economy, this includes the auto industry and the on going foreclosure on the housing system. Even though the newly elected Pres. Barack Obama is having it now on his shoulder, he must do these drastic move to solve the crisis which in effect electricuting the whole global financial market.

    Can the Philippine government do something like that? NO, not now and not ever.. It is only to the dismay of the ordinary Juan dela Cruz seeing his country mauled by corruption.

    If you’re an OFW, what will be your reason if someone asked you why you went out of the country? I’ll answer that,.. It’s because i’ll be in debt all of my life,.. i cannot provide a normal life to my family, and i cannot see that in our beloved country, even though it hurts so much to leave your loved ones behind but i guess our individual future depends on our choice to leave the country or not…

    If only all people in the government are Honest! Then i can believe that we still have hope, even though it’s hard to hope, hoping for nothing..We are all in a survival mode. I don’t like the programs that the government is having for OFWs. And i don’t believe that even there are 99 good tomatoes in the basket but with 1 bad tomatoe.. all will go to trash. Except they are not tomatoes.. LOL.. God bless the Philippines!!!!

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