Keeping the Peso above 40

The Philippine peso has been steadily rising over the past few weeks, as of February 8, 2013, it was valued at 40.6 to the U.S. dollar. Eventually, this rising trend will eventually bite on the competitive edge of Filipino exporters. Such scenario will undoubtedly force companies, especially companies whose main source of income is export, to shed some jobs, adding more unemployed to the economy. An economy that can barely provide adequate and reasonable jobs, much more good paying jobs.

It is paramount therefore for the government to do something about this phenomenon. Personally, I would prefer the peso be pegged at PHP 45 to the USD. Yes, "pegged" is the keyword here. During the financial crisis that gripped Asia in 1997 precipitated by the collapse of the Thai baht, the then government of Malaysian Prime Minister Mahathir Mohammad adopted a policy of cutting spending and raising interests rates, policies which caused more suffering to the people of Malaysia and which were urged upon by the International Monetary Fund. Eventually, in 1998, Mahathir reversed this policy, and in addition, pegged the ringgit to the dollar at a fixed rate, this as of course opposed by the IMF as well as his deputy, Anwar Ibrahim, such policy turned out to be a boon for Malaysia as it helped the country recover faster than its neighbors, including the Philippines, which to begin with, never really had that much economic luster in the first place.

The government of President Aquino should address this issue with speed. Indeed, we may one day wake up to find that call centers in the Philippines have eventually closed shop. These companies will be the first to go in any further destabilization of the peso's value. BPO's are like vendors, they come and go as the economy ebbs and flows, if they do go, thousands of Filipinos will lose jobs that cannot be easily replaced by more traditional brick and mortar companies. Of course, not to mention that the Philippines has a dearth of such companies.

In order to save the capacity of the economy to grow and support the needs of Filipino's who are not OFW's, the government has to conduct some serious thinking about the need to rein in the volatility of the peso. What the government does in this regard will determine the ability of the Philippine economy to sustain itself for the foreseeable future.