TUCP urges OFWs to save in peso, not dollars

Appreciation of the Philippine peso: a boon or bane

Manuel Orozco, an international expert on remittances wrote to me the following:

"..the appreciation of the peso and many countries' currencies is not directly caused by remittances, but rather by an increasing process of dollarization without short term adjustment of the local economy to those changes. In other words, many countries like Philippines are integrating in the global economy through labor intensive activities [non-trad exports, migration, maquila, and tourism] all of which generate dollars but where living standards are low partly because remuneration is low paid (because of its labor intensive nature and poor labor standards). In addition, the US economy has kept the dollar devaluating in order to compete against Europe and China (China keeps its currency without appreciating, to continue to sells cheaply, and Europe sells relatively expensive things vis a vis the US). In lowering the dollar countries are loosing: most developing countries keep their foreign currency reserves in dollars. Thus the problem is not that remittances are appreciating the home country's local currency and making things more expensive.

For example, Filipino dependence on foreign earnings is huge: 70% of its GDP comes from aid, exports, FDI, tourism and remittances alone. Remittances are only 20% of these foreign earnings. Thus when the discussion is focused on local currency appreciation the main question should not be about migrants and their earnings but about exporters: 70% of all earnings are exports and despite the fact that they are gaining space as global exporters, their workers continue to earn low wages. They could raise wages and thus cope with the currency appreciation. Migrants can not be inflating the economy, they are not the main foreign earning factor.

"Unfortunately, people have to move for better jobs and in doing so have to earn foreign currency working in low paid positions. But their positions are part of a strategy in the global economy to use low paid laborers in order to expand the competitiveness of the host country. But the host country not only uses low paid labor but also lets the currency devaluate to increase its exports. Currency devaluation and low paid jobs are forms of revenue raising, but the poor is the one affected, and that includes migrants. That's why we are dealing with a much complex problem and not just about migrants and migradolalrs. The problem is that we turn to blame the poor when the rich can't find answers to their own created problems."

So what should OFWs do? TUCP has a reply:

The Trade Union Congress of the Philippines (TUCP) is advising overseas Filipino workers (OFWs) and their families here to hoard their savings in pesos and avoid the US dollar, saying the local currency is bound to gain more strength against the greenback in the months ahead.

"We are just looking out for OFWs and their families here. There is definitely less risk and greater potential reward in peso investments going forward," TUCP president Democrito Mendoza said in a statement.
"OFWs and their families here stand to lose more value for their money if they continue to stash whatever savings they have in dollars, or in dollar-denominated instruments," Mendoza warned. [Read more]