Philippines feels the pinch of dollar’s decline
May 5, 2008
On the swarm of recruitment booths outside the Luneta Seafarers Center, photocopied fliers advertise jobs that pay in dollars: $2,300 a month for a welder on a natural gas tanker or $3,900 for a second mate on a passenger liner.
But lately, the dollar has lost some of its luster with the highly sought-after crews.
“Almost everyone is asking for more money because they know the foreign exchange is not to their advantage,” says James Estrada, a marine engineer who recruits crews for 300 ships operated by Wallem Maritime Services.
“You get fewer pesos for your dollar. So we’ve had to make salaries higher.”
The dollar’s slide against other currencies is rippling across the globe: It is keeping more American tourists at home, raising prices on imports and creating bargains for foreigners swooping down on U.S. assets.
It is also causing financial pain in less obvious places, such as the Philippines, where millions of people have come to rely on the purchasing power of dollars sent home by relatives working abroad.
An estimated 10 million overseas Philippine workers provide money for an even greater multiple of dependents at home. A year ago, one dollar bought 49 Philippine pesos. Today, it brings about 41 pesos, a sharp depreciation that has coincided with rising commodity prices to create an economic crunch in this archipelago of 92 million.
“The biggest losers are overseas workers because the peso value of their remittances to their families has shrunk,” says Benjamin Diokno, an economics professor at the University of the Philippines and a policy advisor to the previous Philippine government.
Filipinos working overseas have been a pillar of the Philippines’ economy since the 1970s, when some of the country’s hardest-working and best-educated people left to take up service jobs in other parts of Asia, in the West and the Persian Gulf states: nurses and domestic helpers, hospital technicians, sailors and nightclub entertainers.
The money they send home each year accounts for more than 12% of the Philippine economy, often sustaining several extended-family members, some of whom don’t work. For years, these dollars have paid private school fees for younger siblings and bought small condos for aging parents.
“We used to pity people who didn’t have someone in their family making dollars,” says Estrella Gonzaga, 55, sitting in her small but comfortable Manila house that is plastered with family photos, including a high school graduation picture of her daughter Hasmine, a nurse who moved to the Bronx nine years ago.
Over the years, money sent by their daughter allowed Gonzaga and her husband, Jose, 62, a retired X-ray technician who spent five years abroad himself in the 1980s, to build a nest egg of dollars in their Manila bank account. But in December, needing an operation for a herniated disk and with no health insurance to cover the $3,700 cost, Gonzaga had to ask her daughter for more money. And she underestimated the gap between the dollar and the peso.
“She sent me money, but I had to go back and ask for more,” she says. “The dollar just seems to be falling so fast.”
Economists say the drop so far has merely crimped lifestyles, not crippled the economy. The dollar’s decline is only part of a mix of wider economic problems the Philippines faces, from an ominous decline in salaried jobs to sharply rising food and gasoline prices. Analysts also note that those overseas workers living in Europe and paid in the rising euro are doing better than ever. The issue is not a strong peso, they point out. It is a weak dollar.
But many here worry that the subtle effects of dollar weakness today may have a deeper impact down the road. They point in particular to families that can no longer count on dollar remittances to fund private education for children and siblings.
“The patterns of expenditure show that a big part of the money sent home by overseas workers is spent on private education, and this was a significant investment in human capital,” Diokno says. “Now I’m talking to private school owners who say their enrollments are off for next year because families are pulling children out and putting them into the public system.”
Manila’s public schools report being swamped with new admissions. Some of the increase is attributable to the rising Philippine birthrate. But Jose Gonzaga, the retired X-ray technician, says he knows several people who can no longer afford to send their children to private school because of the dollar’s drop.
Not every Filipino is obsessed with the exchange rate, says Pedrito Villaflor, a marine engineer who has shifted careers and is writing a master’s thesis on why Philippine seamen are so widely coveted by shipping companies.
“Seamen are loyal to the U.S. dollar,” he says, contesting the recruiter’s claims of demands for higher salaries. “Most of them don’t understand exchange rates. As long as they are getting paid in U.S. dollars, they are happy.”
Others are less sanguine. The Gonzagas are loath to touch the money in their dollar account, stocked over the years with irregular contributions from their daughter. “When we need it badly, I take a little bit out,” Estrella Gonzaga says. “But the rate is too low.
“We’re still hoping that if we leave it there for a while, the dollar will go back up.”