spot_img
28.6 C
Philippines
Friday, March 29, 2024

Dark clouds

- Advertisement -

Taking great pride in the strides of the Philippine economy in the last four years, administration spokespersons keep saying the best is yet to come, pleading to the electorate for continuity.  The greater problem is how the next administration can, as it should, make the benefits of GDP growth felt by the soft underbelly of worsening poverty.

Meanwhile, dark clouds hover.

The devaluation of the Chinese yuan or renminbi and the corresponding increase in the value of the American dollar vis-à-vis the Philippine peso bring the economy to another crossroad.

Within days, the peso sank from 45 to 46.28, and is likely to reach 47 to the dollar in the next few weeks. That will make imports more expensive for a consumption-driven economy.  While it will give OFW-dependent families some instant gratification, they will pay the gains back whenever they buy goods and services.  We hardly manufacture anything in this country that has no imported component, and if you go to our malls, practically everything you buy is made elsewhere.

Exports will be priced lower, but except for fruits from Mindanao, what exports do we have that are not heavily import-dependent for raw materials and factory supplies?  So the devalued peso will have minimal positive effects on our exports.

- Advertisement -

Counter-balancing the monetary decline though is the relative decline in oil prices.  But that too will be more expensive because we pay for oil in dollars, and I am not betting on the medium term that oil prices will remain low.

* * *

Our foreign loans will be more expensive to service as a result of the decline in peso value vis-à-vis the dollar.  The National Food Authority, for one, inherited what President Aquino and his economic managers call a “legacy debt” from the Arroyo administration of close to P178 billion. 

Because of much lower NFA rice imports in the first two years of the Aquino government and the economic managers’ policy of giving the private sector greater play in the matter of rice imports, that legacy debt went down to P147 billion in two years.  But heavy NFA rice importations in the last three years has brought the “legacy debt” going back to the P170 billion level.

The NFA of course had to resort to bigger rice importations from 2013 to the present because of price spikes in 2013 and 2014, where the staple shot to the 44 to 50 peso level in the commercial retail trade.  NFA’s 25-percent broken rice  had gone up to 32 pesos retail in 2014, although they maintain a 27 peso price for regular-milled rice which is hardly available in the markets these days.

What brings ominous clouds is the fact that the El Nino brought down our palay production last summer, and with the intensification of the drought in the next few months all the way to next year, palay production will register significant decreases.  It is bad enough that the self-sufficiency promised by the Department of Agriculture failed to materialize (expectedly); what is worse are the effects of the strongest El Niño in memory.

Even Vietnam paddy farmers are complaining about the effects of the El Niño.  Rice fields beside the huge Mekong River may not be as gravely affected, but those in the north will suffer severe production declines.  Which means rice prices are likely to spike next year.

In a country where the poor eat rice and more rice (120 kilos per person per year, as compared to 67 kilos per person in Japan, for instance), palay production can hardly cope with the demand.  Our urban poor eat rice and  buy instant noodles as viand (carbo loading is the norm in our cities, laced with artificial flavoring), “mura-murang lamang tiyan.”  Our rural poor eat guinamos or camote with their rice.

 PNoy inherited P178 billion in “legacy debt” from Gloria due to NFA’s sovereign-guaranteed debts. What will the next president inherit from PNoy?  Same-same “pamana”?

The bigger immediate problem for the administration though is how to control rice prices from going up during the campaign season.  The medium-term problem for the incoming administration is how to come up with a realistic rice policy for the future in the light of the expiration of our World Trade Organization-granted quantitative restrictions on rice by June 30, 2017.

The severe El Niño will hit fish production (rising sea temperatures), hog and poultry production (unless owners air-condition their piggeries and chicken coops), and vegetable farming as well.  Which means food inflation will rise.

When we joined the World Trade Organization in 1994, we were given a ten-year period within which we could impose quantitative restrictions on rice imports, so as to protect our palay farmers, while the agriculture department makes them more price-competitive.  In 2005, we asked for another 7-year extension.  Then in 2014, we were belatedly given another non-extendible extension up to 2017.

While there have been increases in palay production, our per-hectare yield is still low compared to other countries, and our cost of production much higher.  Our total production simply could not match increased consumption by a  population which will be 101.6 million by the turn of this year. 

Our country has an area of only 30 million hectares, scattered among 7,107 islands at that, some of them with thin topsoil and no water sources, where nothing but weeds can grow.  Thailand is all of 46 million hectares, virtually in one contiguous land mass.  The Philippines is beset by some 20 typhoons each year, and if a strong one hits the rice granary during the harvest season, millions of tons of palay could be lost in one day.  (This happened in September 26,  2011, when a typhoon hit Central Luzon a week before harvest).  Thailand is typhoon-free.  Even neighboring Vietnam is protected from strong typhoons because they hit the Philippines first.

In 1978, bigger Thailand and smaller Philippines had almost the same number of mouths to feed—44 million Filipinos and 43 million Thais.  There are now 65 million Thais.  There are 101.6 million Filipinos.  Go figure why rice self-sufficiency is virtually unattainable in these islands of “fun.”

Go figure, too, why Thailand exports rice to us, even if we Filipinos keep reminiscing about those days when Thai students enrolled at UP Los Baños.  “Sa atin lang natuto, bakit ganoon?”, even media persons ask.

Numbers.  Everything is about numbers.  And the numbers, for the Philippines, ain’t looking too good.

* * *

Goodbye, gentle soul.  As we write this article, news about the death of a good friend and Thursday Group lunch “addict”, Sen. Butz Aquino, is texted to us.  The last time we saw him was about a month ago, when he joined us but hardly ate.  Butz who religiously attended every wedding in my family, had been looking frail through the past several months, but was still as jolly as ever.

There will be no wake.  Butz wants to be remembered the way he was, always smiling, always your every day friend.  Ave atque vale, dear friend.

- Advertisement -

LATEST NEWS

Popular Articles