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The Philippine Peso Squeeze      

April 19, 2017 • GLOBAL ECONOMY, Asia - Pacific, Dan Steinbock, Special Feature on Duterte and the Philippines

By Dan Steinbock

In the first quarter, the Philippine peso depreciated against the US dollar. Internationally, this was attributed to President Duterte’s policies. In reality, it has a lot to do with the expected US rate hikes. But there is a reason why misguided geopolitics now overshadows Philippines.

 

In the recent quarter, the Philippine peso depreciated by 0.88 percent against the US dollar. It was the only currency in Asia to do so. For the first time since 2009, the peso drifted to 50 per US dollar.

Much of international media attributed the fall to President Duterte and his “unlawful” policies. The number of such reports has increased since last fall and escalated through the spring, particularly in US-based media, including some of the largest global financial news hubs.

At best, these reports reflect an odd discrepancy between the fundamentals of the Philippine economy and the way it is portrayed internationally. At worst, they illustrate a gross misrepresentation of those fundamentals.

 

The Geopolitical Peso Story

As the peso peaked at 50.40 in early March, international media saw the real culprit in President Duterte, who is “involved in unlawful killings and corruption”, as Bloomberg’s Ditas B. Lopez put it. The headline told the story: “Asia’s ugly duckling of the year is the Philippine peso, thanks to Duterte”.

Actually, this narrative did not start in early 2017 when the Philippine currency began to weaken against the US dollar. It did not reflect news; it proactively shaped news. It began already in September 2016 when peso was still 46 against the dollar. From January 2017 back to September 2016, the Bloomberg author’s Philippine stories included “Southeast Asia’s Worst-Performing Currency Is in for Another Tough Year”, “Philippine Peso Completes Worst Month in 16 Years”, “Duterte’s Peso Rout Runs Counter to the Booming Philippine Economy”, “Philippine Officials Seek to Soothe Investors Spooked by Duterte”.

Bloomberg was not alone. In the Barron’s (March 22, 2017), William Pesek’s headline tells the story: “Philippine peso’s troubles just beginning. The peso is down 8% and investors are dumping stocks amid doubts about Duterte’s economic agenda.” Here the peso is seen “buckling under the weight of a chaotic and distracted administration”, and “lots of body bags, more than 8,000 and counting”. The peso’s fall is attributed to “impeachment talk” (about Duterte). In the past investors, were “clamoring for peso assets thanks to predecessor President Aquino’s structural upgrade drive”.

Like many others, Barron’s mistook Aquino’s stated economic goals with his actual achievements. No questions are posed about the dramatic rise of the drug trade under Aquino’s watch, the complicity of public officials, and media silence about the drugs. Instead, marginal figures (Gary Alejano) with an anti-democratic mutineer record are presented as “opposition politicians”. Flawed drug wars statistics is quoted as accurate. Senator Leila de Lima is portrayed as a figure of integrity, despite her gross abuse of public office and funds, and cooperation with drug lords. And Vice President Robredo’s UN speech, which penalized her credibility, is presented as testimony of courage.

Most distressingly, most of these accounts are quiet about the alleged Goldberg plan – that is, the alleged regime change plan by the former US Philippines ambassador to replace Duterte – which advocated exploiting the Philippine public and private sector, along with international NGOs and international media, exactly in the way that these reports have done.

 
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