g-20, apec, aquino, and the peso

08 November 2010

MANILA, Philippines—Six Filipino activists who had planned to take part in alternative meetings that are set to run parallel to the G20 summit in South Korea have been deported from Seoul, their colleagues said on Sunday.

… The activists were put on a flight back to Manila late Saturday after being told by South Korean authorities that they were blacklisted and could not enter the country, the activists said…. One of those deported, Maria Lorena Macabuag of the group Migrant Forum Asia, said they were only attending a peaceful parallel forum and had not broken any law.

Her companions were identified as Josua Mata of the Alliance of Progressive Labor, Joseph Purugganan of Focus on the Global South, musician-poet and Asian Public Intellectual fellow Jess Santiago, Rogelio Soluta of the Kilusang Mayo Uno and Paul Quinto of Ibon Philippines.

… “We were granted visas and it was clear that we were invited by KCTU. It was all disclosed and it was clear that we are not a threat to them,” Purugganan said.

make that 7 activists, the 7th being Bernice Coronacion of the Alliance of Progressive Labor.   hmm.   heard ibon’s sonny africa saying on ANC that only filipino activists have been denied entry.   and so there is wondering whether this is with the collusion of the philippine government, which would explain why the aquino admin is not offended?   but if true, why so?   why would we not want filipino activists represented, having been invited to participate, in the parallel forum organized by the Korean Confederation of Trade Unions?   baka kasi mag-ingay masyado this “noisy minority” that the aquinos think very little of?

and then, again, isn’t it just as possible that this is a kind of backlash vis a vis the aug 23 bloodbath and the vietnam tweets, a kind of curveball from a good friend of hong kong and vietnam?   okay okay it may be a stretch but after reading this…

What is the Philippine interest in this event? At first glance, there is not much to indicate that the Philippines is represented, much less invited. The president of neighboring Indonesia regularly sits at the summit. Korea as the host country exercised its privilege of inviting Singapore, as well as Vietnam which is this year’s head of the ASEAN. With these three ASEAN countries sitting in G20, could it be safely said that Philippine interests are well represented? The presence of at least three ASEAN leaders both have advantages and risks, due to the diverse characteristics of small, free market leader Singapore, socialist Vietnam, and big Indonesia.

… it’s like we’re being snubbed?   and then, again, it could be simply that aquino’s presence would be of no consequence anyway, given the philippines’ reputation of being america’s lackey, no more no less, especially when it comes to the economy?

The G20 leaders will be expected to affirm agreements drafted less than a month ago by their finance chiefs. They promised to avoid a damaging round of competitive currency depreciations. China accuses the United States, however, of already violating the spirit of the pledge by printing excess dollars, which Beijing says contributes to Chinese inflation. Washington accuses Beijing of keeping its currency artificially weak.

[G-20 economies represent about 90 percent of the gross domestic product globally, nearly 80 percent of world trade, and two-thirds of the world’s population. G8 members — Great Britain, Canada, France, Germany, Italy, Japan, Russia and the United States — plus Argentina, Australia, Brazil, China, India, Indonesia, Mexico, Saudi Arabia, South Africa, South Korea, Turkey and the European Union (EU).]

mabuti’t nag-iingay ang brazil:

Brazilian President Luiz Inacio Lula da Silva blames both China and the US for keeping their currencies artificially low — causing the Brazilian real to rise and making his country’s exports less competitive — and could stir things up.

“We believe the United States and China are creating a currency war,” Silva told reporters Wednesday. “So, I am going to the G-20 to put up a fight.”

He didn’t specify what steps he intends to propose.

so the summit should be interesting, america vs. china, and everyone else vs. america and china?   even more interesting, our very own dr. bernardo m. villegas, who is usually so pro-america and pro-imf-worldbank, is predicting that the peso will depreciate post-G20.

In an economic forum sponsored by Security Bank for its clients last October 22, I had the temerity to make the fearless forecast that the peso-dollar exchange rate at the end of this year will be closer to P45 to 46 than to P40 to 41.

…The bleak outlook for the results of the G-20 in Seoul is in stark contrast with the upbeat mood in 2008 when the G-20 met for the first time to help stabilize the global financial system at the beginning of the Great Recession. Two years ago, there was an admirable cohesiveness among the leaders. Today, there is a “clash of interests and a clash of perceptions” that could result in a stalemate at the summit that would impede progress toward recovery. Mr. Mervyn King, the governor of the Bank of England, is more specific in his warnings. He is afraid that tensions over exchange rates could degenerate into trade protectionism: “That could, as it did in the 1930s, lead to a disastrous collapse in activity around the world.”

… The Filipino overseas workers, the biggest source of foreign exchange for the country (estimated to reach $20 billion in 2010), are getting more sophisticated in their understanding of foreign exchange rate fluctuations, especially with the advice of our leading banks and remittance companies. It is very probable that a good number of them will postpone remitting their dollars to the Philippines in the hope of a peso depreciation late this year or early next year. For this reason, I do not expect the usual larger inflow of dollars for the Christmas holidays. The more important expenditures for the families of these OFWs have to do with education, which usually peak in June of each year. There is, therefore, reason for the OFWs to wait and see how the exchange war will work out and keep their dollars in the meantime.

Furthermore, there is reason to expect that portfolio investments in the Philippine capital market could slow down as many more countries follow the lead of China that raised interest rates for the first time in nearly three years because of concerns about increasing inflationary pressures in the economy. As more countries raise interest rates, they would attract more “hot money” into their respective economies. With inflation at low levels in the Philippines, I do not foresee our Central Bank raising interest rates in the near future. If this scenario of higher interest rates among our trading partners should be fulfilled, I am issuing a word of caution to those who are overly excited about our booming stock market today. Easy come, easy go.

These are my reasons for expecting the peso to depreciate closer to P45 to 46 by the end of this year. At the risk of immodesty, let me remind my readers that at the beginning of 2010, I was ridiculed by my fellow economists (including those working for the former administration) when I forecasted that the GDP would grow at 7 percent. The consensus forecast then was between 3 to 5 percent. As everyone knows, GDP grew by 7.9 percent in the first semester and is mostly likely to grow at 7 percent for the whole year. I rest my case.

samantala right after the G-20 summit in south korea on nov 11-12, there’s the APEC summit in japan nov 13-14 that aquino is attending (minus ms.lang of course) along with many of the G-20 leaders, including obama.

[APEC member economies are Australia, Brunei Darussalam, Canada, Chile, China, Hong Kong, Indonesia, Japan, South Korea, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, Taiwan, Thailand, the United States and Vietnam. They account for 40.5 percent 1 of the world’s population, 54.2 percent of world GDP and 43.7 percent of world trade.]

aquino daw is set to propose that a framework be developed to deal with the volatile global financial markets.

“The idea lang, basically, is let us learn from the lessons of the Great Depression where each individual state decided to act on their own interests,” the President said.

sounds good.   if he can swing it.   if not, well, it’s also the same weekend that pacquiao will be fighting margarito in texas, let’s hope pacquiao wins.   consuelo de bobo.

5 Responses to g-20, apec, aquino, and the peso

  1. November 9, 2010 at 1:00 am

    Re the peso “forecast,” who was it who said: “If you’re so smart, why ain’t you rich?” [Ans.: It’s in a book by Deirdre McCloskey.]

    It looks like as von Mises said, “the wish is father to the thought.” It seems that Villegas wants the peso to go down, and by his writing, that Tetangco wants it more or less where it is.

    Of course I’m just kidding. If I could go back to the future, I’d be Michael J Fox, and as rich as Michael Jordan.

  2. November 9, 2010 at 6:47 am

    The Great Depression happened in the 30s. It’s 2010. Economists with PhDs still havent learned anything from it, so what makes Aquino think he has learned its lessons now? He was educated by the same economics professors who failed to learn anything from it either. Or if they did, they learned the wrong things. :-D

  3. November 9, 2010 at 11:16 am

    @jeg:

    as Angela said, what Pres. Aquino said “sounds good.”  And you may well be right that economists, including for example Paul Krugman, haven’t learned all or the right lessons from the Great D.

    But who knows?  Maybe Ricky C knows a bright young Filipino economist who can tweet on which sucks more:  capital controls or a return of the 1970s-style stagflation?  With apologies to Ms. Lang of course.

  4. November 9, 2010 at 11:27 am

    I don’t know if that comment by Dr. Villegas was done before the announcement of the US Fed infusing another $600 billion into their economy but certainly that flood of cash will have an impact on the value of the US dollar. As a father of OFWs I am not overly optimistic the dollar will gain strength against the peso after this $600 billion infusion.

  5. November 11, 2010 at 3:28 am
    UP nn grad

    The primary reason that the US is doing this additional $600Billion infusion is to create (more) jobs in the USA. And the reason that China has kept the value of the yuan low is the same — to create jobs for Chinese in China.

    What is interesting — I can imagine Henry Sy being happy that the peso can buy more dollars (and more yuans). Reason — Henry Sy’s operations do not really export to anywhere. And more pesos buying dollars means that Henry Sy has less capital requirements as he builds more shopping malls and residential-towers in China. I suppose rice hacenderos also are happy with the peso buying more dollars. Pilipinas really does not export rice and, for the same pesos, they can import more kilograms of fertilizer.

    Now, call-center workers? Different story. If India drives down its currency, then USA-headquarters may find that it costs less (dollars per calls processed) when they transfer operations to India.

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