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officials of the Development Bank of the Philippines (DBP)
will personally explain to exporters the $1-billion
hedging facility the bank will be offering, at
government’s instigation, to help exporters avoid losses
arising from the expected continued appreciation of the
peso.
Sergio
Ortiz-Luis Jr., president of the Philippine Exporters
Confederation Inc. (Philexport), said the DBP management
will make a presentation on the details of the hedging
scheme before some 4,000 representatives of local
exporting firms at the group’s midyear national
conference on June 28.
From the
preliminary information that he got, Ortiz-Luis said the
$1-billion hedging program will be like an insurance
program so that upon the receipt of a purchase order or
letter of credit, “the exporter can go to DBP and take
in an insurance that the peso value of the contracted
export product will be the same when the delivery is
made.”
The DBP,
he said, will buy the dollar equivalent to the value of
the covered goods and charge the exporter a small
interest rate for the peso that it uses in the dollar
purchases. The bank then uses the dollar in its
investment portfolio to keep it earning.
“When
the goods are paid and the peso equivalent of the
exported good has gone down, the DBP will pay the
exchange rate difference to the covered goods. This
assures the exporter that he will not incur exchange
rate losses in his deals,” Ortiz-Luis explained.
With the
hedging facility in place, exporters, he said, no longer
have to fear suffering future losses even if the peso
keeps strengthening against the dollar.
“The DBP
need not use the whole $1 billion it allocates for the
hedging facility. Transactions between the small and
medium exporters and their buyers do not reach that much
every three to six months,” Ortiz-Luis said.
The
exporters have made a strong appeal for help to save
them from closing shop due to exchange-rate losses.
They
claimed losing an average of P1.5 billion a month on
goods contracted in the first quarter of this year when
the exchange rate was over P50 to the dollar—this went
down to P45 plus to the dollar when they made their
deliveries this month.
That
translated to losses of P5 per dollar of sales. It takes
three to six months for an export deal to be made from
the time a letter of credit or a purchase order is made
by a buyer to the time the ordered goods are paid, it
was explained.
Responding to this, Finance Secretary Margarito Teves
said the economic team brainstormed recently on the
exporters’ travails, and this $1-billion hedging
facility was the product of that exercise.
Teves
said they expect the peso to continue appreciating “as
long as the macroeconomic fundamentals are improving.” |
