Press Release
August 7, 2007

Senate to probe strong peso's impact
on OFWs, exporters, BPO providers

Remedial measures eyed

The Senate economic affairs committee will examine the impact of the peso's continuing surge versus the US dollar on overseas Filipino workers (OFWs), exporters and business process outsourcing (BPO) providers, the panel's new chair, Sen. Loren Legarda, said Tuesday.

"Our intention is probe the extent to which these sectors are now being hammered by the powerful peso, and to look into existing mitigating measures, if any, and to find new practical remedial measures, if necessary," Legarda said.

Legarda said she has already filed Senate Resolution 55, enabling the inquiry.

"Insofar as our OFWs are concerned, we would like to find out what specific steps are now being taken on purpose by banking regulators to drive down burdensome remittance charges," Legarda said.

"We definitely consider reduced remittance fees as one practical coping action for our OFWs. Lower money transfer charges will mean more money in the pockets of our OFWs and their families here," the senator stressed.

Legarda said studies have shown that OFWs spend anywhere from $519 million to as much as $1.6 billion every year to pay for remittance fees. This does not include financial losses that they incur when their dollars are intentionally exchanged for fewer pesos to account for the margins of banks and dealers, she added.

"As to our exporters and BPO providers, we would like to find out if they have adequate information on, and access to low-cost hedging facilities," Legarda said.

"How many firms are actually availing of hedging facilities, and to what extent? Why are many firms not availing of these facilities? Are their enough such facilities available for everyone, even for small exporters, at a reasonable cost? Can individual investors, such as our OFWs, access these hedging facilities now? These are some of the questions we want answered," Legarda said.

Hedging facilities are mostly forward contracts that enable firms to buy or sell a foreign currency at a fixed conversion rate, for delivery on a specified future date or period.

These forward contracts are used as a foreign currency hedge when an investor has an obligation to either make or take a foreign currency payment at some point in the future.

For example, an exporter who wants to make sure that he is able to sell his dollars for pesos at 1:48 three months from now, may buy a forward contract that guarantees him this, regardless of the prevailing market rate then.

Legarda said she was surprised when the Bangko Sentral ng Pilipinas first complained that exporters were not availing of hedging facilities.

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