Strong Peso Hurts Food Exports Essay Example for Free

Strong Peso Hurts Food Exports Essay Philippines economy nowadays portraits a good start for, as we are lifting our country from the previous economic situation. Not including the whole world economy, we are experiencing a smaller amount of problems in our economy than the recent. The rate of exchange between our Pesos against the Dollar is going stronger from now and as some bank company said that it could reach as high as â‚ ±37.50 in the next year. This is worthy for our country that it could raise the percentage to lessen the financial crisis and issues of our economy here in the Philippines. However, this could also mean that some other Filipinos, who are contributing a lot in our economic growth, will be at an edge of helping themselves to this â€Å"firmer peso†. Strong peso plus the high sugar price, makes local food producers and exporters come to haste to restore the D-Sugar allocation of 2 percent. This will be considered as hedge for the on-going raise of the peso coupled with high sugar price, which cost around â‚ ±40 to â‚ ±44 per kilo without duties and taxes. The D-Sugar allocation is the use of food producers and exporters for local consumption and export of their products. However, the D-Sugar allocation of 2 percent is too small to make a depression on the profits of sugar producers, but its closure will cause a huge percentage on the production costs of food exporters. One of the factors that affect the Philippine economic growth is price control. Price control defines as governmental imposition on the prices changed for goods and services in a market. It is usually intended to maintain the affordability of staple foods and goods and to prevent price gouging during shortage, or alternately, to insure an income for providers of certain goods. These are two primary forms of price control, a â€Å"price ceiling†, the maximum price that can be changed and a â€Å"price floor†, the minimum price that can be changed. The Philippines is one of main product that commonly buys in markets, groceries stores, etc. The government wants to change its minimum price, which rejected by the administrator of Sugar Regulatory Authority. ~Reaction The Philippine Food Processors and Exporters Organization Inc. is a great factor in the Philippine economic society. About its appeal of restoring of D-Sugar, which is not yet responded by the Sugar Regulatory Administration (SRA), will be the hedge for the food exporters to the firmer peso that their expectations of the peso-dollar exchange rates will reach â‚ ±37.50 against the dollar. Exporters, in general, in this case could lose around $100 million from this year as they are dependent of the dollar as the international trading currency. The landed cost of imported sugar is now about â‚ ±40 to â‚ ±44 per kilo before duties and value-added tax. Local sugar, on the other hand, sells these sugars for about â‚ ±54 to â‚ ±70 per kilo. As the dollar continues to appreciate, food exporters carry the burden of absorbing the increasing ratio of loss to margins, and that leaves domestic manufacturers at the losing end. It is very unfair for the food exporters, sugar exporters, without any hedge to cancel the D-Sugar restoration and is now coupling with the strong peso exchange rate with the dollar. Sugar producers will be at risk to have another pricing system to regain the loss form their margins and profits. Sugar Regulatory Administration (SRA) issued Sugar Order 4, series of 2009-2010, converting C-Sugar, or the country’s reserve sugar to B-Sugar for the use of the domestic market. They now abolish the D-Sugar to provide an improvement in the C-Sugar in the domestic supply. It is an aid for the domestic sugar producers as they lucky that they are being supported by the government. However, eliminating D-Sugar plus the increasing value of Peso, is a disease for the food exporters as they may lose not only their margins and profits, but their competition on other countries. Philippine economic growth rate may decrease in such a gap as the sugar which is the main exports for the food exporters which has a greater percentage in contributing to our economic growth. There will be a massive unemployment in some food companies as this problem may tend to be fatal in the next years without any hedge or solution to the abolishment of the D-Sugar. Lots of domestic food producers may shutdown for this reason and a serious displacement as cheaper imports flood the local market. As the currency of peso goes stronger against the dollar, it affects a lot of factors in the Philippine economy. There are lot of appeals concerning sugar because of its continuous increase of price. Local market hurts from the appreciation of peso and comes with a solution of an appeal to aid their problems. But is SRA insisted, they explain why they can’t just take a control over the price of sugar. Moreover, there should be a manipulation in sugar or unstable value of supply and price over the sugar. There is a big increase of percentage in the stocks of sugar so there is no current manipulation. Resoucrce: http://literasura.blogspot.com/2011/07/reaction-paper.html