The most successful investors are those that invest when everybody else is bailing out. I have heard so many bad things about Pinas, and after having lived there for two years I can now understand how bad things really are. Nevertheless, I continue to invest not only money but time and effort as well to my homeland. It’s not that I am a diehard nationalist or a wannabe hero. I invest for my own reasons, and one of those reasons is that I expect my investments to bear fruit in a few years.
I invested all of my retirement savings in gold more than two years ago, when its price was still below a thousand U.S. dollars (USD)Â a troy ounce. Now gold has gone up by 60% at least, with respect to USD. Of course, I have not gained by that same 60% rise. Another way of looking at this is that, had I kept my savings in USD, I would have lost about 14% of its value.Â USD has lost 14% of its value in the past two years with respect to the Philippine Peso (PHP), so my net gain with respect to PHP is only about 46%, or about 23% per annum. That’s not bad at all, and this should tell you that I am not an amateur investor.
A friend of mine asked me, “Why are you trying to get back to Pinas, when everybody else is trying to leave?” My reply was simply that I am optimistic about my homeland.
Why am I optimistic about the Philippines?Â Let meÂ give you five goodÂ reasons.
1. We are among the few countries not trying to inflate PHP by buying oodles of USD. China is among those countries trying to control the price of their currencies with respect to USD, by buying tons of USD and U.S. bonds. Why would countries like China do this? To keep the price of their exports low. This tactic has worked so far for China, but it will get more and more difficult to sustain it. The Chinese will have to be willing to inflate their money by as much as USD falls, which would be catastrophic. Pinas, on the other hand, thanks to our Banko Sentral ng Pilipinas (BSP), is not employing this tactic. One reason is because the price ofÂ our main export, labor, is immune toÂ currency exchange rates. This means that converting USD or any other currencyÂ to PHP (i.e., investing in Pinas now) is a wise decision.
When I say that our main export is immune to currency exchange rates, I mean it only with respect to the buyer. With respect to the seller (us OFWs), it is not exactly advantageous. We allÂ feel how much more we have to send home each month compared to two years ago, but we don’t ask for a higher price on our services from our employers (buyers of our service). So, we shouldn’t really thank the BSP for what they are not doing (inflating PHP). However,Â allowing PHP to go up with respect to USDÂ does make our future look bright indeed. We should be happy knowing that our PHP savings will hold its value, much more soÂ than other currencies.
2. OFWs don’t just spend their money abroad.Â We sendÂ our earnings back to Pinas. For decades now these funds have helped our economy sustain itself; and the number of overseas workers have increased,Â not because of government “help” orÂ regulation, but in spite of it. This flow of money into PinasÂ has helped the price of real estate (land and housing properties) to increase steadily over the years, a fact certainly not ignored by shrewd businessmen like Manny Villar.
The price of real estate property will continue to increase steadily. I bought a home lot in Cebu five years ago, and it’s been a great investment so far.
3. If we liberalize our economy, we canÂ offer our services to the world without having to first move out of our country. Local corporations will form that can compete with Indian multinational companies like Infosys, Wipro, and Tata. We have several advantages over both India and China in this arena: a) we continue to produce world-class talent in software engineering and other technical areas, b) our university graduates speak and write muchÂ betterÂ EnglishÂ than our Chinese brethren, andÂ we beatÂ Indian nationals on average, and c) the time difference between the Philippines and our clients is much more favorable than that of either China or India.
Once we are economically liberated, a potential energy so huge will be released that will increase incomes and thereby discretionary consumer spending, which in turnÂ would lift everything else, including theÂ condition of theÂ poor. Local jobs will become abundant until the price of labor goes upÂ to the point where going abroad to work will beÂ pointless. The middle class will complain that we can’t afford to pay for maids anymore because even those who now work as maids will find real jobs.
4. If we liberalize our economy, those overseas workers like me who have invested (and not just spent) in Pinas will see our investmentsÂ increase in value, prompting even more people to do likewise, which would increase the value of those investments even further.
5. Reasons to be optimistic numbers 3 and 4 depend on liberalizing our economy. I see no reason why this can’t happen. The intellectual climate has changed a bit, and I see us continuing toÂ shift to the political right in the coming years. I see a lot of energy in Orion Perez Dumdum’s nascent movement, CoRRECT Philippines, which aims to amend our defective 1987 Constitution, and which I have joined with gusto. Already,Â smart politicians have smelled the shift, and have started to place themselves ahead in order toÂ appear to be the ones leading the crowd. By itself, this is one great reason to be optimistic.