It’s a great feeling isn’t it? P50 for every dollar! Imagine, just a year ago, the dollar was only worth 40 Pesos, and now we have made a huge jump back to P50. We are not all the way back to where we were a couple of years ago, but it seems to be headed that way. Remember, we peaked out at a little over P56 to the dollar. As far as I can recall, we never quite made it to 57, but we got into the mid-56 range before the bottom fell out.
So, indeed, we have been here before. This is not new territory for us. But, we should not forget that even when the dollar was at it’s peak, things were not rosy. The falling peso does create some inconveniences for us expats too.
How is it bad? Let’s think back and see.
When the Peso was this weak before, the prices of imported products skyrocketed! Of course, how could those prices not skyrocket? After all, when items are imported from abroad, they must be paid for in foreign currencies, usually the US Dollar. It is more expensive to buy those dollars now with pesos, so that makes the price of the import higher for us.
In fact, I believe we are about to see a “double whammy” when it comes to import prices. How? Let me relate a little story about a particular import that I used to enjoy several years ago. It was a bottled juice which was imported from the USA. They had all kinds of flavors. I particularly enjoyed the cranberry juice and the grapefruit juice. Those are two types of juices that you cannot get a local equivalent of. There are lots of good juices here in the Philippines – mango, pomelo, pineapple, etc. – which are all locally harvested and produced, but some of the juices that I drank regularly for most of my life are not available here, and I enjoy having some from time to time. So, if you want some cranberry juice, you buy an imported product. On this particular brand of juice, it came in a 1.9 liter bottle. When I first started drinking the stuff it was just slightly over P100 per bottle. It rose dramatically as the peso declined in value. I remember one time when a bottle of this juice was P150 per bottle or so, and in two weeks time we went back to buy more from the same store, and it was P220 per bottle! That is nearly a 50% price increase in just two weeks. When it hit P220, I decided that it was a luxury item that I could do without.
Back when the Peso was at it’s weakest, we pretty much decided to give up on almost all imported products and chose to go for local products as much as we possibly could. Economically, it was simply the way to go. On some products you would give up a bit of quality by doing this, but in most cases there was not much difference.
As the peso gained strength over the past 2 years or so, a funny thing happened. Prices of US products did not drop. Logically, it would seem that these imported products were now cheaper to buy for the merchants, since the peso was worth so much more, so the retail price should go down. It never did, though. That P220 bottle of juice stayed at P220 instead of going back down to P150 or so. I mean, if a product costed $1 for a Philippine company to import, that means it used to cost them P56, and then it only cost them P40, so selling it in Pesos should have reflected a lower retail price too. They didn’t lower the price, though, electing to take a larger profit instead.
Now that the Peso is at 50 again, do you think that prices on imports will go up more? I think that it’s a virtual certainty. That’s why I am calling it a “double whammy” – because the import prices were already adjusted for a Peso at 56, never brought down, and now will be adjusted upward again!
So, yes, overall, I am very happy that the dollar is regaining strength against the peso. But, don’t forget there are downsides too. Luckily for us, we don’t use many imported products any more, so we won’t be greatly affected. It’s something for you to watch out for if you live in the Philippines and use a lot of imports.
Morning Bob,
I wish I had have bought a truckload of USD's when my AUD was 0.96. Since we have reverted to "Pacific Peso" status, I think I will have to limit myself to rice, fruit and whatever I can grow myself! Hopefully things will improve for all us other westerners with non-USD's. I can see a lot more trouble ahead for the US economy. Alll these rescue packages may ultimately fail in the end and may only compound the situation. At the momemt, however, it remains a rush to security and what is best known for that is the USD. It is a defacto international currency, I suppose, given there are so many physical notes circulating around the world. Only time will tell, but I wish I had the benefit of "Harry Hindsight" right now – a lot of money could be made.
Bob, you are highlighting import prices, but yellow mangoes have gone from 20ish pesos in 2006 to 75ish pesos per kilo and these just grow on trees. It is crazy.
Hi AussieLee- It certainly is a time of turmoil in the world, particularly financially. It applies to other areas of our lives too, but the financial markets are simply crazy these days!
Hi James- Yes, inflation is rampant in the Philippines. Always has been. I am not sure where in the Philippines you quote your prices from, and prices do vary from place to place. When we moved here in 2000, we payed P35/kilo for ripe yellow mangoes. Today, we can buy them here in Davao for P60/kilo. That's still a huge increase, but not quite as bad as the prices from the place where you are quoting.
Yes, mangoes just grow on trees, but when the prices on everything else go up so much, mango growers really have no choice but to raise prices. For example, it takes gasoline to bring these mangoes to market, and gas is certainly a lot more now than it was a while back. In the USA, I have heard that gasoline is down to about $1.75 per gallon, but here in the Philippines we are still paying more than $3 per gallon. All of these kind of costs help determine how much will be charged for mangoes and every other commodity on the market.
Maayong Buntag Bob
So what has the price of gas been doing in the RP? It has been dropping like a rock in the US. I paid $1.73 a gallon today so let me see how much this would be in liters and pesos. 1 gallon equals 3.7843 liter so $1.73/3.7843=$.457151917 per liter, now at 49.27 peso to the dollar that would be $.457151917×49.27= 22.5239 putting the price of gas at 22.52 peso per liter. I am interested in this because I have noticed these same price increases in gas when the price went up but the price in the RP seemed to stay higher when the price dropped in the US. (???)
Hi Bob,I feel your assumption that imports will rise again is correct.Prices of goods rarely come down even when raw material costs fall.In cases where they do actually drop its always at a far slower pace than the raw material drop.However, they never drop back to their original price,regards Chas.
Hi Larry- Gas here is still around P40/L. Things always go down very slowly here.
Hi Larry- I should mention… gas was P14/L when we moved here in 2000!
Hi chasdv- Yes, I agree. Prices rarely drop to their original (although sometimes they do – look at the history of fuel prices, they follow supply/pricing pretty closely).
Bob: it is funny, but since moving, I tend to buy local Filipino products rather than imported brands. In most cases, the local products are equal, if not better, quality than the imports and I don't miss the US products much at all. The one exception is cheese… I usually don't like most of the "velveeta-like" Filipino cheeses and the imported cheese is usually quite expensive, like your juice example. (They just don't make it here!I was making pizza last week and real mozzarella was around 20 pct of our weekly grocery bill)
Hi John Miele- Like you, we rarely buy imports anymore, but we used to. Also like you, we don't buy Philippine cheeses (can you call that cheese?). We buy imported cheeses, mostly from Europe. You're right – very pricey!
Yes, gas prices in the U.S. are dropping nearly daily. I filled up at the naval Base in Norfok, VA on Tuesday for $1.67 per gallon. Other places in Virginia gas can be purchased for much less. Meanwhile where I live in Elizabeth City, NC, the gas was $1.74 on Tuesday, but was down to $1.71 on Wednesday. Gas prices continue to go down while food prices and other necessities continue to increase. If I didn't have to eat, I might get ahead.
Hi Ed Griffin- Come on now, Ed… you can always give up eating and just drink gasoline! That should provide plenty of energy! 😯
Hi Bob, just a question – where do you buy your european cheeses? I am not a good shopper, but did I miss it in the supermarkets? Btw, I had a great time with Brian – I told him to go call Feyma.
Sorry wrong name – Barry pala
aussielee I would concur on your USD prediction.
its good and bad here too Bob for instance the airlines instituted a baggage fee of 15.00 to check one bag and 25 for the second and this was to offset higher fuel prices fed ex charges a fuel surcharge and since the price of fuel has gone down you would think there charges would go away right ? … wrong
Hi Ellen- There are three places that I know of. The best would be Hola Espana in Damosa Gateway, they almost always have a good selection of European cheeses. Second best would be Swiss Deli next to the Chevrolet dealer in Damosa. Third best would be Gourmet Deli in Chimes Mall.
Hi Ellen- Glad that you and Barry had a chance to meet! I was sure that the two of you would enjoy meeting because of your common interest in sailing.
Hi brian- I agree that the US Economy is in for some really tough times ahead. I am still undecided where that will leave the Dollar on the Forex market, though. Thing is that other economies of the world are also hitting the skids, so most world currencies have downside risk.
Hi Tommy- Those extra charges are always quickly put in place and slow to be removed! Funny how that works! 😆
Hi Bob,
I think it was a scant few months ago that we were talking about how much the Php had appreciated against the U.S. dollar. It's amazing how things change in a short period of time. 3 months ago I was talking about maybe, some day, visiting the Phils. and now I'm here. Got in 5 days ago to Manila from Canada, and thanks to your always positive thoughts on Davao, arrived in your beautiful city last night. You're right Bob, it's great here. As you suggested in an earlier post, we should get together for lunch. I'll contact you directly with my phone # and where I'm stay.
Maraming salamat,
Trevor Davies
Hi Trevor Davies- Welcome to Davao and to the Philippines! I hope you enjoy your stay. Yes, please do give me your contact details so we can get in touch.
Yes, over the past few years the dollar really depreciated against the Peso, but this year it's gone the other way – thankfully!
Hi Bob,
I agree with your sentiments on how prices do not seem to drop for imported goods. Many of the inputs in parts of my business are from abroad. While some have dropped a bit, most of our suppliers have yet to lower prices. What I have noticed however, is many of these same suppliers hold off on price increases in the future. Again, some are more 'fair' than others, but the key is to have smooth relations with your suppliers. Some will cut you breaks to keep you and your business from finding a new supplier. Unfortunately, the retail customer is NOT cut any breaks from most businesses . . . I cut the pure imported juice out of my budget as well!
Cheers!
Hi Martin- Yeah, the juice from abroad is like drinking liquid gold, it's so expensive. Bad when a liter of juice costs three 5 times the price of a liter of gasoline! 😆
I agree, when it comes to business here, retail customers are at the bottom of the food chain, they never get a break!
Hi Bob, $1.70 in the US for a (US) gallon. $3 in the Phils. Here in London I pay around $1.60 per (UK) litre.which equals over $7 for a (UK) gallon.
There's always someone worse off 🙂
Hi gerry- Yeah, but you guys pay that by choice. It is your government that imposes the taxes that make your petrol that high! 😯 Get rid of those in government who support such high taxes, and you can bring your price down substantially. You pay no more to the oil companies than anybody else… it's just a matter of how much you give to your government when you fill up your tank! 😆
Speaking of Gas Prices, I bought gas a couple of hours ago at $1.89 ( and nine tenths of a cent ) Per Gallon in the state of Connecticut. Here the price varies due to State, County and in some cases city taxes. Just across the state line in New York State it is now selling for $1.15 ( and nine thenhs of a cent ) per gallon. Those are actual posted prices on the pumps for " Unleaded Regular " grade.
Hi Bob,
In response to your reply about UK petrol prices being so high due to taxes, that is absolutely correct. There are, however, as far as I am aware, no political parties in the UK who propose petrol tax reductions. There are a few who would propose rises however, to make petroleum so expensive that people will finally evacuate their cars, stop destroying the planet, and get on the busor train! LOL That's a whole other subject of course.
It is a bit concerning at the moment how currencies are fluctuating; I certainly would not like to be in a position where my lifestyle was dependent both on good trading levels in my business AND a reasonable exchange rate. That's one of the reasons why when we eventually move to the Phils. our business plan is retail, which will earn the same currency we will be spending. Hopefully, we will then be able to leave our UK pensions in the UK to be invested in property or something for the children. However, as a famous poet once wrote: "The best-laid schemes o' mice an' men Gang aft agley". (It's by Robert Burns, and means that one's best prepared plans frequently go pear shaped). LOL So l
$ 1.88 here , getting lower 🙂 … Phil r.
Hi, Its nice for you Americans that your dollar is soaring, but what about the rest of us? The Australian dollar is only buying around 32 pesos at the moment, where it usually is buying 38 – 40 pesos. Also they are predicting that it will most likely drop to under US 50 cents by next year. Not good for those going on holiday and all the OFWs sending money back to there family's. cheers
Hi Bob New York- $1.15? Is that a typo? I have not heard of any gas prices anywhere near that! If so, that's a great price.
Overnight, there has been a P5/liter reduction here in the Philippines, which is also good news!
Hi Jim Hannah- Earning a living on the local economy, in Pesos, is a vary hard thing to do. If you can do it – more power to you, and I mean that. I diversify the currency fluctuation risk by earning in both US Dollars and Euros as well. Personally, I would much prefer earning foreign currencies than Pesos any day of the week.
Hi Phil R.- We just had a P5 drop overnight here, so we are paying around P34/35 per liter. About $2.75 per gallon here now.
Hi Jason- Perhaps you missed the article that I wrote a week or two ago about this very topic. All currencies are really fluctuating right now. We Americans have just been through some really lean years when it comes to Dollar/Peso exchange, so it's not all roses for us either.
Good luck, I hope that your currency recovers soon.
Hi, I also live in Australia and can not understand the logic if the US$, The Us is in financial turmoil, all the economical and wall st. news are bad in there and yet the US$ is going up. We on the other hand are told that the economy is sound, people are still buying houses, we should have no recession and yet I am getting only 32 peso for an Australian $. It used to be 40-43 peso. What did we do wrong?
Personally I think the peso would have to go to 70 to the $1 to offset the 12%+ inflation rate over the past year. As for imported goods I do without these days. Anything i can't live without I make myself. My frst batch of dill pickles was a success and I will be doing more this week. I make tortillas for any tex-mex I cook and bake my own bagels. All I really need now is a good flour mill and I can grind cornmeal for cornbread or cornflour for corn tortillas. Soon I will be making my own yoghurt, which opens up alot of possibilities for Yoghurt cheese which is a substitute for sour cream (healthier too) and cream cheese. I plan on sending a balikbayan box (or 2 ) back next year full of mason jars and lids.
Hi markus- I can't disagree with you. It is perplexing with the US in financial crisis, yet the dollar playing strong. Of course, for decades the USD has been the currency of choice for those who want security, and that plays into this. However… you just have to wonder how long that will continue!
Hi BrSpiritus- We do a lot of that too… homemade instead of buying imports. Feyma makes tortillas too, and she makes corn bread as well. I love corn bread! 😆
Hi Bob,
Your right about prices never going back down on items in P.I. My wife and I would joke about this whenever the dollar/peso rates would change. We would always watch the price of pandasal. Mostly the price wouldn't change but the size would! It always got smaller but never bigger.
Hi mariner- 😆 Oh yes, that is also the favorite actions of manufacturers here…. changing the size of things! Have you ever noticed that sometimes they even change the size to a smaller size and raise the price? That is the one that gets me! 😉
Of course, Bob, having arrived here in the "Great Northland of Ilocandia," the peso has started it's "Christmas move" back down toward 45. 😆
Good thing everything else around me is pleasing – just arranged for internet access after 2 weeks. Have a mountain of emails and newsfeeds to catch up on now! 🙁
Hi Paul- Glad to hear that you have made it "home" safely. As for the Peso, I don't think that the movement has anything to do with Christmas this time, I think that it is a political thing, with the BSP moving strong to protect the Peso from devaluing down to 50. We'll see, though.
Enjoy your stay, Paul! Nice to hear from you.
Hi again Bob,
I certainly understand what you mean about earning a living in the local currency being difficult…certainly so if one wanted to drive a taxi or maybe sell flowers door to door. On the other hand though, if I were to open say two retail outlets, one perhaps in G mall and the other in SM city, and only accepted foreign currencies, business might be tight. That's only a guess mind you, but I think it would leave most of my customers a tad nonplussed. LOL
Actually, retail is my background, though I'm a refurbishment builder these days, but I long to return to retailing one day. I don't want to discuss my business here…perhaps when we meet sometime…but the existing retailers in malls in davao and manila who are in the same business, though not doing it as well as I would aim to, seem to be very busy indeed.
That said, the way the British pound is going, I'll be lucky to open a sari sari store.
Hi Jim Hannah- Don't worry, I wasn't suggesting that you sell goods in foreign currencies! 😆