Two questions we hear are: How will the global meltdown affect the Philippines and how long will it last? For the present, there is minimal effect on this country, because we do not have a large enough industrial sector or a non-agricultural export sector. It may, however, affect us on the rebound. This will probably not happen for some time. Maybe next year we may experience effects as for example if too many ships are decommissioned for lack of freight then our sailors will send home less foreign exchange. Right now we are in a boom situation with construction. New buildings and homes are being built. The good effects of this is being mitigated by withdrawals of foreign investments in the stock exchange and other direct investments such as slowing down of development of gold copper and nickel mines. The BPO as well as the call center businesses are hardly affected and may even improve because of this meltdown. Agricultural products are also in an upswing situation.
Bananas have a special mini boom with the Japanese diet fad. Sugar is just holding its own while corn has higher prices than normal. Our rice situation is on holding pattern as the government is trying to push it with financing. But the new technology of hybrid rice has not yet panned out. It has been a success in some areas but a failure in others. The factors that differentiate the two are not yet clear. In Mindanao it has been for the most part a failure.

The other question of how long will the meltdown in the mature economies last is important for us because if it lasts too long we will necessarily be affected. But most estimates say it will find a bottom about the last quarter of this year. But it may still be a false bottom. The present Dow at 6900 may still go to 5,000 or even lower. But if the rebound starts by the beginning of 2010 we should not be damaged too much. The Obama government may have made a false first step but it seems they are ready to react depending on the results of their movements. Many people say that relief will not come from the government or fiscal policy. It should in the long run come from business confidence which the Obama government is trying to establish. Some even go so far as to look to the psychologists prescribe for the situation.

The financial institutions will have to be saved almost at any cost. It is like a sugar mill or any machinery that has to be kept going if there is to be any production. The feed can vary but the mill must go on. The modifications can come later. The financial institutions such as the markets, the insurance companies, the banks and other financial institutions have to be rescued otherwise the consequences would be disastrous. Their contribution is that they gather the numbers which give efficiency and safety in that possible losses are spread. Once the financial institutions are stabilized then recovery can start and financial papers be regulated properly. It is the securitization and non prime mortgages that started the trouble. It was this unregulated investment banking sector that took too many risks without the proper safeguards and reserves. In the end it boils down to building confidence of the stability of the financial institutions then the proper regulation of the investment banking and new financial papers. <emeterio_barcelon@yahoo.com>