Marcos’ Regime: The Myth Of 1 Peso To 1 Dollar Exhange Rate
PHILIPPINES -- A number of Filipinos believed that the era of former President Ferdinand Marcos as the “golden age” of the Philippine economy.
Before Ferdinand Marcos take over as president in 1965, the latter President Diosdado Macapagal allows the peso to float on the free currency exchange market, unpegging it from the US dollar to stimulate economic development. Its value sinks from P2 to P3.7 to the dollar. Also in November 1960, the decontrol program enlarged the amount of transactions valued at the free market rate to 50 percent of all foreign exchange receipts with the exchange rate at the free market reduced to P3.00 to $1.00. Marcos became the President in the year 1965, in which the decontrol program was completed and the peso was devalued to P3.90 to a dollar. When the year hits to 1970, or known as the First Quarter Storm wherein series of heavy demonstrations and protests and marches take their toll on the country, the value of the peso slips from P4 to P6 to the dollar. On February 21, 1970, the Philippines adopted the floating rate system with the first interbank guiding rate subsequently determined at P5.6282 to US$1.00 on February 24, 1970. When Marcos was replaced by Corazon Aquino, by means of People Power, the peso to dollar exchange rate still plummeted from PhP 9.4614 to PhP12.1052. The big drop in the exchange rate was felt by Filipinos and the new administration at that time. To make an economic turnaround, Aquino allowed foreign investors and businessman join the economic competition in the Philippines, but the exchange rate of peso to dollar fell sharply from PhP 12.1052 in 1983, to PhP 18.4195, in 1986
However, the economy in the Philippines during the Marcos regime was rollercoaster state. The increase and decrease in the Philippines economy transitioned dramatically through the pre-martial law (1965-1970), and during martial law (1971-1981).
In the research of Caesar B. Cororaton an economist and professor in De La Salle University said that the experience of the 1970 foreign exchange devaluation was generally difficult because of two major factors which is the foreign debt problem caused by the construction spending of the Marcos administration and the balance of payments crisis during the period, and the foreign exchange adjustment was not accompanied by policies that could have softened inflationary pressures economic quotient trade protection barriers through quotas and tariffs were reimposed between 1965 and 1969. As such, the devaluation of the foreign exchange during the year was not part of a development strategy package similar to the previous 1962 devaluation, but was just a policy reaction to the balance of payments problems during that time and the IMF and World Bank loan conditionalities, he added. Cororaton also said that in the year 1984 is the start of the collapse of the Philippines economy because of the international financial crisis in 1982 which was triggered by the Mexican and Brazilian foreign loan default, which virtually stopped the flow of medium and loan term loans to the Philippines and therefore left a tremendous pressure on the foreign exchange to devalue and the domestic political instability which started with the Aquino assassination in 1983 that led to massive capital flight.
Boom Agustin a senior consultant at Our Knowledge Consulting Services, said that between 1970 and 1972, long before Ferdinand Marcos declared Martial Law, the Philippine peso plummeted by a staggering 40% and a total of more than 80% before he was ousted in 1986. Also, during his term in office we hit our highest Debt-GDP Ratio of more than 90% which is extremely bad. Though our GDP did improve during his term, it was too little an improvement to cover for our massive debts and a falling peso. One of the reasons behind the sudden drop in of the exchange rate was due to increasing foreign debt.
In the research conducted this September 2016 by the Department of Economic Research said that the The exchange rate affects the cost of servicing (principal and interest payments) on the country’s foreign debt. A peso appreciation reduces the amount of pesos needed to buy foreign exchange to pay interest and maturing obligations.
Until today, Filipinos are still paying off the debt of the Marcos administration to the World Bank which cost of $28.3 Billion and through the year increases. “We will be paying the Marcos debt, which mostly went to their own pockets, until 2025, or almost 40 years after Edsa,” the Rep. Carlos Isagani Zarate, of the party-list group Bayan Muna said.
As of the end of September 2015, the Philippines have the debt of $75.6 billion said Bangko Sentral ng Pilipinas (BSP) Governor Amando Tetangco Jr in a statement on Monday, March 21, 2016.
The P1:$1 exchange rate is one of the myths under the Marcos regime. In his first 5 years of presidency, the peso to dollar exchange rate was good, but graft and corruption and heavy borrowing weakened our national currency.-- The Quintessence