Foreign exchange rates and seafarers remittances

Foreign exchange rates and seafarers remittances
Atty. Dennis Gorecho October 5, 2022 https://businessmirror.com.ph/2022/10/05/foreign-exchange-rates-and-seaf...

The Philippine peso continues to fall to its lowest level vis-à-vis the dollar since the start of the year.

Foreign exchange rate is defined as the price of the domestic currency with respect to another currency showing their relative values.

Exchange rate is impacted by some factors, which can be economic or political.

The economic factors are inflation, trade balances, government policies, market interest rates, gross domestic product, and unemployment rate in each of the countries.

Political factors are political unrest or instability in the country and any kind of political conflict.

Since standardized currencies around the world float in value with demand, supply, and consumer confidence, their values change relative to each over time.

Exchange rate changes affect businesses by changing the cost of supplies that are purchased from a different country, and by changing the demand for their products from overseas customers.

Fellow UP School of Economics alumnus Bienvenido Oplas said that the difference in today’s depreciation with those 17 to18 years ago is that current depreciation is rather fast, and so many other currencies around the world have similar experience of fast depreciation.

A reading of various posts of our overseas Filipino workers (OFWs), both landbased and seabased, in different social-media platforms, indicates that they in essence recognize that the high peso to dollar exchange rate does not automatically translate as beneficial to their family, especially for a higher cost of living.

On one hand, the Philippines will fare better in terms of higher OFW remittances since they are expected to send more money home to take advantage of the stronger US dollar.

The peso depreciation translates to more pesos exchanged for each dollar earned. Those who depend on remittances from abroad benefit when the peso depreciates since they would get more pesos for every dollar sent to them.

On the other hand, because there are domestic items that rely on imported components and raw materials, these commodities will see price changes when exchange rates fluctuate.

When the peso depreciates, domestic goods and services become cheaper for foreigners. When the peso appreciates, Filipino goods and services get more expensive while foreign or imported goods become cheaper for Filipinos.

The deployed Filipino seafarers in 2021 remitted $6.545 billion per data from Bangko Sentral ng Pilipinas (BSP), which is higher than 2020’s remittance of $6.353 billion.

The sea-based sector’s remittance comprises at least 22 percent of the total dollar OFW remittances.

It is estimated that there is one Filipino seafarer for every four to five crew on board a vessel at any time.

Unlike land-based OFWs, a Filipino seafarer is required to make an allotment which shall be at least 80 percent of the seafarer’s monthly basic salary, payable once a month to his designated allottee in the Philippines.

Blogger Fred Uno of MarineCafe.com pointed out in an article that Filipino seafarers are being shortchanged in the conversion of their dollar remittances to pesos as he described such practice as “thievery” in the maritime industry.

It is a known practice of some unscrupulous manning agencies to shave off at least one or two pesos from the foreign exchange rate, misleadingly calling the cut as “service charges.”

It is not uncommon for unscrupulous manning agents to keep part of the remittances when converting the money to pesos by using an exchange rate that is usually one or two pesos lower than the official BSP rate.

Such tampering with the dollar-to-peso rate, he added, results to the shortchanging of Filipino seafarers since their families receive less than they should in allotments.

A survey made by the Philippine Seafarers Assistance Program revealed that manning agencies have been using a variety of odd techniques to make a quick buck from the remittances’ flow: “Delayed forward of allotment,” using a “house rate” for the currency exchange, “allotment slip available upon request,” “allotment slip mailed to seaman onboard,” or “allotment after all deductions made,” which are often not explained to the seafarer or the family.

These practices are clearly contrary to the letter and spirit of the POEA contract, which says that facilitation by the manning agency of allotments shall be “at no expense to the seafarer, and that “allotments shall be paid to the designated allottee in Philippine currency at the rate of exchange indicated in the credit advice of the local authorized Philippine bank.”