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The peso and the call centers

IN 1996 an Israeli woman sued a TV station for airing an inaccurate weather forecast. She had to go home and change her clothes, making her late for work. She asked for $1,000, and she got it.

In 1997, at the annual shareholders’ meeting for one of his listed companies, John Gokongwei was asked what the company was doing about the depreciation of the peso. He replied that although the peso had gone down from 26 to 40 to the dollar, the company was protected up to 52.

Well-managed companies are prepared for external factors outside their control, such as currency fluctuations. Poorly managed companies and industries whine and complain and expect the government to bail them out, one way or another, for their lack of planning.

Every properly managed company that is concerned about—and might be affected by—the peso rate prepares a business plan for both a peso appreciation and a depreciation of at least 5 percent. That contingency plan is reviewed and updated on a quarterly basis. If the company cannot survive exchange-rate fluctuations, then its business model is wrong and can never be successful.

With the eight-month depreciation of the peso and the Bangko Sentral ng Pilipinas saying it is out of the central bank’s control, the propaganda machine is now saying how wonderful the peso depreciation is for the families of overseas Filipino workers (OFWs) and call centers.

The peso has moved from about 48 in January 2009 to 40 in 2013 and now to 45. The peso averaged about 47 in 2009, 43 in 2010 and 2011, and about 42 in 2012. Data show that the average worker sends home about $3,000 annually. Therefore, the family earned P140,000 in 2009, P129,000  in 2010 and 2011, and P125,000 in 2012—or an average of P130,000.

In 2009 the family made per month P830 more than the average, P100 less than the average in 2010 and 2011, and P400 less than the average in 2012.

For people in the marginal-income brackets, even P200 can be a lot of money. But as harsh as it may sound, a P400-less-than-the-average income for a family of four or six is unlikely to be life-changing. The OFW would only have to increase the remittance by $10 per month to make up for the peso appreciation.

The latest peso propaganda is about the call centers. We are told that a depreciating peso will create many more jobs in this industry.

As with every other business, the peso is not on top of the list of profit factors. We are told that the call centers will hire many more people because they will make more money as they earn in dollars from the clients and spend in pesos. That is not how the business works.

Contracts with local call centers and their clients are negotiated months in advance with nothing but an educated guess on what the exchange rate would be in the future. Clients, not call centers, set the number of agents based on their needs. The contracts themselves can be complicated and vary from client to client. Sometimes, the call center pays for the training of agents, but often not. The managers’ compensation may or may not be paid by the client. The same client may pay $18 per hour to an agent working in one call center and pay $20 per hour to an agent in another. The difference is that the higher-paid call center will have more stringent and higher-performance criteria, including better customer satisfaction, and that their agents will take more calls per hour.

Call centers are financially penalized when they do not meet performance expectations. This is why the first call center accepted a lower compensation rate, as well as lower performance objectives.

Contracts are usually for one or two years and are rarely renegotiated, as competition for clients is fierce. At the beginning of the contract, the client sets expectations for additional agents to be trained and hired over time to reach a peak number. If they reduce that number, they may pay a penalty.

Call centers would never write a client contract, expand their businesses and hire more agents based on the belief that the peso would depreciate. Like Gokongwei, they plan to make money at the P40-to-$1 and P46-to-$1 exchange rate. At the lower rate, they make more profit. It’s that simple. If their profits suffer too much, agents are not fired (part of the contract), but senior manager’s bonuses will be reduced.

So once again, what is the benefit of a depreciating peso to the country?


E-mail me at This email address is being protected from spambots. You need JavaScript enabled to view it. . Visit my website at www.mangunonmarkets.com. Follow me on Twitter@mangunonmarkets. PSE stock-market information and technical analysis tools provided by the COL Financial Group Inc.





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