By Atty. Antonio P. Pekas
It was one of those times when one seeks for a break from the daily routine. So I readily accepted an invitation from the National Treasury to attend a promo affair at Country Club. The guys were in town to promote the sale of Treasury Bonds. These are nothing but papers which indicate your investment or the amount you paid for these which are issued by the government. These are sold by participating government or commercial banks.
After sometime like five years, you can sell back the paper to the government and it would earn interest at around 4.26 percent per year. Earlier than the maturity date, you can sell it in the financial market but your earning would be much lower.
Their sales pitch was that it was better an investment than putting your money in a time deposit. But of course that was misleading. For there are taxes to be deducted and you have to factor in the inflation rate or the depreciation in the purchasing power of the peso.
After taxes, your earning would be a little bit less than 4%. So I asked the presenters about the net yield after factoring in the weakening of the purchasing power of the peso in a year. According to them the expected inflation rate this year is a little bit more than 3%. Bingo. Therefore your net earning in a year would be just around one percent. If you invest a hundred thousand on those bonds, you will just earn just a thousand pesos.
It is certainly not attractive for small guys like us. To drive home this point I told them that if I had three thousand pesos, I would go and buy me a frying pan, a stove and a cart. Then I would go and buy fish ball and push the cart around the streets while cooking the fish ball. Chances are I would get a 100% return from my investment in one day. But of course there are risks. It might rain, there might be no takers, and an accident could happen where a car might bumped the pushcart. These do not include my being baked in the sun. I might end up looking “tostado.”
As to the Treasury Bonds, there are practically no risks unless there will be a revolution tomorrow or before you redeem its value or before you sell the bonds. Otherwise, it will be earning that small interest whether you are just sleeping or philandering with a mistress, or even on Sundays and holidays, or during typhoons. So if you have a hundred million, you will be earning around a million pesos in a year. No sweat.
For us ordinary Tomas, Kulas or Antonio, we might as well sell fishball.
On my way to Country Club to attend the affair, I was thinking why the need for the government to sell bonds which is actually borrowing money from its citizens or investors?
Is the government really in dire straits financially? The presenters were partially answering the question when I entered the hall. One of them was talking about the BUILD BUILD BUILD program of the government where it intends to catch up with our neighbors in terms of infrastructure. The money to be raised by offering the bonds will finance the building of infrastructure.
So I told the people there that the benefits would not trickle down to the ordinary citizens as touted. It would be better to use all that money to help finance MSMEs (micro, small and medium enterprises) which the government is actually doing but only allocating inconsequential amounts.
As I told the participants and the presenters, use all that money for MSMEs and we will become a country of small manufacturers. Common! Let us get our hands dirty and put up more small businesses in the rural areas.
But most of the people there were bankers and accountants who are boring and are only good about counting and making money.
It would have been better had my fellow media practitioners or my lawyer colleagues were there. The affair would have been more lively.
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