Filipino-American businessmen in the region are keeping faith with the US economy, convinced that it will weather the triple whammy of an unprecedented credit downgrade, dysfunctional government and budget cuts that could hit Metro DC hard.
“The fundamentals are still sound,” observed Ramon Llamas, Vice President of Sun Trust Mortgage, Inc. in Oakton, Virginia.
“Everyone’s going to feel it but right now we don’t really know,” said John Cabrera, President of the Philippine-American Chamber of Commerce in Metro DC (PACC-DC). “It’s still premature and there so many different opinions out there that anything they say is just speculation.”
“We’re not going to worry ourselves out of business,” he declared. “Filipinos are worker bees so we just have to work harder, to grow and expand our business, and deal with the problems when they come.”
Standard & Poor’s lowered by a notch last Aug. 5 the US’ gold-standard AAA rating – the first ever in the nation’s history. The two other major rating retained their assessment of America’s creditworthiness but kept the US on a watch list.
They sharply criticized how US debt appears to have been politicized. “The political brinksmanship of recent months highlights what we see as America's governance and policymaking becoming less stable, less effective and less predictable.”
They expressed doubt the White House and Capitol Hill can agree on the kind of deficit-busting measures that S&P believes is needed for the long-term health of the US economy.
“The credit rating is intangible but it is also very important,” banker Llamas tells the Manila Mail.
He said mortgage rates and consumer loans are expected to rise. “At the micro level, this might cause some short-term pain. It’s always difficult if you can not borrow to supplement your capital,” he explained.
“There will be a chain reaction,” he added, “There could be job losses.”
Llamas warned that Filipino migrants might be especially vulnerable, especially those holding temporary workers visas. “The impact on permanent residents or green card holders will be less because they don’t rely on just a single employer.”
Governors Bob McDonnell of Virginia and Martin O’Malley of Maryland warned last month about the effects of a credit downgrade and overly sharp budget cuts that could hurt individuals and businesses heavily dependent on the federal government.
But Cabrera told the Manila Mail that, “many of our members are not in the trade business. There is a handful involved in government contracting and they are worried about the budget cuts but so far no one is complaining…yet.”
Llamas said the US can still win back the coveted AAA rating.
The Philippines managed to claw its way to an S&P BB rating, just 2 notches below investment grade – interestingly because of the current US predicament – after Manila cut chronic budget deficits by raising taxes and improving revenue collections.
In Manila, presidential spokesman Ricky Carandang called the US credit downgrade a “wake up call” even as finance officials signaled they will continue buying US debt. The Philippines reportedly holds $23.6 billion in US treasury bonds.
The solution, according to Llamas, rests with the nation’s political leaders. “It depends on the political will of both Republicans and Democrats to work together because the bottom line here is if they can not settle their differences, it’s going to hurt the people,” he said.
Both Llamas and Cabrera predicted investments will continue to flow into the US despite its current woes. “This is a trust problem. The politicians should give us a reason to trust again,” Llamas said.
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