In subprime cloud, a silver lining
MANILA, Philippines--Nothing strikes as much fear in the hearts of businessmen everywhere as the prospect of recession. The threat, even a hint of it, entails instantaneous belt-tightening. People are forced to undertake harsh, calibrated measures to ensure the survival of their businesses.
The credit crunch, brought on by a meltdown in the US subprime market, is now upsetting the economy of the most powerful country in the world.
Subprime refers to a high risk loan transaction or product. A lot of people in the United States have taken out secondary mortgages on their houses. And because the loans are considered to be "subprime"--with risks and conditions that are less than desirable to banks and financiers--the borrowers get to pay higher rates of interest.
As a result, a wave of bankruptcies and foreclosures began to sweep the country. The meltdown has gone from bad to worse, spilling over across the globe. It has been hurting the pockets of many in the United States, and the Filipinos residing there are no exception.
Lito Hontiveros, senior vice president and general manager of Fortune Enterprise Holdings, operator of the Seafood City chain of supermarkets in the United States, described how some Filipinos in California lived in terror, dreading that their homes would be taken away from them.
"At marami ngang tinamaan ng foreclosure, (the property of a lot of people had already been foreclosed)," he said during a recent trip to Manila, adding that he couldn't imagine how a house, painstakingly paid for over the years, could be lost just like that.
"Of course, what compounded the problem is, quite a few property owners have taken out second mortgages," Hontiveros said during an interview.
He explained that people began to have a hard time consolidating their loans because the equity of their property had been turned "upside down."
"Nationwide, all homes lost their value," he said. "Some Filipinos simply had to abandon their homes as a result of the subprime debacle."
But he added that there were some enterprising Filipinos who managed to settle their mortgages and regain custody of their homes. Others appear to have even profited from the downturn, purchasing property when prices have dropped.
When the difficult times started to set in, Hontiveros noticed that more and more people began "to eat at home."
"They prefer to stay home rather than eat out," he said, observing that restaurants across the United States began to suffer huge cut in sales.
"All restaurants were affected, but the hardest hit were the casual dining restaurants," he said. "That turned out to be a good thing for supermarkets."
Hontiveros grudgingly admitted that business has indeed been looking up.
"In fact, some supermarkets have expanded their hot food section to take advantage of this condition," he said, citing the economic downturn in the United States. Hot food refers to cooked, ready-to-eat goods.
"Whole Foods Market, an American supermarket, has launched an advertising campaign extolling the virtues of its hot and cold ready-to-eat food section, presenting it as a much better alternative to dining in a restaurant.
"Also, in general, food prices in the US have gone up, and more and more people are now going to supermarkets, preferring to cook their own meals," he added.
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