Small Change

One thing people from developed countries may take for granted in their daily lives is the continual availability and abundance of cash. This is not an economic statement, but rather one of practical concern: in a developing country, due to the frequent shortage of smaller-denomination banknotes, a "rich" tourist or expatriate may actually not be able to spend their money simply because all they have are large denomination notes and the shop does not have the change to give back!

Some countries such as Vietnam and Cambodia operate on a multiple currency system, where larger purchases and payments are made with US dollars or Thailand Baht but change is given in Dong (Vietnam) or Riel (Cambodia); in these cases the exchange rate is usually consistent from shop to shop and based on a rounded average. Multiple currency countries are in existence because the local currency is not very strong due to sudden revaluation on the whim of the leadership (as was the case in Zimbabwe) or a weak economic platform. Thus, the currency of a stable economy (usually the US dollar) is used in conjunction with the local currency because it will not devalue suddenly, and can often be traded legally or on the black market by shopkeepers.

The Philippines, though, is one example of a developing country where spending one's money can actually be a problem. The Philippines is a single-currency nation which prints its money, the Philippine Peso, in a wide range of banknotes and coins. In the rural parts of the Philippines (the provinces), costs are low and require small banknotes or coins. Shopkeepers, then, keep small amounts of small change on hand, and an even more limited supply of larger notes-- which, naturally, they are reluctant to part with. Cash machines and currency exchanges only dispense currency in large denominations, so a tourist fresh off the airplane will have a pocketful of money that, when attempting to purchase goods in a shop, will be met with complaint because the shopkeepers will have to either part with their change or send someone to scramble for smaller notes. Reluctance may not seem like the best form of customer service, but in an area where the average laborer's wage is PHP200 (roughly USD$4.50) a day, with bar and restaurant staff earning PHP1,000 to 2,000 a week if they are lucky, the overall goal is to do as little as possible. Especially in a tropical country where the sun is still hot, even in the winter.

To counter this problem, I tend to hoard small notes, and use slightly larger notes as often as possible in establishments where I know they can be changed. This I do even if I, indeed, have a smaller note in my wallet. The keys to this practice, though, are to use a larger note, but nothing too large, and to also know which shops will have an abundance of change. For instance, if I make a purchase of 40 peso at the local supermarket, I will give a 100 peso note so I can keep the small change (a 50 peso note and a 10 peso coin) I receive back. On my once-weekly visit to a restaurant for dinner, which is usually part of a resort that will definitely have cash on hand to deal with the large-denomination holding tourists and street-smart expats, I take my PHP500 or 1,000 notes in order to get the 100 peso notes back that I can use at the supermarket or pub.

So where do the smaller notes, such as the 20 and 50 notes, and change go? I use these at smaller places such as the water refilling station or the fruit/vegetable stands, or with the jeepney drivers when I go once a week to Puerto Galera for food shopping. I do occasionally have to make a very small purchase at the supermarket, and I'll use a small note then.

The best advice I can offer to people who are going to travel in the Philippines or other developing countries, then, is to plan ahead money-wise. Spend a day or two in a city first, use large bills for every single purchase, and hoard the small change. You may end up with a gym bag* full of cash, but it will be needed in the provinces when it comes time to pay for food, transportation and accommodation.

*During my visit to Vietnam in April 2005, I started off in Hanoi. At the time, the Dong to US dollar exchange rate was roughly VHD16,000/USD$1. This isn't groundbreaking news in itself, but a majority of the currency on the street comes in VHD1,000 and 5,000 banknotes, with an occasional 10,000 note, meaning a loaf of bread requires a small bundle of banknotes to purchase. On my first day, I went to a expat-owned local pub for pizza and beer. The owner came in with a black Adidas gym bag, which he set on the counter behind the bar and then motioned to the nearby Vietnamese bartender. Sitting at the bar, I watched him furtively open the bag to reveal, well, a Mafia-style bag of cash, which he then zipped shut and stored in a locked cabinet under the bar. Later, during a conversation with the owner regarding the local currency and costs, etc., he told me that banking is a twice a week activity due to the cash movement, and it was not unusual to have more than one bag of cash ready in a safe for a weekend rush or over holidays.