Posts Tagged ‘Canada’


FT: Invest in Canada

Tuesday 8 March, 2011

The Financial Times hosted this event FT Global Investment Series:  Focus on Canada which shed a different light on America’s still largest trading partner.  After Bernard Simon’s (Canada correspondent for FT) opening remarks, Louis Lévesque introduced Canada’s unique opportunity:

  • stable banking system
  • economic growth
  • lowest cost of doing business
  • R&D
  • top export destination for 34 US states
  • bought 4X as much from the US as China
  • IL does $35B in trade with Canada
  • emerging markets are riskier than doing business in Canada
  • Research in Motion, the Blackberry company, is based in Waterloo, ON Canada.

Dennis Gartman, Editor and Publisher of  The Gartman Letter & former Chicago Board of Trade trader, extolled the virtues of investing in Canada, where his fund has its biggest holdings.  His general thrust was, Canada offers a lot of stuff, (such as lots of mineral resources & is the #1 supplier of crude oil to the US) but Canadians need to do a better job of selling them.  Canada has a highly educated productive workforce which consists of graduates of 13 quality universities.  Ports on the Atlantic & in Vancouver support exports.  Canada’s banks are more conservative, didn’t get caught up in real estate investments, & don’t have any “liars loans”, so their banking system is in better shape & are the best capitalized in the G8.  Canada’s political pendulum is swinging right as the comically leftward-leaning mayor of Toronto is out & the separatist movement in Quebec is non-existent.  As America “protected” its ports from foreign acquisition by companies from Dubai, the government in Saskatchewan protected their mines from foreign acquirers, perhaps stifling some investment as well.  Gartman then offered some suggestions to Canadians to help them market themselves better by playing to their strengths:

  • leverage the Canadian passport that is never disdained as the world’s friend
  • focus on mining
  • produce better quality food from agriculture
  • highlight technologies like RIM’s Blackberry
  • spotlight Canada’s educational/university system


  • Premier Harper made a bad decision to tax income trusts
  • the volatility of the silver market is scary
  • the Canada-Europe Free Trade Agreement should be done soon
  • until unemployment reaches 8-8 1/2% in Canada, there is no reason to change interest rates-the Bank of Canada does not have the same mandate of other similar central banks which are tightening monetary policy, (except for China, India, & Indonesia)
  • Gartman does not recommend investing in China because he doesn’t trust their accounting

Panel discussion with Jason Gray(JG) of SunEdison Canada, Kevin Lynch (KL) of BMO Financial Group, Mark Mullins (MM) of Veras, Inc.

  • MM-with a balanced budget, no inflation, & low taxes, Canada is set to bloom
  • KL-Canada’s nice reputation is insufficient-it’s diversified well-managed financial system is a better brand as Canada now rates ahead of the US on many economic variables
  • JG-is pleased with their growth in Canada as Ontario is doing it
  • KL-Canada’s oil sands contribute to 5% of greenhouse gases, 1/60 of coal & is the most secure energy source
  • JG-Ontario has bold pockets of innovation in green energy while the US hasn’t grabbed hold

open Q&A

  • KL-generalizations about short-selling, pump & dump schemes, & Sarbox alternatives are dangerous.  Canada’s securities industry is viable & good.  MM-it’s well-regulated with a better division of power more closely aligned with the British system
  • KL-Canada is just as concerned about security in immigration as the US & there has been no change in policy.  Like the US, future population growth will come from immigration.  MM-Is Australia’s point system model better?  Canada seeks foreign students to become “ambassadors” for Canada.
  • MM-Although Canada’s manufacturing world share is declining, they’re not feeling that pain.  The relative strength of the loonie (C$) is sustainable as its relationship with relevant currencies like the OZ$ & Kiwi$ (Australian & New Zealand) currencies stays the same. KL-As long as demand in China & India for commodities remains strong, the loonie will remain strong, but Canada still needs to focus on innovation.  JG-the strong loonie does make it a struggle to export from Canada.  Northern Canadian tigers are taking advantage of the strong loonie in deals around the world.
  • JG-Ontario is investing in green energy, with the goal of getting off coal by 2014.  MM-Green energy is still relatively small, so there’s room for growth.  He wants less subsidies because you can’t base business models on subsidies.
  • KL-the US is Canada’s largest foreign direct investor while Canada is America’s #3 FDI contributor.  MM-the most Americans outside of America are in Calgary, Alberta, who have stayed, invested, & created a dynamic business culture.  JG-Canadian’s risk appetite differs.

Prof. of finance Raghuram Rajam, Univ. of Chicago Booth Business School didn’t talk about Canada much, other than to suggest Canadians focus on their strengths, openness & low taxes.   Just read his book Fault Lines:How Hidden Fractures Still Threaten the World Economy to get his take on the rest of the world today.


railroad infrastructure in North America

Thursday 20 August, 2009

I attended this luncheon presentation PAY THE FREIGHT: RAIL INFRASTRUCTURE INVESTMENTS IN CANADA AND U.S. hosted by the Canadian Consulate General, Metropolitan Planning Council, & Union League Club of Chicago.  Here are the presentations the panel made:  Combined Presentations

Mary Sue Barrett, President of the Metropolitan Planning Council opened with few statistics:

  • freight is increasing 350% by 2020
  • 500 trains travel on 2800 miles of track every day
  • Transportation creates $2B in economic output & 70,000 jobs
  • all on a 19th century system.

US Representative fromWisconsin Tom Petri didn’t make a presentation, so I’ll summarize what he said here.  The Midwest-Canadian relationship is crucial.  Wisconsin exporters hip out of Montreal.  Baltimore & New York want that business, but are not cost-competitive.  Canadian railroads are now North/South in addition to East/West.  Statistics from WI. company Schneider Logistics indicate transportation costs dropping from 16% to 8.8% of GDP in past years, but there have been no savings since 2004.  China now invests 9% of its GDP into transportation, while Europe invests 5%.  China will spend $730B on railroads, which exceeds the capital expenditures of the US.  We’ve lost momuentum-increasing the gas tax is not sustainable.  We need to continue borrowing from the Chinese to pay for rebuilding our infrastructure.


  • grade crossings are still a challenge for efficiencies, with big impacts on local communities as people wait @ crossings
  • Germany imposes a road tax implemented by satellite to pay for infrastructure because Poles would not pay for gas when delivering to Germany
  • it’s a big problem to muster political will in Canada-the private sector is 10 years behind.

Canadian building technologies conference

Tuesday 14 July, 2009

I checked out this Building Technologies conference organized by Ann Rosen from the Canadian Consulate in Chicago.  Here are the presentations made that the presenters decided to send over to me:

Sustainable  forest products were addressed byJoel Neuheimer of FPAC, who made this presentation:  Chicago_AIA_FPAC FPAC issues a sustainable initiative report every 2 years.  Canada is the world’s leading forest products exporter, sourcing from 30% of the world’s intact forest, 70% of which is uninhabited.  Canada is 3rd in total forest area behind Russia & Brazil.  The provinces have the most jurisdiction, owning 71%; the federal government exerts indirect responsibility by owning 23%; & private owners speak for 6% of Canada’s forests.  Canada’s regulation of forests is the most stringent in the world, which is verified by 3rd parties.  Forests lose more to natural causes than to harvests.  300 Canadian communities rely on forestry for their livelihoods.

Here are a few issues they are confronting:

  • legal harvests?
  • regeneration
  • reduce/re-use/recycle-to recover 65% of paper, 90% of fibre, & return 10% to biomass
  • reduce greenhouse gases to become carbon neutral  by 2015 without carbon credits (20% of greenhouse gases come from deforestation)
  • independent scrutiny/certification
  • green procurement
  • informational tools (see their website)
  • the Athena Institute claims that wood creates the smallest environmental footprint.

CMHC Chicago presentation

Q&A brought out:

  • The use of wood is restricted in Chicago, which has a building code “from hell.”  A representative from Wood Works Chicago said they are trying to enlist support of the unions.  New York has moved to the international code-Chicago is doing a study on it.
  • Engineered wood preserves & performs.  Yellow/Alaskan cedar actually kills termites.
  • Younger trees remove more CO2 when they are 20-80 years old, so there is good sense to replacing old forests with new ones.

My take:  there’s not a lot of high technology here, but it is important as environmental concerns are becoming more important.  It’s apparent we need to change building codes not to just reflect safety/PR concerns, (reknowned Chicago deck collapse a few years ago), but simply change with the times to reflect new technologies & methods.  I’m not sure wood is the end-all/be-all the Canadians purport it to be because new materials sciences are coming up with lots of innovative products as well.


canadian investment tax credits explained

Wednesday 24 June, 2009

The Canadian Consulate in Chicago sponsored this SR & ED Information Breakfast, which stands for Scientific Research & Experimental Development program, which provides foreign investors tax credits in Canada when doing R&D in the great white north.

Mel Machado, currently of Price Waterhouse Coopers, but formerly of Revenue Canada, wrote the original legislation which brought these into existence.  He provided the details of the program:  DFAIT#2_June_25_2009 v1.0

Claude Jodoin, a tax attorney @ Fasken Martineau, provided a very valuable presentation on how to structure & leverage these investment tax credits from a tax planning point of view.  Here’s his presentation SRED Presentation Fasken Martineau He brought out that foreign companies need to generate income, i.e. build a business in Canada, against which you can deduct these tax credits for tax purposes in Canada.  In other words, you can’t simply set up an R&D cost center & take advantage of the program.  However, his presentation also offers a number of ways to set up companies within & outside of Canada which allow companies to leverage these tax credits without having to do everything required to build a business there.

Canadian provinces offer even more tax credits in addition to what the Canadian government offers. Jerome Nadeau of Investissement Quebec in Chicago let us know how much you can save in French-speaking Canada.  Here’s his presentation SRED Presentation Quebec

Erich Hochstein countered with Ontario‘s offering.  Here’s his presentation SRED Presentation Ontario

Q&A revealed:

  • Investment tax credits are not saleable & have nothing to do with carbon credits.
  • The Quebec office helps Chicago companies finance these tax credits.
  • Ontario is adding programs to take advantage of this.
  • Pharmceutical & aeronautics firms have taken most advantage in Quebec.  Of 90,000 claims in Ontario, 25-30% have gone to information technology companies.
  • The provincial offices & consulate form SWAT teams to help US investors find the right people in Canada.
  • Although historically LLC’s have not been favoured, now they are the favoured vehicle.
  • Investment tax credits must be declared & used within 18 months of filing.
  • The Quick Look for Eligibility takes a few hours & you have a pretty good idea whether or not you can take advantage of the investment tax credits.  The process does not require non-disclosure agreements.
  • The 1st steps are to decide what you want to do, identify research partners, & then contact the economic development agencies

When I worked @ the Canadian consulate, this is something we “sold” whenever we were encouraging foreign direct investment into Canada.  By combining federal with provincial tax incentives, foreign companies can get tax reductions of 50+% of what they spend on R&D there.  In some cases, you can even get cash back.  They are real & firms are taking advantage of them.  You have to abide by their rules, but they can be beneficial.  Consult Claude’s presentation to consider all the different options available.


a better border?

Friday 8 May, 2009

I caught this presentation hosted by the Fed: Toward a new frontier:  Improving the U.S.-Canadian border by Christopher Sands, Senior Fellow, Hudson Institute Metropolitan Policy Program @ the Brookings Institution. I believe this is the paper on which his talk was based.   Chris sought to answer a few questions:  Is the default condition of the border 1 of neglect?  Should post 9/11 changes be sea changes?  Is it actually a single border or multiple borders?  Here’s how he broke it down:  4 borders (geographically & functionally)

  1. pacific northwest-lots of crossings & cooperation
  2. great lakes -mostly H2O, integrated manufacturing & rivalry drives competitive economy
  3. rural-140 crossings, few 24/7, many microcrossings with 2-4 employees, aim to be complemented by SBI (Secure Border Initiative) cameras, etc., but residents don’t trust cameras because they feel they’ll be watching them & not illegal aliens
  4. perimeter-oceans, but must be secured, like airports, pushes the US border out

Border user types

  • commercial-truckers, energy transport (oil pipelines, electricity, uranium, the biggest part of bilateral trade, all with no inspection)
  • commuters-service providers who cross often & will invest in productivity progams, & amatuers, for example those who visited Canada during the recent NCAA Final Four basketball tournament inDetroit.
  • illicit users-smugglers, targets of governments

Border crossings are way down since the requirement for passports to cross the border.  The northern border doesn’t speak with 1 voice-each constituency has it’s own problems.  The US government responds to individual needs like the Ambassador Bridge from Detroit to Windsor, which was privately funded.  The Canadian-US Free Trade Agreement (predecessor to NAFTA) & FAST (Free & Secure Trade) attempted to facilitate crossings, but it required access to reciprocal data bases in each country to which neither government was willing to grant access.  Years ago, the US proposed a common perimeter strategy, which Canada rejected.  Thus the US went with a concentric rings strategy.  Now the Canadians want to come back to the perimeter strategy, but it seems to be too late.

We need to:

  • harmonize & share information.
  • clear up old problems
  • get more precise
  • identify transitional vs. long-term problems
  • decentralize management of the borders
  • build consensus in border communities by building social capital there

My take-we really need a think tank here to address these kinds of issues in this way.  It was very refreshing to see a pretty objective & comprehensive assessment of the issue, which I rarely see.  The Chicago Council on Global Affairs provides the best international content in the city, but most of their events are book summaries followed by book signings.  There is very little rigorous analysis of global issues without someone trying to push their book.  The CCGA has proposed founding a think tank here, & put on event last fall to that end, but 1 event does not a think tank make.  The issue is who pays for it & how, & my sneaking suspicion is many insular & parochial midwesterners see little value in trying to figure out where we fit in the world.  We may rue the day when that attitude leads to our demise.


Distressed M&A in Canada

Monday 16 March, 2009

I had lunch with Canadians down from the great white north for this panel discussion Distressed M&A in Canada .  Here are the presentations they made.  Contact information for the presenters is included with the presenations if you want to follow-up with them.  Here’s what wasn’t included in their presentations:

Restructuring & Insolvency-M&A transactions totaled only $14B in January in Canada, but bankruptcies have risen from 4% to 9% in the past year.  Canada’s deficit of $35B is just 1 tranche to Citibank.  Automotive troubles hit Canada hard because Ontario produces more cars than Michigan.  Buying opportunities are not there because financial holding companies don’t want to call in defaults yet.  The C$ is taking a beating because of commodity & oil prices.  Walmart has shut down Sam’s Clubs in Canada & the print media industry is in the same condition as in the US.  In insolvency proceedings, judges in Canada are concerned with saving jobs.

Tax-he pretty much just read the presentation, so look for the info there.

Anti-trust/foreign investment–  the Minister of Industry must approve foreign acquisitions, so there has to be net benefits to Canada in terms of jobs & capital expenditures in 3-5 years.  This is a very political topic, especially when national security is concerned.  There are implications on harmonized timing that will align better with the US but perhaps take a little longer & create a little less certainty.  Be proactive & anticipate requests to speed-up the process.

There was only time for a little Q&A-It’s been advocated that foreign ownership rules, especially in telecom, be relaxed, but again it’s a hot political topic.

My take-M&A is hot everywhere, Canada included, so give it a look, ifyou can find the financing.  Given Canada’s economy is doing better than that of the US, it would be interesting to talk about Canadians acquiring US firms, but given the size discrepancy, there will always be more US firms looking to buy Canadian firms than the reverse.  Also, it’s beyond the scope of the presenters because Blakes “opened our Chicago office in 2004 to assist our U.S.-based clients with Canadian components of cross-border transactions…As we do not practise U.S. law, we will work closely with your U.S. law firm to assist with your cross-border legal needs.”

Andrew Busch, Global FX Market Strategist for BMO Capital Markets’ Investment Banking Division in Chicago & former McCain advisor gave his take on the curent financial crisis.


a canadian double whammy

Tuesday 24 February, 2009

I attended a couple of Canadian events in 1 evening last week.

1.  a group of IT firms paid Chicago a visit from Winnipeg Manitoba.

  • Frantic Films , a creative digital branded content & commercials producer of short form video I remember from when I worked @ the Canadian consulate, but don’t remember much more than that.  They’re looking to meet advertising agencies with up to 1000 employees.
  • OlaTech web applications developer seeking associations with associations (pardon the pun) for its in1touch member database for managing events, surveys, newsletters, e-mail campaigns, member forums, job opportunities, billing, payment processing, & reports.
  • Online Business Systems technology consulting company already has offices in the US & may be expanding in Chicago with a focus on Justice & Public Safety.
  • Technologies for Learning Group custom e-learning/(LMS) learning management solutions provider.  I worked with the principal when I worked @ the Canadian consulate & am working on hooking them up in Europe.

2.  Porter Airlines iniated services between Chicago’s Midway Airport & 6 Canadian destinations with Toronto as its hub.  Porter held a reception @ the new Trump Tower.   It was pretty swanky… & they gave away travel vouchers for flights on Porter.  Talk about good swag…