Quebec to expand investment agency’s role in developing local companies

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Quebec is stepping up effort to boost its economy and narrow the wealth gap with its neighbours by giving its government investment arm new powers that it says have no equal in Canada.

“We’ll be more gutsy, we’ll be more bold” in our private equity investments in particular, Guy LeBlanc, president of Investissement Québec (IQ), said in an interview Monday ahead of an event to mark the agency’s relaunch. “What we want to do is move the needle.”

François Legault’s Coalition Avenir Québec government widened IQ’s mandate through new legislation passed in December that will see the organization double its staff to 1,000 people and boost its capital by $1-billion to $5-billion. The government is also giving IQ a $1-billion growth fund to stoke the development of local companies and protect corporate head offices.

The agency, known until now chiefly as a lender, will still do financing but will also help companies increase exports and assist with their digital transformation and automation. In addition, it will seek out more opportunities to invest in the equity of companies, playing a more active and insider role.

IQ is absorbing some staff currently employed by other government departments and it will tighten ties with other ministries involved with Quebec political activities abroad. It’s all part of a sweeping move by Quebec to consolidate the state’s resources to boost economic development and create a kind of super-department overseen by Pierre Fitzgibbon, Minister of Economy and Innovation.

What that means in practice is that IQ will become bigger and more brash with its investments, Mr. LeBlanc said. The agency has been involved in between 1,500 and 2,000 transactions a year in recent years, including a 2018 deal in which it bought into Quebec City retailer La Maison Simons and a 2019 deal to recapitalize ailing miner Stornoway Diamond Corp.

“I’m not saying we’ll increase the number of times we get involved. But it’s possible the dollar amounts will be bigger when we do intervene,” Mr. LeBlanc said. The aim is to work with other partners, including pension fund Caisse de dépôt et placement du Québec and labour fund Fonds de solidarité FTQ, for at least 80 per cent of deals, he said.

The IQ setup is unique among Canadian provinces. Its closest point of comparison is Bpifrance, an arm of the French government, Mr. LeBlanc said.

One of IQ’s most pressing files is what to do about its joint venture with Bombardier Inc. and Airbus SE that makes A220 jets. Bombardier has signalled it might pull out of the venture because new cash investments might be too onerous, leaving Quebec to decide how best to protect its own US$1-billion investment into the partnership.

Quebec has changed the agency’s tolerance for risk. Under the new law, IQ’s minimum threshold for return on investment is equal to the government’s own funding costs, which is about 2.1 per cent at the moment. Anything above that will be considered a success, “especially if we move the needle on our economic development goals,” said Mr. LeBlanc, a trained accountant who built his career at PwC.

Quebec wants to double the foreign investment it receives from the current level of about $3.5-billion a year. And it wants to boost its exports, which currently make up 45 per cent of provincial gross domestic product, to 50 per cent of GDP.

It’s all part of a wider goal to reduce the province’s wealth gap with its neighbours, particularly Ontario, whose GDP per capita is 16 per cent higher. The aspiration is at the heart of Mr. Legault’s political raison d’être and he spoke about it again at Monday’s event.

“We can eliminate this wealth gap. But that means having an Investissement Québec that’s a lot more aggressive,” Mr. Legault said. “This is the challenge of a generation.”

Quebec’s Liberal Opposition is generally supportive of the changes made to IQ’s mandate. But it cautions the agency’s added power needs to be kept in check.

“We’ll have to follow them very closely because they will have quite a bit of autonomy and quite a bit of money,” Liberal finance critic Carlos Leitao said. “Issues of accountability and transparency” come into play, he said.