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A federal review of Export Development Canada has exposed serious shortcomings at the Crown corporation, noting its disclosure practices fall far short of other financial institutions, and that the agency is not legally obligated to consider the environmental or human-rights impact of the financial support it provides to exporters.

The agency, which gives loans, credit insurance and other financial services to Canadian exporters, must undergo a review of its enabling legislation (the Export Development Act) every 10 years. A crucial part of the federal government’s efforts to promote international trade, the EDC has been mired in controversy in recent years over multimillion-dollar loans to international companies that were embroiled in corruption scandals.

Begun last summer, the latest review concluded that the EDC’s public reporting on the performance of its credit insurance operations does not meet requirements imposed on the private sector even though it borrows using the federal government’s credit rating. The EDC’s non-financial disclosures (for example, environmental and social effects of a proposed transaction) were also deemed inferior to those of other export credit agencies such as the U.S. Export-Import Bank, and international institutions such as the World Bank.

The findings underscore concerns uncovered in a recent Globe and Mail investigation. The Globe reported that the EDC’s client roster includes companies that have faced allegations concerning corruption, human-rights violations and environmental abuses; the federal agency has demonstrated a tendency to continue supporting such companies after other financial institutions have sanctioned them or cut them loose. Critics have also raised concerns about transparency and federal oversight of the Crown corporation.

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In 2015, the EDC lent US$41-million to a company controlled by the Gupta brothers of South Africa, who subsequently emerged at the centre of a corruption scandal, prompting four South African banks to stop doing business with them. It also continued lending money to SNC-Lavalin Group Inc. for many months after the World Bank banned the engineering giant and its affiliates from taking part in World Bank-financed contracts for up to 10 years for bribery offences.

In 2016, the EDC provided a loan guarantee supporting the sale of internet content-filtering software for use in Bahrain, where the government has been accused of using the technology to censor political opposition movements, human-rights groups and news organizations. And the Crown corporation lent billions of dollars to Petroleos Mexicanos and Petrobras, two huge state-owned enterprises that have had corruption scandals.

Prepared by Global Affairs with assistance from Ottawa-based International Financial Consulting Ltd., the report on the review’s findings didn’t address specific transactions or make recommendations. Tabled in Parliament on June 20, it will be submitted to a parliamentary committee, which could recommend changes.

The EDC told The Globe it is developing a new disclosure policy, to be revealed later this year. And it said it fully supported the review. “We’ve always welcomed this process, as it presented an opportunity to step back from day-to-day business to consider EDC’s current and future roles in contributing to the success of exporters,” it said in a statement.

The report acknowledged the EDC had beefed up its internal environmental, social and other policies, and the team charged with implementing them, in the past decade. However, it also noted that “the details of these processes, or the outcomes for specific transactions, are not disclosed.”

Moreover, it observed that the EDC lacked statutory obligations to consider the human-rights consequences of its transactions, as well as environmental and social implications in most cases, and for addressing risks associated with corruption and financial crimes.

Because the government has no representatives on the EDC’s board of directors – deputy ministers were removed in 2006 over conflict-of-interest concerns – the report found that federal officials can no longer access briefings, minutes and other materials concerning the agency’s operations. This “constrains them in doing analysis and providing advice to ministers,” the report stated. (It’s unclear whether government officials ever asked the EDC for such materials; the EDC said in a statement to The Globe that it had “always provided government officials with information requested.”)

The EDC has long defended its opacity as necessary to retain its customers’ trust, and has said legal and statutory restrictions prevent it from releasing information.

Several advocacy groups have urged the government to compel the EDC to reveal far more about its activities.

“Ottawa must impose rules on this Crown corporation to make it transparent and accountable,” Lori Waller, spokesperson for Ottawa-based human rights group Above Ground, said in a statement. “Without strong oversight of its export credit agency, the government risks profiting from harmful and illegal business activities. The law should prohibit EDC from supporting companies involved in corruption, human rights abuse or environmental harm.”

Aaron Wudrick, federal director of the Canadian Taxpayers Federation, argued that if the EDC’s clients require greater confidentiality, they can always turn to private-sector financial institutions. “Taxpayers have a right to know what’s going on with their money,” he said.

The report concluded the EDC could do better. “EDC’s approach to transparency as a government-owned entity is an issue that recurred throughout the review,” it noted. “Greater transparency and disclosure on non-financial information appears possible without jeopardizing a client’s business or competitive position.”

Days before the report was made public, industry groups warned International Trade Minister Jim Carr not to go too far in response to concerns about the agency.

“Recent negative portrayals of EDC have left us concerned about the potential for a more risk-averse approach to supporting Canadian exporters,” read a joint letter from the Canadian Chamber of Commerce, Canadian Manufacturers & Exporters and the Business Council of Canada.

“We must all recognize that any scaling back of export support would be bad for Canadian exporters and the many thousands of workers they employ.”

The letter added that respecting international obligations to protect human rights and discourage corruption “is not mutually exclusive of doing any form of business in difficult market conditions.”

In fact, the report encouraged the EDC to provide more support, particularly in emerging markets. It criticized the agency for lacklustre performance in broadening its customer base and argued that its large capital surplus demonstrated it was too concerned with financial risk.

“Taking on more risk is an opportunity for EDC to more actively promote the government’s trade diversification agenda,” the report concluded.