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Export Development Canada is not an organization that most Canadians know well, or at all. It garners scant attention from journalists and not much more from elected officials. Yet the Crown corporation, which in 2018 provided financial support for more than $104-billion worth of Canadian sales overseas, ranks among the world’s largest government-backed export credit agencies.

Serious questions about how the agency works, and the decision making behind some of its biggest loans, emerged in a recent Globe and Mail investigation. EDC is in the midst of a once-a-decade review and Parliament has the opportunity, when it resumes sitting after the fall election, to improve EDC’s public reporting.

EDC normally operates on its own dime, self-sufficient from the treasury in Ottawa and, in good years, even paying dividends to it. But though the money it doles out is not taxpayers’ dollars, EDC is backstopped by the federal government – which means taxpayers could be on the hook if it makes poor decisions about how it lends, and to whom. So The Globe’s findings, after a review of about 14,000 deals since 2001, are cause for concern.

The vast majority of EDC’s work involves guaranteeing private loans worth a few million dollars on behalf of exporters, most of which are smaller firms. The EDC imprimatur can be a key factor in securing loans for those businesses.

But where The Globe discovered trouble was in EDC’s relatively small number of big financings, those of $250-million or more.

The Globe found a worrisome pattern in a series of large loans to Pemex, Mexico’s state-owned oil company, and Petrobras, the government-controlled oil company in Brazil. The idea behind lending money to these companies is to lay the groundwork for Canadian exporters to score deals with two large international operators. But both Pemex and Petrobras are companies where corruption has run rampant.

Arguably EDC’s most glaring misstep was a US$41-million loan to a company controlled by the Gupta brothers of South Africa. The money, doled out in late 2014, accounted for 80 per cent of the cost of a new Bombardier private jet. The Guptas were soon embroiled in a major corruption scandal. Banks in South Africa cut ties with the Guptas, but EDC held on until the evidence was overwhelming.

Why EDC got involved with the Guptas in the first place is not clear. Why it stuck it out for so long is even less so.

EDC has increased considerably in the past decade. At the end of 2008, a year when it paid a $250-million dividend to Ottawa, its loan book was worth $28.3-billion. At the end of last year, the value of loans on EDC’s balance sheet had nearly doubled to $53.7-billion, and the organization paid a dividend of $969-million. (That sounds big, but it’s only 0.3 per cent of annual federal revenue.)

Given EDC’s ever-increasing size, the way it operates needs to be reassessed. Last year, the federal auditor-general found problems around risk management and inadequate information supplied to EDC’s board of directors.

EDC also needs to follow the lead of the World Bank and toughen its approach to corruption. The World Bank has debarred numerous companies, including prominent and well-connected ones. SNC-Lavalin is among them, a decade-long debarment that runs until 2023. EDC kept lending to SNC after the World Bank cut it off; it eventually suspended its dealings with SNC, but only for 2½ years.

The point is not that EDC has to cut off SNC, but that it has to have clear processes in place to protect itself, and the taxpayer, from corruption.

Another issue is EDC’s exemption from the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act, which banks and others must follow.

The once-a-decade assessment of EDC is moving ahead. A report tabled in Parliament in June said, “EDC’s approach to transparency … is an issue that recurred throughout the review.” But it also concluded that EDC, with its strong financial position, can do more to back Canadian exporters.

It points to the tension at the heart of EDC’s existence. If it turns a profit, why is it needed, and why should government own it? But if it’s there to make loans others won’t touch, is it subsidizing some businesses over others? The only way to keep things in balance, and the bank out of danger, is for EDC to better disclose what it’s up to.

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