Ottawa has ordered the nation’s export credit agency to consider more carefully the human-rights implications of loans and insurance it offers in support of Canadian businesses.
A Sept. 24 letter from International Trade Diversification Minister Jim Carr to Martine Irman, chair of Export Development Canada’s board of directors, urged the Crown corporation to ensure its internal procedures accord with Canada’s obligations under international humanitarian law. “I ask that you undertake a thorough review of EDC’s ongoing risk assessments and transaction due diligence,” Mr. Carr wrote. “It is my expectation that EDC will flag sensitive transactions under consideration to my office and department." He demanded an update on EDC’s progress by the end of November.
Human-rights and environmental-advocacy groups have criticized EDC for decades over what they say is a pattern of giving financial assistance to companies involved in harmful projects overseas, from China’s massive Three Gorges Dam years ago to its recent loans to Empresas Publicas de Medellin. (The Colombian utility’s Ituango dam was beset by landslides and concerns of possible failure earlier this year, forcing the evacuation of tens of thousands of people in downstream communities.)
Advocates have also said Ottawa’s oversight is insufficient.
“The agency is essentially self-governing in the areas like environment, human rights and anti-corruption,” Karyn Keenan, director at Above Ground, a human rights group, said in a recent interview.
The instructions from the minister arrive as two separate reviews scrutinize EDC’s practices. The agency extends more than $100-billion each year in loans, guarantees, credit insurance and other financial services to thousands of Canadian companies, overseas customers and foreign banks. The Trade Minister supervises EDC, and must review its enabling legislation every 10 years. The latest review began this summer but has been plagued by delays. The agency is conducting its own review of its environmental and social-risk management policies.
In a statement, EDC spokesman David Bhamjee said: “EDC’s current practices reflect Canada’s international human rights obligations, and have been credited by leaders in the international human rights field as being progressive and ahead of its peers. That said, we know that leadership requires continuous improvement.” Mr. Bhamjee added that EDC’s ongoing review included public consultations on the organization’s approach to human rights issues.
EDC faced criticism during the past year after reports about a US$41-million loan it issued in 2015. That loan financed the purchase of a Bombardier business jet by a company controlled by the Guptas, a family of powerful businessmen then based in South Africa. The Guptas became embroiled in a corruption scandal. A judicial inquiry is under way in Johannesburg.
In June of this year, the Department of Global Affairs (which includes the trade portfolio) awarded the contract to undertake this year’s legislative review to Ottawa-based International Financial Consulting Ltd. IFC is to deliver a written report to the minister by March, 2019. The report must then be reviewed by a committee of the Senate or the House of Commons. Mr. Carr must submit recommendations for changes to Parliament by June. IFC also conducted the last review, in 2008.
Documents obtained by Ottawa researcher Ken Rubin under the Access to Information Act, and shared with The Globe and Mail, indicate EDC began preparing for the legislative review in early 2017. By spring of 2018 it had assembled a team including CEO Benoit Daignault, two senior vice-presidents and several senior communications experts to manage the agency’s participation in the review.
The documents reveal elements of EDC’s communications strategy. Employees prepared papers for internal use outlining EDC’s position on human rights, corruption and transparency, as well as a document in anticipation of “questions or negative media articles regarding the review.” A heavily redacted document identified objectives including “generate positive media coverage” and “own and control the message.”
Both of IFC’s senior reviewers emerged as staunch defenders of EDC during the 2008 review. The firm’s founder and CEO, Diana Smallridge, worked at EDC (including as special adviser to the president) between 1988 and 2000, the year she formed the consultancy. Glen Hodgson, who once served as EDC’s deputy chief economist, is also on IFC’s team this year.
Early in 2009, Ms. Smallridge appeared before the Standing Senate Committee on Foreign Affairs and International Trade in its hearings about her report. “In summary, we concluded that Export Development Canada’s legislation, as it is, has stood the test of time remarkably well over the previous 10 years,” she said. “Looking forward to the next 10 years, there is very little change required.”
Mr. Hodgson, who served as the Conference Board of Canada’s chief economist at that time, also defended the status quo. “Nothing is broken at EDC,” he told the committee. “Therefore there is no fundamental reason to fix anything.” He opposed some of IFC’s recommendations, on the grounds the proposed new obligations would make EDC less responsive to customers. “I would be reluctant to see more process heaped on the backs of the corporation, making it more demanding for them to do their jobs.”
At least three senators expressed reservations about the 2008 review. Their most common complaint was that the government had pressured them to rush their deliberations. “You would think that legislators would undertake this work,” Senator Emyard Corbin mused, according to an official transcript, “but they farm it out to a company and then we must examine the company report and complete the examination quickly.”
Activists were also disappointed.
Karyn Keenan was then with the Halifax Initiative, a coalition of labour, human rights and religious groups that focused on international financial institutions. Her submission said EDC’s human rights policies “fall significantly short” of the best practices. But Ms. Smallridge’s report concluded EDC was best-in-class, without providing evidence. She warned against compelling EDC to adopt standards that would “put Canadian exporters at a disadvantage.”
Ms. Smallridge did not respond to interview requests; Mr. Hodgson directed inquiries to the Department of Global Affairs.
Patricia Adams is executive director of Probe International, an environmental advocacy group that opposes what it calls “ill-conceived aid, trade projects, and foreign investment.” Ms. Adams said her organization intends to file a submission to IFC. But “if the past is any indication, I don’t think this year’s legislative review will change the course of EDC,” she said. Canadian lawmakers “have utterly failed us.”
In a statement, Global Affairs Canada emphasized that submissions are a “crucial component” of the review. “This process matters because EDC is an important enabler of trade,” spokesperson Stefano Maron wrote. “Last year, EDC helped 9,400 Canadian companies do business abroad—most of which were small businesses. Those businesses went on to contribute $67-billion to Canada’s GDP."
Matthew McClearn