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Pact aims to boost Canadian firms' heft in emerging markets

Stephen Poloz, EDC’s president and chief executive officer

Pawel Dwulit/The Globe and Mail

Canada's export-financing agency is deepening its ties with the International Finance Corp., an arm of the World Bank, in a bid to help Canadian companies tap into infrastructure and clean-technology projects in emerging markets, including some of the poorest but fastest-growing countries.

Under an agreement disclosed Wednesday, Export Development Canada and IFC will seek out projects in those sectors and join forces with loan assistance whenever possible. Also, EDC has added itself to a list of about a dozen development banks from around the world that accept IFC standards for joint loans and investments, becoming the first export-credit agency to do so. The idea is to make working together much more seamless and hassle-free, allowing transactions to happen more quickly and more frequently.

Stephen Poloz, EDC's president and chief executive officer, and Lars Thunell, IFC's executive vice-president and CEO, explained in an interview that the deal will spur more private sector-led development projects, by allowing the IFC to expand its network of partners willing to work in emerging markets and help compensate for a pullback by European lenders. From the EDC's perspective, the move is designed to help Canadian business tap into projects in unfamiliar places through the IFC's wealth of on-the-ground connections.

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IFC has more than 100 offices around the world, in big emerging powerhouses like China and India but also so-called frontier countries such as Vietnam, Bangladesh, and throughout Central Asia, and 400 staff spread across sub-Saharan Africa alone.

"For Canadian companies looking abroad, this can open up a wider scope of opportunities, by tapping into IFC's relationships with all the multinationals and with 600 financial institutions around the world," Mr. Poloz said. "It's a huge network."

The two organizations have worked together before on a more "random" basis, mainly in the mining sector, Mr. Poloz said, but this new arrangement will "save a lot of to-ing and fro-ing among lawyers" that gums up the process. He would not give a figure for how many deals might be facilitated over the next decade or so, or take a guess at a potential dollar value for Canadian companies. But he said there are already half a dozen deals "in the pipeline" related to this arrangement, and that after a meeting in Toronto Wednesday afternoon with several executives and lenders there are many leads, too.

Over time, Mr. Poloz said, supporting development in poorer countries will have the side benefit of helping those economies grow so they become long-term customers for Canadian businesses.

Indeed, with traditional markets like the United States and Europe projected to languish for years, it will be imperative for companies to expand their links to all emerging markets, let alone the biggest ones like China, India and Brazil where Canada is underrepresented as it is. (Last year, about 30 per cent of EDC's financial assistance to companies buying Canadian products was in emerging markets. EDC's top economist, Peter Hall, said recently that emerging markets could account for almost 30 per cent of all Canadian exports by 2020, compared with 12 per cent before the Great Recession.)

Mr. Thunell added that for the IFC, a global leader in setting corporate social responsibility standards, economic success and building healthy societies go hand in hand, which is why private-sector involvement in these countries is so important.

"The more successful the firms are that we work with locally, or the subsidiaries of Canadian firms in those countries, the more development impact we have because the more jobs are created, the better services are provided, the more training for local staff, and the better they'll handle some of the environmental and social issues," he said. "Financial success and development impact, if you follow the standards we have, most of the time has a very positive correlation."

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Economics/business writer

Jeremy has covered Canadian and international economics at The Globe and Mail since late 2009. More

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