The high dollar is no excuse for Canadian companies to lag behind in export sales, the CEO of the Business Development Bank of Canada says, lending support to the central bank governor's rallying call.
"There is no reason why a Canadian business should not be very competitive with an American business with the dollar at par," Jean-Rene Halde, the head of the BDC, said in an interview Thursday. "When the Canadian dollar was weaker we probably did not make the level of investments in machinery and equipment and information and communication technology and other tools needed to make us competitive. We coasted, honestly, for a while on a lower dollar. There's no reason why with the proper equipment and the proper technology we can't be competitive."
On Wednesday Bank of Canada Governor Mark Carney said that Canada has had the second-worst export performance in the G20 over the past decade, with the country's share of the global export market for goods shrinking from 4.5 per cent in 2000 to 2.7 per cent. While the soaring loonie has been blamed by many manufacturers, Mr. Carney suggested that the dollar only explains about 20 per cent of the poor performance. More important, he said, is the fact that Canadian firms have been too reliant on the U.S. market and have done too little to bolster exports to emerging markets.
Mr. Carney's efforts to talk companies into shifting their strategies by spending more on equipment, looking overseas, and making use of their cash hoards is part of an effort to get corporate Canada to do more to fuel the country's economic growth. Consumers here have been shouldering that burden of late, largely by spending more on houses, but are now starting to tap out having racked up high debt loads.
Mr. Halde suggests that it's true companies could be doing more to improve their own productivity and sales. "I do agree with him that if companies could focus more of their efforts on emerging markets, where there's actually much better growth, then we'd all be better off," Mr. Halde said. "Now, that's not an easy thing to do, you've got to get out of your comfort zone to tackle some of those markets. But there's no doubt that the growth in those markets in the coming decades will be very substantial and there is an overreliance on our southern neighbour."
BDC focuses on lending to, and supporting, small and medium-sized firms. In Canada those firms are responsible for more than 60 per cent of private-sector jobs and one-third of the country's exports.
The crown corporation released its 2012 fiscal results Thursday, and while the turmoil in Europe and sluggish growth in the U.S. are concerning, Mr. Halde said that firms' balance sheets are strong. "One of the reasons that we had great results is because we ended up reversing some provisions for losses, because the balance sheets of our clients are in good shape, and we're still seeing that," he said. BDC's profits for fiscal 2012 were $533.4-million, compared to $346.7-million in the prior year. Companies borrowed $3.8-billion in loans and subordinate financing during the fiscal year, which ended March 31.
Banks are lending and the availability of credit is still good, Mr. Halde added.
At the height of the financial crisis, in an effort to keep credit flowing, Finance Minister Jim Flaherty gave another crown corporation – Export Development Canada – emergency powers to lend money domestically. EDC's mandate traditionally restricted it to helping Canadian companies tap foreign markets, but with its new powers EDC has pumped more than $6-billion dollars into Canadian companies for largely domestic uses and Mr. Flaherty has continued to extend the emergency powers, which will run until at least March 12, 2013.
The powers created overlap between EDC and BDC, but Mr. Halde said Thursday that the two crown corporations quietly signed a memorandum of understanding late last year dividing up their responsibilities. The protocol outlines when EDC should refer companies to BDC and vice versa. For instance, a company seeking mezzanine financing will be referred to BDC, which has developed a specialty in that area, while a company looking to learn more about the risks of doing business with a certain country will be sent to EDC.