The stars are aligned for our country and we have an unprecedented opportunity to expand our leadership and influence around the globe. “Fortune favours the bold,” as the poet Virgil observed. Canada is living in a time for boldness.
The explosive growth in demand for commodities from China and other emerging markets has tilted the world in favour of resource-based economies like ours, and we need to make the most of it.
This goes beyond our economic impact. We can actually make the world a better place by exporting more of what we do well — what could be called the “Canadian edge.”
Consider three aspects of that competitive edge.
The first is Canada’s overall economic strength, and our ability to lead other nations by example, rather than through perceived economic coercion or a geopolitical agenda.
The second is Canada’s abundance of natural resource wealth, and equally important, our unmatched skill for finding, financing and extracting resources responsibly around the world.
And the third is Canada’s reputation as a conciliator and peacemaker, and our strong social conscience — powerful attributes in a turbulent world facing soaring demand, which in turn leads to major social and environmental challenges.
We have what the rest of the world desperately wants and needs — not only in our resource endowment, but critically, in our skill sets, our reputation and the values we live by. We have the ability to enhance not only our own lives, but those of our partners around the world, and to help ensure enlightened development and use of the world’s resources.
If we embrace a truly global outlook, including open borders at home, we can emerge as a natural resource superpower, and a gold medallist in responsible business. After what we’ve seen in recent years, the podium is clearly open!
The first pillar of Canada’s competitive edge is our underlying economic strength.
We’ve come out of the deepest recession in 60 years in better shape than any of our G7 partners. Our economy has regained all the jobs that were lost in the 2008 recession, and then some, creating 500,000 new jobs, even while 7 million jobs lost in the US have not come back.
On the Gallup Global Wellbeing index, which measures how a country’s citizens rate their quality of life, Canada ranks in the world’s top 10, scoring a 62, while the US checks in at 57. Significantly, these numbers match the employment rate in each country.
Our deficit and debt are by far the lowest in the G7. Our current deficit of less than 3 percent of GDP compares to 11 percent south of the border. And assuming the budget balances in 2015, the federal debt will be only 30 percent of GDP, compared to a G7 average of close to 90 percent. The US debt is now $14.3 trillion, and is forecast to reach close to 100 percent of its GDP next year. Japan’s national debt in 2015 has been forecast to exceed 150 percent of GDP — a forecast made before the devastating earthquake, tsunami and nuclear crisis.
We have the lowest corporate taxes in the G7. When provincial and state taxes are added to the mix, Canada’s average corporate tax rate of 25 percent compares very favourably to 40 percent in the US. This is certainly a competitive edge in a world competing for new investment. It’s no mystery: investment goes where it’s welcome, and investment creates jobs.
And, for the third year in a row, the World Economic Forum ranks the Canadian banking system as the best in the world, ahead of Switzerland.
With the sovereign debt crisis, other nations may envy — and hopefully learn from — Canada’s fiscal prudence and economic stability. But importantly, our economic strength doesn’t pose a threat. The world’s leaders don’t lie awake at night worrying about Canadian threats to their sovereignty.
That perceived lack of any larger economic or geopolitical agenda gives Canada an advantage over economic superpowers like China or the US. It helps to increase trust with host governments, and makes Canadian investors and Canadian companies more welcome around the world.
The second pillar of the Canadian edge is our rich resource endowment, and the expertise we’ve built around it. In terms of world population, Canada ranks 36th. But we are number one in the world in the production of uranium and potash; number two in nickel and cobalt; number three in aluminum and platinum group metals; number five in diamonds and zinc; number six in oil; number eight in gold and copper; and number nine in iron ore. Importantly, we are number three in freshwater supply.
Our remarkable mineral endowment has made mining Canada’s largest export. Canadian mining exports of $96 billion in 2010 made up 19 percent of total Canadian exports. That compares to the auto industry, with exports worth $56 billion, and the forestry industry, with exports of $22 billion.
Clearly, with demand from China and other emerging economies forecast to remain strong, mineral exports will remain a big part of Canada’s trade for the foreseeable future. But while the strength of Canadian mining was built on our own domestic mineral wealth, it doesn’t end there. It’s not just our reserves of minerals — it’s also our great reserves of knowledge, experience and expertise.
We have what the rest of the world desperately wants and needs — not only in our resource endowment, but critically, in our skill sets, our reputation and the values we live by. We have the ability to enhance not only our own lives, but those of our partners around the world, and to help ensure enlightened development and use of the world’s resources.
For many years in the last century, Newfoundland mine shaft sinkers were known worldwide in the mining industry. If you wanted to build a hard-rock underground mine, you wanted a crew from Newfoundland to sink the shaft — they were the best.
Today, the same Canadian reputation for mining expertise extends into scores of related disciplines — from exploration to metallurgy, environmental stewardship, mining law, equity and debt funding, and to governance. You name it, we do it — and we are known to it do it well.
This intellectual capital — the product of a highly educated workforce, world-class educational institutions and sophisticated capital markets — is another precious Canadian resource that we export to great advantage.
Over the years the evolution of Canadian mining has tilted in favour of those who have leveraged their mining expertise onto a global stage — companies like Barrick, Goldcorp, Sherritt, Inmet, Lundin, First Quantum, Kinross and many others.
Kinross is a good example of a “next generation” Canadian mining company. While we are one of the country’s largest companies and have exploration projects in Canada, we don’t own or operate any mines here — our 10 operating mines and four major development projects are located in seven other countries. Yet we have chosen to keep our headquarters in Toronto, in part because of the great critical mass of expertise in mining and financing that resides here.
Toronto, of course, is the world’s acknowledged mining finance capital. In 2009, over $22 billion in new equity was raised by TSX-listed companies in nearly 2,000 transactions — representing 84 percent of the world’s total mining financings and 34 percent of the total equity capital raised.
In addition to the scores of mining and exploration companies with head offices in Toronto, there are hundreds more companies and consultants serving the industry. Toronto is the centre of a Canadian mining ecosystem that includes bankers, capital markets, legal experts, engineering firms and educational institutions.
The skills to be found within that ecosystem go beyond the traditional areas of engineering and finance — Canadians also excel in the relationship-building skills that are increasingly vital for global leadership.
And that takes me to what I see as the third pillar of our Canadian edge.
With our long history of multiculturalism, and a record of accommodating a powerful neighbour, we have developed a gift for reconciling differing cultural perspectives and opposing viewpoints.
In the mining sector, this Canadian trait is essential to operating and developing projects in diverse cultural settings. It means working with overlapping levels of government, understanding the needs of indigenous peoples and working with local communities and other stakeholders.
For companies like Kinross, our skills are increasingly critical as we enter new jurisdictions and deal in real time with issues that are the stuff of today’s headlines — like the struggle against poverty and illiteracy in the developing world, or the interface between Muslim and Western cultures.
Of course our Canadian gift as conciliators and diplomats is closely related to another classic Canadian trait: a belief in clear, fair governance, ethical conduct and social responsibility — to put it simply, doing the right thing. For mining companies trying to enter new jurisdictions, one’s reputation as a good corporate citizen is a critical calling card — without it one doesn’t get far with local communities or governments.
This goes beyond just good business. We are managing precious mineral endowments in our host countries. With this great potential comes great responsibility. As mining companies investing billions of dollars in some of the world’s poorest nations, we have the opportunity to make a dramatic impact.
At Kinross our focus is on building local infrastructure, health and educational facilities, and economic capacity that will outlast our mining operations in the communities where we work. We are now operating two mines in West Africa following a recent acquisition. Recently, we announced a $2.5-million grant to build the very first modern and fully equipped emergency medical facility in Mauritania. Late last year, we donated $10 million to build the country’s first mining and technical school.
We certainly aren’t alone in these initiatives. Scores of mining projects financed at the corner of King and Bay Streets are helping to build schools and hospitals, provide communities with access to clean water and give a head start to local businesses — on every continent around the world.
If you look at the numbers, the global success of Canadian mining is living proof of the Canadian edge. Today, 1,800 Canadian mining companies operate in more than 100 countries. Canadian companies control mining and exploration assets worth more than $500 billion across 5,000 individual projects worldwide.
Our industry’s continuing challenge is to ensure these projects provide a model of the Canadian edge in action — profiting as businesses, while improving people’s lives. In short, ensuring more responsible resource development around the world.
Given its global nature, it strikes me as ironic that mining happens to be an industry where an inward-looking and protectionist tendency has recently been seen in Canada.
Sending protectionist signals to the world creates uncertainty, and business detests uncertainty. Investors want to know what the rules of the game are, and recently Canada has been sending some mixed messages.
The inner workings of government
Keep track of who’s doing what to get federal policy made. In The Functionary.
The Functionary
Our newsletter about the public service.
Nominated for a Digital Publishing Award.
When the Mulroney government created Investment Canada in 1985, the intent was to replace the inhospitable Foreign Investment Review Agency with a pro-investment bias. As Brian Mulroney himself famously declared at the Economic Club of New York in 1984: “Canada is open for business again.”
From 1985 to 2008, Ottawa approved every foreign acquisition of Canadian companies. Not a single deal, friendly or hostile, was turned down. And that includes the takeovers of Inco, Falconbridge and Alcan, three iconic Canadian companies in the mining sector.
Last November, however, Ottawa blocked BHP Billiton’s $38-billion hostile takeover bid for Potash Corporation of Saskatchewan. The Premier of Saskatchewan, Brad Wall, made the case that potash was “a strategic resource,” and in the end the federal government agreed with him.
With the sovereign debt crisis, other nations may envy — and hopefully learn from — Canada’s fiscal prudence and economic stability. But importantly, our economic strength doesn’t pose a threat. The world’s leaders don’t lie awake worrying about Canadian threats to their sovereignty.
The decision raises some basic questions, one of which is consistency. If it is all right for a Swiss company to take over Falconbridge, a Brazilian company to take over Inco and a British company to take over Alcan, why is it not all right to have a well-respected Australian company acquire Potash?
As we have seen, mining is a global business that requires global capital flows.
The recent bid by China Minmetals for Equinox is a good example of the cosmopolitan make up of today’s mining world. Here is a Chinese company bidding for a Canadian-based firm managed out of Australia, with a mine in Zambia and development projects in Saudi Arabia.
It could well be asked, with such a web of international interests, which markets and which governments need to approve this transaction?
Or instead, do we simply assume that a free market is operating as it should, and that capital will flow where it should — without the need for intervention or artificial constraints?
I would say that our policy needs to be heavily weighted to the latter point of view.
It’s a matter of reciprocity. It’s a matter of fairness. It’s about a level playing field. And for Canada, it’s about the message we need to send to the world: we are open for business.
Which brings me to the proposed merger of the TMX with the London Stock Exchange. If you asked me what Canada has to gain from this deal, the answer would be: plenty. If you asked me what Canada has to fear from this deal, the answer would be: very little. What we have to gain is the vital message that Canada is fully engaged in developing global capital markets, increased access to investors in Europe — and beyond — and a deeper pool of liquidity.
From a mining perspective, I see no threat to the TSX. Its global dominance in the mining world is clearly established, as we have already seen, and is not threatened by this merger.
Nothing in the proposed combination diminishes the continued autonomy of Canadian authorities to exercise their regulatory authority and oversight over the TMX exchanges, including the TSX.
The bottom line is that this merger is a natural and forward-looking step in the evolution of global capital markets, an inevitable trend that Canada should embrace rather than resist. To quote Churchill, “If we open a quarrel between past and present, we shall find that we have lost the future.”
So we need to be looking ahead. We need to anticipate the next wave of emerging trends in the global economy, and define our leadership position.
One possible trend could be the development of regional stock exchanges, as more countries seek to develop their resource wealth. With the success of the TSX, Canadians have a great deal to teach other countries about how to create effectively governed exchanges in their own jurisdictions as a vehicle to raise capital.
For example, despite its great mineral wealth, Russia remains extremely underexplored and has almost no junior mining exploration sector.
Kinross is Canada’s number one investor in Russia, and the leading foreign investor in the Russian mining sector. Last year we were appointed to the Foreign Investment Advisory Council in Russia, chaired by Prime Minister Vladimir Putin. This gives us direct dialogue with the policy-makers who are shaping the future climate for foreign investment in Russia.
At the request of the Prime Minister, we are now actively engaged in providing recommendations to the government on how the investment climate in Russia might be improved to encourage more robust investment in their mineral sector.
The point is, there are plentiful opportunities to be proactive and creative in taking what we have learned as Canadians — and the things we do well — to see how they can be exported. We need to be continually scanning the horizon for where opportunity lies, including new, emerging economies.
Several weeks ago the Globe and Mail ran a feature on the growth of South American economies and the relative lack of Canadian investment there.
The article caught my eye because for Kinross, South America is our largest region of activity — we plan to invest more than $2 billion there over the next few years. We have the largest gold mine in Brazil, two mines and two construction projects in Chile and a major development project in Ecuador.
The Globe’s point was that with so much focus on China and India, Canadian firms and the Canadian government have overlooked our expanding opportunities to the south. The news paper concluded that “Canada is missing its chance to ride along with one of the world’s key areas of economic growth.”
Based on the tremendous growth we see in South America, I would concur — and I would encourage other Canadian firms to explore the many investment and trade opportunities available in countries like Brazil and Chile, where we do business every day. With a population of 589 million people and growth rates predicted to be over 4 percent per year for the next five years — twice those of G8 economies — Latin America presents a tremendous and largely untapped opportunity.
Needless to say, the Canadian government needs to be fully engaged. I believe that with proper support from Ottawa, our embassies and trade commissions abroad can take a much more proactive and effective role — not just in South America, but around the world — in opening doors for corporate Canada and coordinating efforts to expand business contacts in other nations.
So where does Canada rank as a committed global trading partner? A recently released Index of Globalization, produced by the KOF Swiss Economic Institute, measures trade and investment volume, and the extent to which countries attempt to protect their own economies by applying restrictions on trade and capital movement. Out of 100 countries, Canada ranked 13th — ahead of all of our G7 partners, with the exception of France.
That is encouraging news indeed. Most important, it is something we need to build on. We need to think globally and act globally — and I’d suggest five points for further discussion.
We need to avoid protectionism at home that could send mixed messages and jeopardize our opportunities abroad.
We need to diversify our trade base and keep a keen eye open for new opportunities around the world, with a targeted list of newly emerging economies.
We need to anticipate future trends — like the necessity for better governance in emerging economies — and help to lead them, not merely be followers.
We need a larger budget for our embassies and trade commissions, to give them the resources they need to better promote our business interests abroad and promote the Canadian edge.
Finally, we need to understand that we don’t have to choose between winning in global business and respecting our traditional Canadian values of integrity, fair play and social responsibility — we can truly have the best of both worlds.
On a planet with an insatiable appetite for natural resources, the “Canadian edge” has never been greater. Neither has the opportunity, nor the potential prize.
This is the time for national dialogue about Canada’s global role in this new century. I would urge our political, business and academic leaders to move this topic to the forefront of a national discussion and debate.
Adapted from a speech to the C.D. Howe Institute in Toronto, April 14, 2011.Â
Photo: Shutterstock
