Investing In Canada

Canada is the second largest country in the world, occupying close to 10 millionsquare kilometres of land bounded by the Atlantic, Pacific and Arctic oceans. Canada shares a 6,000 kilometre border and the five largest freshwater lakes inthe world with the United States. Known as the Great Lakes, they provide a routeto the Atlantic via the St.- Lawrence Seaway, permitting direct access tointernational markets.

More international companies are investing in Canada. The stock of foreigndirect investment (FDI) in Canada has increased steadily over the past fiveyears to reach over $130 billion last year. Investor confidence is high.

International companies are discovering what firms in the United States haveknown for decades: it pays to invest in Canada. There is a government commitmentto attract foreign direct investment. Canada’s government provides a competitive,welcoming climate for international business. It is committed to fiscalresponsibility, deficit reduction and job creation.

Canada’s per capita purchasing power is second only to that of the United States,among the G-7 countries, and the OECD expects Canada to lead the industrializedcountries in near-term economic growth. Inflation is below two per cent andforecast to remain low. Cost of money is lower than it has been for decades. Exports are at record high, having increased by 14 per cent in 1993 over 1992.

Under free trade, Canadian-based companies have increased their market share ofthe Canada-U.S. market. Further, the Canada-U.S. Free Trade Agreement (FTA),together with the North American Free Trade Agreement (NAFTA) which came intoforce on January 1, 1994, gives Canadian-based companies an unparalleled accessto 365 million people, forming an economy larger than that of the EuropeanCommunity. The combined 1993 GDP value of the Canada-Mexico-U.S. market was inexcess of $8.5 trillion.

Competitive Wages and Benefit Rates:Many international corporations find the Canadian work force to be highly cost-effective. On average, wages in Canada’s business centers are lower than thosein nearly all major business centers around the world. Hourly wages of Canadianproduction workers have risen only 5.4 percent since 1990. Canadianmanufacturing wage rates showed the second slowest growth among G-7 countries in1992, averaging 2.6 percent. In contrast, hourly increases in Britain andGermany have been 12.4 and 14.3 percent, respectively.

Educated and Skilled Work ForceThe cost-effectiveness of the Canadian work force becomes especially apparent inthe high level of skills and education of the workers. Canada leads the G-7countries in advanced education, with about two-thirds of its 20 to 24-year-oldsenrolled in post-secondary education.

Canada’s 67 universities and colleges produce more than 25,000 graduatesannually in engineering, the applied sciences, the physical sciences andmathematics, while its technical institutes provide 11,000 graduates annually inareas relating to electronics and telecommunications.

Canadian operations enjoy low turnover and absenteeism rates, and the days lostto work stoppages have been cut by more than one-half in the past two years. Major international firms have also won many productivity improvements in theirCanadian operations through work place initiatives in labor-management relations.

Canada is a land of immigrants. Employers will find pools of experiencedworkers who also offer fluency in foreign languages, knowledge of internationalcultures and business practices, and networks of business contacts in the keyAsian, European and American markets. Canada is an effective bridge betweenNorth America and Europe. Canadian business practices and laws are a blend ofAmerican and European cultures. Canada’s metric system of measurement means thatCanadian manufacturers can readily meet requirements for European standards andmeasures. In addition, new government initiatives, such as the Skill InvestmentProgram, are further enhancing Canada’s ability to train and retrain workers fortomorrow’s growth industries.

Canada’s rich mineral reserves and natural resources, coupled with its cost-effective ability to extract and harvest, enable Canada to be a leader inexports of both raw and processed commodities. Canada is the world’s topproducer of newsprint and zinc, as well as the second largest producer of nickel,pulp and potash. Canadian-based processors and manufacturers can enjoy reducedtransportation costs by being close to these globally competitive sources ofsupply.

In addition to raw materials, Canada’s rich mineral deposits involve mineralfuels and river systems that have been tapped for massive energy reserves. Theseinclude huge deposits of oil and gas, coal and uranium, as well as virtuallyunlimited hydroelectric generating capacity. Canada is one of two G-7 countriesthat are self-sufficient in oil supplies. Canada has the lowest electricitycost of all the G-7 countries, and is the only G-7 member with enough naturalgas to be a net exporter. The resulting benefits of Canada’s energy abundance toindustry are widespread. For example, low-cost hydroelectric power enabledCanada to become a leading exporter of aluminum and aluminum products.

As a consequence of the geographical vastness of Canada, the communications andtransportation infrastructure has become highly effective and advanced. Heavyinvestment in fiber optics and high speed transmission technology, together witha newly competitive long-distance market, will help maintain Canada’scompetitive costs. The need to provide effective communications links fromcoast-to-coast led to Canada’s emergence as a major telecommunications equipmentexporter, and an international leader in satellite communications. Collectively,Canada’s transportation systems (roads, railroads, air transport and portaccess) is the cornerstone of its industrial strength.

Canada’s business service sector has expanded considerably over the past 20years, and now provides highly specialized service for all internationalinvestor needs. Canadian banks rank among the largest in North America, withinternational offices in the U.S., Latin-America, Europe and Asia. Trustcompanies and other financial institutions provide additional financial services.

International investors who prefer to deal with financial services firms basedin their home country will find that many leading international banks,investment dealers and insurance companies have offices in Canada. For example,there are Canadian offices for global asset leaders of American, British, French,German, Japanese, Hong-Kong and Swiss banks. Stock exchanges in Toronto, andVancouver provide many international firms with Canadian equity participation.

Factors that discourage direct investment in Canada. Canada is an excellent country for direct investment, although there are fewfactors that might discourage direct and foreign investment;

• The politicalinstability that was created by the Quebec referendum, had discouraged currentforeign investment from expanding, and put a halt in new investments. As long asthe Quebec situation is not solved, uncertainty by foreign investors willcontinue.
• Factors that allow or make Canadian Industry to be competitive or notcompetitive;-Dynamic economies constantly re-invent themselves and grow through innovation.

To grow and prosper, business needs an efficient marketplace an environment thatencourages innovation and expansion, free of unnecessary barriers.

• Increasing productivity, and creating jobs for Canadians. help the privatesector create more and better-paying jobs. Spending smarter, targeting resourceswhere the payoff is greatest, and reallocating funds to new priorities.
• Increasing global trade and advances in technology are changing the worldeconomy. Countries that ignore what is happening and take a “business-as-usual”attitude will fall behind. On the other hand, countries that take bold actionsby adapting to new technologies and the realities of today’s economy will meetthe challenges of tomorrow head on, seize new opportunities, and build a bettercountry.
• Build a positive entrepreneurial climate and help small businesses grow-Expand markets for jobs and growth through trade-Create an efficient and modern infrastructure-Increase global trade and business dealings, and continually upgrade Canadians’skills and knowledge levels to ensure jobs and growth. All Canadians,individuals as well as groups in both business and government, need to worktogether to improve their chances for success-Helping small business grow. Small business creates jobs, almost 90 percent ofthe new jobs in the Canadian economy. The priority is to make sure that nothingstands in its way, by removing obstacles to growth.
• Cutting paper burden: Entrepreneurs should spend more time growing theirbusinesses and less time filling out government forms-Encouraging investment in small business:-Encourage greater cooperation between levels of government, and work with theprovinces in streamlining the regulatory regime.
• High standards to boost sales: Developing and adhering to common standards forproducts and services is important in a highly competitive, global economy.
• Concentrate attention on those countries seeking to become members of the newWorld Trade Organization, and countries such as Chile who may join the NorthAmerican Free Trade Agreement (NAFTA).
• Increase the number of exporters and reduce the current account deficit and, asa result, create more jobs for Canadians.
• Building global linkages. A more strategic approach to promoting Canada as aninvestment site within NAFTA.

The two likeliest strategies to adopt: Open a plant in Mexico to assemble the auto parts. Canadian suppliers mustcompete on the basis of lowest-cost, highest-quality, high value-added;components. The low value of the peso will encourage parts and vehicle sourcingfrom Mexico while discouraging exports to the Mexican vehicle market.

Globalcompetition will intensify for both parts companies and assemblers, particularlyas emerging countries struggle to develop their economies, many using theautomotive sector to spur economic growth. It is expected that trade barrierswill be reduced further, thus opening new market opportunities for Canadianfirms. The risk of adopting this strategy is the firm will have to deal with acompletely different sets of rules and regulation of the Mexican government,that might not suit the firms goals and policies.

Outsource the assembling of auto parts to Mexican plants. In the longer term,the Mexican market is expected to increase assembly capacity over 50 percent, toabout 2 million units per year, and parts sales are expected to grow to $20billion. The phasing out of the protectionist Mexican Auto Decree will createsignificant trade, sourcing and investment opportunities for both assemblers andparts manufacturers. The risks of adopting this strategy are the possibilitiesof jeopardizing quality of the firms auto parts, and the difficulty ofimplementing quality and control check on their products.

The services that Canadian Government can provide to assess Canadianbusinesses:Department of Foreign Affairs and International Trade (DFAIT)DFAIT promotes and protects the interests of Canada and the common values ofCanadians throughout the world. Within its International Trade mandate, DFAITstrives to maintain and enhance Canada’s economic health and competitiveness byactively pursuing and promoting Canada’s economic and commercial interests withits global partners.

Through International Trade Centres (ITCs) in Canada andits missions abroad, DFAIT implements a wide range of initiatives designed toattract productive foreign investment to Canada and promotes Canadian firms asstrong investment, commercial and technology partners. DFAIT programs andinitiatives ensure that Canadians have full access to investment opportunitiesin Canada and abroad. DFAIT meets its objectives through working closely withfederal departments such as Industry Canada, as well as with the provinces andmajor business and industry associations.

Services provided, in Canada, by DFAIT include basic export and trade-relatedadvice, investment and technology development counselling; includingpublications, market studies and information on government assistance programs.

To support its activities abroad, DFAIT has five geographic branches, eachfocused on a specific area of the world: Africa and the Middle East, Asia-Pacific, Europe, Latin America and the Caribbean, and the United States. DFAITalso has a network of trade commissioners and commercial officers, in Canada andabroad, to assist Canadian firms and promote trade, investment, technology andstrategic alliances.

Canada’s International Business StrategyCanada’s International Business Strategy is a blueprint which lays out howgovernment and industry can best work together to generate new internationalopportunities for Canadian business. CIBS is central to the federal government’scommitment to a Team Canada; partnership with Canadian industry and theprovinces.

The specialists to use in import/export: Export DevelopmentCorporation (EDC) EDC is a customer-driven, financial services corporationdedicated to helping Canadian business succeed in the global marketplace. EDCfacilitates export trade and foreign investment through the provision of riskmanagement services, including insurance (export credit, foreign investment),financing and guarantees to Canadian companies and their customers.

Canadian business centerWhere you meet and how you present yourself could make the difference betweenclosing a deal or closing a door. That’s what the Canadian Business Center isall about. The Canadian Business Center can play a key role in your positioning,marketing, and sales strategies. You can host special events including salespresentations, seminars, receptions, meetings an exhibits in the deluxe meetingfacilities.

The firm can have a single contact point for their Mexican clients and partners,where they can. reach you any time you are in Mexico. Up to 30 fully equippedindividual booth spaces available Ideal for a variety of events including mini-trade shows, product demonstrations, special exhibits and receptions.

The centeroffers Professional Services. The Canadian Business Center can give youimmediate access to the resources of the Canadian Embassy and the extendednetwork of clerical resources to assist you with all your businesscorrespondence;Translation and Interpretation Services to facilitate quick and effectivecommunication with your Mexican partners and clientsCentrally located in downtown Mexico City, the Canadian Business Center serviceoffered through the Department of Foreign Affairs and International Trade’sAccess North America program. It is part of an overall strategy to helpCanadian companies take advantage of emerging business opportunities in Mexico.

Experts In International Law and TradeFor the firm to survive and be competitive in the global market, it must beaware of the international laws and regulations of the foreign countries theyare dealing with. To facilitate this task, its extremely important to consultexperts in international laws and global trade.