Canadians exporting more to emerging markets
More Canadian exporters are looking beyond North America for business, and the EDC forecasts a surge in productivity similar to the US a decade ago.
China led the way in EDC’s involvement in emerging markets.
OTTAWA: More Canadian exporters are looking beyond North America for business. Export Development Canada (EDC) helped develop $84.6 billion worth of business volume last year, of which a record $24.7 billion involved emerging markets.
The federal export credit agency reports its products, services and matchmaking expertise in those markets rose 32%, with China, Brazil and India leading the way.
“This is encouraging not only because Canadian companies are actively diversifying, but it also shows they have a longer-term strategy for these markets,” said Stephen Poloz, president and CEO of the Ottawa-based EDC.
Brazil, Russia, India, China and Mexico accounted for $11.4 billion of the volume and EDC-supported trade to Asia increased 21%, which the agency said indicates a much higher penetration into a traditionally challenging market for Canadian companies, but one that is expected to lead world growth.
EDC’s Canadian direct investment abroad (CDIA) reached a total of $4.7 billion, a 12% increase over 2009. The number of CDIA transactions reached 573, which is 79 more than last year. CDIA transactions include loans to help companies open facilities in new markets or participate in joint ventures, as well as insurance for Canadian-owned foreign affiliates.
On the home front, Canada’s trade surplus shrank in January from $1.7 billion in December to $116 million, thanks to a jump in imports, reports Statistics Canada. Exports were up 0.8% to $37.5 billion driven by a 3.3% gain in exports to the US, but imports rose 5.3% to $37.4 billion, charged up by a 16.6% increase in automotive products.
A TD Economics bulletin notes that exports recording a fourth consecutive month of gains and with a strong 7.9% gain in December bodes well for a strong first quarter, despite a Canadian dollar hovering around parity.
A significant increase (1.8%) in imports of machinery and equipment reflects positively on the outlook for business investment in Canada, the bulletin notes.
Indeed, Poloz says Canadian companies are on the verge of their own version of the American “productivity miracle” a decade before the recession.
Besides purchases of new equipment and computers, he says a major driver of the productivity surge came through offshoring unproductive elements.
Poloz points to recent data showing a steep rise in activity by Canadian-owned foreign affiliates as evidence Canadian companies are going global. Sales from foreign affiliates of Canadians companies have been rising by more than twice the rate of exports from firms inside Canada in the first decade of the 21st century, the data shows.
He believes the trend will continue, and may even speed up given the strength of the Canadian dollar, which will make foreign purchases even more attractive.
EDC says exports won’t return to where they were before the fall of 2008 until the end of 2012. During the recession shipments dropped 24%.
The agency forecasts exports will expand 6% this year.
Files from Canadian Press.