If there is one thing investors like before committing funds to projects, it’s a sense of stability. They want to know circumstances won’t unexpectedly change and sour their investment. This is particularly true with foreign investors who entrust their capital to a nation over which they have no control. That makes them more skittish and inclined to close their wallets at any sign of political instability or lack of trustworthiness within the government.
During her testimony at the Emergencies Act inquiry, Finance Minister Chrystia Freeland noted how Canada is having trouble attracting foreign investment. She got close to flying right over the target but then missed with an almost audible whoosh as she blamed weak investor confidence on the truckers’ Freedom Convoy protest.
There can be no doubt the protest came with an economic cost for Canada. Having two major border crossings closed to commercial traffic for weeks caused damage to companies on both sides of the border reliant on a steady flow of goods. And the optics of thousands of protesters camped in the nation’s capital while a hapless prime minister appeared to be able to do nothing—aside from inflaming the issue through insulting and dismissing the protests—didn’t do the country any favours on the world stage.
Freeland testified that a Canadian bank CEO was told by a prospective investor while on a trip to the USA: “I won’t invest another red cent in your banana republic in Canada.”
Those are some strong words, and we should be concerned when business leaders are using them. Banana republics are usually characterized by overbearing and often corrupt governments, and they can be unstable places to invest in due to the risk of citizen uprisings. That is a reflection of poor governance rather than the protesters though, and it takes more than a few months to create such a reputation.
Foreign investors look at the long game. They put funds into large capital projects where the timeline is measured in decades rather than months or years. While the convoy protests were economically disruptive, they were little more than a blip as far as large-scale investors are concerned. The protests did indicate restlessness and discontent among the citizenry that could impact future investments, but that is a consequence of years of weak governance.
Freeland demonstrated an understanding of the problem when she said, “But one of the things we identify in the April budget is underinvestment as being a core problem for the Canadian economy, an Achilles’ heel. We don’t have a high enough rate of business investment.”
She won’t admit that both the cause and the solution to the problem of Canada’s investment reputation land in the hands of the government.
She was right. While the world is starving for sources of energy, Canada has had 15 LNG projects stalled that can’t get out of the blocks, while new large energy projects are nowhere to be seen. Although Canada may have the products the world needs, investors just can’t trust their dollars to the country, and can you blame them?
Prime Minister Trudeau killed the Northern Gateway pipeline after Enbridge invested millions of dollars and years into it to meet 2009 conditions. Energy East was regulated to death, and the Trans Mountain pipeline expansion had to be purchased by the federal government after they drove Kinder Morgan away from the project. The Coastal Gaslink pipeline has been hopelessly delayed by illegal protests the government seems loath to address, and Trudeau was nearly silent when President Biden killed the Keystone XL pipeline.
Trudeau’s West Coast tanker ban helps ensure new conventional oil and gas development remains stunted as well. There is little sense in producing it if you can’t sell it.
German Chancellor Scholz came on bended knee seeking energy products, only to be bizarrely told by Trudeau that there was no business case for exporting natural gas. How can you say that when you literally have a paying customer in front of you?
Yes, Freeland is correct when she says Canada has become an investment pariah and that it is harming the economy. That has nothing to do with the truckers’ convoy and everything to do with a government inclined to kill large capital projects in their tracks. Canada just isn’t a safe place to invest.
