CANADA ECONOMICS

ENERGY

The Globe and Mail. 27 Oct 2017. ‘It’s like night and day’ Brazil’s battered oil industry sees new hope. Brazil: Oil sector accounts for about 15 per cent of national GDP
STEPHANIE NOLEN

W hen engineers, analysts, executives and researchers from around the world gathered in Rio this week for a conference on offshore oil-drilling technology, they encountered something unfamiliar: optimism.
There is a new feeling of possibility in Brazil’s battered oil industry, after an auction of offshore concessions last month drew a record take and raised high hopes for deepwater “presalt” fields that go up for bids on Friday.
A successful presalt auction will be a concrete sign that Brazil is emerging from recession – and will generate desperately needed cash and good news for the beleagured government of Michel Temer.
“That feeling of optimism is substantiated; there’s a lot happening,” said Horacio Cuenca, an oil-industry analyst in Rio with the research firm Wood Mackenzie. “It’s like night and day compared to a year ago, when the government changed, and especially compared to the last auctions in 2015, which were a disaster.”
On Wednesday, the President managed to hold on to his job in the face of a second round of criminal charges for corruption, after doling out an estimated 11.7 billion reais ($4.6-billion) in constituency funding and debt forgiveness to members of the National Congress who voted on whether he should face trial. Mr. Temer’s popularity rating hovers around 3 per cent and he will likely struggle, during his final year in office, to pass a package of unpopular pension cuts and other legislation that international investors were waiting for.
But Brazil’s economy appears to be rebounding in spite of the corruption and mismanagement scandals that have surrounded Mr. Temer since he took over 14 months ago, following the impeachment of Dilma Rousseff. The annual inflation rate is now 2.5 per cent, the lowest rate in 19 years. Unemployment is still high – 12.6 per cent in August – but is trending down; there were 34,000 new jobs in September. The benchmark Bovespa stock index hit an all-time high last month.
A rejuvenated oil industry will help: The sector is responsible for nearly 15 per cent of gross domestic product and significant changes in regulations by the Temer government have helped entice international players back into this market. An oil turnaround is critical for the state of Rio de Janeiro, in particular, where a significant chunk of the budget comes from oil royalties. The state is bankrupt and has made huge cuts to health, education and public-security budgets; schools have been closed by strikes by unpaid teachers, hospitals lack basic drugs and services and violent crime has increased sharply.
Mr. Temer has eliminated or reduced local-content requirements that obliged international players to build wells, ships, pipeline components and platforms in Brazil, and to partner with the state energy firm, Petroleo Brasileiro SA (Petrobras), with a minimum 30-per-cent stake. The rules were put in place by the left-leaning Workers’ Party government of Ms. Rousseff and her predecessor, Luiz Inacio Lula da Silva, in an effort to ensure oil profits benefited ordinary Brazilians. Under the old rules, Petrobras – the centre of the giant Lava Jato corruption scandal – was the mandatory operator on presalt fields; now, the company has right of first refusal, but international firms can bid to operate alone in the presalt fields.
“The change in local-content rules is the key,” Mr. Cuenca said. “That’s what was stopping everything.” Brazil had quickly exceeded local capacity to supply ships and platforms and the backlog was stalling work for years, he said, scaring away the major companies who had cash to invest here and exacerbating a downward economic spiral that sent Brazil into its worst recession in nearly a century.
The Temer government also extended by two decades a preferential-customs regime for the oil and gas industry called Repetro. There is some uncertainty among investors about what next year’s election may bring – Mr. da Silva currently tops the polls – but that is only serving to spur more investment now, Mr. Cuenca said.
But Claudia Rabello, who heads the Rio energy consultancy OGE, cautions that while she expects large bids from all the majors in the presalt auction, it is nevertheless too soon to be unreservedly optimistic. The customs and local-content requirements could still be challenged and the environmentallicensing process is holding up production for years. Most of all, investors want security, she said, and they don’t have it, today. “For businesses to have security to invest, the economy, the political and institutional context still need to improve,” she said.
Mr. Temer is so weakened by the fight to fend off criminal action – and has had to spend so heavily to buy support in Congress – that he is unlikely to be able to pass more legislation unpopular with a public battered by austerity; inequality has risen sharply here in the past two years after years of decline.
When the presalt fields were discovered in 2006, oil prices were at record highs and the discovery seemed to guarantee prosperity for a booming Brazil. But crude prices have fallen to around $55 (U.S.) a barrel, while Brazil entered years of economic and political turmoil. Meanwhile, the presalt developed new competition: The United States doubled its output from shale, a cheaper, more easily accessed source than Brazil’s deepwater fields, while Mexico also opened up to foreign investors. Renewableenergy sources have expanded their market share.
And by 2015, Petrobras was embroiled in the Lava Jato scandal that helped bring down Ms. Rousseff and cripple the economy. Used for years as a source of kickbacks to fuel the political system, the company was hobbled by mismanagement and massively in debt, forced to lay off tens of thousands of workers and slash production targets. But Mr. Cuenca said the company has made significant steps to improve its transparency and accounting procedures and learned significantly from its partnerships with international firms, including Royal Dutch Shell PLC and Norway’s Statoil ASA.
On Sept. 27, Exxon Mobil Corp. bet big on Brazil, buying rights to 10 deepwater blocks, six of them to be developed in partnership with Petrobras. The government earned $1.2-billion in initial payments – a record for Brazil. Exxon’s big play turned heads – its winning bid was more than five times larger than the next highest – and primed expectations the company will also make a major offer in the presalt round, the first such auction in more than four years. Competition on Friday is expected to be fierce – there are 12 billion barrels of estimated oil reserves in the eight blocks at auction, worth about $600-billion at current prices.
Oil extraction in the presalt layer – as much as two kilometres below the surface of the Atlantic Ocean – is a costly and risky endeavour. But Mr. Cuenca noted that the presalt fields, while expensive to develop, produce fast “and once they start, they don’t stop” – for years or decades – giving them a break-even price of $40 to $50.
Brazil plans seven more bidding rounds after Friday, through 2019.

BOMBARDIER

The Globe and Mail. 27 Oct 2017. Ottawa’s awkward matchmaking in Bombardier deal with Airbus. Yakabuski: Airbus CEO has bigger problems than C Series
KONRAD YAKABUSKI

It’s hard to decide which recent revelation to emerge from the twisted C Series saga is more disturbing. Is it that Bombardier was desperate and deluded enough to think it could sell technology paid for by the Canadian taxpayer to Chinese interests, or that Ottawa intervened so directly to engineer a deal between Bombardier and one of its much bigger Western rivals?
Reports that Bombardier was in talks to sell a stake in the C Series to a Chinese company – most likely stateowned Commercial Aircraft Corp. of China, or Comac – defy logic given that most Western countries still take a dim view of transferring technology developed within their borders to entities controlled by the Chinese government. Ottawa would surely have vetoed any C Series tieup with the Chinese out of national security concerns and the terrible political optics in giving the Chinese such easy access to intellectual property developed in Canada.
While a tie-up with a Chinese entity might have helped Bombardier generate orders in China, it might have also have effectively shut the C Series out of the U.S. and European aircraft markets. China wants to become a global aerospace force and Comac has been developing planes to compete with Boeing and Airbus.
But neither the U.S. government nor the European Union would want to help it reach that goal by opening their markets to a Comac-controlled C Series.
Hence, that Ottawa would move to discourage Bombardier from pursuing talks with a Chinese partner is not surprising. What is surprising is that the federal government would so actively try to play matchmaker between Bombardier and Airbus, especially after its earlier failed attempt to engineer a C Series deal on nearly identical terms between Bombardier and Boeing.
Since when is it the job of the Canadian ambassador in Washington to play private deal maker? To be sure, Boeing’s trade complaint against the C Series called for drastic action to save the aircraft program from near-certain death in the face of order-killing anti-dumping and countervailing duties. But Ambassador David MacNaughton’s attempt to play midwife to a deal between Boeing and Bombardier, undoubtedly on orders from his bosses in Ottawa, suggests a level of dirigisme that would would impress even French bureaucrats, masters of state meddling in business.
It should have been clear to Ottawa that, once Boeing launched its trade case, there was no turning back for the U.S. aerospace giant. It had by then already concluded that it stood to gain much more by killing the C Series than by owning a piece of it. Boeing’s only mistake was assuming that Airbus, which had kicked the C Series tires in 2015, had come to the same conclusion.
And it had, until Bombardier came calling again in August, this time at Ottawa’s urging. In the end, Bombardier handed over control of the C Series for nothing, throwing in an option to buy the other 49.9 per cent of the C Series in 2025 and warrants to buy Bombardier shares that are now worth more than $50-million, based on the increase in Bombardier’s stock price since the Oct. 17 deal.
But how much incentive Airbus has to push C Series sales – particularly those of the 150-seat CS300 – over its own A320neo aircraft remains uncertain.
Airbus sales chief John Leahy, who is retiring by year-end, told Leeham News and Comment that Bombardier and Airbus “are blatantly not going to be discussing product strategy or working on deals together until the deal closes.”
Besides, Airbus chief Tom Enders has much bigger problems to worry about than the C Series, specifically the investigation Britain’s Serious Fraud Office and its French counterpart, le Parquet national financier, have opened into potential illegal commissions. According to the French business newspaper Les Échos, this has already led Mr. Enders to initiate an internal corruption investigation and begin dismantling the Service & Marketing Organization at the heart of the charges.
So the Airbus sales team that Bombardier bragged will soon be helping it rack up C Series orders has its own mess to clean up, which may explain why Airbus has fallen so far behind Boeing in generating new orders so far in 2017.
Since Ottawa’s hands are all over the Airbus-C Series deal, it now owns it.
If the transaction lives up to the spin Bombardier chief Alain Bellemare and Mr. Enders have put on it, then the C Series may indeed have a bright future and Prime Minister Justin Trudeau’s government will be able to claim credit for saving Canada’s aerospace bacon. If it doesn’t, blame Ottawa.

NAFTA

The Globe and Mail. 27 Oct 2017. Off balance: NAFTA and labour mobility
PARISA MAHBOUBI, Senior policy analyst at the C.D. Howe Institute

A s it contemplates the possibility of a modernized NAFTA, Canada should seek to improve labour mobility throughout North America to address skill shortages in Canada.
The narrative around the Trump regime focuses on Canada’s increased advantage in attracting skilled international workers. But those same tougher U.S. immigration policies bring a threat: American employers may try to hire more Canadians who can easily cross the border to meet the demand for high skills.
As a result of rapid technological changes, employers’ needs for highskilled workers grow every year. Since the North American freetrade agreement came into force more than 20 years ago, new occupations have been created. The Canadian market faces a labour shortage for many of these new jobs.
Thus, the inflow of foreign workers with modern technical and professional skills is vital to driving innovation and for businesses to start up and scale up.
Increased international labour mobility opens more doors and opportunities for workers who are willing to cross borders, and helps employers find the right talent to fill jobs more quickly. Thus, it improves productivity and drives economic growth.
Despite its positive effects on the receiving economy, greater unrestricted labour mobility can lead to higher job-vacancy rates in the sending country.
In order to gain from labour mobility under a trade agreement and avoid brain drain, countries should build comparative advantages at attracting talents.
Under NAFTA, citizens of Canada, the United States and Mexico are able to cross the borders with relatively little red tape to work at any of the 63 professional occupations covered by the agreement, such as engineers, management consultants and scientific technicians and technologists. Statistics show that Canada has larger labour mobility with the United States than Mexico through this trade treaty: The number of NAFTA visas issued by Canada in 2016 for Americans is more than 25 times higher than for Mexicans.
Every year, a large number of Canadians (150,000 in 2016 according to a report) enter the United States under the non-immigrant NAFTA professional visa.
Considerably fewer Americans (17,602) obtained a NAFTA work permit to take up a job opportunity in Canada.
Labour-mobility imbalance between Canada and the United States is a result of plentiful job opportunities with higher wage rates in the United States.
The average wage rate is generally higher in the United States than in Canada, although it varies between professions.
Critically, however, engineering and computer science are among the highest-paid jobs in the United States, while that is not the case in Canada.
About one-third (34 per cent) of Canadian employers had difficulty filling jobs last year, according to the latest ManpowerGroup Talent Shortage Survey. The flow of Canadian graduates to the United States in certain fields such as mathematics, computer and information science, engineering and related technologies is high, according to a Canadian study.
Any expansion of labour mobility with the United States under NAFTA should take into account the need to ease the inflow of highskilled workers to meet Canada’s skills shortages. In order to do so, we can deploy other tools that complement trade agreements.
Canada allows entry of eligible foreign workers through various channels. These pathways are generally divided into two broad programs: the Temporary Foreign Worker Program (TFWP) and the International Mobility Program. Employers who wish to hire foreign workers under the TFWP are usually required to obtain a Labor Market Impact Assessment, a document that proves the existence of skills shortages in the category they want to hire.
Under NAFTA and all other trade treaties, employers are exempted from that requirement.
Ottawa could also facilitate the inflow of U.S. workers in certain occupations through the TFWP. Canada, however NAFTA talks turn out, needs to focus on reducing the bureaucratic challenges to Canadian companies that are unable to meet their skills needs through the domestic labour market.

BLOOMBERG. 27 October 2017. How a Trump Idea on Cars and Nafta Could Backfire: QuickTake Q&A
By Josh Wingrove

President Donald Trump wants to shrink the U.S.’s half-trillion-dollar trade deficit in goods and services in part by rewriting the North American Free Trade Agreement’s "rules of origin." Those rules dictate how much of a product must be made in the three Nafta countries -- Canada, Mexico and the U.S. -- to qualify for the treaty’s free-trade benefits. Trump is asking Canada and Mexico to tighten considerably the regulations for autos. He hopes this will bring car manufacturing jobs back to the U.S., though such a step also could backfire.

1. What are the rules of origin now?

Generally speaking, a car is subject to Nafta’s preferential trade terms if at least 62.5 percent of it comes from the U.S., Canada or Mexico. (The threshold is generally 60 percent for individual parts not yet attached to a vehicle.) Automakers must specifically prove where some parts come from; that amounts to red tape, they say. And yet there’s something of a loophole: Not all parts and components are on the so-called tracing list, which determines which products’ origins must be tracked. Anything not on the list isn’t tracked, so it’s effectively treated as domestic content, even if was made abroad.

2. Why aren’t all car parts counted?

As time goes by, the original Nafta accord becomes less and less comprehensive in what parts it accounts for. While still considered restrictive, the list is now outdated, opening the door to foreign parts that weren’t in cars built in 1994, such as complex computer systems. In other words, under the existing tracing list, a Nafta car can get more and more of its pieces from overseas and still get the pact’s preferential treatment.

3. How does Trump want to change this?

He would:

• bump the auto minimum threshold from Nafta countries to 85 percent from 62.5 percent. 
• add a U.S.-specific requirement of 50 percent -- unprecedented under the current pact.
• expand the tracing list to include nearly everything.
• strengthen verification of where parts came from, rather than deeming some to be from North America.

Trump’s proposal would mean tougher rules and more legwork for companies to comply, and a complete disruption of existing production systems. He also wants swift implementation of the new rules, giving automakers as little as one year to adapt.

4. Wouldn’t that make it more expensive to make cars?

Yes, for companies doing business under a revised Nafta. While cheaper parts and Mexican labor have caused U.S. job losses under Nafta, they also have made U.S. cars more affordable to consumers, who could suffer from sticker shock if Trump gets his way. There could also be substantial costs for automakers to re-orient supply chains to comply with Trump’s rules-of-origin changes. In the end, automakers may not bother with the new rules.

5. What else could they do?

Automakers might abandon Nafta altogether, choosing instead to build abroad and pay an import tariff to bring vehicles into the U.S. For cars, the tariff is just 2.5 percent -- likely far cheaper than contorting an existing supply chain on short notice. For trucks and SUVs, the tariff is higher, 25 percent, so there’s more incentive for Nafta compliance in those categories. Automakers could also avoid Nafta rules by manufacturing and selling exclusively within the U.S. -- but that, too, would raise the price of a vehicle.

6. Have carmakers indicated how they’d respond?

The Motor and Equipment Manufacturers Association has warned that Trump proposals would lead to higher costs and ultimately risk jobs. Flavio Volpe, who represents Canadian parts makers, said of the proposed new rules, "At some point, with the layering of all these things in it, you’d say, ‘I’m not going to try.’" Then there’s the example of what Ford Motor Co. did. After being criticized by Trump for planning to move production of its second-best-selling U.S. car to Mexico, Ford instead is moving it to China.

7. Why is Trump doing this?

For him, Nafta talks are all about trade deficits. The U.S. trade deficit with Mexico is fueled in part by manufacturers moving plants south of the border, and automakers are a poster child for that. U.S. Commerce Secretary Wilbur Ross has argued that the share of U.S.-produced content in goods imported from Mexico was only 16 percent in 2011, down from 26 percent in 1995, while Chinese content is rising. He partially blames the rules of origin.

8. Will Mexico and Canada agree to this?

Not so far. Along with a U.S.-requested sunset clause and changes in dispute settlement, dairy trade and government procurement, the proposed revisions to rules of origin were flatly rejected during the fourth negotiating round, which ended Oct. 17.

9. Would Trump’s changes narrow the U.S. trade deficit?

Maybe. They also could raise it. That’s because the tougher standards would give companies an incentive to import cars to the U.S., rather than make them in the U.S. Ross, for one, has downplayed that scenario. "I don’t think it’s that hard at all," he said during a discussion of the Nafta proposals in Washington on Oct. 11. "I think you will find we will get increased percentages in the rules of origin and I think you’ll find the car companies will adapt themselves to it."

The Reference Shelf

• QuickTake explainers on the issues in the Nafta talks, the complicating role of Trump’s desire for a border wall and free trade’s foes.
• A Bloomberg View editorial argues that Nafta is working just fine.
• A U.S. Department of Commerce study of U.S. content in imports under Nafta.
• A Bloomberg News article on the auto sector and Nafta talks, and another on why auto companies oppose revamping Nafta. 
• An explanation of the "auto alley" that employs more than 1.5 million people in three countries.

BLOOMBERG. 26 October 2017. Canada Warns Nafta Talks Can’t Be ‘Winner Take All’
By Josh Wingrove and Eric Martin

• Freeland: Nafta deal looks difficult in current situation
• Commerce Secretary said U.S. can’t ‘offer anything’ in talks

Canadian Foreign Minister Chrystia Freeland criticized a one-sided strategy in Nafta negotiations after U.S. Commerce Secretary Wilbur Ross said he wasn’t prepared to make concessions to reach a deal.

“A negotiation where a one party takes a winner-takes-all approach is a negotiation that may find some difficulties in reaching a conclusion,” Freeland said Thursday during a press conference in Toronto, without specifying which party she was referring to. She later added Canada understands the value of opening new export markets in China and elsewhere. “Perhaps now we understand it more urgently than ever.”

Ross, speaking Wednesday to CNBC, said no one should prejudge talks and that he expects there will be a Nafta “proposal” he can eventually take to U.S. President Donald Trump, though said whether Trump accepts it is another matter.

“But we’re trying to do a difficult thing. We’re asking two countries to give up some privileges that they have enjoyed for 22 years, and we’re not in a position to offer anything in return, so that’s a tough sell,” Ross said. “And I don’t know that we’ll get every single thing we want. The question is: will we get enough to make it worthwhile?”

Ildefonso Guajardo, Mexico’s economy minister and lead Nafta negotiator, told reporters on Sunday his country has some margin to compromise with the U.S. on Nafta, without specifying in which areas. The government will be analyzing that issue between now and the next round of talks, scheduled for Mexico City from Nov. 17-21.

The previous round wrapped up this month with ministers trading barbs amid five key impasses on dairy, automotive content, dispute panels, government procurement and a sunset clause. Mexico and Canada are effectively dismissing U.S. proposals on all five.

ECONOMY

Employment and Social Development Canada. October 27, 2017. Government of Canada Strengthens Canada Child Benefit

London, Ontario - When you have an economy that works for the middle class, you have a country that works for everyone. The investments the Government has made in people, in our communities and in our economy are working. Canada has the fastest growing economy in the G7—and we are reinvesting the benefits of that growth back into the people who contribute most to that success.

Today in London, Minister Jean-Yves Duclos highlighted how the Government intends to strengthen the Canada Child Benefit (CCB) by making annual cost of living increases starting in July 2018—two years ahead of schedule. For a single parent of two children making $35,000, a strengthened CCB will contribute $560 in the 2019–20 benefit year towards the cost of raising his or her children. That means more money, tax-free, for books, skating lessons or warm clothes for winter. The added confidence the CCB brings to families has been shown to have an immediate impact on economic growth.

This week’s Fall Economic Statement provides an update on how the Government’s investments in the economy and the middle class are delivering real results for Canadians:

• Canada is the fastest growing economy in the G7—by a wide margin—growing at an average rate of 3.7 per cent over the last year, which is the fastest pace of growth since early 2006.
• Job creation is strong, with over 450,000 new jobs created in the last two years, and the unemployment rate at its lowest level since 2008.
• Growth is forecast to be 3.1 per cent in 2017—significantly above expectations at the beginning of the year.

As our plan works to strengthen the economy, the Government will continue to make smart, targeted investments in an innovative, inclusive and sustainable economy that works for the middle class. With Canada’s economy growing faster than it has in over a decade, the Government is reinvesting in Canada’s middle class by cutting taxes for small business, and providing more money to families through the CCB, while helping low-income Canadians by bolstering the Working Income Tax Benefit. By working together, we will make sure Canadians have every opportunity to succeed, and to build their future and a country we can all be proud of.

Quotes

“The tax-free Canada Child Benefit provides a welcome boost for Canadian parents. Whether the extra money is used for things such as signing up their children for summer camp, helping cover the family grocery bill, or buying warm coats for the winter, the CCB helps parents with the high costs of raising their kids. The investments made in people, in our communities and in our economy have put more money in the pockets of those who need it most, are creating more well-paying jobs and are giving Canadians greater confidence in their future.”

- Jean-Yves Duclos, Minister for Families, Children and Social Development

Quick Facts

• The CCB currently provides a maximum annual benefit of up to $6,400 per child under the age of 6 and up to $5,400 per child for those aged 6 through 17.
• About 65 per cent of families receiving the maximum CCB amounts are single parents, of whom 90 per cent are single mothers. 
• During the first benefit year, over 3.3 million families received more than $23 billion in CCB payments, and those better off under the CCB saw an average of almost $2,300 more in benefits, tax-free.
• The CCB has helped lift 300,000 children out of poverty and, by the end of this year, child poverty will have been reduced by 40 per cent from what it was in 2013.

See also section "Economy" at: http://e-gonomics.blogspot.ca/2017/10/canada-economics-venezuela-global_25.html

MONETARY POLICY

The Globe and Mail. 27 Oct 2017. Bank of Canada must explain its focus on data dependency
STEVE AMBLER, the David Dodge Scholar in Monetary Policy at the C.D. Howe Institute and professor of economics at the school of management, University of Quebec at Montreal
JEREMY KRONICK, senior policy analyst at the C.D. Howe Institute.

Models are indispensable for developing forecasts of inflation and the rest of the economy. … Models provide us with a coherent starting point, but we need to apply real-world judgment before reaching a policy decision. 

Stephen Poloz Bank of Canada Governor

I n its interest-rate announcement on Wednesday, the Bank of Canada once again underlined that future changes in rates would be conditional on the data. Wednesday’s news statement noted that the Governing Council will continue to focus on how sensitive the economy is to interest rates, how economic capacity evolves, and changes to wages and inflation.
That is fine as far as it goes, but for households and businesses trying to anticipate changes in the overnight rate, and therefore changes to market rates, knowing that monetary policy is “data dependent” – as the phrase has it – leaves a lot of unanswered questions.
To clear up the uncertainty, the bank should consider publishing its projected path forward for interest rates.
Rightly, the bank combines economic models with discretion. As Governor Stephen Poloz noted in a September speech, “Models are indispensable for developing forecasts of inflation and the rest of the economy. … Models provide us with a coherent starting point, but we need to apply real-world judgment before reaching a policy decision.”
Some of this discretion comes from additional variables that are not directly in the bank’s forecasting models, including the bank’s own Business Outlook Surveys that contain more finely detailed information on how businesses see the future. One unanswered question for people trying to understand what the Bank of Canada will do is how people at the bank integrate the survey information into their forecasts. The private sector would gain from the BoC sharing how they see these relationships in order to better understand how the bank itself sees the future.
In Wednesday’s announcement, the bank predicts that inflation will rise to 2 per cent by the second half of 2018, slightly later than predicted in July because a stronger Canadian dollar makes imported goods cheaper.
This prediction is based on the BoC’s projection models, updated with the latest data. As an inflationtargeting central bank, the Bank of Canada chooses a path for its policy rate such that its models (tempered by judgment) predict a return of inflation to its target within a horizon of six to eight quarters. Publishing this path, and commenting on the factors that might make actual policy-rate settings different from what the path shows, would help people understand both the bank’s forecast and how it might react to new information. Among other advantages, helping make the overnight rate more predictable in this fashion might enhance the bank’s influence over aggregate demand, and thereby its ability to hit its inflation target.
One frequently stated objection to central bank policy rate forecasts is that uncertainty is so high that the information content of interest-rate forecasts is bound to be low. But the bank already forecasts the dates at which it projects inflation will return to target and when the output gap will close. The uncertainty around those is high as well, but those forecasts are still highly informative to Bank of Canada watchers.
The bank also reveals its forecasts for the long-run neutral rate of interest, where it will be once inflation is at target and the economy is at full employment. That is also highly uncertain – but knowing how the BoC is thinking about it also helps. Information about how and when it expects the policy rate to reach that level would help even more.
A second common objection is that the central bank’s forecasts will be taken as promises, leading to a loss of credibility if it deviates. The bank could reduce this concern by publishing the conditional forecast relative to predicted changes to the long-run neutral rate. If its estimate of the long-run neutral rate were to fall, for example, a lowering of the overnight rate to maintain the same degree of monetary stimulus for the economy would make sense.
To bring this back to the real world, think about the implications for the average Canadian borrower. The concern we keep hearing about is what will happen to debtors if the bank further raises rates. Publishing a clear path for the overnight rate, and making clear how the path depends on economic developments, would lead borrowers to pay more attention to the probable future costs of taking out loans before they mortgage themselves to the hilt. Knowing that the Bank of Canada is data-dependent does not really help Canadians understand what it is likely to do. If the bank published a conditional path for its policy rate, Canadians would learn much more.

REAL STATE

The Globe and Mail. 27 Oct 2017. Brookfield buys Sheraton Toronto hotel for $335-million. Sheraton: Hotel recently spent $110-million on room upgrades
JACQUELINE NELSON
RACHELLE YOUNGLAI

A unit of Brookfield Asset Management Inc. has bought the Sheraton hotel in downtown Toronto in a blockbuster $335-million deal that is the largest transaction for a single hotel in Canada.
The alternative asset management giant will buy the Sheraton Centre Toronto Hotel from Marriott International Inc. through a real estate fund in a transaction that marks Brookfield’s first major foray into the Canadian hotel market. The company will now have a presence in its home market after having built up a base of hotels in the United States, as well as some short-stay holiday properties in Britain.
It is the most lucrative hotel deal in the country, according to real estate services company CBRE, which acted as Marriott’s broker. The next-largest deal was the Westin Bayshore hotel in Vancouver for $280-million in 2015, and last year’s sale of the Four Seasons in Toronto for $225-million.
The four-star Sheraton Centre hotel, with 1,372 rooms, was first put on the auction block two years ago amid a fiery commercial real estate market in Toronto and Vancouver.
“It has escalated over the last three years,” said Bill Stone, executive vice-president of CBRE hotels, of the market activity.
So far this year, Toronto has accounted for one-third of the country’s hotel transactions.
The hotel is close to the financial district and a big mall. It has more than 130,000 square feet of venue space and calls itself the city’s largest convention hotel. The Sheraton recently spent $110-million to upgrade its rooms, but the hotel still requires further upgrades and Brookfield is expected to renovate its expansive lobby and other public areas.
The deal is somewhat unusual because the City of Toronto owns the land the hotel is on, and the sale involved a long-term ground lease agreement.
“We think the Sheraton is a unique asset with regards to size and quality, and gives us the ability to invest in what’s a strong and growing economic market like Toronto,” Brookfield spokesman Matthew Cherry said.
CBRE forecasts occupancy rates for Toronto hotels reaching 80 per cent next year in what Mr. Stone called “one of the strongest periods in recent history.”
The sale process was competitive and CBRE has seen particular demand for properties among foreign buyers. Such investors account for the majority of hotel purchases in Canada. Year to date, foreigners were responsible for nearly 60 per cent of the transactions.
“We are seeing continued interest from non-Canadian investors,” Mr. Stone said. “That will be Asian groups, European groups and American groups and all are much more focused on the Toronto market today than they have been for a long time.”
Earlier this year, British Columbia’s public pension fund manager made waves when it sold a portfolio of Canadian hotels to Leadon Investment Inc., a private investor group with ties to Chinese investors. The properties, including Delta hotels in Toronto, Calgary and Halifax, were sold for more than $1-billion, according to sources familiar with the deal.
Brookfield Asset Management (BAM.A)
Close: $53.40, up 15¢
Marriott International (MAR)
Close: $118.81 (U.S.), up $2.48

FOOD

StatCan. 2017-10-27. Poultry and egg statistics, August 2017

Egg production rose 4.0% from August 2016 to 65.2 million dozen in August 2017.

In September 2017, placements of hatchery chicks on farms increased 8.2% compared with September 2016, to 66.9 million birds.

Stocks of frozen poultry meat in cold storage decreased 2.8% from October 1, 2016, to 85 740 tonnes on October 1, 2017.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/171027/dq171027e-eng.pdf

The Globe and Mail. 27 Oct 2017. ‘Secret’ memos reveal efforts to influence Canada’s Food Guide 
ANN HUI NATIONAL, FOOD REPORTER

As Ottawa moves closer to releasing a new Canada’s Food Guide, the federal department responsible for promoting agriculture has been lobbying Health Canada to soften its language on limiting red meat and dairy, The Globe and Mail has learned.
Early next year, Health Canada is expected to release an updated guide, and so far, dietitians and physicians have applauded signs that the government intends to encourage plant-based foods, while deemphasizing the need for red meat and dairy. Publicly, Health Canada has also emphasized the need for transparency around the process, including banning meetings with food-industry lobbyists.
But e-mails and materials obtained by The Globe through Access to Information legislation show that government officials at Agriculture and Agri-Food Canada (AAFC) have been lobbying their colleagues at Health Canada on the industry’s behalf, after an invitation to submit input. Materials from the last food-guide revision from 2007, meanwhile, appear to show that such lobbying efforts have been successful in the past.
“Messages that encourage a shift toward plant-based sources of protein would have negative implications for the meat and dairy industries,” AAFC officials wrote in an internal memo marked “secret” and dated June, 2017. “Changes to the way in which foods are represented in the national food guide will have a significant influence on consumer demand for food.”
The memos outline a variety of AAFC efforts to influence Health Canada – including at least one written submission and multiple meetings over the course of at least a year.
Together, the documents highlight the minefield that Health Canada are having to navigate in creating a new food guide that balances new research on issues such as obesity and diet-related chronic disease, while taking into account competing government priorities. The 2017 federal budget, for example, specifically identified the agriculture industry as a priority for economic growth. “It will be important for the two departments to maintain a whole-of-government perspective on all food-related policy,” one AAFC memo says.
In an e-mailed statement, an AAFC spokesman did not address specific questions about whether its staff had lobbied Health Canada. On the food guide, the department said, “the AAFC is working collaboratively with its government colleagues to ensure policy recommendations are developed using current sciencebased evidence, as well as valuable input received from Canadians and stakeholders.” The department also referenced its continuing work in creating a national food policy, which is expected to include discussion of health and nutrition.
Seventy-five years after its launch, Canada’s Food Guide has become the government’s second-most requested document (behind income-tax forms), and one of its most influential. It is widely distributed by dietitians and doctors, and used by institutions such as schools and hospitals to create meal plans. For several years now, Health Canada has been working on what many describe as a long-overdue revision – the first update in a decade.
The current guide, based on four food groups, includes what critics have long described as outdated advice, such as recommending juice as a serving of vegetables and fruit. It also recommends for adults two servings daily of each “milk and alternatives,” and “meat and alternatives.”
Earlier this year, Health Canada released its mission statement for a new guide, signalling a major revamp. The “guiding principles” make no mention of meat or dairy as regular food groups – and may do away with food groups altogether. Instead, it advises “a shift towards more plant-based foods” and recommends less red meat, and limiting “some meats and many cheeses” high in saturated fat.
But the e-mails and briefing notes describe AAFC’s efforts to persuade Health Canada officials into adopting “a more neutral tone.”
“While the report includes some positive messages (e.g., choose…), there seems to be an underlying negative tone (e.g., avoid/limit, undermining, eroding),” AAFC staff wrote in its formal submission. They go on to urge Health Canada to adopt more “positive or neutral messaging.”
The AAFC also took issue with messages saying that plant-based diets are more sustainable, using as evidence a briefing note on efforts made by the domestic beef sector to move toward greener practices.
“Furthermore, it is important that any messages on environmental impact and sustainability do not undermine social licence/public trust in the food supply,” they wrote.
At another point, AAFC staffers expressed concerns that encouraging consumers to avoid processed foods high in sodium, sugar or saturated fat “could imply that all processed foods should be avoided.”
It’s not yet clear what effect, if any, the AAFC’s pressure on Health Canada will have on the resulting document.
In an interview with The Globe earlier this year about balancing the needs of competing government mandates, Hasan Hutchinson, director-general of the Office of Nutrition Policy and Promotion at Health Canada, said that health is the guide’s ultimate priority. “If we’ve got the strong evidence for health, that’s my mandate. That’s where we go,” he said.
In an e-mailed statement, a Health Canada spokesperson reiterated this.
“Revisions to Canada’s Food Guide will be guided by the best available evidence to support the health of Canadians,” the statement read. “Final decisions will rest with Health Canada.”
The statement also emphasized its commitment to transparency, saying that while feedback is encouraged from government colleagues as well as outside groups, “we must ensure that the development of dietary guidance for Canadians is free from even the appearance of conflict of interest.” Still, similar efforts by AAFC have had success in the past.
Correspondence leading up to the most recent food-guide revision in 2007 – also obtained by The Globe through Access to Information legislation – show that Health Canada did make revisions after the AAFC expressed concerns that time around.
In the years leading up to the 2007 revision, AAFC officials outlined in dozens of pages of e-mails across several months their concerns with Health Canada’s advice for consumers to “choose local or regional foods when available.”
Both the AAFC and the Canadian Food Inspection Agency argued that such advice fell outside of Health Canada’s mandate. “The food guide is about nutritious eating, not the environment,” one AAFC staffer wrote.
The resulting 2007 guide omitted the “choose local” advice.
Even the food guide’s most ardent critics acknowledge the challenges Health Canada faces. “They are in an impossible situation,” said Yoni Freedhoff, an assistant professor of family medicine at the University of Ottawa and an outspoken critic of the guide. “[Health Canada] is not simply an arms-length organization that gets to make decisions expeditiously to ensure the best health of Canadians. It also has to take into account politics, history, re-elections and so-forth.”
Nick Saul, the president of the Community Food Centres Canada (CFCC), has over the past months participated in Health Canada’s public consultation process on the guide, and called it “completely dispiriting” to learn that other government bodies are potentially influencing the process behind closed doors.
“I think first and foremost our government should be looking out for the public and its citizens,” he said. “I understand why there’s a fierce lobby around these issues, and I think the government has to be pay attention to that, but not be in any way under its thumb.”
Meantime, organizations such as the CFCC and others are doing their best to encourage Health Canada to resist lobbying. “I hope Health Canada pushes back [against the AAFC] and says ‘we need this for our citizens.’ But we will see,” he said.
“It’s a battle. This is contested terrain, and the other side is trying, too.”

DIPLOMATS

Global Affairs Canada. 27/Oct/2017. Biographical notes - Diplomatic appointments. Backgrounder

The Honourable Chrystia Freeland, Minister of Foreign Affairs, today announced the following diplomatic appointments:

• Julia G. Bentley:  becomes High Commissioner in Malaysia. Ms. Bentley replaces Judith St. George. (BA [East Asian Studies], Princeton University, 1981; Postgraduate Diploma [Modern Chinese History], Nanjing University, 1983; MA [East Asian Studies], University of Toronto, 1984) joined External Affairs and International Trade Canada in 1991. At Headquarters, she has worked in the Asia Pacific Regional Coordination Division and the International Economic Relations and Summits Division. She has served as director of the Northeast Asia and South Asia Relations divisions and as acting director general of the South Asia Bureau. Overseas, she has served in Taipei, in New Delhi and—twice—in Beijing. She has also worked as a development consultant in Montréal, Singapore and Beijing and for three years as director of Winrock International’s NGO Capacity Building Program in China, which was funded by the Ford Foundation. Prior to joining the foreign service, she worked as an international policy adviser for the Ontario Ministry of Intergovernmental Affairs for five years.
• Hilary Childs-Adams:  becomes Ambassador to Libya. Ms. Childs-Adams replaces David Sproule. (BSL Hons [Translation], Laurentian University, 1976) joined the Department of External Affairs in 1980 following employment at the Parliament of Canada. She served abroad as ambassador to Lebanon and as deputy head of mission at the Embassy to Germany after postings in Brussels, New York City and Mexico City. At Global Affairs Canada, she most recently headed the Government of Canada’s engagement with the World Economic Forum and also worked as director for Western Europe.  As departmental coordinator for national unity, she designed and launched the Public Diplomacy Fund, served as deputy coordinator for federal-provincial-territorial relations and headed the Energy Section. Seconded to Teleglobe Canada in Montréal for two years, she worked on the International Telecommunications Union’s Centre for Telecommunications Development. 
• Kati Csaba:  becomes Ambassador to the Republic of Serbia. Ms. Csaba replaces Philip Pinnington. (BA [Political Studies and Russian], Queen’s University, 1988; MA [Central/East European and Russian-Area Studies], Carleton University, 1993) began her career at External Affairs and International Trade Canada in 1993, working on Canada’s assistance program to Hungary. In the following years, Kati occupied several programming and analytical roles covering Central and Eastern Europe, including four Canadian International Development Agency (CIDA) postings in the region: as second secretary in Kyiv (1995 to 1997), as head of aid in Sarajevo (1997 to 1999), as head of aid in Moscow (2005 to 2009) and as development director in Kyiv (2009 to 2012). In 2013, she was a member of the transition team responsible for the amalgamation of the then Foreign Affairs and International Trade Canada and the then CIDA, following which she served as the director of amalgamation implementation in Foreign Affairs, Trade and Development Canada’s Sub-Saharan Africa Branch (2014 to 2015). Most recently, she was the senior director responsible for Canada’s development program with Ethiopia, based at the Embassy of Canada in Addis Ababa.
• James Hill:  becomes Ambassador to the Republic of Costa Rica. Mr. Hill replaces Michael Gort. (BEd, University of Saskatchewan, 1983; BA [History], University of Saskatchewan, 1985; Post-graduate Diploma [International Studies], University of Candido Mendes, Rio de Janeiro, 1998) joined the Department of External Affairs in 1989. Mr. Hill has served as second secretary and vice consul at the embassy in Iran, consul and trade commissioner at the consulate in Rio de Janeiro, head of the Canadian Kosovo Diplomatic Observer Mission in Pristina, consul general in Rio de Janeiro, high commissioner in Mozambique, chargé d’affaires in Libya, deputy head of mission in Afghanistan, chargé d’affaires in Kuwait and, most recently, consul general in Seattle. At Headquarters, Mr. Hill has held the positions of deputy director of the Western Hemisphere Summits Office, deputy director of the Latin America Division, director for Europe and Central Asia commercial and economic relations and director for Middle East and Africa commercial and economic relations.
• Edmond Dejon Wega: becomes Ambassador to Burkina Faso. Mr. Wega replaces Vincent Le Pape (BA, University of Moncton, 1998; MBA, Finance, University of Quebec at Montréal, 2000) began his public service career at Transport Canada in 2001. He subsequently worked with the Department of Finance Canada, the Treasury Board of Canada Secretariat and the Privy Council Office. He joined the Canadian International Development Agency in 2003, working on Canada’s assistance to Central and Eastern Europe. In the following years, he held various managerial positions, including director of the Canada Fund for Africa Secretariat responsible for the delivery of Canada’s G8 commitment in support of the New Partnership for Africa’s Development. He subsequently served abroad, in Addis Ababa (2008 to 2012) and in Maputo (2012 to 2015) as head of aid and senior director responsible for Canada's development programs in Ethiopia and Mozambique. At Global Affairs Canada, Mr. Wega led the Pan Africa Development Program as senior director (2015 to 2016) and most recently served as acting director general of the Eastern and Southern Africa Bureau. 

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LGCJ.: