e-Gonomics

CANADA ECONOMICS

ECONOMY

BANK OF CANADA. April 9, 2018. Business Outlook Survey - Spring 2018

Results of the spring Business Outlook Survey suggest that business sentiment continues to be positive, supported by healthy sales prospects. Due to recent strong demand, capacity and labour pressures are evident in most regions.

Overview

Forward-looking sales indicators remain positive across most regions and sectors. Some firms expect a moderation in sales activity from high levels in the past year or a gradual slowing of the pace of the recovery in the energy sector.
While firms’ expectations for US economic growth have strengthened further, some cited rising protectionism and reduced competitiveness as factors limiting the impact on their sales (Box 1).
Although less so than in recent surveys, intentions to increase investment continue to be widespread. Employment intentions are solidly positive, based on firms’ plans for hiring to support expected sales growth or to expand operations.
Indicators of capacity pressures and labour shortages edged down but are still close to recent high levels. Remaining economic slack appears to be mostly concentrated in the energy-producing regions.
Despite expectations for faster input price growth overall, on balance, firms continue to anticipate only modest acceleration in the growth of their output prices due to competitive pressures. Partly driven by rising labour costs, inflation expectations picked up but are still well within the Bank’s inflation-control range of 1 to 3 per cent.
While credit conditions were unchanged for most firms, the indicator points to a slight tightening.
The Business Outlook Survey indicator continues to be high, signalling positive business sentiment.

Business activity

Building on a reported further strengthening of sales growth over the past 12 months (Chart 1), firms expect sales to grow at a faster pace over the next 12 months (Chart 2, blue bars). Among those anticipating faster sales growth, several reported focusing on their product offerings and strategies to reach new customers, including increasing their online presence. As well, firms across all regions and sectors saw an overall improvement in indicators of future sales, such as order books and sales inquiries (Chart 2, red line), albeit to a lesser extent in the Prairies.

* Percentage of firms reporting faster growth minus the percentage reporting slower growth

* Percentage of firms expecting faster growth minus the percentage expecting slower growth
** Percentage of firms reporting that indicators have improved minus the percentage reporting that indicators have deteriorated

Still, several firms anticipate a moderation in sales growth from the pace of the past 12 months, often reflecting expectations of a return to a more sustainable rate after a period of robust activity. Others tied to the energy sector expect the pace of the recovery to slow as oil price discounts and competitiveness issues weigh on sales prospects.

On balance, firms report improved orders from foreign customers compared with those a year ago, and are optimistic about their outlook for export sales. While expectations for US economic growth over the next 12 months have strengthened further, some firms cited rising protectionism and reduced competitiveness as factors limiting the potentially positive impact on sales (Box 1). Despite these concerns, firms expect US demand to provide a lift to their sales overall.

The balance of opinion on investment in machinery and equipment edged down from recent high levels but continues to point to an increase in investment over the next 12 months (Chart 3). Encouraged by ongoing strength in demand, plans for greater spending are most widespread among firms in service industries. Firms not planning to increase capital expenditures often attributed this to large investments made over the past year or to the tax or regulatory environment.

* Percentage of firms expecting higher investment minus the percentage expecting lower investment

The balance of opinion on employment intentions edged up again and remains high (Chart 4). Intentions to increase employment over the next 12 months are widespread across regions and most sectors, particularly in services. Most businesses expecting to enlarge their workforces cited the need to support anticipated sales growth or plans for expansion.

* Percentage of firms expecting higher levels of employment minus the percentage expecting lower levels

Pressures on production capacity

The indicator of capacity pressures moderated but is still close to recent high levels overall, particularly outside the energy-producing regions (Chart 5). Labour-related constraints continue to be the most prevalent obstacle to scaling up operations in response to an unanticipated increase in demand. On balance, firms anticipate capacity pressures to further intensify over the next 12 months, pushed by strong sales prospects and expected difficulties finding labour.

The balance of opinion on labour shortage intensity is unchanged at a high level, indicating a continuing and widespread view that labour shortages have intensified over the past year (Chart 6, red line). The share of firms reporting that labour shortages are restricting their ability to meet demand is now just below the historical average (Chart 6, blue bars). Firms in British Columbia and Central Canada described hiring conditions as difficult, often citing shortages in construction, information technology and transportation, as well as in lower-paid, less-skilled occupations.

* Percentage of firms reporting more intense labour shortages minus the percentage reporting less intense shortages

Prices and inflation

The balance of opinion on input prices edged down but is still firmly positive, signalling an increase in the expected pace of cost growth over the next 12 months (Chart 7). Positive expectations are widespread across regions and sectors and were often attributed to strength in various commodity prices. Several firms also referred to higher costs of intermediate goods and contractual services. Others reported emerging price pressures in their supply chains due to recent policy measures such as carbon taxes and higher minimum wages.

* Percentage of firms expecting greater price increases minus the percentage expecting lesser price increases

The indicator on output prices is modestly positive, reflecting expectations for somewhat faster output price growth over the next 12 months (Chart 8). Businesses attributed positive pressures to pass-through of commodity prices or non-labour inputs. Some firms, especially exporters, continued to report that competition, often linked to global markets or e-commerce, limits their ability to pass on cost increases to customers.

* Percentage of firms expecting greater price increases minus the percentage expecting lesser price increases

Expectations for inflation over the next two years picked up in the spring survey (Chart 9). While most firms still anticipate that inflation will remain within the Bank’s inflation-control range of 1 to 3 per cent, just above half now expect inflation to be in the upper half of that range. Firms cited rising labour costs (due to tighter labour markets and, to a lesser extent, minimum wage increases) and higher prices for some commodities as the main factors influencing expectations.

Credit conditions

After several quarters of hovering near zero, the balance of opinion on credit conditions turned slightly positive, indicating a net tightening over the past three months (Chart 10). While the majority of firms reported no change in their terms and conditions for obtaining financing, some of those seeing a tightening are directly or indirectly exposed to the energy sector. Most firms continue to characterize credit as easy or relatively easy to obtain.

* Percentage of firms reporting tightened minus the percentage reporting eased. For this question, the balance of opinion excludes firms that responded “not applicable.”

Business Outlook Survey indicator

The Business Outlook Survey indicator edged down but remains high, with most indicators included in this summary measure holding above their historical averages (Chart 11). This result is consistent with positive business sentiment overall.

Box 1: The impact of US policy changes or associated uncertainty: views from BOS firms

Beginning with the spring 2017 Business Outlook Survey, firms have been asked if policy announcements from the new US administration or the uncertainty around them have had an impact on their business to date or whether any is expected. Over the past year, most firms reported that they have not been affected so far (Chart 1‑A) and anticipate no clear impact over the coming 12 months (Chart 1‑B). This includes many domestically oriented firms as well as exporters deeming it too early to tell. However, the views of those reporting an impact have shifted over time and have generally become more negative.

* Percentage of firms

Unfavourably affected firms mainly referred to rising US protectionism, including changes to softwood lumber policy, North American Free Trade Agreement (NAFTA) renegotiations or Buy America sentiments. These firms cited adverse effects on their sales or an increase in their costs (for example, due to tariffs). Others reported challenges moving staff or goods across the border. Some firms in recent surveys, including those in the energy sector, also noted reduced relative competitiveness vis-à-vis US firms, pointing to US tax cuts and regulatory differences. Finally, a few anticipate weakened Canadian business confidence.

While most firms indicated that their domestic investment plans to date have not been affected, some reported reducing or delaying Canadian investments, or are considering changes in response. A few firms reported expanding in the United States.

Among those citing favourable effects, some firms, especially in the spring 2018 survey, foresee benefits from lower taxes for their US subsidiaries or from improved performance of their US clients and partners. Other firms noted gains as Canada attracts more tourists and immigrants.

Overall, many firms see US demand as contributing positively to their sales prospects in the spring 2018 survey. The share of firms anticipating strong economic growth in the United States in the next 12 months is near record-high levels.

FULL DOCUMENT: https://www.bankofcanada.ca/2018/04/business-outlook-survey-spring-2018/

BANK OF CANADA. April 9, 2018. Senior Loan Officer Survey - First Quarter of 2018

This Senior Loan Officer Survey (SLOS) focused on changes to lending practices in the first quarter of 2018. The survey was conducted between February 5 and March 2, 2018.

Household lending conditions

Background

In the first quarter of 2017, the Bank added questions on household lending conditions to the SLOS to complement the information currently collected for business lending. With a full year of household survey data now accumulated, we will begin reporting the combined business and household results in our regular SLOS publication. This enhanced survey provides a fuller perspective on lending conditions in the Canadian economy.

The household questionnaire mirrors that for business, with questions covering both price and non-price aspects of lending conditions, as well as demand for credit, over the previous three months. Household lending is divided into mortgage and non-mortgage lending, with questions asked for each. For the household component of the SLOS, 18 institutions are currently surveyed.1

Results

Overall, household lending conditions tightened in the first quarter of 2018, driven by mortgage-related lending (Chart 1). 2
The tightening in mortgage lending was driven by recent changes to underwriting standards (Guideline B-20),3which mainly affected non-price conditions4 for low-ratio mortgages5 and home equity lines of credit (HELOCs) (Chart 2).6 Price conditions for mortgages also tightened, as the spreads charged to customers increased in tandem with mortgage rates.7
Overall, demand for low-ratio mortgages and HELOCs increased slightly. However, some institutions reported a decrease in demand due to regulatory changes, while others reported an increase, citing some pull-forward from applications received before the implementation of the B-20 changes, as well as expectations of higher interest rates. In the next quarter, respondents expect a decrease in the demand for low-ratio mortgages and HELOCs. Demand for high-ratio mortgages has continued to decline since regulatory changes were introduced in the autumn of 2016.
In terms of non-mortgage lending, a slight tightening in price conditions for auto loans was offset by an easing in non-price conditions (Chart 3). Both price and non-price conditions for other types of consumer lending were basically unchanged.
Demand for non-mortgage credit decreased in the first quarter, driven by lower demand for auto loans.

* The balance of opinion is calculated as the weighted percentage of surveyed financial institutions reporting tightened credit conditions minus the weighted percentage reporting eased credit conditions. Thus, a positive balance of opinion implies a net tightening. The chart shows the average of the balances of opinion for the price and non-price dimensions of lending conditions for each category of lending.

Note: Each series is the simple average of the balances of opinion for high-ratio mortgages, low-ratio mortgages and home equity lines of credit (HELOCs).

Note: Each series is the simple average of the balances of opinion for auto loans and other consumer lending.

Business lending conditions

Survey results suggest that overall business lending conditions again eased slightly in the first quarter of 2018 (Chart 4), driven mainly by price conditions (Chart 5). Non-price conditions have remained basically unchanged since some minor easing in the fourth quarter of 2016.
The easing in price conditions continues to be driven by intensifying competition for corporate borrowers.
Lending conditions for small business and commercial borrowers have remained unchanged since the fourth quarter of 2016 and the second quarter of 2017, respectively.
Demand for credit increased in the first quarter of 2018. This marks the second consecutive quarterly increase.
Access to capital markets improved marginally for all risk grades of corporate borrowers.

Note: Each series is the simple average of the balances of opinion for the small business, commercial and corporate sectors.

For the business component, 17 institutions are currently surveyed. [←]
Note that the balance of opinion suggests only the direction of the net change in lending conditions; it does not provide information on the magnitude of the change. [←]
More information on Guideline B-20 is available on the website of the Office of the Superintendent of Financial Institutions. [←]
Non-price conditions for household lending include, for example, minimum payments and credit limits. [←]
The Canadian mortgage market can be divided into high- and low-ratio segments based on the loan-to-value (LTV) ratio. An LTV ratio above 80 per cent is considered high, while one below 80 per cent is considered low. Federally regulated lenders are required to insure high-ratio mortgages. [←]
This response is similar to the non-price tightening in the first quarter of 2017, which was driven by rule changes for high-ratio mortgages introduced in the autumn of 2016. [←]
The pricing of credit is defined as spreads over base rates, rather than as the level of rates. [←]

FULL DOCUMENT: https://www.bankofcanada.ca/2018/04/senior-loan-officer-survey-first-quarter-of-2018/

CANADA - US

Global Affairs Canada. April 10, 2018. Minister O’Regan to hold meetings in Philadelphia on Canada-United States trade relations

Ottawa, Canada – Canada and the United States share strong ties as old as our countries themselves—from deep family relations to businesses that work back and forth across the border, to the world’s most important trade relationship. The Government of Canada continues to build on this important economic relationship with the United States to create new opportunities for the middle class and businesses on both sides of the border.

As part of these efforts, the Honourable Seamus O’Regan, Minister of Veterans Affairs and Associate Minister of National Defence will be in Philadelphia on April 11 and 12, 2018. During his visit, the Minister will establish and reinforce relationships with key political and business stakeholders, including the Deputy Mayor for Intergovernmental Affairs, Deborah Mahler. He will also take part in a NAFTA roundtable with local business executives, and deliver remarks at Temple University Fox School of Business, stressing the importance of Canada-U.S. trade as an engine of growth and prosperity for Pennsylvania, the United States and Canada.

This visit will be an important opportunity to highlight the shared interests between the two countries and build support fora strengthened and modernized NAFTA.

Quotes

“Canada’s relationship with the United States is a model for the world. Trade and investment between our countries strengthens our economies, creates jobs on both sides of the border and fortifies a friendship that has lasted for generations. We want to continue building on this foundation and further enhance our trade and investment ties.”

The Honourable Seamus O’Regan, Minister of Veterans Affairs and Associate Minister of National Defence

“Canada and the United States have the greatest economic partnership of any two countries in the world. We remain committed to modernizing NAFTA in a way that upholds and defends the best interests of Canadians. We know a fair deal, a win-win-win deal, is within reach. That is what we are working towards. Canada is absolutely committed to this outcome and we are working tirelessly to achieve it.”

The Honourable Chrystia Freeland, P.C., M.P., Minister of Foreign Affairs

Quick facts

In 2017, goods trade between Canada and Pennsylvania totaled US $22 billion.
Canada and the United States share the world’s longest secure border, over which approximately 400,000 people, and goods and services worth $2.4 billion, cross daily.
Canada and the United States share values and interests on a range of international issues, including human rights, democracy, development, defence, nuclear non-proliferation and counterterrorism.

The Globe and Mail. 11 Apr 2018. Don’t be fooled by the happy talk on NAFTA
LAWRENCE MARTIN, Columnist

Given all the optimistic chatter from political leaders about a successful NAFTA renegotiation, one might think there would be some basis for it. Each side making concessions, for example, on weighty disagreements.

I asked one of the senior players involved in the negotiations for evidence of such. Where’s the beef? What has changed from earlier days when there was little movement?

The answer was a bit of a shocker.

On the key issues, with the exception of progress on auto trade, nothing has changed. While talks are more constructive, the divide is as wide as ever.

Washington has yet to take any of its tough demands off the table, the big player said. Not with respect to dairy products, government procurement issues, a sunset clause or a dispute-settlement mechanism.

As for the Canadian side, there has been no give either. “I can’t tell you where we’ve given because we haven’t yet,” the insider said.

There will have to be some compromises, he allowed, but in respect to which issues, no determinations have been made. “We have to do so fairly quickly.”

Odd. Eight months of negotiations and even those decisions haven’t been taken. Trade negotiations are complex but you might expect the pace from each side to be a bit quicker than that of a three-toed sloth.

If neither side is conciliatory, why are Donald Trump and Justin Trudeau saying they’re fairly close on a new deal? Why was Mexico’s economy minister, Ildefonso Guajardo, saying there is “a very high probability, about 80 per cent” of a new deal getting done?

“I don’t know,” said the negotiator, referencing the Mexican politician’s comment.

“There are huge obstacles. An awful lot that has to be done in a very short period of time if we’re going to get an agreement.”

One such obstacle is Canada’s supply-management system. Washington wants increased access to Canada’s dairy and poultry market. But so far, Ottawa hasn’t budged and shows no sign of doing so. Said the negotiator, “That’s a tough one, right?”

Given the divisions, what is hoped for now, as opposed to a real agreement, is a preliminary accord or an agreement in principle. It would come as kind of a stop-gap measure, a time saver, a signal at least that they haven’t given up. But judging from the state of negotiations, there would be little basis for it, other than on auto trade.

One sign of encouragement is a more accommodating approach from U.S. trade representative Robert Lighthizer, who met for three hours last Friday with Canadian ambassador David MacNaughton and Foreign Minister Chrystia Freeland. No foreign minister has ever spent as much time in Washington as Ms. Freeland. It has become her second home.

Some officials point to the China factor as helping NAFTA’s cause. Having hit China with billions in new tariffs, and having stoked a possible trade war with that country, Mr. Trump is catering to his nationalist political base. That creates enough instability in the markets. He doesn’t need more upheaval by igniting a trade war on his own continent. He therefore might be more inclined to compromise on NAFTA.

Mr. Trump is used to turning big business deals on real estate and development projects. Sides can be miles apart and suddenly there’s a new offer and, bingo, a deal materializes. A hope of the Canadian side is that this could happen. The President will see an auto sector redo as a prize for American workers, which might trigger a broader resolution.

The sides will continue negotiations at the Summit of the Americas in Lima later this week. No agreement will be announced there.

But the Canadian negotiator said, “I can tell you that if by next week we’re not getting pretty close, then we’re not going to get there.”

There is a sense of urgency because of the coming elections in Mexico, the November midterm elections in the United States, and the time-consuming legalistic and procedural requirements that are a feature of trade pacts. Something’s got to give and the betting line is that there will be an interim agreement that punts the problems down the line.

If it happens, it will be like putting icing on a cake that isn’t even half-baked. It will be a nondeal announced as a new deal.

CANADA - CHINA

The Globe and Mail. 11 Apr 2018. China’s envoy calls for formal free-trade talks ‘sooner than later’
ROBERT FIFE
STEVEN CHASE

We have reached many consensus on extensive issues, but there still remain some differences on so-called progressive trade factors.

LU SHAYE, CHINA’S ENVOY IN CANADA

OTTAWA - China’s envoy in Canada says the two countries have reached broad consensus on many aspects of a trade and investment pact and should begin formal trade talks as soon as possible to strike a blow against rising global protectionism.

Ambassador Lu Shaye told reporters on Tuesday that a free-trade deal between a Group of Seven country, such as Canada, and China, the world’s second-largest economy, would send a powerful message at time when U.S. President Donald Trump is pushing an “America First” agenda.

“China stands ready to start the negotiations of FTA [freetrade agreement] with Canada at any time,” Mr. Lu said. “If China and Canada start the negotiation of an FTA, it will send positive signals to the international community that China and Canada are upholding the flag of supporting free trade and economic globalization.”

The envoy said the stumbling block to launching formal talks is Prime Minister Justin Trudeau’s insistence that labour standards should be included – a proposal China rejects.

“We have reached many consensus on extensive issues, but there still remain some differences on so-called progressive trade factors,” he said, citing labour standards. “We just want to emphasize that we don’t want those kind of ideas to be implemented among the negotiations between China and Canada.”

Efforts to launch free-trade talks during Mr. Trudeau’s visit to Beijing in December, 2017, went off the rails after the Chinese balked at Canada’s demand to make public the fact that labour standards would be up for negotiation.

Mr. Lu said China does not want Canadian labour standards foisted on Chinese companies.

“We [don’t want] to impose our ideas on the Canadian side,” he said. Similarly, he said, “the Canadian side should not impose your standards and your ideas on the

Chinese side.”

The Chinese envoy argued that

Mexico – Canada’s partner in the

North American free-trade agreement – feels the same way. For instance, the envoy said, Mexico is unhappy about pressure at NAFTA negotiations to raise wages for its auto workers.

“It is not acceptable for the

Mexican side,” Mr. Lu said, predicting “if the Mexican side accepts such kind of standards, many of the factories [would] have to close down and their workers [would be] laid off.”

Guy Saint-Jacques, a former Canadian ambassador to China, has said that China does not want a public announcement that Beijing is open to discussing labour standards. He said trade unions in China are “token organizations,” and Beijing is adamant about not emboldening would-be activists who might agitate for change.

Beijing has long sought negotiations with Canada, in part because such talks would help it attempt to persuade other G7 countries to follow suit. China has signed deals with jurisdictions ranging from Australia to Peru to Iceland, and recently wrapped up an agreement with the Palestinian Authority.

Mr. Lu said exploratory trade talks with Canada have been going on for more than a year and both sides have made great progress on a number of trade and investment issues but refused to provide further detail. The ambassador said Beijing did not have a deadline to begin formal negotiations, but said, “We should start the process sooner than later.”

Mr. Saint-Jacques said Beijing and Ottawa should start this year, before the 2019 federal election.

Mr. Lu would say not say whether talks could be affected if the Trudeau government rejects the $1.5-billion takeover of Canadian infrastructure firm Aecon Group Inc. by Beijing’s state-owned China Communications Construction Company.

The acquisition is undergoing a full-scale national-security review. The Globe and Mail has reported that the government would not allow Aecon to bid on the $4.8-billion Gordie Howe bridge that will connect Windsor and Detroit – the busiest trade conduit between Canada and the United States − if it was owned by China.

Mr. Lu said Canadians are “too sensitive” about the takeover, saying Aecon “is just a construction company” and China is only interested in it for business reasons. He said China would not comment until after the national security review.

Aecon – a 140-year-old Canadian firm – is also involved in other infrastructure across Canada, including nuclear-energy installations, pipelines, transit and hydroelectric projects such as the Site C dam in British Columbia. On China’s demand for an extradition treaty, Mr. Lu said there have been no formal discussions with the Trudeau government.

The Globe and Mail. REUTERS. 11 Apr 2018. China renews vows to open economy, cut tariffs this year
KEVIN YAO BOAO, CHINA ELIAS GLENN BEIJING

Chinese President Xi Jinping promised on Tuesday to open the country’s economy further and lower import tariffs on products including cars, in a speech seen as an attempt to defuse an escalating trade dispute with the United States.

While most of the pledges were reiterations of previously announced reforms, which foreign businesses complain are long overdue, Mr. Xi’s comments sent stock markets and the dollar higher on hopes of a compromise that could avert a trade war.

Mr. Xi said China will sharply widen market access for foreign investors, a chief complaint of the country’s trading partners and a point of contention for U.S. President Donald Trump’s administration, which has threatened billions of dollars in tariffs on Chinese goods.

The speech at the Boao Forum for Asia in the southern province of Hainan had been widely anticipated as one of Mr. Xi’s first major addresses in a year in which the ruling Communist Party marks the 40th anniversary of its landmark economic reforms and opening up under former leader Deng Xiaoping. Mr. Xi said China would raise the foreign ownership limit in the automobile, shipbuilding and aircraft sectors “as soon as possible,” and push previously announced measures to open the financial sector.

“This year, we will considerably reduce auto import tariffs, and at the same time reduce import tariffs on some other products,” Mr. Xi said.

He also said “Cold War mentality” and arrogance had become obsolete and would be repudiated. His speech did not specifically mention the United States or its trade policies, which have been assailed by Chinese state media in recent days.

Vice-Premier Liu He had already vowed at the World Economic Forum in January that China would roll out fresh market opening moves this year, and that it would lower auto import tariffs in an “orderly way.”

BRASIL

The Globe and Mail. 11 Apr 2018. End of a corruption era? Lula’s jailing sends a strong signal to South America
ROBERT ROTBERG

A protestor holds up a poster with a picture of Brazil’s former President Luiz Inacio Lula da Silva during a recent demonstration in his support. Mr. da Silva’s conviction and imprisonment will prevent him from running for the national presidency later this year.
The Corruption Cure.

Brazil’s jailing of its beloved former president Luiz Inacio Lula da Silva on Saturday sent a strong signal to all of Latin America that the era of political impunity was over. Some presidents in Brazil and other South American countries have been impeached, but very few politicians have previously been sent to prison, and none as popular as Mr. da Silva (or Lula, as he is widely known in Brazil). His conviction and imprisonment will also prevent him from running for the national presidency later this year despite a large lead in opinion polls.

The actual crimes committed by the ex-president are rather prosaic, but they belie a vast corrupt conspiracy of which he is asserted to be the head. According to the judgment of a federal court in Parana State, a massive construction firm gave Mr. da Silva an opulent seaside apartment in exchange for potentially lucrative contracting privileges in Brazil and overseas in Angola. Sentenced in Parana by crusading judge Sergio Moro to nine years in prison, an appeals court upheld and extended the sentence to 12 years, and the Brazilian Supreme Court last week said that Mr. da Silva must start serving his sentence immediately.

For well-placed politicians, when, and if, there are the rare prosecutions of and convictions for corruption, the usual practice in Brazil has been to let appeals of sentences wend their way through the courts, often for years, until – in many cases – a dozen years passed and a statute of limitations kicked in to prevent further prosecution. The Brazilian Supreme Court is alleged to have a backlog of 30,000 or more cases of all kinds.

Judge Moro and his counterparts in the upper courts sought successfully to break that common pattern, using the punishment of Mr. da Silva as a prime example of effective deterrence. Previously, and especially in Brazil, political corruption has been common, largely tolerated or assumed by the public, and infrequently prosecuted with the vigour exhibited since 2014.

More than 165 politicians and corporate executives have been jailed and fined for corruption in Parana and in other courts as a part of the still unfolding and lavish Lava Jato, or Car Wash, case. In 2014, the police pursued a money-laundering episode that occurred in a petrol station’s carwash establishment. Arrests there led to the discovery of about $1-billion in illicit payments made in Brazil and throughout Latin America by the Odebrecht construction company to secure contracts from Petrobras, the big state-owned Brazilian petroleum company, and to buy influence in a dozen other South and Central American nations. Parts of the payments that Odebrecht delivered to the executives of Petrobras were in turn kicked back to the Brazilian politicians to whom the executives owed their appointments. Some of this “free cash” also helped fund political parties and election campaigns.

Odebrecht’s largesse, and its uncovering by Judge Moro and others, has led to Mr. da Silva’s downfall, the jailing of the former speaker of the Brazilian Congress, resignation of the most recent president of Peru and the incarceration of a number of Odebrecht bosses. Odebrecht funds were widely distributed in Bolivia, Guatemala, Mexico, Venezuela and other Latin American countries.

Judge Moro asserts that Mr. da Silva is a kingpin. In addition to his still acclaimed presidency of Brazil from 2003 to 2011, he allowed (say the courts) the Car Wash scam to cascade toward a crescendo of malfeasance. Without his implicit and possibly explicit approval, the Car Wash events would have developed with a lesser force. Indeed, despite his imprisonment, Mr. da Silva faces seven more trials on various charges of corruption. Judge Moro’s opinion says that Mr. da Silva breached the public trust to secure personal gains and emoluments for himself, his Workers’ Party, and his cronies.

Except possibly for Chile, Costa Rica and Uruguay, Latin America is awash with corrupt behaviour. Corporations bribe politicians and officials routinely, and very few lucrative contracts for bridges, dams, roads or other infrastructural improvements are secured without stuffed envelopes passing from hand to hand. Or there may be deposits in overseas bank accounts, inviting travel opportunities and enticing vacations.

Mr. da Silva’s jailing, even more than his conviction, sends a powerful signal that will reverberate throughout Brazil and the continent. No longer can politicians presume that slaps on the wrist, perhaps some fines and, very rarely, a short stint in prison are the most that they can or should expect to suffer from serious abuses of the public trust.

AVIATION

THE GLOBE AND MAIL. REUTERS. APRIL 11, 2018. Bombardier delivers five C Series jets in first quarter as delays ease: sources
ALLISON LAMPERT, MONTREAL
VICTORIA BRYAN, BERLIN

Canadian plane maker Bombardier delivered five C Series jets in the first quarter and is making progress in tackling delays separate from previously disclosed engine holdups in producing its flagship C Series jets, sources familiar with the matter told Reuters.

The delivery data and comments from executives on progress come as Bombardier nears regulatory approval for its planned sale of the delayed C Series program to Europe’s Airbus.

But the Montreal-based company could still face snags in coming months after delivering 17 C Series in 2017, down from an initial target of 30 — a delay the plane-and-train maker has previously attributed to delays at engine supplier Pratt & Whitney.

Bombardier has not publicly discussed separate delays stemming from general challenges as workers learn to make the 110-to-130 seat jet more efficiently.

These include “quality issues” at French interiors and seat maker Zodiac Aerospace, three sources familiar with the matter said, echoing similar problems affecting other plane makers.

It is not clear when Bombardier experienced these delays, but it delivered four planes in March, up from one during the first two months of the first quarter, one of the sources said. Another said there had been no new Zodiac delays.

All of the sources spoke on condition of anonymity because of commercial sensitivities.

“It is well known across the industry that Zodiac is currently experiencing some production delays,” Rob Dewar, vice president of Bombardier’s C Series program, told Reuters in a statement.

“We are collaborating closely with their team, and we are making great progress, as reflected in our production rate of four aircraft last month,” he added.

Zodiac, recently acquired by France’s Safran, the world’s third-largest aerospace supplier, is emerging from a three-year manufacturing crisis that drew criticism from plane makers Airbus and Boeing.

“We are very happy with the C Series that are already flying with Swiss,” Carsten Spohr, chief executive of Germany’s Lufthansa Group, the parent company of CSeries launch customer Swiss International Air Lines.

“What we are not so happy about are the continuing delays to deliveries. The reason is not the engines but other difficulties at Bombardier,” Spohr told Reuters.

He declined to specify the reasons.

________________

LGCJ.: