CANADA ECONOMICS

BRAZIL

REUTERS. MAY 15, 2018. Brazil's banks sound alert on anemic corporate loan growth
Carolina Mandl

SAO PAULO (Reuters) - Brazilian banks are seeing waning corporate loan demand, the latest sign that Latin America’s largest economy is struggling to bounce back from its deepest recession in decades.

Brazil’s top four listed banks - Itaú Unibanco Holding SA (ITUB4.SA), Banco Santander Brasil SA (SANB11.SA), Banco do Brasil (BBAS3.SA) and Banco Bradesco SA (BBDC4.SA) - reported a 6.6 percent overall first-quarter year-over-year drop in large corporate lending to 602.8 billion reais ($164 billion).

Most of those banks’ top executives expect the decline to persist to the end of the year or into 2019 even as looser monetary policies send interest rates close to all-time lows.

The numbers underline how ample spare factory capacity after the recession, plus a lukewarm recovery and concern that upcoming elections could be a setback for needed reforms in pensions and other areas is keeping companies’ investments to a minimum.

“We do not really expect much improvement in corporate demand this year, especially given that it’s an election year,” Itaú Chief Executive Candido Bracher said this month. “Companies will wait for a clearer scenario before deciding on their investment plans and borrowings.”

Brazilians elect a new president in two rounds of voting that will begin in October. Concern over whether a market-friendly candidate will win has spooked investors and some company executives.

Although Brazil’s interest rates hit an all-time low this year, making it cheaper for companies to raise funds, most of its industrial companies still have plenty of room to boost output before considering new investments after the recession.

“Companies have no urgent need to borrow money for capital expenditures because their capacity utilization is low, and Brazil’s economic recovery has proven to be very gradual,” said Alberto Ramos, head of Latin America Economic Research at Goldman Sachs.

Brazilian companies’ plants were using just 76 percent of their installed capacity by the end of March. That is 3 percentage points higher than a year earlier, but still far from the 83 percent rate reached in December 2013, before the economy plunged into recession, according to Bradesco data.

For example, the last time Votorantim SA, one of Brazil’s largest industrial groups, approved a new expansion program was in April 2015, Chief Financial Officer Sérgio Malacrida said in a recent interview.

Votorantim’s first-quarter capital expenditures slid 39 percent from a year ago to 345 million reais. “Votorantim hasn’t approved significant investments due to all the uncertainties about the Brazilian economy,” Malacrida said.

Without clarity about Brazil’s economic recovery, the São Paulo-based group has focused on debt reduction, as have many other big Brazilian companies.

State-controlled oil company Petroleo Brasileiro (PETR4.SA), for example, slashed first-quarter capital spending by 14 percent to 9.9 billion reais. Quarterly capex at Vale SA (VALE3.SA), the world’s largest iron ore producer, fell to $890 million, the lowest since 2005. Both companies are also trying to cut borrowing.

Overall companies’ health has improved as interest rates fell, reducing debt servicing costs. By December 2017 businesses on average had enough cash on hand to cover nearly three times their short-term debt, Moody’s said in a note to clients in May, from 2.1 times at the end of 2016.

Part of the drop in bank loan demand can be explained by a shift to selling bonds or other capital markets options to raise debt. Still, the quarterly increase in bond issuance - by some 10 billion reais to 61 billion, was dwarfed by the 43 billion real drop in lending over the same period.

Even as corporate loans decreased, Brazil’s top four listed banks eked out a 0.63 percent rise in total outstanding loans to 2.1 trillion reais as higher consumer confidence helped fuel more personal borrowing.

Itau Unibanco Holding SA
47.36
ITUB4.SASAO PAULO STOCK EXCHANGE
+0.01(+0.02%)
ITUB4.SA

ITUB4.SASANB11.SABBAS3.SABBDC4.SAPETR4.SA

But it remains unclear how sustainable that is without companies getting into the act. “A continuous growth in consumer loans depends largely on Brazil’s economic performance,” Ramos said.

Reporting by Carolina Mandl; Editing by Christian Plumb and Susan Thomas

NAFTA

The Globe and Mail. REUTERS. MAY 15, 2018. Mexico does not expect NAFTA deal by Washington’s Thursday deadline

MEXICO CITY - Mexico’s economy minister Ildefonso Guajardo said on Tuesday that he does not expect to meet a deadline this Thursday to reach a new North American Free Trade Agreement that could be presented to the current U.S. Congress.

“It is not easy, we do not think we will have it by Thursday,” Guajardo said, speaking on local radio and referring to a May 17 deadline set by U.S. House Speaker Paul Ryan for lawmakers to be notified of a new deal and give the current Congress a chance of passing it.

REUTERS. MAY 15, 2018. Mexico says NAFTA deal unlikely this week, signing possible this year

MEXICO CITY (Reuters) - Mexico’s economy minister said on Tuesday that he saw diminishing chances for a new North American Free Trade Agreement ahead of a May 17 deadline to present a deal that could be signed by the current U.S. Congress.

U.S. House Speaker Paul Ryan has said that the Republican-controlled Congress would need to be notified of a new NAFTA deal by Thursday to give lawmakers a chance of approving it before a newly elected Congress takes over in January.

“It is not easy, we do not think we will have it by Thursday,” Mexican Economy Minister Ildefonso Guajardo told broadcaster Televisa.

“We will keep negotiating, and in the moment that we have a good negotiation, we can close the deal and it will be notified, independent of which Congress (the current or new) that will vote on it,” he said.

Negotiators from the United States, Mexico and Canada have been in intense talks since late last month to try to reach a deal before upcoming U.S. congressional elections. Mexico’s presidential vote on July 1 also complicates talks.

Mexico’s peso sank to its weakest in more than a year on Tuesday. Guajardo said the currency was being hurt by uncertainty over NAFTA talks and Mexico’s upcoming election.

Canadian Prime Minister Justin Trudeau and U.S. President Donald Trump on Monday discussed the possibility of bringing NAFTA talks to a “prompt conclusion.”

Guajardo said negotiators were getting close to reaching a deal on rules for the auto sector under NAFTA.

However, talks still faced the hurdles of U.S. demands for a sunset clause that would allow NAFTA to expire if it is not renegotiated every five years, and the elimination of settlement panels for trade disputes.

“Trudeau said that there are elements to reach a deal. The problem is there needs to be flexibility from the parties,” Guajardo said.

Kenneth Smith, the chief Mexican negotiator at the talks, said that for Mexico there were no deadlines in the revamp.

“Mexico’s position since the start of the negotiation has been that we’re not going to sacrifice the quality of the deal to conclude quickly,” he told local radio.

Irrespective of the May 17 date mentioned by Ryan, there was still time to ratify a new NAFTA this year, Smith added.

“There’s no question the possibility exists, we’re interested and I think the United States and Canada share this view,” he said, speaking to broadcaster Enfoque Noticias.

Reporting by Sharay Angulo and Dave Graham; Editing by Phil Berlowitz

US - CANADA TRADE

Newsprint Paper Tariff. The Globe and Mail. 15 May 2018. U.S. bill seeks to freeze Canadian newsprint tariffs
BRENT JANG
DAVID PARKINSON

We don’t have the ability to absorb these costs, which are being passed on to us.

PAUL BOYLE NEWS MEDIA ALLIANCE SENIOR VICE-PRESIDENT, PUBLIC POLICY

Ten U.S. senators are seeking to place a temporary freeze on American duties against Canadian newsprint, saying the trade dispute needs further study.

A bipartisan group led by Republican Senator Susan Collins and Independent Senator Angus King, both from the forestry-intensive state of Maine, unveiled its strategy on Monday.

The group has introduced the Protecting Rational Incentives in Newsprint Trade (PRINT) Act of 2018, hoping to win political support for suspending the preliminary duties against Canadian uncoated groundwood paper such as newsprint and book-grade paper.

“The legislation would require the Department of Commerce to review the economic health of the printing and publishing industries,” said a release from lobby group Stop Tariffs on Printers and Publishers (STOPP), which includes the News Media Alliance.

Earlier this year, the Commerce Department imposed preliminary duties averaging 28.69 per cent against most makers of Canadian groundwood. According to complaints filed to the Commerce Department in August, 2017, by U.S. producer North Pacific Paper Co. (also known as Norpac), groundwood from Canada is subsidized and being dumped in the U.S. market at less than fair value. Norpac, which is based in Washington state, argues U.S. paper makers are being harmed by Canadian shipments of groundwood south of the border.

The bill would “pause” the punitive tariffs until further study is done by the Commerce Department on the economic condition of the printing and publishing sector, and the impact of those duties on newspapers, printers and local advertisers, said Paul Boyle, senior vice-president of public policy for the News Media Alliance.

The alliance argues that the tariffs, which run as high as 32 per cent, are dramatically increasing costs for newspaper publishers at a time when most of the industry is in a desperate struggle to survive amid slumping advertising revenue.

“We don’t have the ability to absorb these costs, which are being passed on to us. We don’t have extra revenue coming in,” Mr. Boyle said in an interview. “In fact, our revenue continues to decline.”

A survey of the alliance’s members showed that 70 per cent expected the tariffs to force them to reduce their newsprint consumption, while more than 30 per cent said they would cut jobs. Last month, when the Tampa Bay Times of St. Petersburg, Fla., laid off about 50 staff, its publisher placed the blame squarely on the tariffs, saying they were raising the newspaper’s costs by US$3-million annually.

Mr. Boyle said the next step is to drum up support for the bill in the Senate, as well as to get a companion bill introduced in the House of Representatives.

“We continue to garner strong support from Congress,” said Seth Kursman, a spokesman for Montreal-based Resolute Forest Products Inc., which got hit with a countervailing rate of 4.42 per cent in January, but avoided any anti-dumping tariff.

In March, the Commerce Department imposed antidumping duties averaging 22.16 per cent against most Canadian producers of groundwood. The anti-dumping tariffs are on top of countervailing duties averaging 6.53 per cent levied in January against most Canadian producers.

ENERGY

StatCan. 2018-05-15. Supply and disposition of refined petroleum products, February 2018

• Refinery receipts of crude oil: 7.7 million cubic metres, February 2018, -2.0% decrease (12-month change)
• Source(s): CANSIM table 134-0001: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=1340001&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=
• Refinery production: 8.9 million cubic metres, February 2018, 2.4% increase (12-month change)
• Refinery domestic sales: 7.8 million cubic metres, February 2018, 1.3% increase (12-month change)
• Source(s): CANSIM table 134-0004: http://www5.statcan.gc.ca/cansim/a26?lang=eng&retrLang=eng&id=1340004&&pattern=&stByVal=1&p1=1&p2=31&tabMode=dataTable&csid=

Refinery production and domestic sales of refined petroleum products increased in February, while refinery receipts of crude oil declined compared with the same month in 2017.

Less crude oil received by refineries

Canadian refineries received 7.7 million cubic metres of crude oil in February, down 2.0% from the same month a year earlier.

Chart 1: Crude oil and equivalent products received by refineries

Crude oil imports to refineries were down 16.6% from February 2017 to 2.6 million cubic metres. Meanwhile, domestic crude oil received by refineries rose 7.6% to 5.1 million cubic metres.

Crude oil inventories held at refineries totalled 3.9 million cubic metres in February, down 7.4% from the same month in 2017.

Crude oil used in refinery production up

Total crude oil and equivalent products used in refinery production increased 3.5% from February 2017 to 7.8 million cubic metres.

Refinery production and sales up

Refinery production of refined petroleum products increased 2.4% to 8.9 million cubic metres and domestic sales were up 1.3% to 7.8 million cubic metres from February 2017.

Chart 2: Domestic sales of refined petroleum products, by product

Imports and exports up

In February, refined petroleum product imports rose 0.9% to 1.2 million cubic metres and exports increased 0.5% to 2.2 million cubic metres, compared with the same month a year earlier.

Inventories up

Closing inventories of refined petroleum products held by refineries increased 4.8% from February 2017 to 8.2 million cubic metres.

FULL DOCUMENT: http://www.statcan.gc.ca/daily-quotidien/180515/dq180515b-eng.pdf

INNOVATION

Public Services and Procurement Canada. May 15, 2018. Government of Canada awards 300th contract under the Build in Canada Innovation Program. Driving Canadian innovations from the lab to the marketplace

Halifax, Nova Scotia - Through the Build in Canada Innovation Program, the Government of Canada is connecting Canadian innovators with their vital first customer and helping generate sustainable economic growth in communities across the country.

Today, Andy Fillmore, Member of Parliament for Halifax, on behalf of the Honourable Carla Qualtrough, Minister of Public Services and Procurement, announced that the Government of Canada has awarded the 300th contract under the Build In Canada Innovation Program. Sayle Safety Inc., of Hammonds Plains, Nova Scotia, was awarded a $551,770-contract for its SayleSafety App.

The innovation is a software application that allows organisations to create, distribute and sign-off on job safety risk assessments through mobile devices and computers. The innovation will be tested by Public Services and Procurement Canada.

The Build in Canada Innovation Program bridges federal departments who have an operational need, with innovative businesses who can fill the gap. Purchasing departments test innovations in a real-life setting and provide valuable feedback, as well as a critical first sale.

Since 2010, the Build in Canada Innovation Program contract awards have helped create 1,684 full-time jobs across the country, generating significant economic impact. This is just one of the many ways the Government of Canada supports innovators, including small and medium-sized businesses, across Canada.

Atlantic Canada Opportunities Agency. May 15, 2018. Economic Development and Innovation Spurred by Growing Cybersecurity Sector

Fredericton, NB – Innovation is critical to Atlantic Canada’s economic success. That’s why the Government of Canada is investing in innovative and emerging sectors, like cybersecurity, to strengthen and grow the middle class, to make Canada a better place now, and to build a sustainable economy for future generations.

Matt DeCourcey, Member of Parliament for Fredericton and Parliamentary Secretary to the Minister of Foreign Affairs, on behalf of the Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development and Minister responsible for the Atlantic Canada Opportunities Agency (ACOA), today announced an investment from the Government of Canada to support the CyberSmart 2018 summit, hosted by Cyber NB.

The 2018 summit brings together leaders in industry, academia, and government, to share expertise in cybersecurity, with a focus on workforce development to meet the growing demand for highly-skilled employees in this rapidly growing, priority sector.

The Government of Canada is providing a non-repayable contribution of $85,000 towards  the summit through ACOA’s Business Development Program.

This investment builds on the federal and provincial governments’ commitment to drive economic growth in Atlantic Canada through the Atlantic Growth Strategy, which recognizes the importance of workforce development and innovation as key drivers of productivity, competitiveness and regional economic growth.

Quotes

“Cybersecurity is a federal government priority and protecting Canadian businesses, citizens and infrastructure is of utmost importance. The Government of Canada is committed to supporting the development of cybersecurity solutions, education, and infrastructure, and that is why we’re working closely with provincial partners, industry, and academia to help build a strong and responsive cybersecurity industry in Atlantic Canada and across the country.” 

- The Honourable Navdeep Bains, Minister of Innovation, Science and Economic Development and Minister responsible for ACOA.

“The Government of Canada and the four Atlantic provinces are committed to working together to build a vibrant future for Atlantic Canada. The cybersecurity sector certainly has a major role to play in creating that future. Fredericton should be very proud to be hosting this ground-breaking event for a second year. It is very encouraging to see New Brunswick poised to become a leader in the cybersecurity industry, with Fredericton growing into an industry hub.”

- Matt DeCourcey, Member of Parliament for Fredericton and Parliamentary Secretary to the Minister of Foreign Affairs

TOURISM

Innovation, Science and Economic Development Canada. May 14, 2018. Minister Chagger highlights Canada’s best tourism year ever at Rendez-vous Canada 2018. Unveils report on year-one progress toward goals and action items in Canada’s Tourism Vision

Halifax, Nova Scotia - In 2017, Canada had its best year ever for international visits, welcoming 20.8 million visitors from around the world. Tourism puts Canada on the map and creates good middle-class jobs—one in ten jobs in Canada is associated with the visitor economy. Tourism directly supported 735,300 jobs last year.

The Honourable Bardish Chagger, Leader of the Government in the House of Commons and Minister of Small Business and Tourism, today highlighted Canada’s incredible achievements in 2017 during a keynote address at Rendez-vous Canada, the country’s premier international tourism marketplace.

Minister Chagger also unveiled a report on the results achieved during the first year of Canada’s New Tourism Vision. The Minister launched this bold plan to grow Canada’s tourism industry at last year’s Rendez-vous Canada event in Calgary.

In her keynote, Minister Chagger highlighted the Indigenous Tourism Association of Canada’s new series of Indigenous travel itineraries. From coast to coast to coast, visitors can now experience our country’s rich history through authentic tourism experiences offered by Indigenous tourism businesses. She also spoke about the Atlantic Growth Strategy and the Atlantic Canada Opportunities Agency’s work on this plan to stimulate growth across the region.

The Minister also reminded the Rendez-vous Canada audience that 2018 is the Canada-China Year of Tourism and that China-readiness workshops will be held across Canada in the coming months. These workshops will enable the domestic tourism industry to adapt to the needs of potential tourists from China, contributing to Canada’s efforts to double the number of visits from China by 2021 from 2016 levels.

Quotes

“From coast to coast to coast, our communities rely on tourism; it’s a vital component of Canada’s economy. From the growing Indigenous tourism industry, to the world-class experiences and attractions that drew record numbers of visitors last year, to the great year ahead of us in terms of the people-to-people ties that connect Canada and China, it’s never been a better time to be part of Canada’s tourism success story.”

— The Honourable Bardish Chagger, Leader of the Government in the House of Commons and Minister of Small Business and Tourism

“It looks like Rendez-vous Canada is on track to draw record attendance this year, and that means buyers from around the world and sellers from across the country will be driving more international travel to Canada. Together, we’re showing that now is the time to visit Canada.” 

— David Goldstein, President and CEO, Destination Canada

“This year’s Rendez-vous Canada promises to be another record-setting event as we welcome Canadian tourism businesses from across the country to showcase Canada’s broad and diverse offerings to international travel trade. This annual event continues to have a considerable impact on helping Canada attract more visitors, create more jobs and make significant contributions to local economies in urban, rural and remote locations. TIAC is pleased to collaborate with Destination Canada again this year and salutes the ongoing support of Minister Chagger as we continue to work collaboratively toward meeting the goals of Canada’s New Tourism Vision.”

— Charlotte Bell, President and CEO, Tourism Industry Association of Canada

“Indigenous tourism businesses are providing immersive, authentic experiences, which are high on the list of activities visitors to Canada are seeking. Indigenous tourism in Canada is so much more than observing historic items or touring ancient sites—all across this country these travel experiences are fun, engaging and educational.”

— Keith Henry, President and CEO, Indigenous Tourism Association of Canada

Quick facts

• Rendez-vous Canada 2018 is bringing together 1850 international buyers and Canadian sellers to help export Canadian tourism products to foreign markets.
• In 2017, tourism directly generated 735,300 Canadian jobs, an increase of 1.9% over 2016.
• Total tourism revenues from domestic and international travellers topped $97.4 billion in 2017—an all-time record.
• Tourism directly accounted for $41.2 billion of Canada’s GDP in 2017, an increase of 6.3% over 2016.
• Tourism is Canada’s number one service export, with international revenues reaching $21.3 billion in 2017.
• Support for tourism in Budget 2018 includes $11 million for the 2018 Canada-China Year of Tourism.
• Budget 2018 also includes investments in other key areas such as parks, Indigenous heritage and culture, and Canada’s regional development agencies.

FULL DOCUMENT: https://www.canada.ca/en/innovation-science-economic-development/news/2018/05/minister-chagger-highlights-canadas-best-tourism-year-ever-at-rendez-vous-canada-2018.html

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