A pair of big announcements have seen the pendulum of investors confidence swing in Canada’s economy.
It was a big week for the Canadian economy.
No sooner had the country announced a newly revamped trade deal with the US and Mexico–the USMCA–to replace NAFTA than a string of deals were announced in the energy sector, notably the Royal Dutch Shell-led consortium LNG Canada moving ahead with a $40-billion natural gas export facility on the coast of British Columbia.
Canada has been in a private investment rut of late, desperately trying to entice companies and investors to see the country as a good place to do business. Investment began to fall four years ago and tumbled further when Donald Trump began erecting trade barriers as part of his “America First” policy. Declining investment has put a strain on the Toronto Stock Exchange and the Canadian dollar.
Yet the last seven days could prove significant in terms of changing impressions, both from inside and outside the country.
Beyond the LNG Canada deal, two other energy companies also made headlines with Husky announcing a hostile takeover attempt of oilsands producer MEG Energy for $6.4 billion and Precision Drilling offering to buy up another Calgary-based oil and gas service company, Trinidad Drilling
The announcements swim against the tide of comments by critics who have called Canada a bad place to invest, and as a result, the Canadian dollar–or loonie–is now outperforming other currencies, despite low oil prices in Alberta, which traditionally pull down the value of the dollar.
“It’s an extraordinarily positive development. The vote of confidence Shell is putting behind the economy and Husky as well—that’s going to support investor appetite,” Karl Schamotta, a currency strategist at Cambridge Global Payments, told CBC.
Yet not all Canada watchers are convinced. Critics say issues like the country’s high household debt levels persist, while others say the economic boost from the USMCA pact will be limited. Regulatory concerns in the energy sector remain a bone of contention for industry heads.
For example, investors will want to see how Bill C-69, the proposed legislation that’s set to overhaul the regulatory system which reviews major construction projects before approval, unfolds.
Still, things are looking up, at least for now. Earlier this year, Statistics Canada released data showing direct investment into the country was $33.8 billion, the lowest level since 2010 and well short of the record high of $126.1 billion back in 2007.
