Remarks by: Eric Siegel
President and Chief Executive Officer
Ottawa - June 2, 2009 

Bonjour. Good morning and thank you all for joining us today.  I’d also like to welcome the new representatives who are here on behalf of your associations.

In this volatile business world, it is more important than ever to have a team of industry experts like yourselves with whom we can compare notes about global trade opportunities and concerns.  I’m looking forward to our usual lively discussion. 

Before we speculate on where global trade is going, I’d like to briefly outline where it’s coming from – as seen from our own experience in 2008 and the first third of this year.

Then, we’ll get to the crux of this discussion.  I’ll create a brief scenario on where I believe trade, and especially trade finance, may be heading, once we get past this recession, and I’ll invite you all to join in.

2008 Results

We all know the story of the financial meltdown— the sub-prime mortgage crisis in the United States, financial recklessness, regulatory missteps and the resulting trials and tribulations for some of the world’s biggest banks and businesses.

Today, we’re still paying for it.  Tight credit conditions in Canada, the U.S. and worldwide are impacting even the strongest companies.

Towards the end of 2008, the credit crunch started driving a record number of companies to insure their foreign receivables and access financing through EDC.

Thanks to years of preparation in better economic times, EDC was able to step into an expanded role to help Canadian companies through these tough times.

We served 8,300 Canadian companies last year – 11 per cent more than in 2007.  The vast majority are small and mid-sized firms, like most of your members.

We also facilitated a record volume of business -- $85.8 billion in foreign sales and investments by Canadian companies.

Clearly a lot of businesses are nervous.

In spite of that anxiety, or perhaps because of it, our customers turned more to emerging markets.

We facilitated $22 billion in exports and investments to those markets in 2008.  That was a third more than in 2007 and a quarter of our total volume.

Each year, EDC also measures how much business we undertake in partnership with private financial institutions – this increased by 20 per cent in 2008.

2009 Highlights

Our emerging market volumes and partnership activities reflect trends that EDC is making every effort to develop further.

We continue to reach out to more Canadian companies; facilitate more integrative trade and do more with our capital, people and technology.

The more we can help companies diversify their business opportunities, the less they are limited by the conditions in Canada, the U.S. or any other single country.

The other part of our solution to this credit crunch is helping companies overcome their domestic business challenges.

As you are aware, the Government of Canada turned to EDC to help address gaps in the domestic credit market for a two year period.

It boosted EDC’s share capital -- and the Government’s ability to add more capital -- and broadened our mandate and scope of activity.  You’ll find the details in your binder.

As a result, we can now facilitate more of your members’ international business, while also being able to apply our programs to a wide range of Canadian domestic activities.

Indeed, providing more domestic financing in your sectors is one of the changes EDC has been seeking in the Legislative Review.

It was also one of your recommendations during our gathering last year.

At this stage in the Review, Parliament is drafting its recommendations to the Minister of International Trade.  The recommendations will be based on the consultant’s report, which largely endorsed EDC’s business model.  We thank your associations for your strong support and input.

As the Government has requested, our domestic activities will be done in cooperation with the private financial sector and Business Development Bank of Canada - BDC.

These partnerships are crucial.

They’re the quickest and most effective way for EDC to accommodate your members’ pressing credit needs.

So far this year, we announced new arrangements with Canada’s major credit insurance providers, banks and surety companies to collaborate on domestic credit insurance and domestic bonding – through reinsurance or guarantees.

2009 Highlights

What does all this mean to your industry members?

We expect to add $3 billion in financial capacity to the domestic market to help Canadian companies get through the recession. 

This will allow private financial institutions to do more for their customers and take on new business. 

By the end of April, our combined financing and insurance volumes for Canadian companies reached $22.5 billion, just above what we did this time last year. 

And this barely takes into account our new domestic transactions that are just now coming on stream. 

Seen against the 22 per cent decline in Canadian exports that our Chief Economist is forecasting this year, this strong demand for our services is even more noteworthy. 

Our export business volume in emerging markets tells a similar story. 

At $5.6 billion on April 30th, it’s tracking about the same as our results at that time last year, in spite of today’s troubled economy.

We are pleased to see that Canadian companies are not sitting still and waiting for their trade in the United States to revive.  Many are diversifying their markets with our help.

Outlook: Beyond the Credit Crunch

This focus on emerging markets can help Canadian companies capitalize on the eventual recovery faster than in previous downturns.

For years, of course, we’ve all been acknowledging the importance of Canadian companies’ diversifying into the fastest growing markets in Asia and Latin America.

Those are the only markets that are showing some growth this year, against dismal negative economic performance in the most industrial economies.

By and large, it’s human nature to stick to what’s easy and comfortable.  A few mavericks head out before the rest of the pack and other businesses follow at a slower pace until they are, in essence, forced to do so.

Well, I believe that defining moment may have arrived.

As we are all painfully aware, this recession is not just broader and deeper than anything we can remember, but a different beast altogether.

One of the fundamentals of world trade – the easy flow of capital– has undergone a crisis of confidence that will extend well beyond the economic recovery.

As a result, I believe that global financing practices will never be quite the same again, even after this recession.

For instance, financial institutions may be undergoing a permanent shift to a stronger public-private partnership model and certainly better government oversight.

We may even start seeing more "hybrid" financial institutions abroad, similar to EDC, that operate on commercial principles but have more public-responsibility or even ownership.

Already, many governments have in essence invested in their banking institutions and won’t be letting go any time soon.

Already, corporate and banking giants are turning more to export credit agencies and multilateral financial institutions for increased funding or guarantees.

This will change how your members approach trade too.  And that’s what we’re here to discuss.

From EDC’s perspective, this credit crunch has made it clear that companies need to understand the financial tools at their disposal to help them not only ride out this storm, but also diversify their business beyond the stagnating United States.

The risks are high around the world, but the biggest risk is standing still.

That’s why I am also concerned about the Government’s Private Member’s Bill C-300 – respecting corporate accountability for Canadian mining, oil and gas activities in developing countries.

EDC does about one third of our business with Canadian companies in the extractive sector – that translated to $27.5 billion in 2008.

We already have one of the most comprehensive CSR programs among ECAs – based on internationally-accepted standards.  And our program continues to evolve in line with international and peer practices.

Now, Bill C-300 proposes to create new corporate social responsibility guidelines that companies would have to meet to obtain government support, including EDC financing.

This could put Canadian extractive firms at a disadvantage against their international competitors, who may not have to meet the same onerous standards.

Our concern too is that the new legislation could limit our ability to provide financial capacity to the extractive sector, at a time when they need our services most.

We are engaging with Parliamentarians on this issue and providing them with more information about our leading practices, and I encourage you to do the same.

On the subject of CSR, this recession has also shown us the importance of accountability and transparency in our business dealings – an area that will only gain more prominence as public-private partnerships evolve.

While we still don’t know when this recession will end, the good news is that Canada came into the recession later than our U.S. neighbour, hasn’t been hit so severely and could be the first out.

In preparation for that exit, together we can provide the necessary tools – whether advisory or financial -- to help your members get over this hurdle…and get a head start in creating new global business ventures.

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Before we move on to your views, I’d like to touch on the progress we’ve made on some key issues raised at last year’s meeting.

You asked for more support of transactions by foreign affiliates of Canadian firms.

We introduced a credit insurance program last year for Canadian affiliates in Mexico, provided locally by Atradius Seguros.  Those policies are reinsured by EDC.

You suggested we engage in more public education on globalization.

We’ve collaborated on new practical guides on doing business in China and India; and expanded our Chief Economist’s cross-Canada tour – Let’s Talk Exports.

You wanted us to expand our equity for company investments abroad.

We relocated a member of our Equity Team to China to get closer to that market; and have grown our investments in international funds to help connect our SMEs with like-minded overseas companies.

You were concerned about cutbacks in government programs supporting market development for SMEs.

Our fellow Crown Corporation, BDC, offers a Market Expansion Loan that can help SMEs finance the expansion of their domestic market or explore new and larger foreign markets.  For example, it can help companies participate in trade shows, develop export plans or purchase inventory to export to new markets.

We have provided a chart with Action Items from our last meeting.  Don’t hesitate to ask me questions about EDC’s responses during the course of this meeting.

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Finally, I’d like to welcome our new Senior Vice-President and Chief Financial Officer Ken Kember, who is officially installed in his role today.

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Now, I invite our executive team and our panel members to introduce yourselves.  For our association members, we propose that you also briefly address one of the following questions, which are also noted in your agenda:

• What do you think success will look like internationally for your sector in the next two years?
• How can we work together to enhance your members’ competitiveness, to achieve that success?