EDC’s response to fiction and hyperbole
March 16, 2018
On Saturday, March 10 the Globe and Mail published an opinion piece about EDC entitled “The Death Star of Canada’s economy.” The headline gave a fair indication of what was to come – a fictional story told with hyperbolic language.
The issue at the center of the piece is EDC’s petition before a South African court to ground a Bombardier jet. The aircraft in question was leased by Westdawn Investments, a company with links to the Gupta family of South Africa, with a commercial loan to the lease operator provided by EDC in 2014.
In the fall of 2017, we cancelled the leasing and began efforts to reclaim the aircraft as a result of Westdawn’s breach of contract.
Those are the basic facts of the case. There is, as always, more we would like to say, but as long as the issue remains before the courts (as it does in Johannesburg and in the UK), we are limited in what we can make public by the necessity of not prejudicing our position.
Happily, legal proceedings do not limit our ability to respond to some of the other allegations made in the article. They are many, varied and wide spread in their aim, and leave the impression of international trade and finance as a world of dark dealings with no political or regulatory oversight. This impression demands correction.
The question is, where to begin. The opinion piece cuts a wide swath across major Canadian industries and corporate players, federal departments, ministers and members of parliament. Let’s take them step by step.
1 – EDC’s track record is exemplary
As the author himself notes, this is the first time in nearly eight decades that we’ve dealt with this kind of situation. With more than 20,000 financing transactions under our belt in every corner of the globe in that period, this is the first time where we’ve gone to court because of the risk of corruption. One in 20,000 is an exceptional track record that speaks for itself, and for the people we do it with. Not mentioned here are all of the transactions that we choose not to do every year because of credit and CSR concerns.
2 – EDC is transparent
EDC discloses every single financing and guarantee transaction it undertakes, and has done so since 2001. That disclosure includes the country and sector of the transaction, the company receiving the funds, what the funds will be used for, and, in the case of buyer financing, the Canadian company that is benefiting. The amount financed is also included, within pre-determined ranges so that foreign competitors can’t determine commercial costs of Canadian companies.
The author suggests that EDC’s year-end financials do not provide the exact amount of loans it extends. This is patently false. EDC’s financing portfolio is broken out in exact amounts by sector, geography, by specific exposure (gross loans, commitments, guarantees, risk transfer, etc.), by risk rating (investment grade, non-investment grade, impaired), and by interest rate risk. We also report on our loan interest yield and our net finance margin. All of this information is in our annual reports, which are tabled in Parliament every year and publicly available.
The author then suggests that EDC does not, but should, disclose the exact terms of each financial transaction that it does. This demonstrates a significant lack of understanding of trade finance, as no other Export Credit Agency or commercial financial institution in the world discloses this kind of information. To do so would be a breach of several laws and breach the confidentiality of Canadian companies.
3 – EDC operates in full partnership with the Government of Canada
Not satisfied with taking on EDC, the author turns on the politicians and ministries charged with oversight of EDC and finds them all wanting, even lacking a basic grasp of our organization’s mandate and purpose. On the question of ‘having a grasp’, we would happily test the author’s understanding of trade with the great number of experts within government that have dedicated their professional lives to trade and finance that have direct mandates to provide oversight to EDC.
EDC has been given a measure of independence and discretion to allow it to quickly adapt to changing markets dynamics, with a view to moving at the same speed as Canadian companies. Government after Government has seen the value EDC brings to Canada, and the importance of its commercial model.
4 – EDC has multiple levels of Government and public oversight
EDC has a level of accountability and oversight higher than many public institutions and far beyond the oversight provided in competing countries. Our governance system includes an independent, government-appointed Board of Directors (all of whom have wide and deep private sector experience) that meets with EDC’s Executive Committee six times a year or more, annual guidance from the Minister of International Trade, and annual approval of EDC’s Corporate Plan by the Government.
Does this mean that EDC’s operations are perfect? No, and that’s why we welcome feedback from a variety of Government players, including an annual audit by the Office of the Auditor General (OAG), special examinations by the OAG and a legislative review of EDC by Parliament every ten years. Any suggestion that EDC operates outside of the public eye is nothing short of mindboggling.
5 – EDC listens
Make no mistake, EDC’s business has been informed by, and benefited from, critical engagement with different stakeholders like EDC’s CSR Advisory Council (leading experts in the world of CSR) and various civil society groups. In addition to our Government and legal oversight, we receive feedback from the international working groups that we are a signatory to and business groups that we are members of. We receive regular and consistent feedback in a 360-degree capacity. And we’re the better for it.
We believe our mutual efforts at dialogue and information sharing have generated a greater understanding of our differing positions – as well as our areas of common ground. As a result, EDC is a top tier performer among international financial organizations in project and transactional review and our practices are regularly informed by collaboration with other leaders in the field, such as the World Bank, the IFC, and EBRD.
Why go to these lengths? We think it’s simple. It’s because EDC does play an important role in the Canadian economy. For thousands of companies seeking that first opportunity to go global, for businesses trying to expand and diversify into international markets, we are a trusted partner.
Our customers, in turn, create Canadian jobs, grow our economy, and offer products and services around the world that benefit many. We have been entrusted to protect and promote an important part of the Canada brand for good reason, and we are driven by a mandate to help Canadian companies succeed and our economy prosper. Any threat to EDC’s reputation is a threat to our ability to fulfill this mandate.
That is, of course, why this response to the March 10 piece is necessary. Where we find misinformation, we have a duty to correct it. As we continue to grow our impact and help expand Canada’s global footprint, we expect there will be more questions about what we do, and how we do it. The fact is – and this is a fact – we welcome that scrutiny. But let’s consider this one extreme opinion against the test of thousands of voices that respect and support the work that EDC does.
If this doesn’t sound like the inner machinations of a Death Star, we’re sorry to disappoint. They are, rather, the inner workings of a proud Crown corporation, run by dedicated professionals, working for and with Canadian companies around the world.