Canada, the Caribbean and Latin America: Trade

Transcription

Foreign Policy for
Canada’s Tomorrow
N o. 9
Canada, the Caribbean
and Latin America:
Trade, Investment
and Political Challenges
Stephen J. Randall
August 2010
Canadian International Council
www.onlinecic.org
Conseil international du Canada
www.cicenligne.org
Canada, the Caribbean and Latin America:
Trade, Investment and Political Challenges
Author Biography
Stephen J. Randall, FRSC, PhD (Toronto), is a professor of history at the University of Calgary. He is currently
a Fellow with the Canadian International Council working on Canadian relations with the Caribbean and
Latin America. He was director of the University of Calgary Institute for United States Policy Research in the
School of Public Policy (2006-2009). He served as dean of the Faculty of Social Sciences (1994-2006) at the
University of Calgary and as Imperial Oil–Lincoln McKay Chair in American Studies (1989-1997). He held
previous appointments at McGill University (1974-89), and the University of Toronto (1971-74). He is an elected
member of the Royal Society of Canada, and a fellow with the Canadian Defence & Foreign Affairs Institute.
Dr. Randall was a member of the editorial board of the Latin American Research Review (2004-09). He is
a former co-editor of International Journal of the Canadian Institute for International Affairs, and of Canadian
Reviews in American Studies. A specialist in United States foreign policy and Latin American international
relations and politics, he holds the Grand Cross, Order of Merit from the Presidency of Colombia, in recognition
of his scholarly contribution to inter-American understanding. Dr. Randall has served with the United Nations, the
Organization of American States, and the Carter Center, supervising elections in the Caribbean, Latin America,
and Southeast Asia. In 2007 he held the Fulbright Visiting Chair in North American Studies at American
University, Washington, D.C. He is the author, co-author, editor, or co-editor of a number of books, most recently
United States Foreign Oil Policy Since World War I. (2005); Canada and the United States: Ambivalent Allies
(4th edition, 2008); and the authorized biography of former Colombian president Alfonso López Michelsen,
Su Vida, Su Epoca (Bogotá : Villegas Editores, 2007).
Acknowledgements
I would like to thank once again Juliana Ramirez, M.A. for her effective research for this paper as well as
Chantal Hansen, MGIS, who prepared the maps and graphs. As ever the staff of the Canadian International
Council has been not only patient with the author but also remarkably effective in preparing this paper for
publication. None of the above of course bear any responsibilities for either errors or the author’s interpretation.
The opinions expressed in this paper are those of the author and do not necessarily reflect the views of the
Canadian International Council, its Senate or its Board of Directors.
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Executive Summary
This paper provides a broad overview and analysis of Canada’s trade relations with Latin America and the
Caribbean. It examines the patterns of Canada’s commodity trade, discusses the trade agreements that have
been negotiated or are under consideration, and explores the political debate surrounding free trade agreements
with countries in the region, in particular the human rights dimensions of the FTA with Colombia. The paper also
discusses the relative economic importance of Canada to the countries of the Caribbean and Latin America. With
the possible exception of Mexico, the evidence suggests that Latin America is more important to Canada than
vice versa. However, in some sectors, such as mining and the extractive industries in general, Canadian interests
are major players.
The paper describes the historical economic relationship Canadian interests have had with the Americas, and
the increased importance of the region to Canada since the lost decade of the 1980s. It summarizes the often
intense debate in Canada over the merits of trade and investment liberalization and the concerns associated with
Canadian private sector investment in the more sensitive extractive sector, identifying some of the measures the
Canadian government and the private sector have implemented to address those concerns.
The policy issues are several. How important to our economy are Canada’s economic ties with Latin
America? Is the Canadian government pursuing agreements with the most appropriate countries in the effort to
advance the national interest? What does Canada do to promote and protect private sector investment? What
obligation, if any, does the Canadian government have to respond to concerns expressed by some sectors of
Canadian civil society about the impact of private investment in the extractive sector on the environment, labour,
and indigenous people? The paper also offers a modest number of recommendations for policy-makers.
Recommendations
• The paper asserts that the expansion of Canadian trade with the countries of the Americas contributes
to the diversification of Canadian trade, and that trade is essential to the health of the Canadian
economy, its workers, and social institutions. The Canadian government should continue to seek ways
to expand that trade in a politically and socially responsible manner.
• The Canadian government needs to continue to be proactive in seeking to expand and enhance
economic relations with the Canada’s main economic partners in the Caribbean and Latin America
(Brazil, Mexico, Peru, Chile, and Venezuela) and to devote less time, energy, and resources to
cultivating the less economically significant countries in the region.
• In its pursuit of trade agreements with the countries of the Americas, the Canadian government should
continue to include provisions on human rights, labour, and environmental standards. These provisions
should exceed international standards where possible and be consistent with Canadian values.
• The Canadian government should not shy away from negotiating with countries that have experienced
civil strife if, in the assessment of Canadian policy-makers, engagement might help alleviate conflict.
• With regard to foreign direct investment, especially in the natural resource extraction sector, the
Canadian government should continue to promote a high standard of corporate social responsibility.
Where feasible, the government needs to go beyond the application of purely voluntary principles by
the private sector, and set high standards for accountability and mechanisms to ensure compliance.
Nonetheless, the primary responsibility to maintain good governance in the operation of foreign
companies must reside with host countries. The Canadian government should continue to work closely
with the governments of host countries to strengthen their capacity to govern their own natural
resources sector.
–3–
Sommaire
Cette étude se veut à la fois un tour d’horizon et une analyse des relations commerciales du Canada avec
les Caraïbes et l’Amérique latine. Son auteur met en évidence les schémas du commerce des marchandises
canadiennes, examine les accords commerciaux déjà négociés ou à l’étude et rend compte du débat politique
soulevé par les accords de libre-échange conclus avec les pays de la région, en ce qui a trait notamment aux
dispositions sur les droits de l’homme de l’accord avec la Colombie. Il évalue aussi l’importance économique
relative du Canada pour l’ensemble des pays concernés. Car à l’exception probable du Mexique, les données
semblent indiquer que l’Amérique latine revêt pour le Canada une plus grande importance que l’inverse. Quoique
dans certains secteurs comme l’exploitation minière et l’industrie extractive, les intérêts canadiens jouent un
rôle majeur.
L’auteur retrace ainsi l’historique des liens économiques que des entreprises canadiennes ont entretenus
avec les Amériques et l’importance grandissante que la région a prise pour le Canada depuis la décennie perdue
des années 1980. Il résume le débat souvent intense qui a cours au Canada sur les avantages de la libéralisation
du commerce et des investissements ainsi que les inquiétudes entourant les investissements du secteur privé
canadien dans une industrie extractive particulièrement sensible, tout en relevant certaines des mesures
adoptées par le Ottawa et le secteur privé face à ces préoccupations.
L’étude soulève donc plusieurs questions stratégiques. Quelle est l’importance pour l’économie canadienne de
nos liens commerciaux avec l’Amérique latine ? Ottawa poursuit-il des accords avec les pays les mieux en mesure
de faire avancer nos intérêts nationaux ? Que fait le Canada pour promouvoir et protéger les investissements
du secteur privé ? Quelles obligations, s’il en existe, Ottawa doit-il remplir pour répondre aux préoccupations de
certains secteurs de la société civile canadienne concernant l’impact sur l’environnement, la main-d’œuvre et les
peuples autochtones des investissements privés dans l’industrie extractive ? Face à ces questions sont formulées
à l’intention des décideurs les quelques recommandations suivantes:
Recommandations
• Étant donné que le renforcement des liens commerciaux du Canada avec les pays des Amériques
favorise la diversification du commerce canadien et que ces liens sont indispensables à l’économie, à la
main-d’œuvre et aux institutions sociales canadiennes, Ottawa devrait en poursuivre le développement
tout en cherchant à le faire de façon socialement et politiquement responsable.
• Ottawa doit maintenir une approche proactive pour développer et améliorer ses liens économiques
avec ses principaux partenaires des Caraïbes et de l’Amérique latine (Brésil, Mexique, Pérou, Chili
et Venezuela) tout en consacrant moins de temps, d’énergie et de ressources aux pays de moindre
importance économique de la région.
• En négociant des accords avec les pays des Amériques, Ottawa doit continuer d’exiger l’inclusion de
dispositions sur les droits de l’homme, les conditions de travail et les normes environnementales. Ces
dispositions doivent si possible dépasser les normes internationales et correspondre aux valeurs canadiennes.
• Ottawa doit accepter de négocier avec les pays où sévissent des conflits civils dans la mesure où, selon
l’évaluation des décideurs canadiens, son engagement économique serait susceptible d’atténuer ces conflits.
• En ce qui concerne les investissements directs à l’étranger, surtout dans l’industrie d’extraction des
ressources naturelles, Ottawa doit continuer de promouvoir de rigoureuses normes de responsabilité
sociale d’entreprise. Il doit si possible aller au-delà d’une application purement volontaire de ces
principes par le secteur privé et définir des normes élevées de responsabilisation fondées sur des
mécanismes qui en assurent la mise en œuvre. Pour autant, la responsabilité première de la bonne
gouvernance des entreprises étrangères échoit aux pays hôtes. Mais Ottawa doit continuer de
collaborer étroitement avec les gouvernements de ces pays hôtes en vue de renforcer leur capacité de
régir leurs propres secteurs des ressources naturelles.
–4–
Trade Patterns
Canadian government documents addressing the goals of Canadian foreign policy consistently refer to Canadian
“interests,” yet the notion is an ambiguous one. My previous papers for this series on Canada and the Americas
focused on security challenges in the Caribbean and Latin America, and on Canadian foreign aid programs in the
region. This paper is concerned with Canada’s economic relationship with the area, including trade and foreign
direct investment.
When we cut through the rhetoric associated with such goals as alleviating poverty and promoting democracy
(not that such goals are not sincerely pursued), it is Canadian economic well-being that lies at the core of our
national interest. Although it was not until 2007 that the Conservative government of Stephen Harper announced
that Canadian foreign policy would focus on re-engagement with the Americas, Canadian private sector actors
have been involved in the region since the late nineteenth and early twentieth centuries. Canadian government
departments and agencies have also long been engaged in the region: promoting economic ties, supporting
democratization initiatives, participating in and providing support for elections, seeking to alleviate poverty—
among many other goals. Such humanitarian initiatives have been considerably less controversial, both at home
and in the region, than trade and foreign investment.
Since the lost decade of the 1980s, there has been a more aggressive approach to promoting trade with the
region, as Canada has sought to diversify its trading relationships and to take advantage of significant economic
growth in Latin America.
For a short time in the late 1990s and early 2000s, the United States led a hemispheric movement to realize
a Free Trade Agreement of the Americas. That approach proved unfeasible, largely owing to the opposition of such
major players as Brazil. In the interim, the Latin American countries have themselves built regional trading blocs
or sought to reinvigorate existing ones, including Mercosur, the Central American Common Market, CARICOM,
and the Andean Pact. These regional trading blocs have presented challenges to countries like Canada that
seek to reduce tariff barriers and restrictions on foreign investment. Building on the trilateral North American
Free Trade Agreement with Mexico and the United States, Canadian policy-makers have, since the early 1990s,
negotiated a series of bilateral free trade agreements, beginning with Chile.
Since the late 1980s, Canadian governments have pursued an active policy of trade and investment
liberalization in the Americas, long before the Harper government in 2007 initiated its Americas Strategy.
Canada’s membership in the Organization of American States, and the conclusion of the Canada–U.S. Free
Trade Agreement and the North American Free Trade Agreement in 1994, have propelled Canada into more
focused attention on the Americas. Policy has been driven by a desire to defend Canada against protectionist
impulses in the United States, which continues to account for more than 66 percent of Canadian trade, and by
the perceived need to diversify Canadian trade. Increased American protectionism has loomed since 9/11 and
been most recently reflected in “Buy American” policies. When it became increasingly evident in the 1990s that
the Washington-driven Free Trade Area of the Americas initiative had failed to resonate with the most significant
Latin American countries, Canadian governments turned their attention to a series of bilateral negotiations in an
effort to expand Canada’s markets.
After the United States, the significance of individual countries in the hemisphere to Canadian trade drops
sharply. In 2001 the United States accounted for 86 percent of Canadian exports; Mexico accounted for only 1
percent of exports and 4 percent of Canadian imports, although the total value of that bilateral trade—US$10
billion—was significant.1 In 2008 Canada’s main trading partners in the region were Mexico ($17.9 billion total
bilateral trade in commodities by value), Brazil ($2.68 billion), Peru ($2.45 billion), Chile ($1.79 billion), and
Venezuela ($1.37 billion). It is significant that Canada has been able to conclude FTAs with only two of those
countries, Peru and Chile; Brazil, by far the most powerful economy in the region, has proven to be especially
1 United Nations, Economic Commission for Latin America and the Caribbean, Canada’s Trade, 1, 4.
–5–
elusive. Cuban bilateral trade with Canada in 2008 ($895 million) slightly surpassed that of Argentina ($640
million). Canadian exports to the region in 2008 exceeded $1billion in value only with Mexico and Brazil. With
“second-tier” countries Chile, Colombia, Cuba, and Venezuela, Canadian exports were between $500 million and
$999 million in 2008. Among “third-tier” countries (Peru, Argentina, Uruguay, Ecuador, Panama ,Guatemala,
and the Dominican Republic) Canadian exports were between $100 million and $499 million. Canadian exports
to other individual countries in the region did not exceed $100 million in 2008.
After Mexico, Brazil and Venezuela in South America were a distant second and third in terms of bilateral
trade with Canada. In the Caribbean, Cuba, Jamaica, Guyana, and Trinidad and Tobago were the only countries
with substantial trade. However, the aggregate Canadian trade with CARICOM countries was significant at
US$835 million, a 62 percent increase over the previous decade. Canadian trade with the Commonwealth
Caribbean has been stimulated by the CARIBCAN agreement, under which products from the region are eligible
for duty-free access to Canada if at least 60 percent of the ex-factory price of the product originated in either
a Caribbean Commonwealth country or Canada. In the non-Commonwealth Caribbean, Canadian bilateral trade
with Cuba has been particularly significant, although Canada faced increased competition from the United States
after December 2001, when Cuba increased its agri-food purchases from the United States.2 Almost a decade
later, there is little change, although some of the fastest- growing exports markets for Canada are in the region.
The relatively small scale of bilateral trade with the region has not prevented Canadian governments from seeking
to expand economic ties: more than a decade ago Canada negotiated a bilateral free trade agreement with Chile.
This was the first in a series of such agreements, the most controversial and recent of which is with Colombia.
Canada has similarly been of relatively low importance to the international trade of Latin American
countries. Prior to World War I, Great Britain was the dominant economic player in the region, but that war
severely reduced its influence and presence. After the war, American capital flowed into the area and trade
flourished, tying the region increasingly to American markets for the export of goods and the import of
technology. Historically, Latin American countries, with a few important exceptions, have tended to be primarily
exporters of raw materials and tropical products. In Central America and the Caribbean they were also often
single-commodity exporters, with the result that they were highly vulnerable to shifts in commodity prices, a
situation that persists. But as the region has industrialized, its economies have become far more complex, and
during the 1950s and 1960s many countries pursued import substitution policies in an effort to diversify and
to reduce their reliance on imports of manufactured goods. The import substitution policy was most closely
associated with the influence of the UN Economic Commission for Latin America and the ideas of Raúl Prebisch.
In the 1980s, the import substitution model gradually gave way to trade and investment liberalization. It was
Chile and Mexico, the latter with its apertura al norte, which were most clearly identified with that orientation.
In the case of Mexico, apertura resulted in the North American Free Trade Agreement.3 Caribbean and Latin
American trade patterns have also evolved as countries in the region have formed, or in some instances sought
to revitalize, existing regional trade and economic blocs: the Andean region, the Central American Common
Market, Mercosur, and CARICOM.
Latin American countries have also looked increasingly to Asia, in particular China, and to Europe to
expand markets and sources of foreign investment. Brazil has increasingly diversified its trade patterns. Its most
important trading partners (in terms of exports) are the United States (17.9 percent), Argentina (8.5 percent),
China (6.1 percent), and Germany (4.1 percent), but it has also opened significant and controversial ties with
Iran. The United States supplies 16.3 percent of Brazilian imports, Argentina 8.8 percent, China 8.7 percent,
and the Netherlands 0.9 percent.4 For Canada one impediment to increased trade with Brazil is high tariffs on
imports in some sectors from non-Mercosur countries. In 2007 Brazil nonetheless accounted for 0.34 percent of
total Canadian exports, the most significant of which were related to non-metallic mineral mining and quarrying,
2 United Nations, Economic Commission for Latin America and the Caribbean, Canada’s Trade, 2, 5.
3 On import substitution policies, see Braga, “Import Substitution Industrialization”; Baer, “Import Substitution and Industrialization in Latin America.”
On Raúl Prebisch, see Dosman, The Life and Times of Raúl Prebisch.
4 Data are for 2006. Industry Canada, Accessed August 10, 2010. http://www.ic.gc.ca/eic/site/ibi-iai.nsf/eng/bi18730.html.
–6–
coal mining, and paper mills. There was also a notable increase between 2006 and 2007 in Canadian exports of
aerospace products and wheat. In the same period, there was a decline in several categories of Brazilian exports
to Canada, including sugar, engine, turbine and power transmission equipment, iron and steel and ferro-alloy
manufacturing, construction machinery, and footwear. Brazil’s main imports, regardless of source, are machinery
and electrical equipment, chemical products, oil and derivatives, and transportation equipment and parts. The
country’s main exports are transportation equipment and parts, metallurgical products, soybean meal and oils,
and chemical products.5
Brazil’s neighbour and Mercosur partner Argentina has a similar trading pattern. Its most important trading
partners are Brazil, Chile, the United States, China, and Germany. After Brazil, the United States (15.4 percent),
China (6.5 percent), and Germany (5.2 percent) are the main sources of Argentine imports. Reflecting the
impact of Mercosur, Brazil absorbs 16.8 percent of Argentine exports and is the source of 37.2 percent of the
country’s imports; Chile takes 8.8 percent of its exports, only slightly ahead of the United States with 8.3 percent
and China with 7.2 percent. Canada is simply not an important trading partner for Argentina. Canada ranks 53rd
as an export market and 47th as a source of imports for Argentina, and the total value of Canadian trade with
Argentina changed little in the decade between 1998 and 2007. Nonetheless, in 2007 Canada’s main exports
to Argentina were power boiler and heat exchanger manufacturing, mining and oil and gas field machinery
manufacturing, and telephone apparatus manufacturing. Canada’s main imports were gold and silver ore, iron
and steel, wines, and pharmaceuticals.6
Although it is important to note where the Caribbean and Latin America rank in Canada’s overall trade
picture, we should also try to understand the relative significance of Canada for the countries in the region.
For most of Latin America, the key consideration continues to be access to the large U.S. market. In the case
of the Dominican Republic, for instance, more than 67 percent of its exports go to the United States. With few
exceptions Canadian exports to the countries of the region constitute a small proportion of their overall trade.
In 2008 there were only nine Caribbean and Latin American countries whose exports to Canada represented
more than 2 percent of their total exports, and with the exceptions of Mexico, Colombia, and Peru they were
relatively minor economies in the region: Barbados, the Bahamas, Guyana, Haiti, and Jamaica in the Caribbean,
and Nicaragua in Central America. Guyana had the highest percentage of its total exports destined for Canada
(22.48 percent).
Canadian exports to the region represented an even smaller percentage of total imports. In only three
countries did Canadian exports constitute more than 2 percent of total imports: Barbados, Trinidad and Tobago,
and Uruguay.7 Canada has nonetheless acquired significant niches in the region. Canadian exports of paper
and paper products, for instance, constitute 18.2 percent of Brazilian imports and over 9 percent of Colombian
imports in that category; more than 11 percent of Brazil’s imports of metals, ores, and non-metallic minerals
come from Canada; Canadian exports of metals, ores, and non-metallic minerals comprise more than 24 percent
of Colombian imports, and Canadian agricultural and forestry product exports to Ecuador represent 23.8 percent
of the country’s imports in that sector. Metals, ores, and non-metallic mineral exports to Ecuador constitute 39
percent of that market. Venezuela imports more than 45 percent of its metals, ores, and non-metallic minerals,
more than 18 percent of its paper and paper products, and 15.6 percent of its agricultural goods from Canada.
Bolivia imports more than 5 percent of its office and computing equipment and 4.6 percent of its metal and
woodworking equipment from Canada. Panama obtains more than 6 percent of its wood products from Canada.
In 2008 Canada had a modest share of Mexican imports: 8 percent of the country’s agricultural imports, 6.4
percent of its railroad equipment requirements, 4 percent of its paper and paper products, 3.9 percent of its
processed foods, and 3.78 percent of its iron and steel. In the same year Canada met more than 10 percent of
Costa Rica’s requirements for metals, 3.5 percent of its petrochemical and coal products imports, and 3.6 percent
of its processed food imports.8
5
6
7
8
Industry Canada, http://www.ic.gc.ca/eic/site/ibi-iai.nsf/eng/bi18730.html. Accessed August 10, 2010.
Industry Canada, http://www.ic.gc.ca/eic/site/ibi-iai.nsf/eng/bi18732.html. Accessed August 10, 2010.
International Trade Centre, “International Trade Statistics.”
Canada, Export Development Corporation, “Country Information.”
–7–
Taking the region as a whole, the most important Canadian exports to the Caribbean and Latin America by
value in 2008 were vegetable and mineral products, with Mexico, Brazil, and Venezuela the leading importers,
followed by Colombia, Chile, Peru, Jamaica, and Trinidad and Tobago. The main imports from Canada by
Argentina and Uruguay in that year were machinery, mechanical appliances, and electrical and transportation
equipment. Bolivia’s main Canadian imports were machinery, mechanical appliances, and electrical equipment.
In Central America the leading Canadian import by El Salvador and Guatemala was wood pulp; Costa Rica and
Honduras imported chemical products, and Panama imported transportation equipment. In the Caribbean, Cuba’s
primary commodity import from Canada is chemical products; the Dominican Republic imports base metals and
articles of base metal, and even Haiti, the poorest country in the hemisphere, imports live animals and animal
products, as do Barbados and Grenada.9
The Latin American market is important for some individual Canadian companies and for the Canadian
economy as a whole. To cite only one example, Bombardier reports that 25 percent of its market share in the
aerospace industry is in Latin America with particular interest in Mexico, but it is not involved only in the sale
of technology in the Latin American market. The company has a world-class manufacturing facility in Querétaro,
Mexico, which produces electrical harnesses for Bombardier aircraft.
There are, of course, regional differences in Canadian exports to the Caribbean and Latin America. In
2007, Western Canada accounted for 37 percent of Canadian exports to the region, Ontario 27 percent, Quebec
22 percent, and Atlantic Canada 14 percent. Between 2003 and 2007, the annual average percentage growth
of Canadian exports to the region was 20.56 percent. For Western Canada it was only 11.35 percent. During
that period the rest of Canada was particularly successful in increasing merchandise exports in machinery and
equipment, building materials, consumer goods, and food products. Exports from Western Canada are dominated
by agricultural equipment and commodities, with wheat representing 20 percent of total exports to the region.
Saskatchewan has been the major exporter, with potash, wheat, and other grains the main commodities.
British Columbia has exported minerals and paper products, and Alberta has focused on oil, mining and gas
field equipment exports. The main destinations for exports from Western Canada have been Brazil, Venezuela,
Colombia, Chile, and Peru.10
Canadian interests play a major role in exports of fertilizer to Latin America. Canpotex is an international
marketing and distribution company owned by Saskatchewan potash producers — Agrium Inc., Potash
Corporation of Saskatchewan Inc. (PotashCorp) and The Mosaic Company, a U.S. enterprise that operates some
of Canada’s potash mines. PotashCorp also owns a potash mine in New Brunswick that produces nitrogen and
phosphate at facilities in Brazil and Trinidad, as well as in the United States. Agrium, based in Calgary, is a
leading global producer of agricultural nutrients, industrial products, and specialty fertilizers. Total sales in 2007
were US$5.3 billion. The Canadian Export Development Corporation (EDC) assisted Agrium with financing to
construct a fertilizer plant in Argentina that has been operating for well over a decade. Potash exporters credit
the EDC with providing the financial support that has enabled them to compete more effectively in the Brazilian
market.11
Canada’s main imports from countries in the region come from Mexico, Brazil, Chile, Peru, and Venezuela,
which together exported more than $1 billion in commodities to Canada in 2008. The second tier in terms of
exports to Canada includes Argentina, Colombia, and Cuba. Ecuador and Guyana in South America constitute
a third tier, along with Guatemala, Honduras, and Costa Rica in Central America, and the Dominican Republic
in the Caribbean. With the exception of technical equipment and appliances from Mexico, many of the leading
Canadian imports from Latin America are raw and semi-processed materials. These include precious metals from
Peru and mineral products from Venezuela, Panama and Bolivia; products of the chemical or allied industries
from Trinidad and Tobago; base metals from Chile; chemical and related products from Brazil; precious metals
9 See the appended maps for Statistics Canada sources.
10 Canada, Western Economic Diversification, “Western Canada’s Economic Relationship.”
11 Herscovitch, “ExportWise – Summer 2008.”
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from Guyana; and vegetable products from a range of countries in the region, in particular Guatemala, Ecuador,
Grenada, Costa Rica, and Colombia. Textiles and textile articles are leading exports to Canada from Honduras,
Haiti, and El Salvador, and Canada imports wood and wood products from Paraguay and prepared foodstuffs
from Barbados.
Canada-Latin America Trade Agreements
Since the conclusion of NAFTA and the failure of the Free Trade Area of the Americas (FTAA) initiative,
Canadian governments have targeted specific countries for bilateral free trade agreements, beginning with Chile.
Brazil has shown little interest in trade negotiations with Canada, in part because the Canadian market is simply
too small and in part because Brazil has sought to diversify its trade relations with major powers in Europe and
Asia, to supplement its trade with the United States. The Canada–Chile economic relationship, however, has been
a constructive one. In 1991, Chile re-emerged from more than a decade of authoritarian rule under General
Augusto Pinochet to reclaim its earlier status as one of Latin America’s leading democracies. Shortly thereafter,
Canada demonstrated its interest in formalizing the bilateral trade relationship. Chilean governments in the
post–Salvador Allende years were also committed to liberalized trade and investment policies. Canada and Chile
concluded a bilateral free trade agreement in 1997, six years before Chile concluded a similar agreement with
the United States. In 1996 the value of total bilateral trade was $556 million. In less than a decade total trade
tripled, with Chilean exports to Canada showing particular increase. The EDC concluded that most of the benefits
for Canada came in the form of lower prices for imported copper, fresh fruit and vegetables, and wine. Even with
that expanded trade, Chilean imports to Canada still represented a very small percentage of Canadian trade, in
2008 0.35 percent.12
The conclusion of a trade agreement with Colombia has presented a far more difficult political challenge than
the agreement with Chile. Colombia’s rich natural resources, stable regulatory regime, and favourable approach
to foreign investment and liberalized trade have long been recognized, but insecurity has deterred investors. The
country has experienced lengthy civil strife that brought severe violence and human rights abuses, contributed
to the displacement of more than a million people, and in many ways hampered the country’s international
relations. The Conservative government of Stephen Harper nonetheless pursued free trade agreements with
Colombia and Peru in 2007. The opposition in the United States to the ratification of the U.S.–Colombia Free
Trade Agreement (an opposition that intensified with the Democratic Party control of Congress after 2006)
made Canada an attractive alternative for expanded trade. Colombia constitutes Canada’s fourth-largest export
market and sixth-largest trading partner in South America, and bilateral trade has steadily grown in recent years,
with an 18.7 percent increase in value from 2007 to 2008.13 Canadian sectoral priorities for Colombian trade are
agriculture, food and beverages; metals, minerals and related equipment, services and technology; and oil and gas
equipment and services. Colombia’s main exports to Canada, which were valued in 2008 at more than $643 million,
included mineral fuel and oils, coffee, fruits and nuts, trees and plants, and plastic.
A free trade agreement with Peru rounded out the trade negotiations with the Andean countries. Canada
has substantial foreign investment in Peru, in 2009 totalling more than $2.4 billion. Canada is also a significant
export market for Peru, with exports totalling more than $2.8 billion in 2009 and exports to Canada valued at
more than $428 million. By 2007 Peru had replaced Venezuela as the third-largest Canadian partner in Latin
America, behind Mexico and Brazil. Increases in imports from Peru in the past decade have been attributed
to a rise in mineral prices and an increase in production by Canadian gold mining companies in the country.
Barrick Gold and Skye Resources are two of the major Canadian firms in Peru. Gold and other precious metals
constituted more than 53 percent of Peruvian exports to Canada in 2007.14
12 Poloz, “Free Trade with Chile.”
13 Canada, Foreign Affairs and International Trade Canada, “The Embassy of Canada to Colombia.”
14 Latin Business Chronicle, “Canada–Peru Trade Boom.”
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Canada has also concluded a free trade agreement with Panama, which has what can only be described
as minuscule bilateral trade with Canada, totalling only $115 million in 2007. Small as the bilateral trade is
between the two countries, there is some expectation that the modernization of the Panama Canal, predicted for
2014, will result in significant economic growth and additional opportunities for Canadian trade and investment.
Even before the conclusion of the free trade agreement, Panamanian exports of petroleum and bituminous
fuel entered Canada duty free, and its other major exports, including coffee and tropical fruit produce, pose no
competition with Canadian goods. In turn, Canada exports primarily non-agricultural merchandise to Panama,
including pharmaceuticals, machinery, and electronic equipment.15 In addition, Panama is important to Canada’s
service sector, and Canadian service providers operating in the country include financial services, construction,
and mining. In 2006, the EDC concluded a Memorandum of Understanding with Panama’s Ministry of Finance
and Economy, to increase opportunities for Canadian investors and exporters. Canada and Panama also have a
Foreign Investment Promotion and Protection Agreement, concluded in 1998.16
The Politics of Canada–Latin American Trade
Although a number of Canadian civil society groups oppose free trade and investment liberalization on principle,
opposition has focused specifically on the bilateral agreement with Colombia, which has been by far the most
controversial. Advocates of the agreement point to the potential increase in Canadian grain sales and pork
exports to Colombia.17 Their argument for supporting the agreement is that human rights are more likely to
improve if Canada engages with the Colombian government rather than ostracizing it. Critics focus on the human
rights context, the persecution of labour leaders, and conditions among indigenous people. President Álvaro
Uribe Vélez has pursued a vigorous policy of trade and investment liberalization, and Canada is only one of
several countries with which the Colombian government has sought trade agreements. By mid-2010 Colombia
had concluded 10 agreements, eight of which had been implemented. Most were simply regional agreements,
including those with Ecuador, El Salvador, Guatemala, Honduras, Mexico, and Peru. The two most important
agreements, with the United States and Canada, had been negotiated but not implemented because of opposition
in the latter countries. That opposition came from NGOs, trade unions, and elected officials that are concerned
about human rights issues and worry about the potential impact of increased trade on the environment and
labour.18 The Canadian Centre for Policy Alternatives (CCPA) is among organizations opposed to the agreement,
suggesting that it represents the triumph of investor rights over human rights, although the CCPA provides only
vague suggestions as to the ways in which the agreement will actually affect human rights.19 The Canadian Auto
Workers called for a human-rights impact assessment before the agreement with Colombia was concluded. The
CAW criticized the Liberal Party amendment to the agreement that provides for an optional annual assessment
of human rights. The CAW called the approach a “shocking betrayal of Canadians’ expectation that we don’t
negotiate with human rights abusers.”20
Amnesty International Canada has been consistently critical of Colombia’s human rights record. In February
2010 Amnesty documented an intensification of violence against indigenous leaders, many of whom live in areas
valued for mineral resources. Amnesty cited the National Indigenous Organization of Colombia, which claims that
some 32 indigenous groups are at risk because of the armed conflict, large-scale economic projects, and a lack of
state support.21 The Canadian Council for International Co-operation (CCIC) prepared a report entitled Making
a Bad Situation Worse: An Analysis of the Text of the Canada–Colombia Free Trade Agreement. The report was
prepared in collaboration with the Canadian Association of Labour Lawyers, the Canadian Labour Congress, and
the CCPA. The CCIC called the side agreements on labour and the environment “ineffectual,” suggesting that
15 Canada, Foreign Affairs and International Trade Canada, “Panama.”
16 Canada, Foreign Affairs and International Trade Canada, “Panama.”
17 Al Sema, “Canada Sees Gain.”
18 Salazar, “Los TLC de Colombia.”
19 Canadian Centre for Policy Alternatives, “Canada-Colombia FTA.”
20 Canada NewsWire, “Independent Human Rights Impact.”
21 Amnesty International Canada, “Human Rights in Colombia.”
– 10 –
the agreement is a standard market-access agreement. The CCIC argued that it raised serious human rights
concerns for vulnerable populations in the context of civil conflict, would negatively affect small-scale farmers,
and “expose indigenous people, Afro-Colombians, and rural dwellers to land grabs by Canadian mining companies
equipped with powerful new investor rights.”22 Opposition has also come from Canadian flower growers, who
are alarmed that the agreement removes tariffs on cut flowers from Colombia rather than phasing in the tariff
reductions over 10 years. In 2005 Canada imported $60 million in cut flowers from Colombia. Greenhouse
Canada notes that imported flowers from various destinations in 2005 earned more than $6 million, revenue that
would be lost under the free trade agreement with Colombia. The association cites also the differential between
minimum wages in Colombia and Canada and the potential environmental impact of pesticides that may be used
in Colombia but are restricted in Canada.23
There is clearly a fundamental divide in Canadian society between the advocates and the opponents
of liberalized trade and investment. Liberal MP Scott Brison, who was one of the main proponents of the
incorporation of a provision on human rights in the agreement, captured the essence of the differences when he
said, in the House of Commons, “If we refuse to engage a country like Colombia that is making progress, where
civil society leaders, union and government and victims of both paramilitary and FARC gorilla (sic) violence
are all trying to move forward … we will be allowing evil to flourish.”24 In Parliament, the main critique of the
agreement has come from the New Democratic Party. MP Peter Julian, NDP trade critic from Burnaby-New
Westminster, dismissed as ridiculous the idea that the two governments would be able to develop an objective
and neutral way of measuring progress on human rights.25 The Canadian Council of Chief Executives (CCCE)
provided a strikingly different perspective in its presentation to the House of Commons Standing Committee on
International Trade, on November 19, 2009. The CCCE’s brief stressed the advantages of liberalized trade as
creating high-quality jobs for Canadians and generating tax revenue needed to support Canadian social programs
and institutions. The CCCE expressed concern about the rise of protectionism in the United States, reflected
in the “Buy American” provisions in the stimulus package. On the specific issue of the Colombian agreement, it
noted that Colombian tariffs on Canadian goods currently range from 15 percent to 108 percent. Approval of the
agreement (under Bill C-23) would, they argued, benefit companies and workers in the automotive sector, steel,
chemicals, public infrastructure development, oil drilling, environmental and engineering services, information
technology, agriculture, fertilizer, paper and other forestry products, copper products, textiles, apparel and
footwear, mining and advanced manufacturing. Acknowledging challenges in Colombia, the CCCE nonetheless
stressed that poverty levels in Colombia had declined by 20 percent and unemployment by 25 percent between
2002 and 2007. Its brief cited the conclusions of Human Resources and Skills Development Canada that the
“agreement signed with Colombia represents the most comprehensive labour agreement in the world today,”
as well as the Ministry of Finance’s conclusion that “this free trade agreement tries to support corporate
social responsibility, environmental laws and labour laws.” The CCCE argued that failure to implement the
agreement would further undermine Canadian aid programs in Colombia in the areas of support for marginalized
communities, women and indigenous groups, legal assistance, and judicial reform.26
The debate over the Colombian free trade agreement has often been fuelled less by facts than by emotion
and ideology. There is little scholarship, for example, on the critical question of the relationship between trade
agreements and human rights, and no one knows whether trade agreements (with or without side agreements
on human rights) actually have any impact. It is difficult to imagine that the human rights situation will be
improved without such a provision and without international pressure. A decade since it was passed, there is
more substantive scholarship on the impact of the labour standards side agreement in the North American
Free Trade Agreement. There is also some substantive scholarship on the relationship between trade and the
22 Canadian Council for International Cooperation, “Making a Bad Situation Worse.”
23 Smith, “A Fair Trade Agreement?”
24 Canada, Parliament, House of Commons Debates (Hansard), September 14, 2009. For Brison’s role in brokering an agreement on human rights with the
Uribe government, see Globe and Mail, “Bipartisan Deal.” In August 2009 Brison and Liberal foreign affairs critic Bob Rae went to Colombia to meet with
supporters and opponents of the free trade agreement.
25 Globe and Mail, “Bipartisan Deal.”
26 Canadian Council of Chief Executives, “The Global Economic Crisis.”
– 11 –
environment. Brian Copeland and Scott Taylor have not found evidence of negative impact of trade on the
environment. Copeland suggests that it is difficult to isolate the effects of trade from the effects of other changes
in the economy, but he adds that “there is no evidence that trade has been a major source of environmental
degradation.” Copeland believes that, although liberalized trade may weaken environmental policy, environmental
problems are more significantly derived from economic growth and capital accumulation per se. But James
Gaisford and Annette Hester argue that it is “naïve to believe that trade agreements lead to free trade” and that
it is important to understand that trade policy favours certain vested or special interests over the interests of
civil society, environmental groups, and labour. Furthermore, Gary Hufbauer and others have argued that “labour,
animal welfare and environmental standards are not trade compliant unless they produce a demonstrable
consumption externality.”27
The free trade agreement with Panama received considerably less public attention than the agreement
with Colombia, despite similar provisions to ensure minimum standards for occupational health and safety basic
employment standards, and measures to give migrant workers the same legal protections as nationals. The
labour co-operation agreement with Panama provides what the Canadian government defines as an “open and
robust complaints and dispute resolution process,” which provides opportunities to file public complaints with
respect to compliance with the labour standards of either country or a perceived failure to enforce domestic
labour legislation.28
Canadian Foreign Direct Investment in Latin America
and Corporate Social Responsibility29
At the heart of much of the debate over free trade is a larger debate over the value of economic liberalization,
in particular the impact which large scale foreign direct investment (FDI) has on developing countries. Foreign
direct investment plays a significant role in Latin American economies, but it is not without controversy. Total
FDI to Latin America in 2008 was US$139.3 billion, which represented 8 percent of total world FDI in that
year. Foreign direct investment is subject to the vagaries of the international economy. The Caribbean and
Latin America enjoyed an infusion of investment in 2008 and a slowdown with the international financial crisis
in 2009. It is likely that the financial crisis in the European Union in 2010 will reduce European capacity
for both investment and foreign aid in the region. Nonetheless, the year 2000 witnessed a strong surge in
foreign investment. In that year South America received US$89.8 billion in FDI, half of which was invested in
Brazil alone, followed by Chile and Colombia. Central America received $21.9 billion, with Panama the leading
recipient. The Caribbean received $8.9 billion in FDI, with the Dominican Republic and Trinidad and Tobago
the leading recipients.30 The rise in FDI flows to South America in 2008 was to a significant extent the result
of strong commodity prices. Prices remained high for most of 2008 and accordingly attracted investment in the
natural resources sector (hydrocarbons and metal mining). In Argentina, Bolivia, and Ecuador, for instance, the
largest FDI between 1999 and 2008 was in natural resource development. The region also experienced strong
economic growth (5.5 percent compared with 2.5 percent worldwide), further boosting FDI. Brazil, Chile, and
Colombia accounted for 80 percent of the subregion’s FDI inflows, and the main attraction in those countries was
in services. In contrast to those countries where the natural resource sector was the most attractive to foreign
investors in Mexico manufacturing and services led the way. The Economic Commission for Latin America and
the Caribbean (ECLAC) noted that one of the downsides for investment in the mining sector was that foreign
companies are less likely to have work done locally and tend to seek suppliers of inputs, services, and machinery
27 Copeland and Taylor, Trade and the Environment; Copeland, “Trade and the Environment”; Gaisford and Hester “Why Are There Trade Agreements?”;
Hufbauer andWilson, “Trade and Standards.”
28 Canada, Foreign Affairs and International Trade Canada, “Negotiations Toward a Canada-Panama.”
29 The most reliable source of data is the United Nations, Economic Commission for Latin America, Foreign Direct Investment. See also Holden, “Overview of
Canadian Foreign Direct Investment.”
30 United Nations, Economic Commission for Latin America, Foreign Direct Investment, 29.
– 12 –
and equipment abroad. ECLAC adds that “the large FDI flows … show that the arrival of FDI per se does not
guarantee that all the possible benefits that the presence of transnational corporations implies will necessarily
be reaped.”31
The 2008-09 economic crisis had a significant impact on Mexico and the Caribbean Basin countries. The
recession in the United States reduced the capacity of Latin American countries to export to the U.S., which is
the main market for most countries in the region. The slowing of exports also reduced the inflow of FDI related
to trade. At the same time, the downturn in local economic growth had a negative impact on domestic marketseeking FDI. Mexico was the worst hit in this regard, and its FDI intake fell 20 percent in 2008 in comparison
with 2007. On the other hand, investment to Central America rose 7 percent and to the Caribbean 42 percent,
owing primarily to increased investment in the Dominican Republic and Trinidad and Tobago, which offset the
decline in the other countries. Mexico, the Dominican Republic, Trinidad and Tobago, and Panama were the main
recipients in the region.32
Research has underscored the extent to which the Canadian economy is oriented towards FDI; in the first
decade of the twenty-first century, the total stock of Canadian investment abroad was above the G7 average, yet
Canada attracted proportionately less foreign investment than either France or the United Kingdom. As well, the
data suggest that Canada has been in decline as a target for overseas investment; both inbound and outbound FDI
for Canada as a percentage of GDP was stagnant between 2000 and 2006. The data indicate that in 2007 43.9
percent of Canadian FDI went to the U.S., 26.2 percent to Europe, and 22.8 percent to the Caribbean and Latin
America, but the Caribbean and Latin American FDI represented only 3.6 percent of Canadian FDI. Canadian
FDI in the region did show a modest increase between1987 and 2007, from 10 percent to approximately
20 percent, in marked contrast to the United States as a source of FDI, which declined from 69 percent to
approximately 42 percent. In the 1990s the Caribbean was a major recipient of Canadian FDI, and the financial
services sector in Barbados was the main beneficiary. In 2001 the Caribbean received 55 percent of Canadian
FDI in the region, in comparison with all of South and Central America (40 percent) and Mexico, which received
5 percent of Canadian FDI in that year.33 The sectoral allocation of Canadian FDI, not limited to the Caribbean
and Latin America, was dominated by finance and insurance in 2006 (44 percent), followed my metallic minerals
(11.8 percent) and energy (11.5 percent). Between 1982 and 2007, Canadian FDI rose at about the same rate
as direct investment in Canada, from approximately $5 billion in 1982 to approximately $30 billion in 2007.34
The range of Canadian FDI in the Caribbean and Latin America is substantial and has increased significantly
over the past few decades. In 1995, Canadian FDI in South and Central America was $7.5 billion; by 2006 it had
risen to $23.1 billion. In that year South and Central America accounted for 4.4 percent of total Canadian FDI,
in comparison with Asia/Oceania, which accounted for 6.5 percent. In 2006, Canadian FDI in the Caribbean and
Latin America was $107.1 billion. In 2007 Canadian FDI in the Americas, excluding Mexico and Bermuda, was
$94.9 billion.35 ECLAC reported in 2007 that Canadian FDI in the region was concentrated in mining, financial
services, and some manufacturing, and present mainly in Argentina, Brazil, Chile, Mexico, Peru, and Trinidad
and Tobago. In 2006, Canadian FDI in Brazil was more than $8.2 billion, followed by Chile with $5.1 billion,
Argentina with $3.9 billion, Peru with $2.9 billion, and the Dominican Republic with $1.8 billion. Investments
in Venezuela, Colombia, Costa Rica, and Trinidad and Tobago followed, but all were less than $1 billion.36 In the
financial sector, the main Canadian investors are Scotiabank (Chile, Costa Rica, El Salvador, Mexico, Panama,
Peru, and Dominican Republic); Royal Bank (Trinidad and Tobago); and Canadian Imperial Bank of Commerce
(Barbados and Jamaica). Other financial services investors are Brookfield Asset Management (Brazil and Chile)
and Ontario Teachers’ Pension Plan (Brazil and Chile). Although the financial services and extractive resource
sectors are the dominant areas of Canadian foreign direct investment, there is also investment in such areas as
31
32
33
34
35
36
United Nations, Economic Commission for Latin America, Foreign Direct Investment, 64, 66.
United Nations, Economic Commission for Latin America, Foreign Direct Investment, 3, 20.
United Nations, Economic Commission for Latin America and the Caribbean. Canada’s Trade, 7.
Holden, “Overview of Canadian Foreign Direct Investment.”
Canada, Foreign Affairs and International Trade Canada, “Our Priorities.”
Canada, Western Economic Diversification, “Western Canada’s Economic Relationship.”
– 13 –
aerospace technology, where Bombardier is the leading contributor, and in food processing, where McCain Foods
is an important player.
Canadian investment in banking, financial services, transportation, and mining and other extractive industries
dates back to the early twentieth century. Entrepreneurs such as Sir William Van Horne were involved in railroad
construction in Cuba by 1900, shortly after the United States defeated Spanish forces.37 The Royal Bank entered
Cuba as early as 1903, when it acquired control of the Banco Oriente de Santiago de Cuba. The following year
it acquired the Banco Comercial de Havana, and the Royal remained in Cuba until the Castro government
nationalized its operations. In 1907 the bank entered Puerto Rico, and in 1912 Honduras with the acquisition of
the Bank of British Honduras. By 1919 the bank had branches in Argentina, Brazil, Uruguay, and Haiti as well
as several of the smaller French colonies in the Caribbean. The Royal Bank preceded U.S. banks into Colombia
in 1920, primarily owing to legal restrictions on American branch banking. It continued to expand in the region,
acquiring the Bank of Central and South America in 1925, which also brought it control of more branches in
Colombia, Costa Rica, Peru, and Venezuela. In the Caribbean alone, the Royal Bank now serves some 1.6 million
people through 127 branches.
National politics in the countries in which it operated changed the bank’s operations in Latin America
and the Caribbean. Cuban nationalization was the first major change in the 1960s, but in 1974 Colombia also
nationalized the foreign banks, with the result that the Royal Bank became the Banco Royal Colombiano. The
Royal Bank began to withdraw from the Caribbean in the mid-1980s, departing from the Dominican Republic
in 1985 and from Guyana, when its operations were nationalized. In Trinidad and Tobago, it divested itself of
ownership in its operations; the new bank that was established was the Royal Bank of Trinidad and Tobago
(RBTT), but by 2008 Royal Bank had reacquired ownership.38
Scotiabank was the other Canadian banking interest to move early into the Caribbean and Latin America.
The Bank of Nova Scotia established its first branch in the Caribbean, in Jamaica, in 1889 to facilitate trade
in sugar, fish, and rum. In the 1960s the bank established offices in Buenos Aires, Mexico City, and São Paolo.
In the 1990s, it acquired additional banks in Argentina, Mexico, Chile, the Caribbean, and Central America. In
2010, Scotiabank acquired all the banking operations of R. G. Premier Bank of Puerto Rico, where Scotiabank
was already well established. At the time of the acquisition Premier Bank had 29 branches on the island. In
2008, it acquired control of the Chilean Banco de Desarrollo, which was owned by Chilean, French, and Italian
interests. By the early twenty-first century, Scotiabank operated in 27 countries in the Caribbean, and Central
and South America.39 The Ontario Teachers’ Pension Plan also invested in Latin America, in 2008 acquiring an
interest in the Sociedad Austral de Electricidad S.S. of Chile.40
There are a number of Canadian manufacturing and processing operations in Latin America. Among them
are Methanex (Chile, Trinidad and Tobago); Magna International (Mexico and Brazil); Nortel (Argentina, Brazil,
and Mexico); Agrium (Argentina); Quebecor World (Argentina, Chile, Colombia, Mexico, and Peru); Celestica
(Brazil and Mexico); McCain Foods (Argentina and Chile); Bombardier (Brazil and Mexico); Linamar (Mexico);
Transcontinental Inc. (Mexico); Gildan Activewear (Honduras, Nicaragua, and Dominican Republic).
Canadian interests moved early into the natural resource, transportation, and energy sectors. In 1914,
Imperial Oil formed a subsidiary, the International Petroleum Company, to find and develop oil fields in South
America to augment Canada’s sources of supply. Oil fields were acquired immediately in Peru, and the Tropical
Oil Company of Colombia was acquired in 1920. Because Imperial Oil had been a Standard Oil of New Jersey
subsidiary since 1898, Tropical Oil was viewed by Colombians as American, but the Canadian connection was
there. One of the most significant Canadian-based companies operating in Brazil by the 1940s was the Brazilian
37
38
39
40
Regehr, “Van Horne.”
McDowell, Quick to the Frontier. See also Royal Bank of Canada, “History” and “RBC Caribbean Banking.”
Scotiabank. “The Scotiabank Story.”
United Nations, Economic Commission for Latin America, Foreign Direct Investment, 79.
– 14 –
Traction, Light and Power Company, or Brascan.41 At its peak Brascan employed some 50, 000 Brazilian workers.
Prior to its departure from Ecuador in 2005, Calgary-based Encana was one of the largest petroleum producers
in that country. Colombia, which is one of the most open countries in the region for foreign investment in the
energy sector, received over US$3 billion in investment in the sector in 2008. One of the major Canadian
investments was the acquisition of the Colombian firm Kappa Energy Holdings by Canadian based Pacific
Rubiales.42 Two Canadian companies were until 2009 major players in Cuban oil production: Pebercan and
Sherritt International, which had a production-sharing agreement with the Cuban government. The agreement
represented 26 percent of Sherritt’s total Cuban oil investments. Pebercan withdrew in early 2009, when Cuba
stopped paying for the oil produced.43 Mexico has been a challenging investment environment in the hydrocarbon
sector, because foreign investors are legally prevented from participating in the exploitation of the deep-water
reserves in the Gulf of Mexico.44
Canadian firms have also played an important role in the communications sector. Northern Telecom, which
later changed its name to Nortel Networks, was at one time a wholly owned subsidiary of Bell Canada. Nortel
expanded first into Asia and then Latin America until it experienced serious financial troubles early in the twentyfirst century and declared bankruptcy. The experience of Nortel is an example not of the challenges of investing
in Latin America but rather of the implications for the host country when a major Canadian company fails. In
2004 Nortel had assets of US$15.8 billion and 37,000 employees in 150 countries. Among its various operations
in Latin America, Nortel Networks de Colombia helped bring about the liquidation of Telecom, Colombia’s largest
telecommunications company and the privatization of its successor. Between 1997 and 2004 Nortel contracted
for the construction of approximately 800,000 telephone lines and built more than 550,000 lines in 17 different
regions of Colombia under association agreements with Telecom. In its Colombian venture, Nortel received
considerable financial assistance from the Canadian Export Development Corporation. In 1996 the EDC provided
$65 million to support Nortel’s sale of equipment to the Colombian Telecommunications Funding Corporation.
Between 2002 and 2004, the EDC provided $130 million in total financing for nine different sales by Nortel
of telecommunications equipment to Sercotel S.A. de C.V. in Colombia. Sercotel was owned by Mexico-based
América Móvil, the largest cell phone company in Latin America. As of 2004 almost half of the EDC’s $21 billion
portfolio was to clients of Nortel and Bombardier. Over the next several years, Nortel sold its wireless division to
Ericsson, its enterprise unit to Avaya, and its optical business to Ciena. In Colombia, the privatization of Telecom
and its replacement by Telecom Colombia Telecomunicaciones S.A. resulted in the loss of an estimated 8,000
Colombian jobs held by members of USTC, the Colombian Communications Workers Union.45
In the smartphone business, Waterloo-based Research in Motion has become a significant player in Latin
America. In 2009 RIM, in collaboration with NII Holdings of Virginia, announced that Nextel Argentina, Nextel
Brazil, Nextel Mexico, and Nextel Peru would launch the Blackberry Curve smartphone with PTT (Push to Talk)
service. NII is a leading provider of wireless communications in a number of major Latin American markets.46
Canadian direct investment in the Caribbean and Latin America has become increasingly diversified, but
there is still a concentration in extractive industries and the service sector. A relatively new area of Canadian
investment in the region has been global delivery or call centres. Sitel of Canada, for instance, has operations
in Brazil, Chile, Colombia, Mexico, and Panama.47 Chile was the major recipient of Canadian FDI. Between
1974 and mid-2007, Canadian interests accounted for 16.4 percent of foreign investment in Chile. Canadian
companies and their business practices enjoy a favourable reputation in the region, partly because they tend
to hire local management and offer the possibility of rising within the corporate structure. Nonetheless, any
concentration of FDI in the natural resource sector carries with it certain political problems. ECLAC notes that
41
42
43
44
45
46
47
For a full history of Brascan, see McDowell, The Light.
McDowell, The Light, 40.
FocalPoint, News Briefs, “Pebercan Cuba Surprise,” http://www.focal.ca/publications/focalpoint/fp0209/?article=news&lang=e#news3. Accessed 30 April 2010.
Donnelly, “Update: Nortel Enters”; Ismi, “Nortel Implicated.”
Marketwire, “NII Holdings and Research In Motion.”
– 15 –
“resource-seeking FDI has contributed to higher exports and has generated employment and fiscal revenue. TNCs
[transnational corporations] in the natural-resource sector often continue to operate as enclaves in isolation from
the domestic economy, however, with very limited local processing operations and high risks in terms of pollution
and environmental degradation.”48
Canadian direct investment in the mining sector in Latin America is one of the most significant areas of
Canadian economic activity in the region; it is also the most controversial, with a significant impact on local
populations and the environment. By the early twenty-first century, seven Canadian mining companies ranked
among the top 20 mining companies with operations in Latin America.49 The main Canadian mining companies
investing in Latin America and the Caribbean and their locations are:
In precious metals: B2Gold Corp, a Vancouver-based gold mining company with two mines in Nicaragua and
development projects in Colombia and Costa Rica50; Goldcorp (Argentina, Brazil, and Mexico); Yamana
Gold (Argentina, Brazil, Honduras, and Nicaragua); Barrick Gold (Argentina, Brazil, Chile, Peru, and the
Dominican Republic); IAM Gold (Guyana and Surinam); Kinross Gold (Brazil, Chile, and El Salvador); Peak
Gold (Brazil). Greystar Resources, the Angostura gold-silver operation near Bucaramanga.
In common metals: Teck Cominco (Chile, Mexico, Panama, and Peru); Sherritt (Cuba); PotashCorp (Brazil and Chile);
This paper does not explore the details of each company’s operations but rather focuses on Canadian
and regional criticism of their operations and the policy implications of that criticism. Those who radically
oppose the operation of foreign mining companies would like to prevent it altogether; governments and the
companies themselves have tended to focus on self-regulation with a preference for increasing the commitment
of companies to corporate social responsibility (CSR). Ostensibly the latter approach results in more attention
to the environmental and human impact of mining operations. Some of the more critical Canadian analyses of
the impact of Canadian mining in Latin America have been advanced by Todd Gordon and Jeffery Webber, and
by Liisa North and T.D. Clark, the latter in an edited collection of papers that were part of a conference at York
University’s Centre for Research on Latin America and the Caribbean (CERLAC).
Detailed analyses of Canadian corporate activity in the Caribbean and Latin America are still relatively
rare. There has been some Canadian media attention to the impact of Canadian mining in the region. Writing in
Maclean’s magazine in 2006, Colin Campbell was particularly critical of CIDA’s work with the Canadian Energy
Research Institute in the late 1990s to assist Colombia in developing a new mining code. The code has been
criticized for being too liberal in providing access to foreign investment without adequate protection for local
labour and the environment.51 What Campbell and other critics fail to note is that the terms of the code reflect
Colombian, not Canadian, policy and law. Whether or not CIDA should be involved in assisting Latin American
countries to develop regulatory policies in the natural resource sector has become a contentious issue in recent
years, in spite of the fact that CIDA has a long and very positive record of contributing to good governance in
this area.
Colombia has been a focus of attention not only because of the debate over the free trade agreement but also
because of rapid expansion of foreign investment in the mining sector. Between 2006 and 2008, an estimated 40
foreign companies expressed interest in developing Colombian gold and other mineral resources.52 Mining and
other extractive operations in Colombia frequently occur in areas that have been affected by armed conflict and
narcotics trafficking, making it difficult for mining operators to avoid getting caught up in problems of security.
Colombia’s Semana magazine noted in an article in July 2009 that the Colombian government, under its policy
of “democratic security,” had been giving special protection to foreign companies in sensitive areas and that
48
49
50
51
52
Gordon and Webber, “Imperialism and Resistance,” 63.
B2Gold, “Welcome to B2Gold.”
Campbell, “CIDA Goes for the Gold.”
Aya, “Colombia.”
– 16 –
local small mining interests and labour leaders had suffered negative consequences. Even more critical of both
the liberalization of investment regulations, the role of Canadian enterprise in the mining sector, and the role of
CIDA and CERI in the revision of the Colombian mining code was a 2003 report of the Colombian miners union,
Sindicato de Trabajadores de la Empresa Nacional de Minas Minercol.53
The most systematic analysis to date of Canadian involvement in the mining sector in Latin America came
out of a conference held at York University’s Centre for Research on Latin America and the Caribbean in 2002,
entitled “Canadian Mining Companies in Latin America: Community Rights and Corporate Responsibility.” It
was sponsored by the International Development Research Centre (IDRC), the Canadian Auto Workers, and the
Canadian Environmental Law Association. This was one of the first efforts to draw together current research by
Canadians and Latin Americans on the issues. The conference featured papers on a range of mining operations
where there have been challenges: the Tambogrande in Peru; petroleum exploration in Ecuador; mining
investment in Mexico; Canadian gold mining companies in La Libertad and Bonanza, Nicaragua; environmental
conflicts in Chilean mining; Bolivia’s Amayapampa and Capasirca mines in which Da Capo Resources Ltd. has
invested; and Canadian investment in Colombian mining. The principal themes that emerged from a discussion of
these and other cases were the role of the state, the tension between corporate self-regulation and the priorities
of the communities in which they operate, and the potential role for civil society to promote social and ecological
sustainability in mineral extraction operations.54
The Canadian government’s response to concerns in Latin America has been to encourage the development
of a voluntary corporate social responsibility strategy by the private sector, inspired by the increasingly global
reach of Canadian incorporated companies. In March 2009, the Canadian government produced a report
entitled “Building the Canadian Advantage: A Corporate Social Responsibility (CSR) Strategy for the Canadian
International Extractive Sector.”55 The report noted that as of 2008 over 75 percent of the world’s exploration
and mining companies were headquartered in Canada. The report added that Prime Minister Harper indicated
that the government expects and encourages Canadian companies to meet high standards of corporate social
responsibility, during a speech delivered in Tanzania inn 2007. He added that the government understood that
Canadian companies often faced extremely complex circumstances abroad. The report noted that the Canadian
government supported the development of an online Sustainability Reporting Toolkit in 2003 and provided
national training workshops on CSR for Canadian companies. The government also supported reviews of the
reporting performances of Canadian companies, not only in the extractive sector, in 2001, 2003, and 2005.
Since 2005, Canada has also supported the work of the UN Secretary-General’s Special Representative for
Business and Human Rights, through the Global Peace and Security Fund. As well, in 2008 the EDC outlined
principles under which human rights factors would be taken into consideration in projects it supported. The EDC’s
Statement on Human Rights recognizes the sensitivity of natural resource extraction in developing countries that
have experienced a history of conflict.
The guidelines adopted by the Harper government stress the importance of the extractive sector’s
contribution to reducing poverty reduction and protecting human rights in developing countries where Canadian
companies operate. The Canadian government’s approach to policy on CSR is designed to be consistent with
the Organization for Economic Cooperation and Development’s Guidelines for Multinational Enterprises.
Implementation of policy has involved several initiatives. One was to establish a contact point in the Department
of Foreign Affairs and International Trade for CSR issues. A second was DFAIT’s allocation of funds to assist
Canadian offices abroad to engage in CSR-related activities. A third was the 2007 decision to endorse the
Extractive Industries Transparency Initiative (EITI), which deals with transparency in financial operations.
The EITI insists on the full publication and verification of company payments made to governments and of
government revenues received from oil, gas, and mining activities.
53 Semana, “Oro y Plomo”; Sintraminercol, “La Gran Mineria.”
54 Clark, “Canadian Mining Companies.”
55 Canada, Foreign Affairs and International Trade Canada, “Building the Canadian Advantage.”
– 17 –
Natural Resources Canada (NRCan) reports that “Canada participates in the EITI in recognition of the
potential development benefits it can bring to resource-rich developing countries, and because of the importance
Canadians attach to transparency.” The EITI involves a requirement that participating governments work with
the private sector and civil society. Since the system is still voluntary, host countries still have to commit to
implement EITI. If a host country does so, then the company is expected to implement the initiative through the
reporting of payments to the host government, using approved templates. For EITI reporting to be effective, it
must be implemented by all extractive industry companies (including international, national, and state-owned
companies) operating in that country. Among the Canadian companies that have committed to the system are
Goldcorp of Vancouver, which is involved in the Peñasquito Mine in Mexico; Talisman Energy of Calgary, which
has operations in Colombia and Trinidad and Tobago; and Barrick Gold, with its head office in Toronto. Barrick
has active gold mining operations in Argentina and Peru and has been exploring possibilities in Chile.56 The case
studies of progress made under the EITI which NRCan provides on its website relate to Nigeria and Liberia
rather than to the Americas. In the same year Export Development Canada became a signatory to the Equator
Principles, which are the international benchmark for financial standards. In the specific context of Latin
America, both CIDA and NRCan are providing assistance to host countries to enhance their governance capacity
in the natural resource sector. CIDA has been mandated to develop an Andean Regional Initiative to strengthen
the capacity of regional and local governments to implement sustainable development projects. CSR issues were
included in the discussions with Colombia and Peru during the free trade negotiations, with the result that
there are provisions in both agreements encouraging the respective parties to promote CSR in their business
communities. Again, the approach is voluntary and no penalties are imposed on the parties for failure to be
proactive or on the private sector for failure to implement voluntary CSR strategies. Clearly, even companies that
are not direct signatories to international agreements have been very proactive in support of local community
initiatives in the countries where they operate. Bombardier, for instance, which has major manufacturing
facilities in Querétaro, Mexico, became a long-term supporter of the Sierra Gorda World Biosphere Reserve in
Querétaro, in October 2008. The company reports that its assistance with three environmental and economic
development projects will benefit the reserve’s 23,000 residents directly and the more than 90,000 people in the
region indirectly.57
Prior to the Harper government’s 2009 report on Corporate Social Responsibility in the extractive
industries, the Subcommittee on Human Rights and International Development of the House of Commons
Standing Committee on Foreign Affairs and International Trade conducted extensive hearings on mining in
developing countries, the role of Canadian companies, and the importance of corporate social responsibility.58
The subcommittee heard testimony on Canadian mining operations in a number of developing countries, including
Colombia, Sudan, the Philippines, and the Republic of Congo, although it cast its net widely over the general
issues associated with the operations of Canadian mining companies in the developing world. The committee
drew several conclusions from its hearings:
The Committee:
• Acknowledges that the government encourages and expects Canadian companies to observe the OECD
Guidelines in their operations abroad;
• Recognizes that some Canadian mining companies endorse internationally agreed-upon corporate
social responsibility standards, but also that smaller companies in particular often lack the resources,
knowledge or incentives to adequately address issues arising from the social, cultural, political, or
environmental context in which they seek to operate in developing countries; and
• [Is] concerned that Canada does not yet have laws to ensure that the activities of Canadian mining
companies in developing countries conform to human rights standards, including the rights of workers
and of indigenous peoples.
56 Canada, Natural Resources Canada, “Extractive Industries”; Talisman Energy, “Who We Are”; Barrick Gold Corporation, “Responsibility Report.”
57 Bombardier Aerospace, “Bombardier Aerospace Demonstrates Its Commitment.”
58 Canada, Parliament, House of Commons, Standing Committee on Foreign Affairs and International Trade, Subcommittee on Human Rights and International
Development, Third Report.
– 18 –
The subcommittee made a number of recommendations:
• More must be done to ensure that Canadian companies have the necessary knowledge, support and
incentives to conduct their activities in a socially and environmentally responsible manner and in
conformity with international human rights standards.
• The government should put in place a process involving relevant industry associations,
non-governmental organizations and experts, which will lead to the strengthening of existing programs
and policies in this area and, where necessary, to the establishment of new ones.
• The government should put in place stronger incentives to encourage Canadian mining companies to
conduct their activities outside of Canada in a socially and environmentally responsible manner and
in conformity with international human rights standards. Measures in this area must include making
Canadian government support—such as export and project financing and services offered by Canadian
missions abroad—conditional on companies meeting clearly defined corporate social responsibility and
human rights standards, particularly through the mechanism of human rights impact assessments.
• The government should strengthen or develop new mechanisms for monitoring the activities of
Canadian mining companies in developing countries and for dealing with complaints alleging socially
and environmentally irresponsible conduct and human rights violations. Specifically, the government
must clarify, formalize and strengthen the rules and the mandate of the Canadian National
Contact Point (NCP) for the OECD Guidelines for Multinational Enterprises, and increase the
resources available to the NCP to enable it to respond to complaints promptly, to undertake proper
investigations, and to recommend appropriate measures against companies found to be acting in
violation of the OECD Guidelines. The government shall develop specific rules for companies operating
in conflict zones.
• The government should work with like-minded countries to strengthen the OECD Guidelines for
Multinational Enterprises.
• The government should work with like-minded countries to integrate and mainstream international
human rights standards in the work of international financial institutions such as the World Bank and
the International Monetary Fund.
The government’s response acknowledged the seriousness of the challenges. It observed that “these exploration
and mining companies are the ‘face of Canada.’ Consequently, issues of the type raised by the Committee are
likely to increase in both intensity and volume in the coming years as further projects are developed to meet
rising global demand for natural resources.” At the same time the government noted the difficulties in developing
common international standards in CSR. The government noted as well that “for companies operating in weak
states with little or no capacity to enforce their laws and little in the way of accountability or transparency,
a blurring of lines between public and private responsibilities can result. Not only can this perpetuate weak
governance, but it can also result in misdirected grievances.”59
In the aftermath of the committee’s report and the government response, Liberal MP John McKay on
February 9, 2009 introduced Bill C-300 as a private member’s bill, with the support of such organizations as
Mining Watch Canada.60 Bill C-300, if adopted, would impose far more restrictions on both government and the
extractive industries than the current voluntary guidelines. It would
• Regulate the relationship between Canadian government agencies (Export Development Canada, the
Department of Foreign Affairs and International Trade, and the Canadian Pension Plan) and Canadian
extractive companies operating in developing countries.
59 Canada, Parliament, House of Commons, Government Response.
60 Mining Watch Canada, “Bill C-300 – Corporate Accountability.” Bill C-300 was also endorsed by the Canadian Federation of University Women in January 2010,
http://www.cfuw.org/media/3483/mining_c-300_final.pdf. Accessed May 20, 2010.
– 19 –
• Create eligibility criteria (“guidelines that articulate corporate accountability standards”) for political
and financial support that is provided to Canadian extractive companies by Export Development
Canada, the Department of Foreign Affairs and International Trade, and the Canadian Pension Plan.
• Require that “guidelines that articulate corporate accountability standards” include the International
Finance Corporation Performance Standards, related guidance notes, and Environmental Health and
Safety General Guidelines; the Voluntary Principles on Security and Human Rights; “human rights
provisions that ensure corporations operate in a manner that is consistent with international human
rights standards; and any other standard consistent with international human rights standards.”
• Create a complaints mechanism where complaints are filed with the minister of Foreign Affairs
and International Trade. If accepted, the complaint would lead to an investigation of a company’s
compliance with the guidelines and a public report on findings within eight months of receipt of
the complaint. A company may become ineligible for government support for as long as it is out of
compliance with the guidelines.
The challenge of enforcement remains, of course, not only with Canadian companies but also with host
governments. The extractive industries will remain one of the most sensitive areas of Canadian corporate
operations in the Caribbean and Latin America, but the government’s proactive focus on CSR is at least a
movement in the right direction.
In recent decades there has also been an increase in Latin American foreign investment, but little of that
investment has been in Canada. In 2008, FDI by Caribbean and Latin American firms was valued at US$35
billion, which was an increase of 42 percent over 2007. Brazilian and Chilean enterprises led the way in 2008,
with Mexico falling back as a result of the North American financial crisis. The factors driving offshore FDI by
Latin American firms in 2008 include the general economic growth in the region, increases in productivity and
innovation, knowledge transfer, strong corporate profits, high international commodity prices—conditions that
did not continue into 2009. The range of Latin American companies with substantial FDI is impressive, led
by Brazilian, Chilean, and Mexican companies, although Venezuela’s PDVSA is the leading player, followed by
Petrobras. The top six Latin American foreign investors in the first quarter of 2009 were Argentina, Brazil, Chile,
Colombia, Mexico, and Venezuela. The companies engaged in foreign investments cover a broad range of sectors,
from oil and gas to mining, telecommunications, steel, food products, transportation and construction, cement,
and the aerospace industry.
Much foreign investment by Latin American firms is within the region, such as the investments in Peru,
Colombia, and Brazil by Chilean retailer Cencosud y Falabella and the investments by Petrobras in Colombian
oil development in partnership with Ecopetrol, although Petrobras is also investing in West Africa. One firm that
has invested in Canadian-owned enterprise recently is the Mexican company Grupo Bimbo, which in 2009 paid
US$2.5 billion to acquire the assets of the baked products division of Weston (Canada) in the United States.61
Brazil made a major investment in Canadian mineral extraction when it invested in INCO. Vale Inco is a whollyowned subsidiary of Vale (Vale S.A.) of Brazil. Vale is the second- largest mining company in the world, with a
market capitalization of more than US$125 billion. Vale Inco has over 12,000 employees worldwide and had
net sales in 2009 of over US$8 billion.62 The Brazilian government is part-owner of Vale Inco, directly through
Vale Inco Golden Shares, and indirectly through the Brazilian state-owned bank and pension fund. The parent
company is Companhia Vale do Rio Doce. Mortimer and Razo suggest that if Latin American companies wish
to increase their foreign direct investments they need to develop more focused national policies to that end,
including actively promoting FDI as a strategic tool to improve their integration into global markets.63
61 United Nations, Economic Commission for Latin America, Foreign Direct Investment, 60.
62 Vale Inco, http://www.inco.com.
63 Mortimer and Razo, “Outward Investment.”
– 20 –
Conclusions
It is evident that Canada’s economic linkages with the Caribbean and Latin America in the areas of trade and
foreign direct investment have acquired increasing importance since the 1980s. Although the United States
continues to be the dominant economic player in the hemisphere and the major trading partner with most
Latin American countries, Canadian trade with the region is significant. The dominant trading partner for
Canada in the area is, of course, Mexico as a result of the North American Free Trade Agreement, but Brazil,
Chile, Colombia, Peru, and Venezuela are also important. It is also evident that the Canadian private sector’s
contributions to foreign direct investment in the region goes well beyond the less significant level of Canadian
trade, and that in some instances, such as the cases of Peru and Chile, Canadian foreign direct investment has
resulted in enhanced bilateral trade. Yet the evidence is also clear that Canadian direct investment in Latin
America, investment that in the words of the Canadian government is the “face of Canada” in the region, has
become increasingly controversial. There are legitimate concerns about the impact of such investment on local
workers, on the environment, and on the regulatory capacity of the host governments. There is also concern
about the contribution of Canadian direct investment to the national economies of those countries. Such concerns
have led Canadian parliamentary committees, federal government departments, and agencies, and the corporate
sector, to examine measures that need to be taken to ensure that such investment contributes positively to
developing countries and that the “face of Canada” is not tarnished by our investment in the region.
– 21 –
Appendix I
– 22 –
Source: Statistics Canada. http://cansim2.statcan.gc.ca/cgi-win/cnsmcgi.pgm (Accessed March 2010).
– 23 –
– 24 –
– 25 –
Source: Statistics Canada. http://cansim2.statcan.gc.ca/cgi-win/cnsmcgi.pgm (Accessed March 2010).
– 26 –
– 27 –
Appendix II
– 28 –
Appendix III
– 29 –
– 30 –
– 31 –
Appendix IV
– 32 –
– 33 –
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– 37 –
About Us
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The goal of the CIC Working Groups is to identify major issues and challenges in their respective areas of
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Canada, the Caribbean and Latin America: Trade

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