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February 10, 2022

Strong loonie sending exporters (and Cdn. jobs?) overseas

No one knows quite what to make of a strong Canadian loonie.

Istockphoto_600141-coins-16 We’ve all heard the harm it gives our economic outlook though, let’s be honest, it’s a little tough to grasp such drawbacks when our dollar goes as far as it does. It’s a cruel reality, but at a time when the loonie leaves more money in our pockets after U.S. shopping trips or vacations to the sunny south, we’re not really thinking about foreign affiliates, offshore production or the balance sheets of Canadian exporters.

Of course, we should, because no matter what kind of consumer boom we’re feeling, the strong loonie may slowly be rotting Canada’s economy from within.

According to a new report released this morning, Canadian firms have been coping with the loonie’s rise exactly as we expected them to: by shifting production overseas.

By numbers from Export Development Canada, sales from foreign affiliates of Canadian firms grew by more than twice the rate of domestically-originated exports between 2000 and 2008.

That’s the period, as you know, when the loonie/greenback disparity dramatically shrank. In 2000, the Canadian buck hovered around 60 cents to the U.S. dollar before rising to parity in 2008, according to the Canadian Press.

During that time, overseas investment assets by Canadian firms rose from $356 billion in 2000 to about $650 billion in 2008.

Similarly, as the high dollar drives Canadian businesses to dump operations to low-tax, cheap-wage nations, it’s becoming more expensive for foreign companies to continue production in the great, white north.

Two foreign-owned entities based in Calgary, for instance, have either seen layoffs or are preparing for the worst following recent “streamline” efforts by their parent companies.

And while it may be unfair to pin the pink slips – given to Houston-based ConocoPhillips’ Calgary workers this month and feared coming by Alberta employees of Dallas-based Hunt Oil, which has sold $525 million of its Canadian assets to Korea National Oil Corp. – on a stronger loonie, it might be tough to discount the coincidence, too.

By Jason Buckland, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...