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Opinion

Trudeau prepares to sell Canada

By Paul Wells      

Justin Trudeau's government is looking for tens of billions in private investment into his new infrastructure bank. It's a an attractive and ambitious goal, and it comes with risks.

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Prime Minister Justin Trudeau will kick one of his most ambitious and uncertain projects into high gear in Toronto today: a plan to attract tens of billions of dollars from outside investors to pay for an unprecedented burst of public infrastructure investment.

It’s a big day for Trudeau. He will lead two sessions with large institutional investors. The first is for large Canadian investors including the Ontario Teachers’ Pension Plan and Quebec’s Caisse de dépot et placement.

Federal officials have been planning for today’s second meeting, organized with the New York-based asset manager BlackRock, since at least midsummer.

Trudeau will be joined by nine senior cabinet ministers to pitch Canada as an investment destination. Their audience will be two dozen representatives from pension plans, sovereign wealth funds, and other international organizations that control a combined $21-trillion in assets.

The meeting follows Finance Minister Bill Morneau’s announcement in his fall economic update two weeks ago that the government will create a Canada Infrastructure Bank to supplement federal spending by attracting outside investors.

Morneau said his goal is to land about $4 from investors for every dollar the feds put up. That would suggest a $140-billion windfall, given the
$35-billion the Trudeau Liberals will use to capitalize the new bank.

For the investors, the lure is stable long-term returns, measured on the same decades-long time scale over which pension plans must provide for their members, at rates of return that look pretty good in the context of an extended global slump in interest rates.

For the Liberals, the attraction is the possibility of dreaming bigger on roads, rail, power grids and social infrastructure than Morneau could afford through direct federal spending alone.

The hitches are … well, they’re multiple.

There is no real international model for the infrastructure bank Morneau and his colleagues are trying to build. There are reasons to believe the demand for decent rates of return is very large, but connecting demand to a reliable supply of projects is tricky.

Long-term institutional investors are supremely unsentimental in their portfolio decisions, so a Trudeau charm offensive is unlikely to sway them if they are unpersuaded by the numbers.

And the very notion of seeking private investment for public building has aroused suspicion on the Liberals’ left flank, just as more traditional public-private partnerships do.

So, it’s an untested vehicle for attracting the kind of investment that isn’t easy to attract, in a manner that looks like a “Kick Me” sign to anyone leery of government getting into bed with big money.

But to Trudeau, the project is at the heart of an argument he has made repeatedly since his election: in a world gone mad, good old reliable Canada has become a cosy place to stash money, like a wool sock.

“What Canada offers to the world right now at a time when it is characterized by populism and anti-globalization,” Trudeau told reporters in Saguenay, Que., in August, “is an approach that offers political, financial, economic, social stability, predictability and openness to globalization.”

That’s a “very different climate than what we see elsewhere around the world,” he added. “And that is one of the things that I don’t have to push very hard when I meet with potential international investors.”

Trudeau has been making that pitch to investors one by one since the World Economic Forum in Davos, Switzerland, in January.

The U.K.’s Brexit vote in June and especially Donald Trump’s shocking victory in the U.S. presidential election last Tuesday serve only to emphasize his point.

“Trump’s election came as a surprise to a lot of these investors,” a senior Liberal said late last week. “It certainly enhances how we look as a destination for global investment, that’s for sure.”

Joining Trudeau at the summit will be Morneau, Trade Minister Chrystia Freeland, Natural Resources Minister Jim Carr, Environment Minister Catherine McKenna, Innovation Minister Navdeep Bains, Health Minister Jane Philpott, Heritage Minister Mélanie Joly, Infrastructure Minister Amarjeet Sohi ,and Transport Minister Marc Garneau.

Nobody will be asked to sign contracts or write cheques at this meeting. The process that might lead to those decisions will last months, at least. Morneau will continue the pitch by flying immediately after Monday’s sessions to London, where on Wednesday he will address a conference organized by the Swiss financial services company UBS.

The goal is to state emphatically, as one of Trudeau’s predecessors once proclaimed, that Canada is open for business.

Paul Wells is a national affairs writer. His column usually appears Wednesday, Friday and Saturday.

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