Exporters looking beyond U.S.: EDC

Canadian companies looking to expand abroad are increasingly looking past the U.S. and Europe and finding toeholds in emerging markets, new data released Monday shows.

Export Development Canada is the federal body that partners with private companies looking for financing to go overseas, and the agency says its export volumes to emerging markets hit $10.8 billion in the first six months of 2010 — a 28 per cent increase over the same period last year.

"Emerging markets attracted Canadian exporters and investors looking for the best opportunities for growth during the first half," EDC president Eric Siegel said.

"While some of this increase is influenced by continued slow growth in the U.S., EDC is encouraged because the types of transactions we're seeing demonstrates a longer-term interest in emerging market business."

EDC's total business volume touched $37.5 billion up to the end of June, compared with $38.2 billion for the same period last year. So while emerging markets still make up a minority of the total, their share is growing.

"The data released today confirms a trend we've seen for a while that has intensified since the recession," said Jean-Michel Laurin, vice-president of global business strategy with the Canadian Manufacturers and Exporters Association. 

Within what EDC defines as "emerging markets," China made up $1.5 billion of the total. Brazil was next at $868 million, followed by India at $767 million and Mexico at $537 million.

The infrastructure and environment sector was a major driver of exports, as business volume there was 36 per cent higher.

Within the $10.8 billion of emerging market volume, $2.5 billion was directly related to Canadian firms securing financing to set up regional offices.

Emerging markets are growing at a faster pace than the global economy at large, "and the good news is that Canadian manufacturers have known that for years," Laurin said.

The EDC was given expanded powers in Ottawa's fiscal 2009 budget and tasked with helping Canadian businesses to expand by increasing their access to credit.

'It's not like we're just throwing people on planes and hoping for the best.' —CMEA vice-president Jean-Michel Laurin

A lack of credit was the key driver of the recession and lending has yet to return to pre-recession levels.

Since being granted expanded powers, more than $4 billion in financing has been secured by the EDC, including $1.5 billion in the first six months of 2010. The agency also took in a profit of $689 million even as total assets were $31.4 billion, a 7.1 per cent decrease from the same point in 2009.

The larger role for EDC has been particularly helpful to small and medium-sized businesses, Laurin said, because they often lack the infrastructure and contacts to expand internationally that their multinational rivals already have in place.

"It's not like we're just throwing people on planes and hoping for the best," he said, "but it's nice that Ottawa is starting to recognize the importance of expanding our trading partnerships."

Thanks in part to new overseas markets, the outlook for manufacturers has improved, Laurin said, but it's still far from ideal. "Nobody has their order books filled — it's getting better from week to week and month to month, but I don't see very many manufacturers looking farther ahead than that."

In its history, EDC has worked with more than 8,400 Canadian firms seeking to do business in more than 200 markets across the globe.