Low Fertility Rate

1971 was the last time in Canada where the fertility rate matched the replacement level. The fertility rate tells us how many hypothetical children a female between the age of 15 and 49 will have. The replacement level tells us where this rate needs to be in order to replace our aging population. In essence if the fertility rate remains below the replacement level for a long period of time as it has in Canada, the population will naturally begin to shrink without immigration. It is thanks to our high immigration levels that Canada’s population is actually growing rather than shrinking.

Although our population may be growing, it is still not growing fast enough to replace all the retiring baby boomers in the job market. This is not only putting extra pressure on corporate pension plans and the Canada Pension Plan (CPP) but also causing our unemployment rates to drop to record lows as our overall economy is thriving.

Low Unemployment Rate

Last month the Canadian economy added 27,700 more jobs causing the unemployment rate in Canada to fall to a record low 5.4%. This is following an April where the economy added a record 106,500 jobs. Although the job numbers of May when broken down aren’t as great as they are on the surface, for the month of April, the numbers were amazing from every angle and breakdown. Such low unemployment is amazing right? Yes in a sense it means wages will start going up and the general public will benefit in the short-term.

However, an unemployment rate that is too low also means businesses will struggle to find good talent to fill there roles and that eventually the businesses will not be able to perform at full capacity because of the lack of full employment. Businesses will instead need to scale down if they are not able to find the right people for these jobs. In a sense the Canadian economy will be performing so well it will burn out. Immigrants are the reason our GDP and economy are growing while allowing Canada to maintain a healthy unemployment rate. Without immigration, less people in Canada would be employed so less people would be spending there hard earned dollars in our local economy and thus it would be unlikely that Canada’s economy would be able to maintain it’s growth rate without coming to a crashing halt.

The US Unemployment Rate

Many people are quick to point out that the US unemployment rate is much lower than Canada’s so if they burnout problem is real then we must be still far away from that burnout level. There is 1 very important thing to note here, the US and Canada calculate there unemployment rates very differently. In both Canada and US the very basic definition of being unemployed is the same.

To be considered “Unemployed” a survey respondent must not have done any work for pay during a particular week of the survey month, must be available for work, and – most crucially – must have done something to find a job during the last four weeks. – The Globe and Mail

However where the key difference comes into play is what qualifies as doing something to search for a job. In the US only active searching qualifies you to meet this criteria whereas in Canada both active and passive (simply browsing through job listings) searching qualifies you for this. For more details on the differences you can read this Globe and Mail article.

Cognitive Diversity

Canadian are no stranger to diversity in the traditional sense. As a country we embrace different types of people, diversity and multiculturalism is a part of Canada. However, cognitive diversity is something many people do not understand. While someone that is born or raised in Canada with a diverse background adds significant value to the workplace, we all went to the same elementary and high schools and were taught to think the same way. That is not to say differences in age, gender and ethnicity do not provide cognitive diversity. However, people arriving to Canada from various countries can bring very different ways of thinking and doing things. This creates cognitive diversity in the workplace and allows Canadian companies to better succeed.

A high degree of cognitive diversity could generate accelerated learning and performance in the face of new, uncertain, and complex situations, as in the case of the execution problem we set for our executives. – Harvard Business Review

Sources: Bloomberg; CTV News; CBC; CIC News; Bank of Canada; The Globe and Mail; The Globe and Mail; Statistics Canada; Miles Corak; Forbes; Forbes; Emergenetics; The Star; HBR; Wikipedia Commons;

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The Pressure and Shuffle

This is the part of the controversy where things become less clear and aren’t just simple facts. It has become a game of he said, she said and there are many conflicting points between what Jody Wilson-Raybould has said versus what Justin Trudeau and his office have said. There is however also some common ground between both sides. Both sides agree that there were discussions between the PMO and Jody-Wilson-Raybould about offering SNC-Lavalin a Deferred Prosecution Agreement (DPA). They also agree that there were talks about obtaining the opinion of a former Supreme Court Justice although both sides seem to disagree on who’s idea this was. The hardest part to decide is at what point do these discussions become inappropriate pressure and if this line was crossed did the Prime Minister know it was being crossed.

“I do not believe it is inappropriate to have conversations about job losses, about SNC in the early stages where ministers can raise these issues with the attorney general. What is inappropriate is the long, sustained discussions about the job losses after it is very clear that I had made my decision and was not going to pursue a DPA.” – Jody Wilson-Raybould

Of course, both sides disagree whether it was just simple discussions or if it was inappropriate pressure. In my opinion, there are three really key points where the stories differ beyond the simple fact of if there was undue pressure or not.

A Final Decision

• Gerald Butts and Justin Trudeau say that they were unaware that Jody Wilson-Raybould had made a final decision and this is why they continued discussions with her.
• Jody Wilson-Raybould says that she had made it very clear her decision had been made and was final. She says she also warned them by continuing to talk to her about it, it could be considered political interference.

Former Supreme Court Justice Consultation

• Gerald Butts and Justin Trudeau insist that most of their discussions have been about obtaining an outside opinion from a former Supreme Court Justice to help Jody Wilson-Raybould make her decision. This implies if there has been any pressure it hasn’t been to offer a DPA to SNC-Lavalin but instead to seek out advice on whether it would be appropriate to do so. They say they did make the case for a DPA but once Jody Wilson-Raybould said she felt it would not be appropriate for her to intervene this is what they have been recommending. Something Gerald Butts said in his testimony was her idea in the first place. They also say that they have been focussed on protecting jobs and it is in the best public interest to offer the company a deal.
• Jody Wilson-Raybould, on the other hand, contends that the pressure has been to offer a DPA to SNC-Lavalin and a solution must be found in any way possible. She says consulting a former Supreme Court Justice was the idea of Gerald Butts and they have only been pushing this on her because they want to change her mind about offering SNC-Lavalin a DPA. She also says that most of their pressure has still been that the company should be offered a deal not only because it is in the best interest of the country but also because of political reasons.

The Cabinet Shuffle

• Gerald Butts and Justin Trudeau say that the only reason Jody Wilson-Raybould was moved out of her position was that Minister Brison stepped down from his position as President of the Treasury Board. This required a cabinet shuffle to take place and the Prime Minister wanted to move some key ministers including Jody Wilson-Raybould. He wanted her to be the next Minister of Indigenous Affairs as this was a key part of his agenda and he felt she would handle it well. She refused this position and was thus moved to Veteran Affairs instead as Gerald Butts said this could create bad precedent if she was left in her current position so she was moved to a different position.
• Jody Wilson-Raybould says she believes she was shuffled out of her position as Minister of Justice and Attorney General because she did not do what the Prime Minister wanted in regards to SNC-Lavalin. She says she was told that one way or another the Prime Minister would get what he wanted and this is why she believes her being shuffled was meant to punish her for not complying. Many agree with her turning down the position of Indigenous Affairs and some say it could even be considered offensive offering it to her. Others say that as an Indigenous person herself, she would have done a great job running this department.

This short video highlights four key points where the stories differ by showcasing different parts of Jody Wilson-Raybould and Gerald Butts testimonies. This video touches on the three points I mentioned while providing more detail and context to these points. The video also brings up some additional relevant points.

An Underlying Issue

In Canada, the Attorney General and the Minister of Justice are the same person. This is nothing new and it is how it has always been done in Canada but the same is not true in many countries. The reason that this is an issue is because this can create some conflict between the two roles. The Minister of Justice is a member of the cabinet and is free to discuss all sorts of matters including political ones, in a sense, this role is a political one. However, the same cannot be said for the Attorney General who serves as the chief law officer in Canada. This role is meant to be independent and non-partisan.  Thus, one could essentially say that Justin Trudeau is free to have all conversations and put all sorts of pressure on the Minister of Justice but not the Attorney General. The only problem is they are exactly the same person. Whether you believe Justin Trudeau’s side of the story or Jody Wilson-Raybould’s, most seem to agree on this point, even Jody herself.

“The two hats that the minister of justice and the attorney general wears here in our country are completely different, and I think there would be merit to talking about having those as two separate individuals” – Jody Wilson-Raybould

Although this issue has existed for many years, this recent scandal has brought it to light. Imagine being in this role yourself, you have to think about the politics, getting re-elected and other political issues as the Minister of Justice but as the Attorney General you have to remain completely non-partisan on these same issues. What if SNC-Lavalin employed thousands of people in the riding of the Minister of Justice. As the Minister of Justice, a member of Parliament (MP) and a cabinet member you want to make sure you serve your local riding well, consider constituent concerns and are re-elected. On the other side as Attorney General, you cannot give anyone special treatment just because of how it looks politically. The United States and the United Kingdom both have similar legal systems as ours but these two important roles are separated in the countries. If anything this scandal could finally split these two roles. Whether we follow the system of the United Kingdom where both roles are MPs but only the Minister of Justice sits in the cabinet, the United States where it is someone simply appointed by the President outside of Congress or create our own method this is something worth considering.

Current Situation

The current situation has been exacerbated by the way Justin Trudeau and the Liberal party originally responded when the accusations arose. When Justin Trudeau first spoke out, his answer was very scripted and precise and realistically barely answered the question at hand. As time has gone on, the answer itself has changed too. As came in more detail so did more confusion and contradictions. Furthermore, when Jody Wilson-Raybould has resigned from the cabinet and after her testimony, he went into attack mode. A much better approach would have been an apologetic and sympathetic approach which he has now started to drift towards. This is typically how he responds to situations so it was a little surprising to see the other side of him. Something more along the lines of I am sincerely sorry that Jody Wilson-Raybould felt she was being pressured, this was never my intent and then laying out his side of the story would have been much better than basically saying she was wrong.

“And so now, to come out and adopt this very conciliatory tone — acknowledging mistakes were made, we should have handled this better — it’s hard not to see that as damage control, as opposed to an authentic acknowledgement.” – Shannon Proudfoot

The situation continues to rapidly evolve so it’s hard to say where we will sit in a few days but hopefully we will have some more concrete answers soon. The bad news keeps piling up for Justin Trudeau as the Organisation for Economic Co-operation and Development (OECD) has said they are concerned about these allegations of Trudeau potentially interfering the SNC-Lavalin case. The international organization, of which Canada is a member, is now keeping a close watch on the situation as it develops. Canada, all OECD countries and an additional eight countries signed a legally binding Anti-Bribery Convention in 1999. Although both Jody Wilson-Raybould and Jane Philpott have resigned from the cabinet because of this scandal, both still remain in the Liberal caucus. In fact, Jody has even said she will be running as a Liberal in the upcoming election. Probably some of the only good news for Trudeau right now.

I am not going to tell you whether I think what Trudeau, the PMO, the PCO, Jody Wilson-Raybould or others did was right or wrong. That is your decision to make and hopefully, all the facts presented above and in part 1 will help you decide that. Let me know what you think in the comments below!

Disclaimer: I am not a lawyer so nothing in this article constitutes legal advice. 

Sources (Part 2): CPAC; CBC News; CBC News; CBC News; CBC News; CBC News; CBC News; CBC News; BIV; CTV News; CTV News; CTV News; CNN; National Post; Global News; Global News; Global News; Huffington Post; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; YouTube;

Sources (Part 1): CPAC; CTV News; Global News; Financial Post; Financial Post; National Post; National Post; The Tyee; CBC News; CBC News; CBC News; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Global and Mail; City News; The Star; Trading Economics; Yahoo Finance;

The post SNC-Lavalin Scandal – Part 2 appeared first on Nitin Gaba.

SNC-Lavalin Charges

To even begin to understand this entire situation, we need to understand how it all began. In 2015, the RCMP brought fraud and corruption charges against SNC-Lavalin for acts committed by the company in Libya. It is important to note that these charges being brought in front of the courts have nothing to do with the company’s conduct in Canada and technically speaking the charges are not for breaking any laws within Canada. However, Canadian law has the ability to hold Canadian companies liable for certain laws even if they are broken in a different country. SNC-Lavalin allegedly used bribery to get government projects in Libya between 2001 and 2011.

“There is one count of corruption related to at least $47.7-million in alleged bribes to Libyan public or other officials. A second count is for fraud of about $130-million related to construction projects in Libya, including the Great Man Made River Project.” – The Globe and Mail

This is actually a very heated debate topic in the business world. Should Canadian companies be bound by Canadian laws, especially on laws about corruption in countries like Libya? For context, Libya currently ranks 170th of 175 countries on the Global Corruption Perceptions Index whereas Canada ranks 9th. So basically Libya is perceived to be the 170th worst country in the world for corruption. The old saying “when in Rome do as the Romans” comes to mind here. Now imagine attempting to conduct business in a country like this where every company except your company is bribing government officials in an effort to land the project. The chances your company secures the project are basically 0 because government officials care more about their own pockets than anything else. SNC-Lavalin attempted to level the playing field by playing by the same rules as the local companies in an attempt to secure these projects. So when operating in Libya should Canadian companies stick with Canadian norms and ethics or follow the local norms and ethics.

Illegal and Legal Contributions

There were separate charges regarding illegal federal political contributions. Between 2004 and 2011, SNC-Lavalin executives encouraged employees and their spouses to make political contributions to the Liberal or Conservative parties and then were reimbursed by the company. In total the party illegally donated nearly $118,000 (approximately 7% went to the Conservatives and 93% to the Liberals). The federal elections commission reached a deal with the company in which the company was not charged as all the executives responsible were no longer a part of the company and the company was fully co-operating. In January, Normand Morin, the only executive charged by the election watchdog pleaded guilty to 2 of 5 charges while the remaining 3 charges were dropped, bringing a close to this saga. These charges themselves are not relevant to the situation at hand and both these cases have no connection whatsoever beyond the fact that SNC-Lavalin has a very murky past. Many media outlets continue to draw a connection between the fact that the Liberals are trying to help the company because of the illegal contributions they have received, even though all 3 major political parties in Canada had very different leaders at the time. The parties have also repaid all the contributions made illegally stating they had no knowledge of the illegal activities. As the case did not go to trial we will never know who precisely received the money or any further details.

During that same time period, SNC-Lavalin and its subsidiaries donated over $200,000 legally. Approximately 55% of this money went to the Liberals while 25% of this money went to the Conservatives. Since then, the company seems to have switched its strategy. Between 2011 and 2015 the company donated nearly $150,000 with 56% going to the Conservatives and 34% to the Liberals. The small remainder of the money going to various provincial parties or candidates directly. Both parties have received vast amounts of funds from SNC and the amounts would be even higher if you count the personal donations made by the Lamarre family (the family that ran SNC for many years).

Economic Impact on Canada

SNC-Lavalin was founded in 1911 in Montreal. Since that day, the company has grown significantly and now employs over 50,000 employees globally. With C$9.3 billion in revenue in 2017, the company is one of the largest engineering firms in the world and apart of the largest 100 companies in Canada. Through numerous acquisitions and mergers, the company has expanded quickly globally but this has also led to the fact that Canada no longer has the most employees for the company. Following 2 acquisitions in the UK in 2014 and 2017, the company now employs over 10,000 employees in the UK, a little more than here in Canada.  While at one time SNC-Lavalin employed over 20,000 people in Canada, today the company only employs 8,500 people in our country, still representing 16% of the company’s global employees. Most of these 8,500 jobs are high paying jobs so the impact on our economy would definitely be felt.

“SNC-Lavalin is one of only a dozen large-scale infrastructure companies worldwide and the only one in Canada capable of taking a project from start to finish, according to analysts.” – The Globe and Mail

If found guilty and charged with these crimes, SNC-Lavalin would no longer be able to bid for any government contracts whether they be federal or municipal in Canada. Thus, the company has threatened to leave the country altogether and move its head office to London. A loss of 8,500 high paying jobs would have an impact on our economy but it goes beyond just that. SNC-Lavalin is responsible for many major projects that we all know very well. Vancouver’s SkyTrain system, including the design, construction and current operation of the Canada Line was and is SNC-Lavalin. The massive Manic-5 hydroelectric dam in Quebec, once again SNC-Lavalin. The company is also responsible for Darlington Ontario nuclear-generating station and is a part owner (16.76%) of Highway 407. In Alberta, SNC-Lavalin is responsible for the Husky Lloydminster Refinery. These are just a few examples of the projects that SNC-Lavalin has either been a large part of or has been slowly responsible for.

“The company is working on seven of the 10 biggest construction projects underway in Canada, according to data from infrastructure trade publication ReNew Canada. Total value of the projects: $66.8-billion.” – The Globe and Mail

The company would also have difficulty bidding for contracts in other countries if it had a criminal record in Canada so even if the head office was not moved to London, many jobs could be lost and the company could go bankrupt. Many say that SNC-Lavalin has already been slowly moving these high-skilled and executive decision making jobs so fighting for these jobs is futile, especially since many of these jobs could be picked up by competitors. However, SNC-Lavalin is a huge part of our economy beyond just jobs in Quebec. A loss of the company in any way would have a strong hit on our economy considering how integrated the company has become in many of our everyday lives without us even realizing it.

Subscribe now to be sure you’re notified when I publish the second part that focuses on the current scandal rather than the background information or be sure to check back next Wednesday! You can read part 2 here now. Don’t forget to share your opinions below in the comments!

Disclaimer: I am not a lawyer so nothing in this article constitutes legal advice. 

Sources: CPAC; CTV News; Global News; Financial Post; Financial Post; National Post; National Post; The Tyee; CBC News; CBC News; CBC News; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Globe and Mail; The Global and Mail; City News; The Star; Trading Economics; Yahoo Finance;

The post SNC-Lavalin Scandal – Part 1 appeared first on Nitin Gaba.

At the end of the day on December 3rd Western Canadian Select (WCS) futures, the reference price for heavy crude from the oil sands was trading at $27.95/barrel. WTI Crude (North American Crude benchmark), on the other hand, was trading at $52.95. WCS was trading at a relative discount of $25. This too after WCS was up by over 65% ($11.02) on the day because of Alberta Premier Notleys announcement. The spread/differential has continually grown to historic highs as global oil prices have increased over the past year but the price of WCS has rapidly declined from its high of $58.37 since May. In fact, in October WCS was trading at a $52/barrel discount compared to WTI.

At historic lows of $13.27 in mid-November, something needed to be done. For the first time since 1980, the province of Alberta will limit the production of oil. This cut of about 325,000 barrels a day along with a plan to acquire more rail capacity and Enbridge line 3 expected to open by the end of next year, WCS prices finally have some relief. Although WCS has historically always traded at a discount, why is the discount at such a high level now?

Reliance on the U.S.

For anyone that followed the NAFTA saga since President Trump was elected knows how reliant the Canadian economy is on the United States. For many years Canada has been working on diversifying our global trade and trade agreements like CETA and CPTPP will help with that a lot overall. However, without building more pipelines to the coasts, the Canadian Oil industry will remain strongly reliant on the U.S. Canada is the fourth largest producer and exporter of oil but 99% of our oil exports go to the U.S. This means that we are very reliant on the U.S. to buy our oil. Two of Canadian oil’s key U.S. customers have been offline and underground maintenance for some weeks. With both BP Plc’s Whiting refinery in Indiana and Marathon Petroleum Corp.’s Detroit refinery offline, a large amount of inventory has built up with nowhere else to be shipped.

Shipping Constraints

Roughly 35 million barrels of oil (double the normal amount) were sitting in storage and before these cuts, an additional 190,000 barrels were being added every day to storage because they were unable to be shipped out. Basic economics teaches that an excess of supply means prices will have to drop to compensate. Even if these lower prices increase demand, the oil still has no way of being shipped. Most pipelines are running near maximum and while rail capacity is increasing fast, it cannot keep up.

Need for Pipelines

Many activists say that if the Trans Mountain pipeline and other pipelines are allowed to be built, it will increase emissions because more oil will be produced from the oil sands. There is no denying that the emissions from the Canadian Oil Sands contribute significantly to Canadian emissions. There is also no denying that moving oil that pipeline spills can damage the environment around them. However, looking at the facts the lack of pipelines will not reduce the amount of oil being produced but it will just be transported in different ways, primarily by rail. In 2017, the oil industry shipped approximately 140,000 barrels by rail per day. By the end of this year, the amount of oil being shipped by rail could hit 300,000 barrels per day.

Greg Stringham an energy consultant said,

With further delays in pipelines, that’s increased the amount of oil that’s moving by rail but also increased the interest in that as well as companies look to that option.

Safest Method of Transportation

Experts say not only are pipelines the safest method for moving crude but also the most efficient and least expensive way to ship oil. In 2015 the Fraser Institute conducted a study analyzing the methods of transporting oil between 2003 and 2013. Although both rail and pipelines are considered safe methods of transportation, pipelines are by far the safer method. The study highlights that an incident is 4.5 times more likely when shipping by rail. Not only that but 99% of pipeline incidents did not damage the environment. If the oil is going to be produced and shipped regardless, should we not be using the safest method of transportation while reducing our reliance on the U.S. by building more pipelines?

Sources: Oil Price; CBC; Financial Post; Financial Post; Financial Post; BNN Bloomberg; Keep Canada Working; CTV News; CBC; Natural Resources Canada; Fraser Institute;

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