Support to Canadian Investment Abroad

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Support to Canadian Investment Abroad EDC -
Export Development Canada
CCBC Round Table Rio de Janeiro 30 November 2007
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Corporate Profile

• EDC - Export Development Canada is Canadas
  Official Export Credit Agency
• EDC Mandate To support and develop, directly or
  indirectly, Canadas export trade and Canadas
  capacity to engage in that trade and to respond
  to international business opportunities
• Established in 1944
• Our services include
• Financing
• Political Risk Insurance
• Accounts Receivable Insurance
• Contract Insurance Bonding
• Equity
• Open for business in over 175 countries including
  153 developing markets

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A Partner with Financial Strength

• EDC rated Aaa (Moodys) and AAA (Standard
  Poors).
• Record CAD 66 billion export and investment
  support in 2006, 15.2 billion in emerging
  markets.

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Network of EDC Representations Outside Canada
International Representations
Moscow (to be launched early 2007 )
Warsaw
Moscow
Beijing
Warsaw
Monterrey
Shanghai
New Delhi
Beijing
Ottawa Head Office
Mexico City
Shanghai
New Delhi
Monterrey
Mumbai, (Nov, 2007)
Kuala Lumpur
Mexico City
GCC (Jan. 2008)
Kuala Lumpur
Rio de Janeiro
São Paolo
Rio de Janeiro
São Paolo
Chile (Opening in 2008)
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EDC - Volume (CAD billion - 2006)

• Source EDC Data 2006
• Various countries relates to volume not assigned
  to a specific country or region

Top Countries Volume (M) Top Countries Volume
(M) USA 36,004 China 1,293 Mexico 2,624
Taiwan 1,164 Japan 1,905 Spain 961 Uni
ted Kingdom 1,804 South Korea 852 Brazil 1,
438 Russia 756
Source EDC Data 2006
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BRAZIL - EDC BUSINESS VOLUME 2001- 2006
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EDC in Brazil

• 2 offices Sao Paulo (2000) and Rio de Janeiro
  (2004)
• Doing business in Brazil since the 60s
• All EDC products available in the Brazilian
  market
• Wide relationship network of financial partners
• Client of portfolio includes some of the largest
  Brazilian corporations Petrobras, CVRD, Samarco,
  Votorantim, Gerdau, Usiminas, Embratel, etc.

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EDC Supporting Canadian Direct Investment
Abroad (CDIA)
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Canadian Trade and Investment Evolution

• Since the implementation of the FTA with the US
  in 1989 (followed by NAFTA in 1994), Canadian
  trade has increased by 50.
• Exports Imports now represent 80 of GDP,
  compared to 52 in 1990
• Canadian firms extending supply chains through
  investment
• avg. Cdn content of exports down from 71 in 1990
  to 64
• Canadian content on manufactured goods often
  below 50

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Canadian Outward Foreign Direct Investment
Canadian foreign affiliates sales

• Canadian FDI
• US share of outward FDI is only 60 vs. 85 of
  exports going to the US
• FDI is the Canadian business driver in emerging
  markets
• Canadian Foreign Affiliates Sales
• Significant share of total Canadian international
  business revenues
• Sectoral shares
• Manufacturing -- 46 and falling
• Services -- 42 and rising
• 15 annual growth rate
• financial services about one-third

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TRADE AND INVESTMENT - LATAM
Canadas exports have been in low gear for some
time but are booming in LATAM.
LATAM is experiencing great economic growth and
infrastructure projects are in demand.
Source StatsCan EDC Economics
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CANADIAN EXPORTS TO LATIN AMERICA

• 45 countries represented in Latin America and
  Caribbean
• Canadian export to Latin America are up 66 since
  2002
• The top 10 markets represent over 90 of exports

Source Stats Can
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CDIA in Latin America
Since 2002 CDIA to Latin America has increased
16. Venezuela has seen the largest increase -
over 180 since 2002
CAD in millions Excludes reported CDIA in
Barbados, Bermuda and Cayman Islands Source
Statistics Canada. CANSIM 376-0051
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Why are Canadian Companies Embarking on CDIA?

• Development of international resources deposits
• Access to new markets/ following their buyers
• Diversification of operations/assets and general
  need to grow
• Technology acquisition and need to broaden
  product offerings
• Supply chain management to ensure lower costs and
  enhance productivity
• Maintain and improve competitive positions and
  generate shareholder value through the above
• In summary Canadian companies need to both
  become and remain competitive global players.

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Benefits of CDIA

• Research has shown that CDIA facilitates
• Improved RD, productivity and innovation and
• Increased exports and trade e.g. each 1 of
  investment generates approximately 2 of
  additional exports in developing markets and
  approximately 0.6 in advanced markets
• Benefits of CDIA to Canada
• Helps Canadian firms compete internationally
• Canadian companies who engage in CDIA generally
  invest more in RD than those who do not engage
  in CDIA, which in turn creates longer-term
  benefits for the economy
• Sales from foreign affiliates represent a
  significant and growing share of international
  Canadian companies revenues
• Benefits flow from exports or investments or both

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Importance of Canadian Affiliate Sales in CDIA

• Canadian Direct Investment Abroad
• Outflows 40-50 billion annually
• CDIA stock of 523.3 billion - 2006
• Foreign Direct Investment and its benefits travel
  a two-way street
• CDIA is the Canadian business driver in emerging
  markets
• FDI builds Canadian export capacity
• Canadian Foreign Affiliate Sales (FAS)
• Significant additional share of total Canadian
  international business revenue
• Canadian FAS of 372 billion in 2004 (compared
  with exports of 450 billion)
• FAS equivalent to about 30 of GDP in both Canada
  and the US

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The Need for Support to Canadian Subsidiaries
and EDCs Response

• As integrative trade expands, Canadian companies
  are increasingly turning to EDC to support not
  only exports, but also foreign direct investments
  and on-going foreign affiliate operations
• Primary Canadian Investor requirement to EDC
  ability to secure financing to fund foreign
  expansion and tools to manage inherent risks
• Companies seeking long term risk sharing
  partners and capital sources for foreign
  investment
• EDC works closely with their Canadian banks but
  they have limitations on their ability to follow
  their clients into foreign markets
• Local financial institutions in international
  markets often limited by appetite and liquidity
  in supporting Canadian foreign affiliates
• EDC can and does play a role in facilitating
  foreign direct investment into Canada

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Evolution of EDCs CDIA support

• BEFORE
• EDCs support limited to
• PRI
• Project Finance
• ARI affiliate sales (in selected markets)

• NOW
• 2006 additional guidelines increased EDC support
  for CDIA through
• Expanded political risk insurance, financing,
  CIB, and ARI
• Expanded EDC financing support of foreign
  acquisition financing
• Providing solutions for foreign affiliates of
  Canadian companies
• Expanding support to SMEs and mid-market
  companies
• Development of an international equity investment
  program

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Evolution of CDIA Support 2005-2007
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EDC CDIA Support

• There are typically 3 types of CDIA support
• that EDC can provide
• To the Canadian exporter/investor for the purpose
  of making an investment
• To the foreign affiliate to help capitalize/fund
  the affiliate and
• To the foreign affiliates buyer to finance
  purchases from the affiliate.
• Shifting from Made in to Made by

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EDC CDIA Support

• ACCOUNTS RECEIVABLE INSURANCE
• support for
• Sales of foreign affiliates of Canadian exports
• CONTRACT INSURANCE and BONDING support for
• Cover for bonding and insurance needs for
  exporters foreign affiliates
• Cover for working capital support
• FINANCING support for
• International acquisitions
• Ongoing investments in foreign affiliates
• Refinancing of the above
• POLITICAL RISK INSURANCE for
• Equity investments
• Offshore assets, including equipment

Canadian Company

• FINANCING support for
• Project and acquisition financing
• Financing support for operations and expansion
• Refinancing of the above
• POLITICAL RISK INSURANCE for
• Cover for Lenders to foreign affiliate
• EQUITY
• Financing support for direct and indirect
  international investment

Ownership of 10 - 100
Return
Foreign Affiliate/Subsidiary
Goods Services

Foreign Buyer of Goods Services from Foreign
Subsidiary / Affiliate

• FINANCING support for
• Direct buyer financing
• POLITICAL RISK INSURANCE for
• Cover for Lenders providing Buyer Financing

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CDIA EDC Perspectives

• Industry Sectors
• Traditionally Mining, Power, Oil Gas
• Emerging Automotive, Infrastructure
• 2) Type of Investors
• Traditionally Large Corporations
• Emerging SMEs and Pension Funds
• 3) Markets
• Traditionally USA and Latin America
• Emerging Africa, China, India and Middle East.
  For pension funds also Europe and the USA

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EDC Successfully Supporting International
Canadian investment

• 1) Canadian direct investment in a foreign
  affiliate/project
• Oil Gas Colombia Finance support to
  Petrobank Energy and Resources Ltd. affiliates
  Colombian oil fields development
• Mining Brazil Finance support to Kinross
  expansion project in Brazil
• Infrastructure (Power) Mexico Project
  refinancing (Ontario Teachers)
• 2) Support for Canadian companys foreign
  affiliate
• Manufacturing India EDC financed equipment
  sale by Husky Injection Molding India affiliate
  to Tata Motors subsidiary to facilitate a
  machinery sale
• Oil Gas Russia Finance and PRI for Kudu
  Industries (SME)

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Cont

• 3) Canadian foreign company acquisition or new
  operations
• Infrastructure (Power) Chile Acquisition of
  Transelec by Brookfield
• Infrastructure (Airports) UK Acquisition of
  Airport Development and Investment by the Caisse
  de Deport
• Telecom Portugal Acquisition of Cabovisao
  (Cable TV company) by Cogeco Cable.

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In conclusion
CDIA increasingly becoming the main form of
international business development for Canadian
companies gt growing demand for financial
products that provide financial capacity and help
Canadian investors mitigate political and
commercial risks EDC is a one-stop solution for
Canadian Investors of any size, from any
industry, globally!!
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EDC - Contacts
Brazil Southern Cone Claudio Escobar Chief
Representative and Regional Director Brazil and
Southern Cone International Business Development
Group Tel [phone] Fax [phone]
4275 Email cescobar_at_edc.ca Fernanda de
Custodio Regional Manager, Brazil International
Business Development Group Tel [phone]
Fax [phone] Email fcustodio_at_edc.ca Patri
cia Emidio Associate Brazil and Southern
Cone International Business Development Group
Tel [phone] Fax [phone] Email
pemidio_at_edc.ca