Corruption in Quebec: Cleaning up
Heads start to roll in a Canadian corruption scandal. More may follow
QUEBECKERS were outraged in 2010 when Maclean's, a Canadian magazine, labelled their province the most corrupt in the country. True, a Quebec-based scandal had helped to topple the federal government in 2006, and evidence was mounting of bid-rigging and kickbacks in local administrations. But Quebec's defenders claimed that the revelations simply showed their anti-corruption investigators were more vigilant than others. Months of damaging testimony to a corruption inquiry have now left even the province's boosters short of excuses.
The inquiry, headed by France Charbonneau, a justice of the Quebec Superior Court, has this month led to the resignations of Gérald Tremblay, the mayor of Montreal, and Gilles Vaillancourt, mayor of neighbouring Laval. Both still vehemently maintain their innocence, yet had little choice but to go.
Mr Tremblay has not been accused of personal involvement in the kickback scheme--described at the inquiry by two former Montreal engineers--in which the value of construction contracts was fraudulently inflated. The firms involved, some of which are said to have links to the mafia, allegedly gave back some of their remuneration to municipal employees, and made generous donations to political parties. But the racket took place on Mr Tremblay's watch. Martin Dumont, a former organiser for his Union Montréal party, testified that the mayor knew the party kept two sets of books, separating clean and dirty money, but chose to turn a blind eye. Mr Tremblay denies any such knowledge.
Meanwhile Mr Vaillancourt took sick leave and then resigned after anti-corruption police raided his offices. A construction boss told the inquiry that firms were expected to hand over 2.5% of every contract they received in Laval to the mayor. He, too, denies the allegation.
Other heads have already rolled. Four further Montreal employees have been suspended without pay pending further investigations. The mayor of Mascouche and the former mayor of Boisbriand, two smaller cities north of Montreal, were charged with fraud before the inquiry began. And more may yet follow: Ms Charbonneau is due to submit her report in October 2013.
Although the inquiry's mandate is restricted to Quebec, the testimony has also pointed to possible wrongdoing at the federal level and in the neighbouring province of Ontario. Assorted criminologists and police officers have testified about the mafia's sway in Ontario. One theory suggests that the mob there is just as powerful as in Quebec, but is less rancorous than its counterpart and so attracts less attention (as it happens Joseph di Maulo, an alleged kingpin, was shot dead on November 4th in the driveway of his Quebec home). Politicians elsewhere don't seem overly concerned by these insinuations.
None of this means that Canada, which Transparency International, an advocacy group, rated among the world's cleanest countries in its 2011 index of perceptions of corruption, has suddenly become Nigeria. But the episode does suggest that it can no longer be complacent about graft.
November 17, 2012
Stephen Harper
The prime minister, Mr Harper, is now leading his third federal government, but this is his first one with a parliamentary majority. He has led the governing Conservative Party since it was formed in 2004 (in opposition at the time) from a merger of his Canadian Alliance and the Progressive Conservatives. His decision to prorogue parliament twice before his minority governments collapsed attracted considerable controversy. He has also been accused of centralising control of government departments. Even so, he has managed to stay at the top of Canadian politics for the last six years and may have hoped for smooth sailing now that he is into his second year of majority government. However, events have conspired against him: sluggish external demand has dampened economic prospects in Canada and forced a shift in focus to job creation, although deficit reduction remains a goal. His government faces a tricky decision in late 2012 or early 2013 on whether to allow the US$15bn takeover by state-owned China National Offshore Oil Company of a Canadian energy firm, Nexen Inc. Either way, the decision will have an impact on relations with China. Internal political and economic tensions caused by the rise of the resource-rich western provinces and the relative decline of the manufacturing heartland in Ontario and Quebec will test his government's ability to maintain national equilibrium. So too will the recent election (on September 4th 2012) of a separatist Parti Québécois (PQ) minority government in the mainly French-speaking province of Quebec.
Jim Flaherty
Mr Flaherty is the minister of finance in the Conservative government, a role he has filled since the Conservatives came to power in 2006. He has succeeded in lowering gradually the corporate tax rate, to 15% in 2012, and has kept the federal public finances in relatively good shape even through the downturn in 2008-09. Previously, he had served in the Ontario government. He is now looking for new ways to stimulate the economy without jeopardising the government's goal of eliminating the federal budget deficit by 2015. Mr Flaherty's push for a national securities regulator to replace 13 separate provincial and territorial commissions received a setback in December 2011, when the Supreme Court ruled against the legislation. However, the ruling laid out a path that he may be tempted to take once he recovers from the blow.
John Baird
Once seen as the government's hyper-partisan attack dog, Mr Baird, the foreign minister, has mellowed since being made chief diplomat in May 2011. As foreign minister he retains the ability to be blunt in implementing the policy that Canada will no longer "go along just to get along". This means Canada is more forthright in identifying and defending its interests, as defined by the government. One manifestation was the strong push by Mr Baird for Canadian business in Libya after Canada's involvement in the NATO campaign. Another is Canada's decision to close its embassy in Iran and expel Iranian diplomats from Canada, part of a policy of supporting Israel and attacking its critics, both in Canada and abroad. On the trade front, Mr Baird is leading efforts to diversify relations beyond the US; this includes negotiating a trade and economic agreement with the EU and strengthening relations with countries in the Asia-Pacific region.
Leona Aglukkaq
Ms Aglukkaq, who has been health minister since October 2008, will represent Canada in 2013 when it takes over from Sweden to chair the Arctic Council, an inter-governmental forum for co-operation among Arctic states, indigenous communities and other Arctic residents. An Inuit (the first to serve in the cabinet) who was born in Inuvik in the Northwest Territories and now lives in the neighbouring territory of Nunavut, Ms Aglukkaq served in the two territorial governments before entering federal politics in 2008. Canada will chair the Arctic Council at a sensitive time, when governments are seeking a balance between resource development and protection of the sensitive Arctic environment.
Thomas Mulcair
Leader of the official opposition, Mr Mulcair took the helm of the New Democratic Party (NDP) in 2012, replacing Jack Layton, a popular leader who died shortly after he led the left-leaning party to a record result in the May 2011 election. There were doubts that Mr Mulcair could maintain the party's popularity, given his history as something of a firebrand in his native Quebec, where he had quit his job as environment minister in the provincial Liberal government. Despite some missteps, he has so far made a good start in presenting the NDP as a credible official opposition and potential government-in-waiting. This may change when the Liberal Party, currently relegated to third-party status, selects a permanent leader in April 2013.
Mark Carney
Mr Carney became governor of the Bank of Canada, the central bank, in February 2008. His period in office coincided with the global financial and economic crisis, but Mr Carney has generally won high marks for his response and stewardship of the Canadian economy throughout the crisis. The Bank of Canada has kept official interest rates extremely low since the crisis, but that has come at a price. Household debt has soared to record levels and house prices, which dipped briefly during the recent recession, have continued to rise. Mr Carney has indicated that rates will rise in future as long as economic expansion in Canada continues and the current excess supply in the economy is absorbed. As a former investment banker, Mr Carney also has international responsibilities as chair of the Financial Stability Board, tasked with improving global financial regulation and supervision.
Alison Redford
Ms Redford became premier of Alberta, Canada's fastest-growing province and the heart of its energy industry, in October 2011 and cemented her position by leading her Progressive Conservative party to victory in April 2012. She gained national prominence through her efforts to persuade the nine other provincial leaders and three territorial leaders to adopt a national energy strategy, which Canada lacks. That plan was derailed in July 2012 when Christy Clark, the premier of neighbouring British Columbia, who is facing an election in May 2013, set conditions on her support that were untenable for Alberta. It is likely that Ms Redford will redouble her efforts after the British Columbia election.
Pauline Marois
The election in September 2012 of a minority separatist Parti Québécois government, led by Ms Marois, will destabilise national politics after almost a decade of calm under the previous Liberal government in Quebec. Although Ms Marois will be restrained in some of her policies by her government's minority status, the hardcore separatists in her party will press for an early referendum on independence. Voters in the largely French-speaking province have narrowly voted "no" in two previous referendums (1980 and 1995), both held under PQ governments.
September 26, 2012
Official name
Canada
Form of state
Constitutional monarchy
National legislature
Bicameral federal parliament; House of Commons of 308 members elected from individual constituencies; Senate of 105 members appointed by the prime minister; the Senate has the power to delay legislation
Electoral system
Universal direct suffrage for all citizens over the age of 18
National elections
Next election due by October 2015; last election: May 2nd 2011
Head of state
Queen Elizabeth II; the monarch's functions are carried out by her representative in Canada, the governor-general, currently David Johnston, who is appointed on the advice of the prime minister
Provincial legislatures
Unicameral legislative assemblies of varying size in each of the ten provinces
National government
Cabinet headed by the prime minister, drawn almost invariably from the House of Commons; the Conservatives, led by Stephen Harper, won a third successive term at the general election on May 2nd 2011
Main political parties
Conservative Party; Liberal Party; Bloc Québécois; New Democratic Party
Key ministers
Prime minister: Stephen Harper
Aboriginal affairs & northern development: John Duncan
Agriculture & agri-food: Gerry Ritz
Canadian heritage & official languages: James Moore
Citizenship, immigration & multiculturalism: Jason Kenney
Environment: Peter Kent
Finance: Jim Flaherty
Fisheries & oceans & Atlantic Gateway: Keith Ashfield
Foreign affairs: John Baird
Health: Leona Aglukkaq
Human resources & skills development: Diane Finley
Industry: Christian Paradis
Intergovernmental affairs: Peter Penashue
International co-operation: Julian Fantion
International trade & the Asia-Pacific Gateway: Ed Fast
Justice & Attorney-General: Robert Nicholson
Labour: Lisa Raitt
Leader of the government in the Commons: Peter van Loan
Leader of the government in the Senate: Marjory LeBreton
National defence: Peter MacKay
National revenue: Gail Shea
Natural resources: Joe Oliver
Public safety: Vic Toews
Public works & government services: Rona Ambrose
Transport, infrastructure & communities: Denis Lebel
Treasury Board: Tony Clement
Veterans' affairs: Steven Blaney
Central bank governor
Mark Carney
November 20, 2012
Outlook for 2013-17
Review
November 20, 2012
Fact sheet
| Annual data | 2011 | Historical averages (%) | 2007-11 |
| Population (m) | 34.4 | Population growth | 1.1 |
| GDP (US$ bn; market exchange rate) | 1,781.1 | Real GDP growth | 1.2 |
| GDP (US$ bn; purchasing power parity) | 1,432.9 | Real domestic demand growth | 2.3 |
| GDP per head (US$; market exchange rate) | 51,824 | Inflation | 1.9 |
| GDP per head (US$; purchasing power parity) | 41,692 | Current-account balance (% of GDP) | -1.5 |
| Exchange rate (av) C$:US$ | 0.99 | FDI inflows (% of GDP) | 3.4 |
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Background: The Canadian economy was the 11th-largest in the world in 2011 (measured in US dollars at market exchange rates). It is highly integrated with the US economy, which absorbs 75% of its goods exports and is the source of around 50% of its imported goods. Most Canadians live in a narrow strip (160 km wide) north of the US border. The US exerts a powerful economic and cultural influence on Canada. 57% of Canadians say English is their mother tongue, about 21% say French, and 20% speak another language before learning English or French. The majority of French-speakers live in Quebec, Canada's second most populous province. This makes Canada a potentially fragile country. Support for full sovereignty is currently muted in Quebec, although a separatist party has recently formed a minority government there.
Political structure: Canada is formally a constitutional monarchy, with the governor-general (always of Canadian nationality and appointed in Ottawa) acting as the representative of the British crown. In practice, the Canadian House of Commons is sovereign. Canada is a federation of ten provinces, each with substantial powers, and three territories. At the federal level are the Commons, the main seat of legislative power, and the non-elected Senate, which plays only a marginal role. The Conservative Party has headed a majority government since winning the general election in May 2011.
Policy issues: The government is focused on reducing the fiscal deficit, partly by cutting back the size of the federal civil service. But since it has pledged not to undermine the economic recovery in doing so, fiscal consolidation may be slowed. A manageable public debt allays major concerns about the public accounts. Energy and environmental regulation will continue to come into conflict, as large-scale energy projects tend to have a negative impact on the environment.
Taxation: The federal corporate income tax rate is 15%. Provincial governments charge corporate tax at rates between 5% and 16%. In July 2010 Ontario and British Columbia harmonised their provincial sales taxes with the federal value-added tax into a 12% harmonised sales tax (HST), leaving only three small provinces with provincial sales taxes (but British Columbia has since reversed its decision).
Foreign trade: On a balance-of-payments basis, merchandise exports amounted to US$463bn in 2011. Merchandise imports rose to US$461bn. The rise in exports brought the merchandise trade balance back into a mild surplus, at US$2.3bn. The current account recorded a deficit of US$49bn in 2011, equivalent to 2.7% of GDP.
| Major exports 2011 | % of total | Major imports 2011 | % of total |
| Industrial goods & materials | 25.6 | Machinery & equipment | 27.4 |
| Energy products | 24.5 | Industrial goods & materials | 21.5 |
| Machinery & equipment | 17.7 | Automotive products | 15.6 |
| Automotive products | 13.0 | Other consumer goods | 13.1 |
| Leading markets 2011 | % of total | Leading suppliers 2011 | % of total |
| US | 73.7 | US | 49.5 |
| UK | 4.2 | China | 10.8 |
| China | 3.7 | Mexico | 5.5 |
| Japan | 2.4 | Japan | 2.9 |
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December 14, 2012
Data and charts: Annual trends charts
November 20, 2012
Canada: Country outlook
FROM THE ECONOMIST INTELLIGENCE UNIT
POLITICAL STABILITY: The federal election in May 2011 resulted in Canada's first majority government for seven years. The Conservatives hold 166 of the 308 seats in the House of Commons (including one independent conservative). The government's majority status should provide a more stable political environment and easier passage of legislation than in the previous seven years, when the Conservatives led a minority government. At that time, the political process was frequently plagued by impasses. Freed from the necessity of co-operating with the opposition, the government has been emboldened to pass more conservative legislation--and so far has encountered little resistance in doing so. The main reforms introduced in 2011-12 include corporate tax cuts (which were unpopular with the opposition), a law ending the monopoly on wheat exports of the Canadian Wheat Board, bills to toughen crime laws and abolish the long-gun register, and provisions that lighten the regulatory burden on large energy projects. A major energy investment by a Chinese state-owned firm was also approved over centre-left opposition. Further such measures will inevitably attract political opposition but will probably be passed anyway.
ELECTION WATCH: Canada has had four federal elections in the past eight years, reflecting the inability of any party to win a parliamentary majority. This had made it easy for the opposition to topple the government. However, following the Conservatives' victory in the 2011 election, the party is expected to serve a full five-year term. There will be little incentive for the Conservatives to return to the polls, and neither opposition party is in a strong enough position to challenge them. Mr Mulcair will face a tough task maintaining the New Democratic Party's relevance and popularity over the parliamentary term. Meanwhile, the Liberals are rebuilding and searching for ways to appeal to voters again. They are preparing to select a new leader in April 2013, who will have the task of making the party relevant again. Financing difficulties are also troubling the party, owing to a lack of backers. Nonetheless, it is unlikely that the Liberal Party will remain in the doldrums; it should be reinvigorated by the arrival of a new leader. Consequently, it remains the most likely challenger to the Conservatives at the next election, which is due by October 2015.
INTERNATIONAL RELATIONS: Access to the US market is of paramount importance for Canada, and the relationship with the US is therefore the country's most significant. There is significant crossborder integration in a wide range of industries. However, the two economies' relationship over energy is in transition. Canada has traditionally exported oil and natural gas to the US, but the US demand for energy imports is falling, owing to its major shale gas and oil finds. There is also US opposition to buying petroleum from Canada's oil sands because of environmental concerns over extraction techniques. The US government has delayed approval of a crossborder pipeline that would almost double the quantity of crude oil imports from the oil sands. Canada is seeking to reduce its export dependence on the US economy by moving closer to other trading partners, such as China and the EU. Negotiations on a free-trade agreement with the EU are making progress--the two sides hope to reach a deal by 2013.
POLICY TRENDS: The federal public finances are improving, but Mr Harper has recently shifted the government's emphasis moderately away from fiscal consolidation. The government now intends to ensure that cutting the budget deficit does not occur at the expense of economic growth. This move comes in reaction to the emerging downside risks to growth at a global level in recent quarters. The Bank of Canada (BOC, the central bank) will keep monetary policy fairly loose, which should support the government's stance. Environmental protection policy has become less of a priority for the majority Conservative government, and a cap-and-trade carbon emissions scheme is unlikely to come to fruition--the government has pledged to mirror US policy action on this issue, and there is no majority for such a move in the US Congress. In fact, the Conservative government is loosening some elements of environmental legislation, which will make the approval of energy megaprojects easier. Foreign investment in energy projects has progressed with two high-profile approvals in December, from a Chinese state-owned firm and a Malaysian one. The government will seek to balance a need for foreign investment with domestic political disquiet over foreign control of energy resources. It has pledged new, more restrictive guidelines on such investment, but it remains to be seen whether these will markedly cool foreign interest in the energy sector.
ECONOMIC GROWTH: Real GDP growth in Canada is expected to remain fairly healthy during the forecast period, but quarters of weak growth remain possible. The latest occurred in the third quarter of 2012, when growth dropped off sharply to 0.1% quarter on quarter (from 0.4% in each of the previous quarters). As a result, the Economist Intelligence Unit has lowered its GDP growth estimate for 2012 to 2% (from 2.2%) and our forecast for 2013 to 1.8%. Economic growth next year will be weighed down by a slow start, as the global economy and particularly the US economy are expected to be somewhat sluggish around the turn of the year. By the second half of 2013 we expect a more buoyant economy, with growth benefitting from a new monetary stimulus move by the US central bank, the Federal Reserve. This should boost the US economy and, in turn, Canada's as well. We forecast a slight pick-up to an annual average of 2.4% growth in 2014-17.
INFLATION: Annual headline consumer price inflation is running well below the central bank's preferred rate of 2%, at 1.2% in September and October. The sustained disinflationary trend since the peak in May 2011 seems to have come to an end, but underlying inflation, excluding volatile items such as food and energy, remains low. Wage growth has decelerated sharply, suggesting that wage pressures are being tempered by the elevated unemployment rate, which stabilised at around 7.3% in 2012. With the economy still operating below capacity, we expect the rate of headline inflation to be modest in 2012, averaging 1.6% for the year. In 2013 the effects of global monetary stimulus will lift commodity prices again, and should also boost the real economy, leading to a pick-up in inflation to 1.9%. In 2014-17 we forecast that the annual average rate of inflation will return to just above 2%.
EXCHANGE RATES: The exchange rate has fluctuated around parity with the US dollar in 2012. The Canadian dollar is still strong by historical standards, even if it remains at some 5% below the peak reached in mid-2011. Some view the Canadian dollar as a safe haven given the relative lack of macro-imbalances in the Canadian economy. However, the main influences on the Canadian dollar tend to be trends in global commodity prices and investor risk appetite. These leave the currency susceptible to episodes of volatility. Tighter monetary policy by the Bank of Canada, compared with its US counterpart, the Fed, has helped to support the currency since mid-2010. In 2012 we estimate a full-year average of C$1:US$1 for the currency. Given the fact that the BOC will continue to operate tighter monetary policy than the Fed, we expect the Canadian dollar to remain firm in 2013, remaining at parity with the US dollar, on average. We then forecast a marginally stronger rate against the US dollar in 2014-17.
EXTERNAL SECTOR: Canada's current account has been in deficit for the past three years, on the back of a stronger domestic economy than in Canada's main trading partners. The trade account, which moved into deficit in 2009-10, posted a small surplus in 2011, although the current account remained in deficit. Over the forecast period we expect a widening trade surplus to offset deficits on the services and income accounts. The current account is expected to remain in deficit, but these shortfalls will be manageable, at an annual average of 2.5% of GDP.
December 10, 2012
Country forecast overview: Highlights
December 14, 2012
Land area
9,093,507 sq km (7% farmland; 46% forest)
Population
34.6m (2011)
Main metropolitan areas
Population in '000, July 2007
Toronto: 5,510
Quebec: 729
Montreal: 3,696
Hamilton: 720
Vancouver: 2,286
Winnipeg: 713
Ottawa (capital): 1,169 (a)
London: 465
Calgary: 1,139
Kitchener: 468
Edmonton: 1,081
St Catharines-Niagara: 396
(a) Includes the Gatineau conurbation
Climate
Continental; snow cover in winter (very cold in the north); warm summer
Weather in Ottawa (altitude 103 metres)
Hottest month, July, 15-26°C; coldest month, January, -16°C to -6°C; driest month, February, 56 mm average rainfall; wettest month, June, 89 mm average rainfall
Languages (2006 census)
English only (67.6% of the population), French only (13.3%), English and French (17.4%), other languages (1.7%)
Measures
Metric system (although the US imperial system is also commonly used)
Currency
Canadian dollar (C$)=100 cents. Average exchange rates in 2011: C$0.99:US$1; ¥80.5:C$1; C$1.38:€1
Time
Hours behind GMT
Newfoundland (island) 3.5 Central zone 6
Other Maritime provinces 4 Mountain zone 7
Eastern zone 5 Pacific zone 8
Fiscal year
April 1st-March 31st
Public holidays, 2012
January 1st, Good Friday and Easter Monday, Victoria Day (May 18th), Canada Day (July 1st), Labour Day (September 7th), Thanksgiving Day (October 12th), Remembrance Day (November 11th), Christmas and Boxing Day (December 25th and 26th). Additional holidays apply in specific provinces
March 28, 2012