On the same day in April that Benoit Daignault and I met for lunch at Finemondo, an Italian restaurant a couple of blocks east of the White House, the Financial Times began a week-long series on how the growth of the emerging middle class in countries such as China and Indonesia may have hit a wall.
If he saw the FT that day, he couldn't have been thrilled. When Mr. Daignault accepted the offer to lead Canada's export credit agency earlier this year, he became the latest in a long line of Ottawa mandarins tasked with separating Canadian exporters from the magnetic pull of the United States. Negative press about emerging markets complicates the trade evangelism practised by Export Development Canada and Mr. Daignault, who reckons he's visited at least 25 countries either for pleasure or for work as a senior executive at EDC and, before that, at General Electric Capital.
For the same reason your investment manager advises a diverse portfolio, federal governments since at least the time of Pierre Trudeau have tried to tempt Canadian executives into trying their luck in markets where English isn't the primary language, but where demographic trends suggest significant opportunity.
Emerging markets account for most of the global economy's growth, yet Canadian companies still are reluctant. For much of the past year, forecasts have shown that growth in emerging markets is slowing, while the U.S. finally seems to be shaking off the effects of the recession. In 2012, EDC set out to increase the business it underwrites in emerging markets by between 4 and 8 per cent. Instead, that business deteriorated, plunging 15 per cent from 2011. The institution did better last year, projecting a small decline in emerging-market business, and instead managed a gain of 8 per cent, according to its latest annual report.
"If you look at the papers today, people are not too-too hot or bullish on emerging markets," Mr. Daignault says. "My concern is that with emerging markets, people actually are going to wait and see and look until things come back and then go for the opportunities. You can't be tactical about these things. I'm saying, `Come on. Go now. Come on! It's time to go.' Yes things are getting better in the United States. Europe is doing better as well. But please, please continue to focus on the options in emerging markets."
These comments come early in our two-hour conversation over chicken picante (him) and branzino (me), Mr. Daignault's first interview since winning the job that Stephen Poloz left vacant last spring when he was appointed governor of the Bank of Canada. Mr. Daignault, 51, revealed himself to be a practical man, choosing to sell his 1992 Porsche 911 convertible after driving it only 2,000 kilometres in a year. He also apparently thrives on exertion. I've toured Northern California's wine country by car. Mr. Daignault and his wife did it on a bicycle last year, pedaling some 350 kilometres over a week. "It was not crazy, crazy," he says.
Mr. Daignault, a soft-talking, comfortably bilingual native of Montreal, lacks a public profile, even in Ottawa, where Export Development Canada (EDC) occupies shiny new headquarters a few blocks south of Parliament Hill. That could change.
Whether it's Mr. Poloz or Prime Minister Stephen Harper, exports are on the mind of every economic policy maker in Ottawa these days. Mr. Poloz is keeping borrowing costs exceptionally low in part because exports remain at pre-crisis levels, and Mr. Harper has signed free-trade agreements with the European Union and South Korea in the past five months. With so much emphasis on trade, it is surely only a matter of time before the country's export agency grabs a piece of the spotlight.
That will be a new experience for Mr. Daignault, whose career until now has been entirely backstage. It takes him a little while to warm up. But once he does, you see a guy who is ready to take a public role, if only because he recognizes that's what's needed to take EDC to another level.
"We need to make sure people understand our story," says Mr. Daignault, who was appointed in February after serving most recently as EDC's senior vice-president in charge of lending. "We need to do a better job at conveying that message. Our clients, the ones who know us, like us a lot, but we want to do more, especially now in the context of the Canadian economy. Trade basically now is at the centre of everything."
If EDC were a private company, it would compete with National Bank for the right to be mentioned in conversations that include the country's Big Five lenders. EDC's revenue in 2012 was $1.4-billion, comparable to that of National Bank, and more than the $780-million Montreal-based Laurentian Bank earned that year. (Revenue declined to $936-million last year, when the institution says its lending and insurance programs helped support about 569,000 jobs.)
Those numbers show EDC's scale. Yet the institution has struggled to live up to its own expectations. Jim Dinning, the former chair of EDC's board of directors, acknowledged that the Crown Corporation's results in 2012 were "mixed." EDC paid the federal government a dividend of $500-million in 2012, a welcome contribution for a prime minister bent on erasing a crisis-era budget deficit.
But EDC's primary mandate is to boost exports, not reap big profits. Not only did EDC miss its emerging-markets target, but it also fell short of its goal for overall business growth in 2012. The institution worked with about 7,400 customers in 2012, fewer than in 2011. That's not unusual, as EDC tends to be busier when the economy is struggling, and less busy as growth picks up. Still, given Canada's weak export recovery, it's surprising more companies aren't taking advantage of EDC's financing and insurance programs.
"We need to be more present," Mr. Daignault says.
Canada is a trading nation, but not an adventurous one. We send a lot of stuff to the United States, our largest trading partner. The U.S. consumes about three-quarters of Canada's merchandise exports. By comparison, Australia sent only 18 per cent of its merchandise exports to its largest trading partner, China, in 2013. Mexico has 44 different free-trade agreements. Canada has nine, excluding the recently signed, but not yet completed, arrangements with Europe and South Korea.
This is my blunt critique of Canada's reliance on the U.S. economy. Mr. Daignault, I sense, will make a more nuanced assessment of what keeps Canadian executives from testing their luck outside of North America. When I suggest Canadians may simply lack the stomach for big financial risks, Mr. Daignault acknowledges the possibility, but doesn't say whether he agrees. His reluctance to rush to judgment causes me to recall former Bank of Canada governor Mark Carney, who attempted to get a rise out of Corporate Canada by calling its cash stockpiles "dead money." Mr. Carney wanted Canadian companies to invest abroad. Mr. Daignault wants the same thing, but he will go about it in other ways.
"I see entrepreneurs ready to do business in Mongolia, in the mining space, with a very high risk tolerance," he says. "At the same time, I see a lot saying, 'Oh, I'm not sure if I want to go the next step and the next step.' One thing I will want to do as CEO is engage with other CEOs one-on-one and try to understand" what holds them back, he says.
We will be able to measure his success by watching the economy. If exports pick up, growth will too. If they don't, the economy will continue at its current lacklustre pace.
Education: Bachelor's degree in business administration from l'École des Hautes Études Commerciales in Montreal; completed executive programs at London Business School and Columbia University in New York.
Dream car: Porsche 911
Real-life car: Audi S4
Travel expenses last year: $84,502.90
Favourite part of the world: Southeast Asia
Big idea: "Where we are struggling in my mind is the lack of integrators," he says, referring to bigger corporations that create demand for smaller companies. "If you have this company that is a great integrator, absorbing technologies from small businesses, and they go global, it is great for the economy. It's those global champions, whoever they are. We need to make sure they are well supported. For me, one of the issues we have right now is we lost quite a few of them."