Foreign Affairs Committee on Dec. 6th, 2011

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're going to move back here to Mr. Larose.

[Jean-François Larose, NDP, Repentigny, QC]

Thank you, Mr. Chairman.

Thank you very much to our guests. What you're doing is very valuable. As a member from Quebec, I am pleased to see the representatives of the Mouvement Desjardins. I am moved by your involvement in international development.

I always find it fascinating to hear guests explain to us, using big figures, big numbers, the problems that there are and the solutions that are being provided on international issues. That always makes us do some serious thinking.

However, I would like us to go back to the initial item on the agenda concerning Africa. Would it be possible for you to give us a much more modest example of a small community where you are intervening through a project, specifically in Africa? Can you explain to us very simply, in layman's terms, the impact you are having on that specific community?

In addition, what impact would be produced if timeframes were imposed? I would like to have a true picture of those people in that small community in Africa who are experiencing the problems, and specific solutions that you have applied. What would happen if unreasonable timeframes were imposed?

[Yvon Bernier]

I'll try to answer your questions as well as possible.

I don't know whether you noticed in the text, but earlier I talked about supporting whole groups, groups already deployed that have put immense distribution networks in place in recent years.

We are dealing with that issue at this stage. Direct intervention in the base community is done by the Africans themselves. It is they, our partners, who are increasingly doing this work using their own resources.

We have fewer and fewer actions where we start from scratch, where we enter a community to establish the first caisse. We hope these enormous projects will come up again, but for the moment we are doing more to increase the penetration rates of the existing financial institutions, to reinforce their governance and to bring in technology so that they are able to go further in their communities.

Here's an example of a more limited impact. We are in Ségou, in a small village in northern Mali, where there is only one financial institution. Only the local caisse is open, and it must be open three or four days a week. It is mobilizing the savings of the people there. It grants credit, mainly to farmers. The caisse reinvests in its community through its surpluses and its network because all the caisses are now in a federated network. So it can have community development activities, such as supporting a dispensary or a school, with its resources. So it is contributing with other resources. As a result, a relationship of trust is being established between the community and the base financial institution.

I just thought of a clearer picture that I'm going to give you. During the governance problems in Haiti, no caisses in the Le Levier federation's network were attacked. I'm talking about the period before the earthquake. Four caisses were destroyed during the earthquake. People joined forces to get them back up and running, and they are still operating. I believe this type of institution is very deeply rooted in the community. The institutions serve the needs of the community and they work.

You also asked me what problems a financing deadline can cause. However, it isn't exactly working that way for us right now. If, for example, the program of support for the Le Levier federation in Haiti stopped, technical support would be withdrawn and programs would slow down.

I can tell you that we did not experience that. Even with all the problems, for us CIDA was really dilligent in readjusting the programs. There was no discontinuity between the events on which undistributed funds might have had an impact. We didn't experience it like that. Others may have experienced it in various ways, but that was not our case.

Naturally, if a commitment has been made and that financing is interrupted for various administrative reasons and does not reach its destination, there will of course be repercussions, since a series of activities is under way. In our case, however, we have not experienced that kind of problem recently. Historically, we have previously dealt with that, but not in the past 15 years or so.

[The Chair, Conservative, Dean Allison]

Thank you very much.

We're now going to move over to Mr. Dechert.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

I want to go to Mr. Horswill and Teck.

We've talked about zinc and vitamin A and the interesting projects that Teck is involved with in respect to those two elements. I understand also that Teck has what is known as a copper program in Peru. I wonder if you could describe that program for us and tell us how it's contributing to economic growth in that country.

[Doug Horswill]

I'm scratching my memory a little to understand. Do you mean in terms of the copper program's developing new projects?

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Is Teck operating in Peru?

[Doug Horswill]

Yes. We're a partner in a mine called Antamina 400 kilometres north of Lima. Our other partners include BHP and Xstrata and one Japanese trading house.

In the Antamina program, maybe it's the focus on community development you're interested in.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Yes, I'm concerned about economic growth in that region.

[Doug Horswill]

There's a set of initiatives partly funded through a tax in Peru called a canon, which is additionally funded by a separate contribution from Antamina to a foundation run by local governments, mayors, and politicians. It funds infrastructure and agricultural opportunities and so on within the Ancash region of that part of Peru. The funding is running around $60 million a year, placed into trust, but I'm not certain of what the actual spending is. My hope is that they're building a capability to continue productive employment when the mine shuts down.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

How many people is Teck employing in Peru? How do you think mining companies like Teck can contribute to reducing poverty in the various nations where they operate?

[Doug Horswill]

Antamina's direct payroll is around 1,200 or 1,300. Virtually all of that is Peruvian. There are two or three ex-pats at the senior levels, and technical people are brought in as necessary. The multiplier effect through indirect and induced employment is probably three to one. There are some imports, some supplies, that are brought from elsewhere, simply because they wouldn't be available in Peru.

Between taxes paid to the central government and the canon I just mentioned, there is a substantial contribution to the Peruvian economy from that operation. There are other mining operations throughout the country. I'm not certain what mining amounts to in the total GNP of Peru, but it is significant.

Chile is a country where we also have operations directly owned and operated by us, whereas Antamina is a separate corporation operated through its own management. We have two mines in Chile that together would employ something in the order of 2,000 people directly. There would be the same kind of multiplier, probably a little bit higher, because Chile's mining sector has a more well-developed network of suppliers. It's a major copper producer in the world, number one, actually. Mining and the sale of resources contribute substantially to their current and long-term economic growth. Overall, our company focuses on building local relationships, business relationships, and other relationships to support development. We don't move ahead without community support, so you build that any way you can.

[Bob Dechert, Conservative, Mississauga—Erindale, ON]

Very good. Thank you.

Mr. Bernier, I understand that Desjardins has started a new credit facility to help farmers in Haiti. I wonder if you could describe that facility and tell us how it will help farmers to become more productive. Could you also give us your assessment of the potential for economic growth in Haiti and how the private sector could play a part in Haiti's reconstruction?

[Yvon Bernier]

That's another good question.

The program to implement an agricultural financing and insurance system in Haiti began only a few months ago. That was in response to a request from Haiti's department of agriculture, natural resources and rural development. We responded to it together with the Inter-American Institute for Agricultural Cooperation. The Financière agricole du Québec specializes in crop insurance. We try to ensure, in cooperation with government authorities, that there is a national response there to a national food security problem. We are trying to establish a synergy with stakeholders working in the fields of agricultural input supply and methodologies designed to increase productivity, as well as with others who are establishing commercial channels for local products.

We are managing to get the entire financial sector involved in financing the agricultural sector, not just the microfinance institutions or financial cooperatives, but commercial banks as well. We are providing the banks with training for their credit officers in the methods they must use to analyze a loan portfolio so as to minimize risk.

Then a guarantee fund is constituted. This is a loan portfolio guarantee, of up to approximately 30% of 40% in this case, which provides an additional risk incentive. Haiti is exposed to violent hurricanes and major flooding, in particular. Natural disasters occur there almost repeatedly. We must therefore find mechanisms to control the risk.

Then a crop insurance fund for natural disaster cases should be implemented and become permanent. The idea will be to provide farmers with basic crop insurance. Since we are just starting, it is hard for me to talk about the impact. However, I believe this system should have a leverage effect, result in other investors taking part and increase the funding that for the moment is being generated by the Canadian International Development Agency, but is of interest to the World Bank, which will interest the Inter-American Development Bank.

So there is a spillover effect there. We hope to create a lot more synergy in the agricultural sector and a higher degree of professionalization in agricultural financing. We would also like to manage to innovate in the crop insurance field in a high-risk country. Our activities only started four months ago. We are just at the operational planning stage. It's off to a good start and has been well received.

What was the other part of your question?

[The Chair, Conservative, Dean Allison]

You know what? That's all the time we have. He's just over time.

We'll catch you in the last round.

We have 15 minutes left. I have Mr. Wallace, Mr. Eyking, and Madam Laverdière. I'm going to start with Mr. Eyking, we're going to go to Madame Laverdière, and then we're going to go to Mr. Wallace.

[Mark Eyking, Liberal, Sydney—Victoria, NS]

Thank you, Mr. Chair.

A recent article in The Economist stated that international aid is going to be hitting rough water. It talked about the European Union financial crisis, the U.S. crisis, and the cutbacks to the U.S. budget. We even see it with CIDA; we have sporadic funding.

So when you look at that side of the scale--that it's going to be harder to get funding or potentially harder--and then on the other side you see the need.... When we talk about some of these countries that are getting out of dictatorships, they're going to need our aid to help set up proper governance structures. Also, we have climate change and we have the population increase. So you have the demand side, with the supply side getting shorter.

Doug, you're in the business world, of course. That could create a bit of a problem. You stated in one of your comments that we have to mobilize the private sector. There's an article in The Globe and Mail today saying that just with Canadians alone, the average age of a donor who donates to various organizations has changed from the age of 45 to an average of 55 now. There's a concern out there about these individuals, which is that as these people are getting older, they're going to fall off the scale. There seems to be a lack of younger people--I'd call “younger people” those who are between the ages of 30 or 35 and 45--who should be getting in there.

That said, I guess the question is for you, Doug. Going back to your statement, how can we mobilize the private sector? How can we get this generation more into funding? We've had some successes. When we had the Somalia and Haiti initiatives, people stepped up to the plate to match the funds. But my concern is about going forward. When you see those numbers, how are we going to keep that age group seeing the benefits not only as a tax receipt but seeing the whole benefit of funding...? As you said in your statement, how do we mobilize that private sector? But also, how can we mobilize that age group?

[Doug Horswill]

I'll go with my colleague's answer. It's a good question without a good answer.

I'll kick it over to your side of the table. In some respects, the politicians are going to have to do something with leadership. It is interesting. I noticed that article and there's been a series before about the fact that donor ages are rising. In other words, the young are not coming in behind.

I do a lot of work with St. Paul's Hospital Foundation and a couple of others locally in Vancouver, and we're noticing the same thing.

Is it pressure on the purse for young people, or somehow there's been a change in ethics? What was it that a generation or two ago made people, in a sense, in their own lives, more charitable than maybe some of the young people coming through today? How do we establish and engender those values? Those are big political questions, and any one opinion is just one among many.

In terms of mobilizing the private sector, in specific terms what I was talking about were companies who have, as in our business, a need for social licence on a world stage and global citizenship-type initiatives are part of the package of things we do, whether it's in a small town in northern Chile where we're providing school support or health support or a global initiative that really has nothing to do with our business. We're operating in Peru and one of the UNICEF programs is there, but it wasn't put there because of that; it was put there because Peru was ready and they had the requisite health system in place. It's the same thing in Senegal. It's not a country of interest to us from a business point of view; it's part of that global citizenship.

I know many of our peer companies like Rio Tinto and BHP are doing the same sort of thing, and that's good, but it's not enough. Getting down to the citizens around the world, particularly the western world--western Europe, the U.S., Canada, Australia, and New Zealand--and making sure that young people coming through realize that development aid is crucial, that a lot of people are worse off than they are, and how do they help make the world a better place.... I don't know the answer, Mark. It would be....

[Mark Eyking, Liberal, Sydney—Victoria, NS]

I have one more comment.

As you see all these budgets around the world, it's interesting that Britain has made major cuts to their budgets, but I think there are two things: in two departments they're freezing their help, but the only one they're increasing is their aid. So they're not going to say they'll rely on the private sector; they're going to maintain the goals they're achieving for the amount of percentage. If you don't get it on one side, if you believe in maintaining your percentages....

Did you have a short comment?

[The Chair, Conservative, Dean Allison]

He may have a short comment, but we may be out of time.

Mr. Bernier, go ahead with a short comment.

[Yvon Bernier]

I have a suggestion.

Earlier we talked about the Desjardins fund for inclusive finance, and I believe similar initiatives could be introduced to attract investors. This would involve small amounts invested in funds mainly intended for development—the finance or microfinance sector is definitely still a priority for us—and that would entail tax benefits so that young people and the general population can save tax points.

I believe these funds could be generated by professionals and be intended strictly for projects with a good internal return. We could create value so that those funds can become increasingly large and permanent.

Initiatives of this kind will perhaps be more appropriate in a future context. They could also supplement public support for traditional development.

[The Chair, Conservative, Dean Allison]

Madame Laverdière, and then we'll finish with Mr. Wallace.

[Hélène Laverdière, NDP, Laurier—Sainte-Marie, QC]

Thank you, Mr. Chairman.

Thanks to the witnesses.

Thank you to all.

I'm going to continue in French. I often speak English, so let's go with French this morning.

I must admit that one thing fascinated me. The idea of working together emerges from all your presentations. You talked about working with the communities themselves, as Desjardins is doing, or about working with grandmothers in the context of a number of your projects. There was also what Mr. Horswill mentioned about mobilizing private sector money and then ensuring coordination. Various players are at the table, various points of view are being discussed to bring about a certain efficiency, as are the essential issues of follow-up, evaluation and so on. So it's really a kind of contribution to a broader, more comprehensive effort. That's one of the lessons I have drawn from your three presentations.

I have a brief question for you. In the case of Desjardins' microcredit programs, I was wondering whether, as is elsewhere the case, women were generally better payers than men, as we see in other microcredit programs. Is that the case?

[Yvon Bernier]

Yes, definitely, but first I would like to correct one point. We don't really call it microcredit at Desjardins. We call it microfinance instead. A number of financial services may be small but accessible to everyone. That's part of the overall financial sector. It's regulated and supervised and so on, like any financial instrument in various countries.

However, historically, and even today, women are better at discharging their obligations than men in most of the countries where we work. Recovery rates for women are always higher: 98%, whereas it's quite different for men. However, women generally have smaller loans. So the amounts are smaller. The amounts are larger, riskier, for men. Other factors are in play.

However, in overall terms, the way women manage their financial affairs is distinctly superior to that of men in all developing countries. Whether it be Vietnam, Africa, Latin America or Mexico, the framework of reference is the same everywhere. Yes, there is more discipline in that regard.

[Sadia Groguhé, NDP, Saint-Lambert, QC]

Thank you, Mr. Chairman.

I'd like to make a brief comment before asking my question. I'm going to talk more about the African continent, with which I'm more particularly familiar. In terms of development, I believe we've moved out of the development era and into the sustainable development era. I think that aspect is very important. It will have much finer, much more strategic implications. At the last meeting, one of the witnesses, whose name I forget, told us about smart investments. I believe we have fundamentally adopted that smart investment principle.

My question is for Mr. Bernier. With regard to the offer of diversified financial services, I am somewhat familiar with virtually all aspects of the cooperative financial model. I know from what you've told us that it is having very positive effects, particularly in Africa, since all investments are reinvested within the community. That same community benefits from them. I find that principle absolutely positive.

However, with regard to the diversification of access to various financial services, what guidelines are you implementing to protect people from overindebtedness, to prevent people from becoming indebted or overindebted?

[Yvon Bernier]

I believe there are two parts to that question.

As regards the first part, the idea is to provide technical and technological support to financial institutions so that they can offer financial services appropriate to riskier or more complex problems.

Let's consider the example of agricultural financing. Our partner organizations were doing a lot of financing in rural areas, but were making very few loans directly related to agriculture, in view of the risks inherent in that type of production. What is needed is to propose methodologies, a way of mitigating the risks of their network at the national level, more diversified portfolios, in other words a series of mechanisms. Sometimes we're lucky and we work together with political authorities to provide guarantees or additional funding.

The purpose of that is to reinforce capacities and to develop agricultural financing expertise. Credit training is often offered to agronomists who know the subsidiaries, the sectoral risks and the costs. The same is true of housing and microinsurance. The idea is to include expertise in the institutions to master these new niches. That's where our contribution lies.

As for the other part of the question, there's a lot of awareness and transparency about interest rates. We must ensure that our interest rates are known. When we conduct credit analysis, we must also take information on indebtedness into consideration. If there's no obvious ability to repay, we must deny loans. A lot of financial education is being done in the networks. I say "a lot", but to be frank, it's not the same everywhere. There is a lack of investment in that area. That's an objective that should be achieved in order to avoid leveraging...

I will conclude by saying that this is the problem with microfinance in a number of countries because there is no information. Here there is a credit office, which has information on a borrower's borrowing history, whether that borrower does business with a number of financial institutions. We have no access to that information in those countries. We don't know whether the person has borrowed money from a financial institution. We have to do more research and document our loans. That's why this approach is lengthy and costly. However, it is essential and even mandatory.