Immigration Canada

Is the Canadian economy in trouble?

By Kevin Press, BrighterLife.ca
June 20, 2012 Topics: Today's economy Comments (24)
“Conditions in the international financial system are fragile.” That is how the Bank of Canada chose to begin its latest Financial System Review, released on June 14. The report goes on to note that our domestic financial system “continues to be robust.” But that good news comes despite a host of risks to the system and to the Canadian economy, including the eurozone sovereign debt crisis, a slowdown in other advanced economies and potential trouble in the Canadian residential real estate market. Consistent with December’s report, the Bank says the risks facing the Canadian financial system are “high.”

I was in to see Sadiq Adatia, chief investment officer of Sun Life Global Investments, last week so I asked him what he thinks about the outlook for Canada. He wasn’t optimistic. After talking about his confidence in the U.S. recovery, he told me: “Canada is turning a corner too, but in the opposite direction.” We may not see gross domestic product growth above 2% this year.

Adatia sees five problems:

Household debt. “We’ve had a great run in our markets, fuelled by consumer spending,” Adatia told me. “Consumers have added a ton of debt to their balance sheets.” Indeed, we learned on June 15 that Canada’s household credit market debt (consumer credit, mortgage and loan debt), measured as a percentage of personal disposable income reached 152% in the first quarter of this year. That’s a new record. Actual borrowing has slowed, but income has too. According to the Bank of Montreal (BMO), the percentage of Canadian households with debt-service ratios above 40% of income – a level considered to be vulnerable by lenders – has risen over 6%. That’s “slightly above the past decade norm,” reports BMO.
Housing prices. Adatia thinks a double-digit drop in prices is possible. “We think there’s going to be a pullback across the board,” he said. “Some regions may be hit harder than others, but I think a 5%-to-15% drop is definitely in the cards.” That may be a conservative call. Across Canada, home prices are up 12% relative to where they were before the most recent recession.
Global factors. No surprise here: There’s trouble in Europe, a slowdown in China and the U.S. recovery (while it gives Adatia reason for optimism) remains vulnerable to global economic factors. These are all potential threats to Canada. By the way, Adatia does not believe there will be a hard landing in China.
Rising interest rates (eventually). Adatia doesn’t expect the Bank of Canada to move on rates this year, but they may start to come up in 2013: “Until we see a better resolution in the eurozone and a stronger U.S. economy, the Bank of Canada is not going to jump out too far ahead, particularly given that the U.S. Federal Reserve has already said it’s not going to raise rates until 2014.” When it happens, higher rates will dampen spending by a lot of highly indebted households.
Unemployment. “We’re probably going to see unemployment move up,” said Adatia. “I’m not convinced the employment picture is really as strong as it looks right now.” The four points listed above could each contribute to job losses.
Are we headed down a path similar to the one Americans took toward the end of the last decade? “These are the same things that were going on in the U.S. economy before it faltered,” Adatia told me. “We’re probably where the U.S. was a few years back.” Meanwhile, the U.S. housing market is showing signs of stabilization and according to the Federal Reserve Bank of New York, Americans have slashed their debt by about $100 billion since the fourth quarter of 2011.

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Canadian universities bridge foreign student tuition gap to attract thousands of Brazilian students

English: The National Institute for Nanotechnology on the north campus of the University of Alberta in Edmonton, Alberta, Canada. (Photo credit: Wikipedia)

CAMPBELL CLARK

OTTAWA — The Globe and Mail

Thousands of Brazilian students will fill the halls of Canadian universities over the next four school years as part of the rising South American country’s project to send vast numbers around the world to study science.

For Canadian universities, it’s a chance to add bright recruits from a country with a growing middle class, in the hope that increased research and academic links will continue long past the four years of the scholarship program. But it will also mark a major expansion of ties with an emerging nation that Canada has struggled to bring closer.

Up to 12,000 students will go to Canadian universities and colleges under Brazil’s Science Without Borders scholarship program, that country’s ambitious effort to send 100,000 students to study abroad. In Canada, it is being led not by governments, but by universities, especially a group of graduate research schools that have seized the Brazilian offer.

That means the addition of roughly 3,000 Brazilian students to Canadian schools for a year, in each of the next for years. But the real point is to provide a kick-start that will see more come even when the program ends.

“I think at this point we have less than 500 Brazilian students in Canada,” said Paul Davidson, president of the Association of Universities and Colleges of Canada. “This is an opportunity to build that quickly.”

It is also a chance to build ties to a country whose fast-growing economy is already seventh-largest in the world, and is expected to be in the top five by the end of the decade. Canada’s efforts to increase trade ties have often seemed sluggish.

Prime Minister Stephen Harper visited Brazil last August, in an effort to foster deeper connections, and underlined foreign-student programs as a means. His government has also placed emphasis on recruiting students from countries like India and China, to spur the economy and deepen ties.

“How do you create alignments and collaboration between countries these days?” said Britta Baron, the vice-provost at the University of Alberta responsible for international programs. “Not through pompous diplomatic agreements but through person-to-person interaction on a high level such as science and knowledge. You’re going to end up here with thousands of young Brazilians. They will, in their later life, buy Canadian, act Canadian, work with Canada.”

Marcelo Salviano, a neuroscience PhD student from the University of Brasilia on a one-year exchange at Dalhousie University in Halifax, where he’s studying the impact of environmental factors on Alzheimer’s disease, said he thinks Brazilian students who want an international education will see Canada as a good place to go.

“It is a great experience. It allows you to know other labs, with resources you don’t have in your home country,” he said. Learning English at the same time helps, too. “In the science world, everybody has to write in English, so that’s a great opportunity.”

Canada, he added, “is known as a sort of international country that accepts the differences in culture very well. I didn’t have any kind of racism,” he said. The weather? “Everybody was saying, watch out in January and February, you will die,” he said, laughing. “I got good [winter]clothes and I survived.”

The 3,000 additional students, out of a Canadian student body of about one million, shouldn’t create a shortage of spots in Canadian universities, Mr. Davidson said, as aging populations are leaving schools in some regions with vacancies.

For a while, it seemed likely that Canada would miss out on the Brazilian program. Brazil’s government has set a condition that the students must pay domestic fees, not the higher ones of international students – leaving the question of who would make up the difference. In Ontario, for example, a university student pays about $5,000 in tuition, while foreign students pay two or three times that sum.

Universities didn’t want to discount the difference, and federal and provincial governments did not appear willing to foot the bill. But in the end, Brazil’s government did agree to pay the difference, although for undergraduate students only. Universities will have to decide whether they’ll pay the difference to attract graduate students, Mr. Davidson said.

That could be a to-be-negotiated hurdle, since Brazil is likely to insist on some proportion of graduate students among the 12,000.

But four Canadian universities already have offered to discount the fees for graduate students – a consortium dubbed CALDO including the University of Alberta, Laval, Dalhousie and the University of Ottawa, which has taken the lead in negotiating links with Brazil. They will take 2,840 students, with doctoral students making up the biggest proportion, said Ms. Baron, who spearheaded the creation of the group.

It will bring talented students here, create research links and open opportunities for Canadian students in Brazil, she said – and Canada can gain by respecting what Brazil wants out of it. “The Brazilian side doesn’t want to just shovel people across borders,” Ms. Baron said. “They want to build a younger generation that is much more world-wise and much more innovation-aware. And they want to build lasting partnerships.”