Federal review of Export Development Canada finds inadequate disclosure practices

by Matthew McClearn

A federal review of Export Development Canada has exposed serious shortcomings at the Crown corporation, noting its disclosure practices fall far short of other financial institutions, and that the agency is not legally obligated to consider the environmental or human-rights impact of the financial support it provides to exporters.

The agency, which gives loans, credit insurance and other financial services to Canadian exporters, must undergo a review of its enabling legislation (the Export Development Act) every 10 years. A crucial part of the federal government’s efforts to promote international trade, the EDC has been mired in controversy in recent years over multimillion-dollar loans to international companies that were embroiled in corruption scandals.

Begun last summer, the latest review concluded that the EDC’s public reporting on the performance of its credit insurance operations does not meet requirements imposed on the private sector even though it borrows using the federal government’s credit rating. The EDC’s non-financial disclosures (for example, environmental and social effects of a proposed transaction) were also deemed inferior to those of other export credit agencies such as the U.S. Export-Import Bank, and international institutions such as the World Bank.

The findings underscore concerns uncovered in a recent Globe and Mail investigation. The Globe reported that the EDC’s client roster includes companies that have faced allegations concerning corruption, human-rights violations and environmental abuses; the federal agency has demonstrated a tendency to continue supporting such companies after other financial institutions have sanctioned them or cut them loose. Critics have also raised concerns about transparency and federal oversight of the Crown corporation.

In 2015, the EDC lent US$41-million to a company controlled by the Gupta brothers of South Africa, who subsequently emerged at the centre of a corruption scandal, prompting four South African banks to stop doing business with them. It also continued lending money to SNC-Lavalin Group Inc. for many months after the World Bank banned the engineering giant and its affiliates from taking part in World Bank-financed contracts for up to 10 years for bribery offences.

In 2016, the EDC provided a loan guarantee supporting the sale of internet content-filtering software for use in Bahrain, where the government has been accused of using the technology to censor political opposition movements, human-rights groups and news organizations. And the Crown corporation lent billions of dollars to Petroleos Mexicanos and Petrobras, two huge state-owned enterprises that have had corruption scandals.

Categorised in: Canadian News