Editorial Foreign capital enhances opportunities

Even the lack of investors’ interest prior to Amax’s bid, when Noranda was on the brink of taking full control of Falconbridge, was typically Canadian. Despite the almost certain knowledge that Noranda was going to buy control of Falconbridge on the open market, the stock price barely responded. If such a situation had developed anywhere else in the world, the market price for Falconbridge would have increased sharply in anticipation of Noranda’s intention to buy.

Now, when a foreign investor makes a bid that offers a better value to shareholders, there are grumblings that the deal should be prohibited for some vague nationalist idea that it would be bad for the country.

Grumblings is the operative word. There has been no specific charge as to why this deal should be opposed, only vague references to “foreign control.” What opposition has been voiced has been of the political variety — short on conviction but long on covering the political bases. Ontario Premier David Peterson, for example, told a crowd of party faithful in Timmins that his government would “scour the books” in search of a means to block the deal even though he knows that approval is entirely up to the federal government.

The fear of foreign ownership is largely the fear that foreign owners would somehow have less loyalty to Canadian assets. For example, if the demand for nickel were to fall dramatically and mine owners felt the need to reduce output, foreign owners would presumably be more willing to “sacrifice” Canadian mines than mines in their own country.

But it is ridiculous to presume that a foreign owner would close a profitable mine to subsidize a less profitable mine. A nickel mine in Canada has to be competitive to survive regardless of who owns it. Unlike protected industries such as textiles and auto manufacturing, mining has to compete in a truly global marketplace. And that means the capital to develop and operate mineral resources must flow freely, too.

That doesn’t mean Canada will lose the resource that’s being developed. As Falconbridge Chairman Bill James says, they can’t move the mine. In fact, without the capital that often comes from offshore, Canada’s resources would be developed more slowly — if at all — and we would be the more impoverished.

Nor would it mean that standards for safety or the environment will be compromised. Regardless of ownership, the same standards have to be met by any company doing business in Canada. Of greater concern here is the discrepancy between standards from province to province.

And the money Falconbridge shareholders get from the new owners will be recirculated in the economy. It is hoped that a large portion will be reinvested in mining, but even if it is recycled through some other use — if those Falconbridge shareholders who turn a profit from their investment go out and buy a new car or dine out at restaurant — the benefits will be enjoyed by more than just shareholders. Surely, then, it is better for the country that the shareholders get top dollar.

It’s a predictable complaint whenever foreign capital buys Canadian assets: “How can we control our nation’s future if foreigners own all the businesses?” But that question begs another question: What future will we have if we don’t make use of capital that is available from outside Canada?

To refuse that capital would really mean limiting the goals for which Canadians might strive, and no one can justify that.

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