Skip to content

Trudeau’s development finance institution could mean P3s, water privatization, more mining

Finance Minister Bill Morneau

The Canadian Press reports, “Canada can do more with less foreign aid spending, says Finance Minister Bill Morneau, and that includes relying on a new profit-driven financial lending institution to help fight poverty in poor countries. Morneau’s recent federal budget drew widespread criticism from international development and anti-poverty organizations because it did not contain an increase in foreign aid.”

The article adds, “Morneau is touting a new anti-poverty tool — a so-called development finance institution, which will lend money to private companies to help them pay for projects to reduce poverty in the developing world. The previous Conservative government proposed the idea in its final 2015 budget, and Morneau brought it to life with a $300-million investment that will get it up and running under Export Development Canada.”

Cowater International, a management consulting firm, argues, “Development Finance Institutions fill an important gap between public aid and private investment through the provision of finance and technical assistance to the private sector in developing countries. DFIs use a commercially-driven model that seeks to achieve both developmental impact and financial self-sustainability.”

The World Bank Group’s Public-Private Partnership Infrastructure Resource Centre notes, “Examples of DFIs are International Finance Corporation (IFC), European Bank for Reconstruction and Development (EBRD), CDC Group (UK’s development finance institution), DEG (the German development finance institution), Proparco (the French DFI) and European Investment Bank (EIB).”

Another example of a DFI is the  the Overseas Private Investment Corporation (OPIC) in the United States.

Their website says, “OPIC is a self-sustaining US Government agency that helps American businesses invest in emerging markets. OPIC helps American businesses gain footholds in new markets, catalyzes new revenues and contributes to jobs and growth opportunities both at home and abroad. OPIC services are available for new and expanding business enterprises in more than 150 countries worldwide. To date, OPIC projects have generated $75 billion in US exports and supported more than 276,000 American jobs.”

What are examples of DFI projects?

As noted on the OPIC website, “In 2005, Algeria’s capital city of Algiers lacked the infrastructure to provide all of its residents clean drinking water on a regular basis. The Algerian Energy Company entered a deal with Ionics Inc. of Watertown, Mass., in which Ionics agreed to build a water desalination plant and the state water authority took a minority stake in the plant and agreed to purchase the bulk of the clean water produced. OPIC provided a $200 million loan to Ionics, a desalination equipment manufacturer which was later acquired by GE [General Electric]. The Hamma Water facility, which opened in 2008, was Algeria’s first privately-owned water desalination plant.”

That website also highlights, “Guinea holds the world’s largest bauxite reserves but the Sangaredi Mine, the country’s largest mine, had been unable to obtain sufficient long-term private financing to expand to meet growing demand. OPIC financing will support the expansion in multiple ways: enabling the expansion of trains that transport raw materials to the processing plant, and modernization of facilities and the processing plant. While the project is supporting a key industry in Guinea, it is also expected to generate more than $70 million in procurement of goods and services from the U.S.” The project involves Alcoa Corporation of Pittsburgh and other private sector investors.

This is also reminiscent of Harper-era development aid policies of linking the Canadian International Development Agency (CIDA) with mining companies.

The Globe and Mail has reported, “In 2011, the federal government announced it would launch a series of jointly funded pilot projects involving Canadian mining companies and non-governmental organizations – a move often cited as an example of CIDA’s work with the private sector. The agency also established a new institute aimed at providing regulatory advice to developing countries with significant mineral potential. The projects were criticized for providing what was seen by some as indirect subsidies for mining companies’ corporate social responsibility programs.”

With respect to international assistance, The Council of Canadians has called on the Trudeau government to: 1) uphold the human right to water; 2) stop negotiating ‘free trade’ agreements; 3) stop tying aid to mining companies; 4) extend legal protections; 5) support divestment campaigns; and 6) ensure Canadian companies respect the United Nations Declaration on the Rights of Indigenous Peoples.