The credit crisis, which sharply increased private borrowing costs but reduced government borrowing costs, highlights the potential advantage of having a public agency to finance economic development.
The front page of today’s Regina Leader-Post features a report on my union’s letter (full text below) to the Government of Canada about Evraz using its Canadian facilities as collateral to borrow from Russia’s national development bank. The upshot is that, if Evraz cannot repay the loan, these facilities would presumably become property of the Russian government. However, the story quotes company officials as indicating that the due date was just recently extended until December 2010.
A month ago, Duncan Cameron made the case that Canada could use a national development bank of its own.
June 5, 2009
Minister of Industry
C. D. Howe Building
235 Queen Street
Dear Minister Clement:
We write regarding the revelation in Evraz Group’s recent annual report (see page 35 enclosed) that it has used its Canadian steel facilities as collateral to obtain financing from Vnesheconombank, the Russian state bank chaired by Vladimir Putin. If Evraz cannot repay the US$800-million loan when it is due in December 2009, the Russian government could take ownership of these facilities.
The United Steelworkers union represents employees of Evraz’s plants in Regina and Calgary. Evraz has already laid-off hundreds of our members. We write to inquire about the implications for Canadian workers of Evraz’s obligations to the Russian government.
Vnesheconombank’s mandate is to develop the Russian economy. Given global overcapacity in the steel industry, it might conceivably prefer to manufacture steel products at facilities in Russia rather than in Canada.
IPSCO’s western Canadian facilities were taken over by SSAB in 2007 and by Evraz in 2008. You should disclose what commitments these companies made in obtaining federal approval for these foreign takeovers under the Investment Canada Act. Has Evraz met these commitments? Has the Government of Canada taken any action to ensure that the Russian government will honour these commitments if it acquires the facilities?
We would welcome the opportunity to meet with you to discuss this matter further. Thank you.
National Director for Canada
District 3 Director
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