|Performance Measures||2012 Actual||2012 Plan||2011 Results|
|Total Business Facilitated||15% decline||3-6% growth||22% growth|
|CDIA Transactions||9% growth||3-6% growth||44% growth|
|Business in Emerging Markets||15% decline||4-8% growth||26% growth|
|Partnership Transactions*||9% decline||4-8% growth||5% growth|
|VfM to TCO Ratio||32:68||35:65||37:63|
* For purposes of the 2012 comparison, the 2011 partnership transactions have been restated to reflect changes to the definition of this measure made in 2012.
Ratings in our performance measures are as follows:
Target met or exceeded (> 98% of plan)
Target substantially met (≥ 95% and ≤ 98% of plan)
Target not met (< 95% of plan)
Mixed results for 2012
While there were signs of improvement, 2012 still presented challenges for many Canadian exporters and investors. Slower growth in the U.S. and Europe meant fewer opportunities for Canadian companies that rely on these markets. And while emerging markets continued to outpace the developed world, growth in China and India was still less than expected, which led to lower commodity prices in some instances and thus, lower volumes of EDC insured exports. At the same time, we saw less demand for our insurance and bonding services as private sector financial institutions took on a larger share of the marketplace this year and more liquidity was available for Canadian companies, good news for the Canadian economy.
In this environment, Canadian exports grew about 2 per cent in 2012, still below pre-recession levels, and overall there are fewer exporters today than in 2008. A smaller pool of exporters and decreased demand meant a decline in the number of customers we served and the amount of business that we helped facilitate, both of which dropped closer to our more normal, 2008 pre-recession levels. A positive development was an increase in private-sector financial capacity, which reduced demand for EDC. We were also encouraged to see that our customers continued to diversify and increased their direct foreign investments.
In 2012 we served 7,427 customers, whose exports and investments totalled $87.4 billion, a 15 per cent decline from 2011 and below our plan of 3 to 6 per cent growth. Close to 80 per cent, or 5,817 were small-and mediumsized businesses, whose business facilitated by EDC totalled $11.7 billion, $642 million more than in 2011. Close to 35 per cent of these SMEs’ business was to markets in Asia.
We helped 5,772 clients by insuring almost $73 billion in export sales with about 75,092 buyers in 187 foreign markets. The majority of this business was Accounts Receivable Insurance (ARI), which helps companies mitigate credit risk and leverage their receivables with financial institutions. This insurance also allows them to offer their buyers more flexible payment options.
Our financing activities delivered $14.6 billion in loans to Canadian clients and their foreign trading partners. 90 per cent of these financing transactions were done in partnership with private sector institutions. We earned revenues of $1.2 billion from our loans, investments, and loan guarantee fees, compared to $1.1 billion in 2011.
We earned $196 million for coverage under our insurance programs and paid out $358 million in claims, due primarily to a $300 million claim charge under our PRI program.
Canadian Direct Investment Abroad (CDIA) transactions
Given the uncertainty of today’s global trade environment, foreign investment strategies have become increasingly critical for Canadian companies looking to diversify and grow, and even more so as a channel to capitalize on the opportunities arising from South-South trade. Our CDIA transactions include loans to help companies open facilities in new markets or participate in joint ventures, and insurance for sales by foreign affiliates of Canadian companies as well as political risk insurance.
Overall, our customers undertook 896 transactions related to their foreign investments in 2012, 9 per cent more than last year. The value of these transactions was $6.6 billion, up from $5.9 billion in 2011.
Business in Emerging Markets
Through our services, our customers’ business in 138 emerging markets totalled $26.3 billion in 2012, a 15 per cent decline from 2011 and below our plan of 4 to 8 per cent growth.
Key contributing factors for this decline included slower than expected economic growth in the big emerging markets such as India and China, which was associated with lower prices for some Canadian commodity exports.
However, our loans to foreign buyers in emerging markets, a key focus for EDC, reached $4.4 billion in 2012, an increase of $1 billion over 2011. This included close to $865 million in financing to Brazil, up from $388 million in 2011, $214 million to China, up from $16 million in 2011, $1.4 billion to Mexico, up from $904 million in 2011, and $174 million to Southeast Asia, up from $43 million in 2011.
Working in partnership to combine our expertise and risk capacity is the most efficient way to expand our reach and have a greater impact on more Canadian exporters and investors. Whenever possible we try to share the risk and complement the activities of the Business Development Bank of Canada (BDC) and private-sector financial institutions, insurance companies, sureties and brokers, depending on the level of private-sector capacity.
In 2012, the number of transaction we conducted with partners was 4,517, down 9 per cent from 2011’s total of 4,977, and below our plan of 4 to 8 per cent growth. These transactions led to $35.75 billion in business for our customers. Again, slower than expected growth in China also limited banks’ need for our risk capacity.
EDC has 16 foreign representations in key international markets. By having a presence in important international markets, we can gather local market intelligence, build relationships with foreign buyers, and collaborate with DFAIT and the TCS to identify new opportunities for Canadian companies, particularly in rapidly growing markets such as China, India, Brazil and Mexico. Currently, emerging markets represent 30 per cent of our business activities.
As more private sector capacity returned to the market in 2012, we were generally less needed and, as a result, saw less demand for our insurance and bonding services, a positive development for the Canadian economy.
Furthermore, we were very encouraged that 90 per cent of our 892 financing transactions were done in partnership with financial institutions.
Throughout the year we continued to build on our partnerships. For example, we strengthened our relationship with the banking sector through the Lending Practitioners’ Forum, a joint consultative body with Canada's private financial sector and participated in the Government-led Credit Insurance Advisory Group (CIAG), in order to grow our partnership with private-sector credit insurers. Other initiatives included a Memorandum of Understanding (MOU) with the International Finance Corporation (IFC) to leverage each other’s capabilities in emerging market projects and transactions, and an MOU with the African Trade Insurance Agency (ATI) to facilitate more trade and investment between Africa and Canada. We also provided a USD 30 million five-year line of credit to the African Export-Import Bank, in order to deepen the business relationship between Afreximbank and EDC.
Value for Money to Total Cost of Ownership ratio
Each year, we evaluate how our information technology investments are divided between Value for Money (VfM), investments in IT that increase business performance, and Total Cost of Ownership (TCO), which are the costs of maintaining core business infrastructure and technology assets. Our goal is to devote more resources to delivering on VfM objectives while managing TCO.
In 2012, our result of 32:68 did not reach our plan of 35:65, as we continued to modernize our legacy systems and information technology architecture. We expect that the upward pressure on TCO will continue in the near future, as these efforts are ongoing.
Domestic financing and insurance
In 2012, we continued to provide trade-related financing solutions to Canadian companies in the domestic market through Canada’s Economic Action Plan, which gave us temporary, additional flexibility to provide credit to Canadian companies. By participating in transactions with Canadian private-sector financial and insurance institutions and BDC, we helped position viable Canadian companies for recovery. Under this program, we undertook $2.2 billion in commercial solutions for 316 Canadian exporting companies, including $1.7 billion in direct financing, $238 million in domestic bonding and $283 million in domestic credit insurance. We continued to participate as a reinsurer to private insurers, bringing additional capacity to the market for 233 small Canadian companies. In total, we have provided $11.2 billion in credit capacity to 819 Canadian companies for their trade-related needs since March 2009. This program, originally a two-year mandate from the Government of Canada, was extended until March 12, 2013.
Our targeted financing facilities with foreign buyers such as India’s Tata Motors, pictured here, brought new business to 1,046 Canadian exporters in 2012.
Developing future opportunities for trade
Our ultimate goal is to generate benefits for Canada. In addition to facilitating trade, this often means finding trade opportunities where they would otherwise not exist. We do so in many ways, including participating in financing facilities to targeted foreign buyers to influence procurement from Canadian suppliers, thereby pulling in exports from Canada. These facilities led to almost $3 billion in new contracts in 2012, bringing new business to 1,046 exporters, largely SMEs. Close to 40 per cent of the 207 foreign borrowers were in emerging markets.
Currently, we have 105 active pull financing facilities with major buyers around the world. Some of these include Codelco, Chile’s state-owned copper company, India’s Tata Motors, Reliance Industries and Larson & Toubro, Brazilian energy giant Petrobras, Mexico’s state-owned petroleum company PEMEX and China’s transportation specialist, Noble Group and China Everbright, to name a few. Since 2004, our pull loans have helped create export sales of almost $18 billion.
Throughout 2012, we also participated in 38 matchmaking events in collaboration with partners such as the Trade Commissioner Service (TCS), connecting more than 400 Canadian suppliers with more than 100 large foreign buyers. These events generated more than 600 one-on-one meetings for Canadian companies and are expected to result in more than 100 eventual deals.
For example, Peru’s healthcare industry is booming and Canadian companies are well-positioned to offer their expertise.
Following a visit to the market in 2011, we set out to create awareness within Peru and put Canada’s industry on their radar. In 2012, in collaboration with the Ontario Ministry of Economic Development and Innovation, DFAIT and the TCS, we organized an inbound mission for more than 30 Canadian companies in the healthcare industry to pitch their services to procurement directors from Peru’s Grupo Auna, one of that country’s largest private healthcare providers.
EDC is an active investor in direct venture and growth capital investments and also partners with private-sector fund managers, both domestically and internationally. During periods of constrained credit, this program is particularly helpful to small- and medium-sized companies, as it gives them access to the private equity they need to penetrate the global marketplace.
Including commitments of $230 million in 2012, since the inception of this program we have provided commitments totalling $922 million. These include $280 million in commitments to next-generation exporters, $149 million in commitments to mid-market growth exporters and $493 million in commitments focused on connecting with emerging markets. For example, we committed up to $7.5 million to the Avrio Ventures Limited Partnership II, a venture capital fund that targets Canadian companies operating in subsectors like industrial bio-products, agricultural biotechnology, natural and organic consumer packaged goods and renewable ingredients.