Down dollar days are here again for Canada, and that presents challenges and opportunities for the country and its business prospects.
The trick in this vast land with a small population is positioning the country’s currency exchange rate in the sweet spot that makes the price of its abundant resources attractive in the global marketplace but gives Canadian companies the financial leverage they need to invest in productivity and innovation, especially during the current labour shortage.
Executing that trick is not easy.
A lot of the factors that determine the Canadian dollar’s value in the global marketplace are not in the control of Canadian businesses, citizens or government.
But some are. Those need to be addressed here and now if the Canadian dollar is to get to its international exchange rate sweet spot, which for many analysts ranges around US$0.90.
Canada’s February 2012 to January 2013 flirtation with U.S. dollar parity reduced the cross-border competitive edge of many Canadian exporters.
On the flip side, the loonie’s extended sub-US$0.70 run in the late 1990s and early 2000s eroded the innovation and productivity of Canadian companies by increasing the price of imported technology and propping up businesses operating with business models that relied on an anemic dollar as their lone competitive edge.
Current dollar valuations have the loonie above its late 1990s anemia but far below parity with the U.S. dollar.
The Canadian dollar is not the only currency that is lagging far behind the greenback, but its weakness reflects several factors that need attention if it is to regain competitive vitality in the global marketplace.
Among the keys to improve the country’s competitiveness are investing profits reaped during the recent goods boom in productivity and removing government-instituted complexities and hurdles to doing business in Canada.
The former is in the hands of savvy business leaders; the latter is in the hands of the country’s electorate.
