VIP Report – A Plataforma do Governo Liberal É Favorável Para Empreendedores?

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This report objective is to bring some light and discussion on the main topics from the Liberal Party 2015 Election Platform that may have an impact on businesses and the economy. Each Platform topic will start with the information available from the Liberal Party followed by the discussion and supporting data.

On a stunning majority with Justin Trudeau bring back the Liberals to the Canadian government. It was a historical election process, with more engagement than usual. Could this be the return of Trudeaumania, which brought his father into power with strong popular support in 1968? Hard to say… However, the fact is Justin Trudeau started as a weak third place, surging into the lead late in the campaign. Preliminary results show voter turnout close to 70%, significantly higher than the 60% average during Harper government.

To start, let us check how the stock market behaves in a conservative government in comparison to a Liberal government.

Do the Canadian Stock Market like the Liberals?

Is there any trend associated with which party is in power in Canada? The chart below illustrates the TSX index, which covers approximately 95% of the Canadian equities.

TSX_COMP_IDX_(Trade_Price)

An analysis of the chart shows that the stock market had a hard time when the conservatives where in power. The index would oscillate, but with little gains overall. When the Liberals had the command, the markets trended, both up and down. This is an important difference, because it is easier to deal with a trending market than with a market that is going nowhere…

Nevertheless, the Liberals went through very hard times. Pierre Trudeau’s second government lived the 81/82 crash. John Crétien saw a 50% decline from the top in 2000 to the bottom in 2002, caused by overall weakness in the global markets that brought the developed countries to a recession. But this did not prevent the next Prime Minister to be a Liberal, Paul Martin, who benefited from the major commodities bull market that started in 2002.

During Harper the market experienced a crash in 2008, a recovery in 2009 – 2010 and a stall, driven by low commodities prices.

Jobs.

Platform points:

We will invest to create more jobs and better opportunities for young Canadians

After ten years under Stephen Harper, good-quality job opportunities for young Canadians are tougher and tougher to find. Faced with high unemployment and underemployment, many young people have stopped looking for work altogether.

This is hard for both young people and their families. Many parents are seeing their household debt rise and retirement savings dwindle as they struggle to support their grown children, who often return home. It is time to invest in young Canadians – to help them get the work experience they will need to start their careers and contribute fully to our economy.

We will create 40,000 good youth jobs – including 5,000 youth green jobs – each year for the next three years, by investing $300 million more in the renewed Youth Employment Strategy.

We will more than double the almost 11,000 Canadians who access Skills Link each year. This program helps young Canadians – including Aboriginal and disabled youth – make a more successful transition to the workplace.

After this initial three-year boost in funding, we will set the renewed Youth Employment Strategy’s funding level at $385 million per year – a $50 million increase from 2015/16.

We will invest $40 million each year to help employers create more co-op placements for students in science, technology, engineering, mathematics, and business programs.

And to encourage companies to hire young Canadians for permanent positions, we will also offer a 12-month break on Employment Insurance premiums. We will waive employer premiums for all those between the ages of 18 and 24 who are hired into a permanent position in 2016, 2017, or 2018.

We will also work with provinces, territories, and post-secondary institutions to develop or expand Pre-Apprenticeship Training Programs. This will provide up to $10 million per year to help young Canadians gain the skills they need to enter high-demand trades.

We will end the rule that discriminates against new workers and those reentering the workforce by requiring them to accumulate 910 hours of work to qualify for Employment Insurance benefits, including training support.

We will invest $25 million per year in a restored Youth Service Program, to give young Canadians valuable work and life experience, and provide communities with the help required for much-needed projects.

We will help Canadians get the training they need to find and keep good jobs.

In a changing economy, Canadians need more opportunities to improve their skills and upgrade their credentials. We will make it easier for adults to access training programs by increasing investment in skills training.

To help those receiving Employment Insurance get the training they need to rejoin the workforce, we will invest $500 million more each year in provincial and territorial Labour Market Development Agreements.

To help those who do not qualify for Employment Insurance or are not currently employed, we will invest an additional $200 million in training programs led by the provinces and territories.

We will also invest $50 million to renew and expand funding to the Aboriginal Skills and Employment Training Strategy, and provide $25 million each year for training facilities, delivered in partnership with labour unions.

We will work with employers and workers to determine an appropriate apprenticeship ratio for all federal infrastructure projects.
“Our total investment of an additional $775 million per year for job and skills training will help Canadians get the training they need to find and keep good jobs.”

We will expand export opportunities that benefit Canada.

Trade is vital for our economy. It opens markets, grows Canadian businesses, and creates good-paying middle class jobs – jobs that pay wages that are 50 percent higher than industries that are not export intensive. That is good news for the middle class and the communities they call home.

Stephen Harper’s approach to trade, however, has failed. His Conservative government has recorded the largest trade deficit in Canadian history, and Canadians are paying the price in lost job opportunities.

While Stephen Harper may sign trade deals, he walks away from partnering with businesses and entrepreneurs to ensure they can succeed in new markets and create wealth and jobs for Canadians.

Properly negotiated and implemented, free trade agreements are good for the Canadian economy. We will carefully consider all trade opportunities currently open to Canada, and explore deeper trade relationships with emerging and established markets, including China and India.

We will develop a new export promotion strategy that will help businesses take advantage of new trade agreements.

We will invest in our cultural and creative industries to create jobs and grow the middle class, and to strengthen our rich Canadian identity.

Canada’s cultural and creative industries are a vibrant part of our national identity and our economy, providing employment to more than one million Canadians.

Unfortunately, these industries have been under attack during the Harper decade, hit by funding cuts that have made it harder for Canadian artists to share Canadian stories, here in Canada and around the world.

We will invest in our cultural and creative industries to help support and grow these nation-building efforts.

Targeted investments will include:

  • doubling investment in the Canada Council for the Arts to $360 million each year;
  • increasing funding for Telefilm Canada and the National Film Board, with a new investment totalling $25 million each year; and
  • restoring the Promart and Trade Routes international cultural promotion programs cut by Stephen Harper, and increasing funding in these programs to $25 milllion each year.

As part of our commitment to create 40,000 youth jobs each year, we will increase funding for the Young Canada Works program to help prepare the next generation of Canadians working in the heritage sector.

We will also make significant new investments in cultural infrastructure as part of our investment in social infrastructure.

We will make it easier and more financially rewarding for Canadian businesses to invest in creating clean jobs.

Clean technology can deliver real benefits for our environment and our economy, including more good, middle class jobs.

We will invest $100 million more each year in clean technology producers, so that they can tackle Canada’s most pressing environmental challenges, and create more opportunities for Canadian workers.

We will deliver more support to emerging clean tech manufacturing companies, making it easier for them to conduct research and bring new products to market.

CleanTechJobs

We will also invest $200 million more each year to support innovation and the use of clean technologies in our natural resource sectors, including the forestry, fisheries, mining, energy, and agricultural sectors.

To support both large- and community-scale renewable energy projects, the new Canada Infrastructure Bank will issue Green Bonds to fund projects like electric vehicle charging stations and networks, transmission lines for renewable energy, building retrofits, and clean power storage.

We will enhance existing tax measures to generate more clean technology investments, and work with the provinces and territories to make Canada the world’s most competitive tax jurisdiction for investments in the research, development, and manufacturing of clean technology.

We will deliver a better quality of life for all Canadians by working with the provinces to set stronger air quality standards, monitor emissions, and provide incentives for investments that lead to cleaner air and healthier communities.

As the country’s single largest employer, customer, and landlord, we will lead by example and increase government use of clean technologies. This will boost domestic demand for clean technology, support entrepreneurs, and fuel new jobs.

We will improve energy efficiency standards for consumer and commercial products, and use new financing instruments to encourage investments in energy-saving retrofits to Canada’s industrial, commercial, and residential buildings.

We will provide more support for our clean technology companies to successfully export their products by training trade officials and leading trade missions focused on clean technology. These companies will also be provided with useful training, data, and technical assistance on export opportunities in a more coordinated way.

We will look for ways for government to be an “early adopter” of emerging green technologies, and will support clean transportation by adding electric vehicle charging stations at federal parking lots, and rapidly expanding the federal fleet of electric vehicles.

To foster the creativity that leads to cutting-edge research, we will establish Canada Research Chairs in sustainable technology.

We will also work closely with the provinces and territories to develop a Canadian Energy Strategy to protect Canada’s energy security; encourage energy conservation; and bring cleaner, renewable energy onto the electricity grid.

Discussion:

There is no clear trend in unemployment rates in Liberal governments as compared to Conservative governments. The following chart illustrate this aspect. The vertical axis is the unemployment rate, the horizontal axis is the year. The red color highlight a Liberal government and the blue color highlights the Conservative government.

Unemployment

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Unemployment follows the general economy, how well is Canada able to create wealth through goods and services and sell it internally and externally. Trudeau’s government can provide some stimulus to specific sectors by increasing investments, removing provincial trade barriers, reducing some taxes, etc. All the proposals of the platform though very important, will not create a flood of new jobs.

Another area that Trudeau can improve and that can have a huge impact in employment levels is international trade. Agreements such as the recently concluded Trans-Pacific Partnership. This agreement is extremely important for Canada and provide access to the markets of Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, US and Vietnam.

The Table below list the current Free Trade Agreements:

Country/Agreement Name

Start

Trans Pacific Partnership

2015-10-05

Ukraine

2015-07-14

Korea

2015-01-01

Honduras

2014-10-01

CETA (with the European Union)

2014-08-05

Panama

2013-04-01

Jordan

2012-0-10-01

Colombia

2011-08-15

Peru

2009-08-01

European Free Trade Agreement

2009-07-01

Costa Rica

2002-11-01

Chile

1997-07-05

Israel

1997-01-01

NAFTA

1994-01-01

United States

1989-01-01

Canada is currently negotiating the following agreements:

Country/Agreement Name

Caribbean Community (CARICOM)

Guatemala, Nicaragua and El Salvador

Dominican Republic

India

Japan

Morocco

Singapore

Modernization of the Costa Rican agreement

Concisely, both Conservative and Liberal governments tried to stimulate employment, but used different strategies. The Liberals had a hard time in the 70’s and 80’s, but successfully drove unemployment down in the 2000’s. This was mostly due to increased foreign trade; the most important of them was the NAFTA. Trudeau may benefit immensely from the recently signed Trans Pacific Partnership, if it proves to be as important as it is expected.

The programs aiming to create jobs for the youth are interesting but, from my experience, they are complicated to access and NRC/IRAP has been facing difficulties to use the resources available. The platform does not clarify if there will be any improvement in the application process. However, there is a commitment from the Liberals to make the government more accessible. This is key, if the policies are going to be effectively applied.

Reliable Information

Platform points:

We will embrace open data.

We will accelerate and expand open data initiatives, and will make government data available digitally, so that Canadians can easily access and use it.

We will make government information more accessible.

Government data and information should be open by default, in formats that are modern and easy to use. We will update the Access to Information Act to meet this standard.

We will make it easier for Canadians to access information by eliminating all fees, except for the initial $5 filing fee.

We will expand the role of the Information Commissioner, giving them the power to issue binding orders for disclosure.

We will ensure that Access to Information applies to the Prime Minister’s and Ministers’ Offices, as well as administrative institutions that support Parliament and the courts.

To ensure that the system continues to serve Canadians, we will undertake a full legislative review of the Access to Information Act every five years.

We will restore the long-form census.

Without accurate and reliable data, Canada’s communities cannot plan ahead. Everything from transit planning to housing strategies to support for new Canadians becomes more difficult.

We will immediately restore the mandatory long-form census, to give communities the information they need to best serve Canadians.

We will make Statistics Canada fully independent.

Data collected by Statistics Canada helps the private sector, government, not-for profit groups, and researchers make better decisions.

We will make Statistics Canada fully independent. We will work with Statistics Canada and other stakeholders to provide a broader range of information, including detailed labour market information, child development data, and statistics about our population.

Discussion:

This is one of the most important aspects of the platform, from a business point of view. Harper’s government has reduced the reliability of the available data by scrapping the long form Census and reducing investments in Statistics Canada. This increased the difficulty of doing market research to identify consumer trends. All this is very relevant for businesses planning and development.

In my opinion, the incompetent manager that wants to increase the bottom line cuts jobs. That is what has been done with the public service during Harper government. Complete services were wiped out, with no real evaluation of it affect the country future performance. According to the Canadian Centre for Policy Alternatives, it will take years to know the impact of the staff cuts. For Statistics Canada alone the job cuts reduced 35% of the full time positions since 2006.

Worse yet, we live in a data centric world, where the technology to use data to find key information is getting cheaper and cheaper. From health sciences to economic development, policymakers and strategists rely on data to carve out their strategies. Smart firms are investing heavily in hiring dozens of skilled statisticians and data scientists. Smart governments are investing in collecting relevant data and liberating it for use by researchers. However, as the maxim in the data analysis world says garbage in garbage out. If there is no data, there is no information. This leaves businesses and governments with no solid foundation to plan and make decisions. Public sector agencies must consider investing in the infrastructure that promotes data collection, free data dissemination, and analysis as the Liberal Platform proposes.

Canada Revenue Agency

Platform points:

We will make the Canada Revenue Agency fairer, more helpful, and easier to use.

The Canada Revenue Agency exists to serve Canadians. We will overhaul its service model so that people who interact with the CRA feel like valued clients, not just taxpayers.

A client-focused Canada Revenue Agency will:

  • proactively contact Canadians who are entitled to, but are not receiving, tax benefits;
  • offer to complete returns for some clients, particularly lower-income Canadians and those on fixed incomes whose financial situation is unchanged year-to-year;
  • support more Canadians who wish to file taxes using no paper forms; and
  • deliver correspondence that is straightforward and easy to read.

We will allow charities to do their work on behalf of Canadians free from political harassment, and will modernize the rules governing the charitable and not-for-profit sectors.

This will include clarifying the rules governing “political activity,” with an understanding that charities make an important contribution to public debate and public policy. A new legislative framework to strengthen the sector will emerge from this process.

We will also invest an additional $80 million, over four years, to help the Canada Revenue Agency crack down on tax evaders.

We will deliver easy online access to government services.

Accessing government services online should be easier. We will make the process easier and faster through individualized, secure accounts for Canadians who want to access their benefits and review key documents.

We will also create a single online point-of-contact for all government services, and work with the provinces and territories on ways to combine online access.

As we expand online services, we will also expand in-person service, such as reopening the nine veterans’ service centres closed by Stephen Harper.

Finally, we will work with the Privacy Commissioner as we develop these new initiatives, to ensure that Canadians’ data is kept safe and secure.

Discussion:

A big change in the platform is the commitment to contact people elegible for benefits but that are not receiving it. This is very important for the effectiveness of the policy that created a benefit, mostly because Canada is a big and diverse country and the information does not flow easily.

Also, a modernization of the rules governing charities is welcome. There are several not-for-profit enterprises that currently have no resources to do all the work necessary to become a charity and can potentially benefit from a more modern and agile legislation.

Part of the modernization will be the easy online access to government services. But there are concerns about security and privacy. The new government will need to invest a lot on security, thus creating a business opportunity.

Also, the reopening of the Veterans Centres is relevant and a sensible issue for Canadians.

Science and Innovation

Platform points:

We will value science and treat scientists with respect.

We will appoint a Chief Science Officer who will ensure that government science is fully available to the public, that scientists are able to speak freely about their work, and that scientific analyses are considered when the government makes decisions.

We will kick-start investment in innovation to grow our economy and create good, middle class jobs.

To get our economy growing again, we need to immediately invest in helping our businesses and entrepreneurs – including those in manufacturing – become more innovative, competitive, and successful.

Over the next three years, we will:

  • invest $200 million each year in a new Innovation Agenda to significantly expand support for incubators and accelerators, as well as the emerging national network for business innovation and cluster support; and
  • invest an additional $100 million each year in the Industrial Research Assistance Program, which has a proven track record of helping small- and medium-sized businesses to innovate and become world leaders.
  • We will introduce a new tax benefit to help teachers and early childhood educators with the cost of school supplies.
  • Teachers and early childhood educators work hard to provide a positive learning environment for our children, often paying out-of-pocket for classroom supplies. It is a generous gesture that is not currently recognized by our federal tax system.
  • To help offset these costs, we will introduce a new Teacher and Early Childhood Educator School Supply Tax Benefit. This new benefit will apply to the purchase of up to $1,000 worth of school supplies each year, providing a cash benefit of up to $150 each year for licensed and certified teachers and educators, starting in the 2015 tax year.
  • Because this benefit will operate as a refundable tax credit, all educators who have purchased educational materials qualify, regardless of their income level.

Discussion:

There is no doubt that innovation is key for any business. The same is true for a country. Canada has been a very innovative country, however has benefited less that it should. Many innovative companies start in Canada but get sold to foreign investors, taking out of the country all the investment made. Sure, its shareholders made money, some made huge profits. But not all the stakeholders benefited and the country lost.

On the other hand, programs like SR&ED were not fully utilized because of a number of factors, such as: complex application process, lack of knowledge, poor disclosure from the government.

The numbers themselves are not too high. In my opinion to really stimulate innovation it is necessary more investments in centers like the ones the National Research Council has. But the investments need to receive better evaluation process, to avoid investing in technologies that have little or no chance to become commercial.

During the Harper years, the National Research Council lost more than 100 jobs. In Winnipeg alone the NRC operation lot 54 employees with the closure of the Institute of Biodiagnostics, which has developed relevant medical imaging technology and was the birth place of Biotech companies like IMRIS.

As a country, we are at a challenging situation since it takes years to develop science and scientists require years of on the job training until they become productive. There is no sure short-term solution for this problem and I will be following closely this subject because several opportunities may arise.

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