The Canadian dollar’s diminishing value has begun to leave its impact on the economy. Since this time last year, the dollar’s value has plummeted, and currently remains at its lowest value in over a decade.
When compared to United States’ dollar, which has improved in value over the same time period, it might appear to some that Canada is in poor economic shape.
While businesses have a reason to be cautious, a weakened dollar actually brings tremendous benefit to Canadian businesses in a variety of industries.
Among these benefits is Canadian businesses’ ability to leverage increased trade and foreign investment opportunities, which will help bring more export revenue into the economy.
United States to boost Canadian investment and exports
As the largest (and closest) export market for Canada, the United States provides significant opportunity to Canadian businesses.
Historically, when the American economy is booming and the Canadian dollar is comparatively low, American businesses look to take advantage of the exchange rate by buying more Canadian products and services.
In 2014, the United States imported 75.64% of all Canadian exports, a significant rise compared to 2009, when they only imported 73.56% of Canadian exported goods.
In the same time period, Canada has grown to export more than $400 billion annually to the USA, up from $270 billion in 2009.
Yes, you read that correctly. Canadian businesses have grown their American exports by nearly $130 billion in 5 years.
The low Canadian dollar has meant more than American businesses purchasing an increased quantity of goods, it’s been leading to investment, the most well-known of which being the automotive industry investments.
Earlier this year, American vehicle manufacturer General Motors increased its commitment to the Canadian economy by investing $560 million into their Ingersoll, Ontario plant.
These types of deals, assisted by a weakened Canadian dollar, pose a long-term opportunity for our economy and allows us to gain an advantage for the future.
How investment and manufacturing will reshape the Canadian economy
Canada’s energy resources, once the centre of the economy and exporting, have seen a significant drop and are expected to remain stagnant.
Falling oil prices around the world have meant that Canada must diversify its revenue sources and take advantage of other economic opportunities.
Value-added manufacturing has witnessed the greatest growth due to the slumping energy sector. International businesses will look to Canada for manufacturing that uses our skilled labour and advanced technological abilities.
These advantages, in addition to falling material and labour costs, will make Canada the ideal country to invest and import from.
Although this requires an economic shift from the direction Canada has gone with projects such as the Keystone XL pipeline and other energy projects, it’s an important step to make.
Early effects of a shifting economy
Canadian manufacturing statistics are revealing that demand, as anticipated, is slowly increasing for Canadian goods. As the dollar continues to weaken, international companies see more benefit in working with Canadian firms.
Unfilled manufacturing orders rose nearly 7% to $96.1 billion in September 2015, and Canada’s GDP has rose nearly 1% since this time last year.
Although this economic data is encouraging, most experts claim that it will take 2-5 years for businesses to begin to launch strategic initiatives that make use of the benefits of a low exchange rate.
Waiting reduces the risk of an exchange rate that returns to near-parity, but it may also mean missing out on major advantages.
Although it’s speculated that Canada’s currency value won’t be improving any time soon, businesses need incentives to adapt to changing economic conditions.
Technological improvements and capacity-building projects are two areas of investment which the federal and provincial governments are most active in supporting, providing a number of grants, loans, and tax incentives for businesses to access.
By making strategic investments now, Canadian businesses can ensure that they are poised for growth and success in a new economy.
Grant opportunities for Ontario SMEs
The CME SMART Advanced Technologies for Global Growth (CME SMART) is a government grant that helps Ontario small and mid-sized businesses (SMEs) take advantage of these economic conditions.
Ontario businesses may qualify to receive 35-50% of their eligible project expenses, up to $100,000 for technology assessments and implementation.
For most manufacturers, this will help to address outdated technology and processes that reduced production output.
Businesses that receive CME SMART grants will be able to expand into foreign markets or improve their ability to satisfy existing export markets’ demands with new capabilities and increased production.
Ontario businesses that use this grant will become more agile in responding to the Canadian economy and its business conditions, making them more attractive to foreign customers and investors alike.
How could this SME import export grant help your business with your current market expansion strategy?