Prime Minister Justin Trudeau and a cadre of cabinet ministers are meeting with major Canadian and international investors Monday as part of a concerted effort to convice them to invest their billions in the country’s infrastructure.
The government is hoping to facilitate a new era of private investments to close an infrastructure gap that some groups peg at roughly $120 billion and growing.
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Finance Minister Bill Morneau has already committed billions in new public funds to projects across the country, but with deficits ballooning, Ottawa is turning to major pension funds and institutional investment firms such as BlackRock to invest in return for a stable revenue source.
He announced earlier this month the creation of an infrastructure bank, which will solicit funds from private investors. The government will give the bank $15 billion in seed money to help spur more public-private investments for projects similar to the Montreal light-rail transit system pitched by the infrastructure arm of the Caisse de dépôt et placement du Québec.
The government hopes ultimately to attract some $140 billion in private capital to the infrastructure bank.
“Canada has a made very strong commitment to be investing in infrastructure over the next 12 years,” Trudeau told the group assembled at the Shangri-La Hotel in Toronto Monday. “We need to make sure that the investments we’re making are going to bring Canada in the right direction and [are] done as efficiently as possible.”
User fees, tolls
In an era of persistently low interest rates, investors have turned to investments with higher returns.
Canadian firms, including the Canadian Pension Plan Investment Board, which manages CPP money for future retirees, have plowed billions into airports, ports, hospitals, roads, railways and pipelines in Asia, Australia, Europe and the U.K., among other locales. (Read the full list of the CPPIB’s infrastructure investments here.)
These investments are made in return for tolls and fees from users, something that would likely be replicated here in Canada if pension firms take the lead on building new projects.
CPPIB has produced impressive results, growing the size of the fund to a respectable $280 billion in total investments, placing it among one of the largest such firms in the world.
NDP finance critic Guy Caron slammed the government’s embrace of private sector investors Monday, saying these funds will only want to “line their pockets.”
“They won’t do it out of the goodness of their hearts. They will want a return,” he said, noting the revenue streams from these projects could become onerous for low-income Canadians.
Trudeau promised during the election campaign that his infrastructure program would take advantage of historically low interest rates to invest public monies, Caron said told reporters. Instead, he said, the prime minister is turning to the private sector, which will impose “highly regressive” fees.
“The Liberals are pushing ahead with a privatization scheme that will leave Canadians paying the price for new user fees and tolls. Canadians have every right to feel betrayed, and we will be there with them every step of the way to oppose this scheme.”