A federal program designed to encourage investment in new Canadian packing plants by offering to cover a portion of potential losses is an ineffective policy that will leave major foreign-owned packers even more powerful in the Canadian industry, opposition and government MPs complained last week.
Critics argued that agriculture minister Andy Mitchell should reverse his decision to not put government funds directly into new plants, opting instead to create a $38 million “loan loss reserve” to try to entice private investment.
“I see no alternative to direct investment because otherwise, the only people with money to invest are the big players and their grip on the industry will get stronger,” New Democrat Charlie Angus said in an interview.
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Quebec MPs echoed the argument. The Ontario government already has committed $7 million for direct investment in expanding cull cow slaughter.
During a House of Commons agriculture committee meeting Nov. 2, Angus asked Mitchell if the expansion is coming from the big players.
Mitchell said almost all the new capacity so far is from the existing big players. It will take more time for new independent players to set up.
Alberta Liberal David Kilgour argued that the loan loss reserve is ineffective because private lenders will not commit money to an industry as uncertain as the beef packing industry.
“Lenders continue to express concerns that the risk in backing loans for the creation of slaughter plants is still far too great despite the governmental guarantee on 40 percent of the value of all loans issued,” Kilgour wrote in a letter to committee chair Paul Steckle. “The key lenders’ concern revolves around the uncertainty created by the border situation and the potential for an oversupply of slaughter capacity.”
He suggested the government change it to a direct investment plan.
“If the program were to be restructured such that there is a limitation on the number of slaughter plants that will be financed and the $37.5 million being made available is used to directly finance slaughter plants, these measures would lower the risk profile for potential lenders to slaughter plants,” he wrote.
Mitchell gave no ground. He said the $38 million should attract $120 million in private investment.
“We’re using the vehicle of a loan loss reserve so that we cannot replace private sector investment but rather entice private sector investment,” said the minister.
