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00:00You've been finance minister for seven years now, but you really follow Canada's broader fiscal picture closely.
00:07So, given the persistent tariffs and a projected federal deficit that could range between $70 billion and $100 billion,
00:15do you have any concerns about Canada's fiscal outlook?
00:21I think it's obviously a very important exercise.
00:25There hasn't been a true fiscal statement for Canada in a long time, so there will be a lot of interest.
00:33So, no matter what the initial number is, the deficit for the current year,
00:38I think it's very important that we see a downward trajectory with respect to deficit
00:44and a credible plan as to bring this to a sustainable path.
00:50And if you look at the economy, do you base your assumptions on the idea that the tariffs could be in place for a longer period of time
00:57and that sectoral tariffs could actually remain in place?
01:01Well, we're going to update our economic assumption, but when we did the budget,
01:06we assumed on average 10% tariff for two years,
01:10is always under the rationale that if you exclude energy, the U.S. has a trade surplus with Canada.
01:18But we need to be mindful that if tariff were to be permanent,
01:24the economic impact on the structure of the Canadian economy would be permanent.
01:29So, we really need to go through the bottom of this and find common ground
01:39and a solution that is optimal for both what has been a very successful economic partnership.
01:45We need to go back closer to where we were, certainly.
01:49I just want to talk about the federal budget that's going to be released on November 4th.
01:54So, the government plans to release their budget and their major fiscal documents in fall instead of spring.
02:01Does that change anything for you?
02:04Well, the timing is for them to choose.
02:08Obviously, when they used to do February budget and all provinces and territory were in March, it was just fine.
02:14But since the pandemic, their budget came always later.
02:19So, the move is interesting.
02:22But what's really important for us is the content of the budget.
02:26The timing is a bit of a side issue.
02:29We need an infrastructure program that will help province and territory face the great challenges
02:36that are associated with population growth.
02:39We need more school, more hospital, more housing.
02:42And the federal infrastructure program has expired since December 2023.
02:47They're the AAA credit.
02:50There was a program to the tune of $10 billion a year.
02:54So, for Quebec, this represents close to $2 billion a year.
02:57We're looking for help in infrastructure from the federal government.
03:02And we're all on content, not the timing.
03:05Any other expectations from this budget?
03:08I'm expecting a federal infrastructure program that is helpful for province and territory.
03:13So, the message is clear here.
03:15Quebec's economy is heavily exposed to trade.
03:18Correct.
03:18So, we have minerals, aluminum, 50% tariffs there, lumber.
03:22I don't know where it is right now.
03:24I think it's 45% in total or likely to become 45%.
03:27Dairy product is at risk, aerospace also.
03:31Have you seen measurable impacts on Quebec's economy aside the contraction in GDP we saw in the second quarter?
03:38Yes, we do.
03:40We're seeing all over Canada capital expenditures are really weak because of the uncertainty.
03:49And people need the certainty with respect to the access to the number one consumer in the world.
03:57And therefore, the uncertainty period is reducing capital expenditure.
04:02It's reducing export, obviously, given the tariff.
04:05So, we are seeing impact.
04:08We are seeing also that originally the weakness in the labor market was in these sectors that are related to trade.
04:16Now, it's spreading.
04:17It is a summer job for students.
04:21It's all over the economy that we're seeing weakness slowly spreading.
04:27So, we're at the core of the weakness.
04:31Q2 was a negative bounce back from the strength of Q1.
04:34And now, Q3 is going to be difficult.
04:38And we expect that Q4 is going to be difficult for the U.S.
04:43And if we collectively want to have a good 2026, then we need these tariffs to be lowered.
04:52From a fiscal policy perspective, you'll release...
04:53Or eliminated.
04:55Even better.
04:56So, from a fiscal policy perspective, you'll release an update.
05:01I guess it's in November.
05:02Are you planning any measures to help Quebec companies to remain competitive,
05:08considering that in the U.S. they're lowering taxes,
05:11that in the U.S. they have an incentive, actually, to stay in the U.S. and produce in the U.S.?
05:16Could you lower the fiscal burden for businesses in Quebec to help them thrive
05:21and remain competitive, considering the situation?
05:26That's an easy question, because we've already done that.
05:29The federal government announced that they were going to bring back accelerated depreciation
05:34for capital expenditure.
05:36We've announced that we will harmonize, and now the federal government needs to table its legislation,
05:42and therefore, all corporations can have certainty with respect to capital expenditure.
05:46But could you do more on the top of what was announced?
05:49We can always do more, and when you're in politics, there's infinite demand for limited means.
05:54Okay.
05:56Let me answer this.
05:58If the federal government wants to lower corporate taxes, that would be helpful.
06:02That would be helpful to a Quebec corporation.
06:04Okay.
06:05Another message here.
06:06In your March budget, well, let's talk about the limited potential here.
06:11You projected a $13.6 billion deficit in Quebec.
06:14It's a lot for a province of 9 million people.
06:17S&P Global recently downgraded Quebec's credit rating from AA- to A+.
06:22Are you preparing measures to rein in spending?
06:25Well, first of all, since the downgrade, $24.25, which was supposed to be a deficit of $11 billion,
06:39has been revised to $7.5.
06:41And that's after contributing to the Generation Fund.
06:44So, we, the deficit of $24.25 is 0.8% of GDP.
06:51The deficit of $23.24 is 1% of GDP.
06:55The deficit of $26.27 is forecasted at 1% of GDP.
06:59So, the problem is with $25.26, which is at $1.8.
07:05$1.8 is too much.
07:06BC is at $2.6.
07:08Nova Scotia, $2.2.
07:09So, we want to bring that down.
07:11But in there, there is a $2 billion contingency fund for current economic condition.
07:19So, if we were not to need the contingency reserve, we'll do a lot better.
07:25So, we are aware that the current deficit at 1.8% of GDP is too high.
07:31Our economic assumption, 10% tariff on average, we're currently at 7%, 8% in Quebec.
07:38Our economic forecast was 1.1% in GDP.
07:42All that is in line.
07:43So, we're looking at doing better.
07:45Was the downgrade fair then?
07:47Sorry.
07:49The downgrade, I would have preferred a negative outlook first.
07:55Okay.
07:59Since the downgrade, what appetite have you seen from investors for Quebec bonds into issuers?
08:04That's how they usually do it, by the way.
08:05I was a little surprised that we skipped that step.
08:09So, since the downgrade, what has been the appetite from following Bonnie Schwentz's ministers?
08:16The appetite is fantastic.
08:18We've done the largest issue in Europe, $3 billion, 10-year last summer.
08:24We're trading flat with Ontario.
08:26The demand for our product is solid.
08:28We have a credit plan to balance the budget with both expenditure and revenue measure.
08:34Yeah, and no real changes in spreads, which is worth noting.
08:37So, given the mix of geopolitical dynamic and the federal credit environment in the U.S.,
08:43should Canadian provinces seek to reduce or to actually increase their share of their bond issuances in U.S. dollars?
08:50It depends on the arbitrage.
08:53We swap everything back into Canadian dollar.
08:56We diversify our funding.
08:58Obviously, issues in Euros and U.S. are large, but we're sensitive to cost.
09:05So, this year, the arbitrage was interesting.
09:08We did large issues.
09:10And we will continue to issue, on average, two issues in Euros and two issues in U.S. per year.
09:17So, no change there?
09:18No change there.
09:20Polls are giving the Parti Québécois a win in one year.
09:24They're promising a referendum there.
09:26And I want to be careful with my words, but the word referendum, like,
09:30it's not necessarily well-perceived in financial markets.
09:33Have investors started to talk to you about this risk that they may see on their radar?
09:38I think there is so much risk on the radar right now that, no, the focus is not on that.
09:45In due time, there will be an election.
09:48We will be competitive, and we're looking forward to win.
09:53And just to go back to tariffs, do you believe that down the line, there's…
09:58Politics is more fun when you win.
09:59Yes.
10:02So, just when you look at tariffs right now, do you believe that bonds and the spreads and
10:08the risk is going to push the spreads higher down the line over the upcoming months?
10:14We don't see it right now.
10:16If the tariff were to be…
10:18I want to be honest with the people that are listening to us.
10:21If the tariffs were to be permanent, there will be permanent impact on the Canadian economy
10:27to the extent that we're on the lower growth path on a permanent basis, then we could have
10:33wider spread.
10:34We don't right now.
10:36It is in the interest of the United States and Canada to pursue this great economic integration
10:44that has brought so much benefit to both countries.
10:47Let's talk quickly about Hydro-Quebec.
10:49So, electricity was, a few years ago, a main incentive to attract businesses in Quebec.
10:57Right now, the supply is limited.
10:59What new argument do you have in Quebec to attract foreign companies to invest in the province,
11:05considering that there's a limit on power now?
11:08Certainly human capital.
11:09We have great universities, a lot of talent.
11:12We have a geographic location, competitive cost.
11:17We have comparative advantage, a vast amount of natural resources, expertise in aerospace,
11:24aluminum, artificial intelligence, bioscience.
11:30We have a lot of assets.
11:32We can count on ourselves.
11:36Let's talk about human capital.
11:37So, the CEO of Group Dynamite, it's a $6.5 billion company we have in Quebec.
11:42The CEO came out recently saying that we'll move to the U.S.
11:45It's at Cordon-Montreal.
11:47They said that they have concerns for their C-suite executives because they actually have
11:52issues with immigration requirements.
11:53Every year, 12 months, 13 months, they have to renew their visas or their immigration requirements,
12:01which brings uncertainty.
12:02Could you provide an exemption in Quebec for C-suite-level executives that have a good part
12:10of the business outside Canada?
12:13Well, first of all, that already exists.
12:17So, just to be clear, when you're in politics, there's a lot of complaints.
12:22And certainly one of my surprises, I taught a lot of citizens when complained.
12:26I found out that a lot of corporations also have complaints when you're the finance minister.
12:31Three complaints from the CEO of Dynamite.
12:34Taxes are too high.
12:36I agree, and that's why we lowered them.
12:39We've lowered personal income tax.
12:41We've lowered school taxes, which is helping Dynamite.
12:44Second complaint, they want longer opening hours for businesses, shopping malls.
12:51We agree.
12:52We have a pilot project.
12:53When the pilot project is finished, we will extend these businesses.
12:56If the pilot project is successful, we will extend the business hour to all businesses.
13:02Third complaint, immigration.
13:04Population growth was too high in Canada 2023-2024.
13:09We need to absorb the excess.
13:11Like, for example, Quebec, we're used to 0.5% to 1% population growth.
13:17We add 2% to 2.5%.
13:19It's going to take 3% to 4% to 5% years to absorb the excess of non-permanent residents that we witness after the pandemic.
13:28And we can do this.
13:30We will do this in a professional manner.
13:35And for a special talent, like the CEO of Dynamite is referring to, we already have a program for that.
13:42Okay.
13:43So, it's not right to go out there and say that?
13:45No, no.
13:46His concerns are legitimate, but there's always a solution to a problem.
13:49We need to sit down.
13:51He met the economy minister.
13:54I will meet him.
13:55I'm sure we can find a solution, and he can continue to run a great business in Quebec.
14:00Eric Girard, thank you very much.
14:02Merci.
14:02Merci beaucoup.
14:03All right.
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