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Canada risks relegation to the second tier of the global tech economy if it doesn't act now – TheChronicleHerald.ca

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The head of one of Canada’s most important technology companies said the country is at a crossroads: we have the talent required to be a leader in the digital economy, but a mix of complacency and poor policy means we could easily end up in the remainder bin.

“I’ve seen Canada over the last decade, sadly, turn into a little bit of a low-cost jurisdiction,” said Mark Barrenechea, chief executive of Waterloo, Ont.-based Open Text Corp. “A lot of companies today think of Canada as a lower-cost (country) for entry-level talent; first job or second job is a better way to say it.”

Put another way, we’ve become a development league, “competing more with Southeast Asia than the United States,” Barrenechea said. Open Text used to be able to hire four Indian software engineers for the cost of one worker in Waterloo. That ratio is now two to one. Canada is competitive, but maybe not in the way many of us might have thought.

Followers of Jim Balsillie, the former co-chief executive of the company that created the BlackBerry smartphone,

will be familiar with the argument

that Canada has unwittingly become a staging ground for young coders who eventually take their talents to the real tech centres in the U.S., China and Europe.

But it feels like a good time to stir the fire that Balsillie started. The prospectors of the digital gold rush ignited by the COVID-19 crisis are moving at rapid speed. The big fish will be gorging on the little fish. The winners and losers are being sorted now, not years from now.

Many of Canada’s homegrown technology companies were already upset over the tendency of governments to get excited by the arrival of famous tech behemoths such as Amazon.com Inc. and Google’s parent company Alphabet Inc., which tend to monopolize the best talent before patenting their ideas, thus locking up the wealth for themselves and their home countries.

The race to secure market share in the digital economy

has added a new dimension

: emerging Canadian companies are proving to be attractive targets for larger firms that want to accelerate their adoption of cutting-edge technology.

The ownership of St. John’s, Nfld.-based Verafin Inc. (cybersecurity), Montreal’s Element AI (artificial intelligence) and Calgary’s Benevity Inc. (software) all shifted abroad last year. They were local heroes and now they are branch plants. The jobs are still here, and more may come, so it’s not a dire situation. But it’s objectively the second-best outcome, because control rests elsewhere. It also puts a ceiling on what Canada can achieve since the highest performers at those companies will eventually be called up to corporate headquarters.

“Canada has really got to think through that,” Barrenechea said.

We have some time to think it through. Foreign-direct investment isn’t a one-way street and some Canadian companies are doing their share of the raiding.

For instance, Lightspeed POS Inc., a Montreal-based developer of software that restaurants and smaller retailers use to process sales and manage inventory, on March 11

announced

its intention to buy Vend Ltd., a New Zealand-based rival backed by PayPal Holdings Inc. co-founder Peter Thiel. The US$350-million acquisition would be Lightspeed’s third big purchase since November, a US$1.2-billion shopping spree.

That’s the kind of action it takes to play in what Barrenechea describes as the first tier. You take risks. You raise capital. You deploy that capital, gathering valuable intellectual property, talent and customers. You favour investment over dividends and share buybacks. You go farther afield than the U.S. The Vend acquisition would strengthen Lightspeed’s toehold in Asia, complementing its core operations in Canada, the U.S. and Europe.

Lightspeed, which Dax Dasilva founded in 2005 and took public on the Toronto Stock Exchange in 2019, is one of a few dozen Canadian

technology hotshots

that have been given long leashes by shareholders who are less sensitive about profitability than they used to be. Some will fail or disappoint, which shouldn’t bother anyone. That’s how innovation works.

Open Text, meanwhile, is a survivor, so it probably warrants more attention than it tends to receive. The company is nearing its 30th anniversary and generating cash isn’t an issue. The company

earned

a record US$855 million in its most recent quarter, an 11 per cent increase from the previous year. Its stock price is up about 25 per cent over the past year, pushing its market capitalization to about $12 billion.

Back in 1991, its original mission was to commercialize technology that the University of Waterloo developed to digitize the Oxford English Dictionary. Now, Open Text finds itself in an ideal situation to exploit the shift to cloud computing. Barrenechea this week

unveiled

a streamlined range of software products that will allow companies to gather and protect information generated from employees working from home, manage supply chains and interface with cloud-storage servers, including Open Text’s own private cloud.

The opportunity is huge. Barrenechea predicted the information-management market will grow eight per cent to US$84 billion by 2024. Open Text is already the market’s leader, and its CEO predicts organic growth of two per cent to four per cent in three years, an ambitious jump from the current rate of one per to two per cent. If he pulls it off, he might force people to reassess Open Text’s reputation as a company that is only able to achieve growth through acquisitions, even though it intends to keep buying whenever it spots a good value.

“It is a seminal moment for us,” Barrenechea said, adding that he plans to invest 14 per cent of revenue into research and development, compared with 10 per cent currently. “We’re going to invest

into

modern work and we’re going to invest into our growth rates.”

Open Text is here to stay, but we can’t take for granted that others have the same ambition to stay in the top division or climb their way there.

“IP and engineering is very mobile,” said Barrenechea, who took over as CEO in 2012 after a couple of decades in Silicon Valley. “You can optimize the economics by leaving Canada, but, for us, we haven’t led with that. We’ve led with talent and culture.”

The challenge for policy-makers, then, is working on the economics. We need to make it less optimal for those who don’t care about culture to leave.


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Economy

Arizona mining fight pits economy, EVs against conservation, culture – The Guardian

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By Ernest Scheyder

SUPERIOR, Ariz. (Reuters) – Early last year, Darrin Lewis paid $800,000 for a hardware store in a tiny Arizona town where mining giant Rio Tinto Plc hopes to build one of the world’s largest underground copper mines.

Rio buys materials from Lewis’s Superior Hardware & Lumber for its Resolution mine site, accounting for a third of the store’s sales and helping to keep it afloat during the coronavirus pandemic.

But U.S. President Joe Biden put the mining project on hold last month in response to the concerns of Native Americans who say it will destroy sacred land and of environmentalists who worry it will gobble up water in a drought-stricken state.

That’s fueled anxiety among Lewis and others here in Superior, Arizona, who want to reap the economic benefits of a mine that would harvest more than 40 billion pounds of copper.

“I sunk everything I have into this place,” said Lewis, surrounded by hammer drills, wrenches and other goods in his store. “It would absolutely devastate us if this mine doesn’t open.”

In halting the project, Biden reversed a decision by predecessor Donald Trump that would have given Rio land for the mine. Biden ordered more government analysis of the project.

The ongoing fight pits conservationists and Native Americans against local officials and residents who support its economic benefits. The complex debate is a harbinger of battles to come as the U.S. aims to build more electric vehicles, which use twice as much copper as those with internal combustion engines. The Resolution mine could fill about 25% of the demand for U.S. cooper.

The Arizona dispute centers on Oak Flat Campground, which some Apache consider home to deities known as Ga’an. Religious ceremonies are held at the site, near the San Carlos Apache Reservation, to celebrate teenage girls coming of age. Many Apache have ancestors buried under the volcanic rock.

In 2014, the Obama administration and Congress set in motion a complex process intended to give Rio 3,000 acres of federally-owned land, including the campground, in exchange for 4,500 acres that Rio owns nearby. Biden has paused that transfer.

The White House did not respond to a request for comment.

“If Rio gets this place, then the mine will kill the angels and the deities that live here,” said Wendsler Nosie, a San Carlos Apache tribe member who has led a protest camp for 18 months at the site. A sign there describes the land, known as Chi’chil Bildagoteel in the Western Apache language, as the physical embodiment of the earth’s spirit.

Nosie has marshaled widespread support for his cause, helped by rising global attention to the rights of indigenous peoples. Rio itself fueled that cause last year when it blew up culturally significant Aboriginal rock shelters in Australia.

If the land swap is approved, Rio has said it would keep the campground open for the next few decades before the underground mine causes a crater that would swallow the site. The company has also said it would seek tribal consent for the project and study ways to avoid causing the crater.

“The land exchange gives us the opportunity to collect more data, then we can refine our plans and look for ways that we can do further avoidance and minimization” of site damage, said Vicky Peacey, a senior permitting manager for the Rio project.

Rio, which is based in Australia and the United Kingdom, has also promised to preserve other cultural sites including Apache Leap, a rock cliff that overlooks Superior and where Apaches jumped to their deaths to avoid capture by U.S. troops in the late 19th century.

‘AMERICAN COPPER’

Politicians in Superior – a town of 3,000 residents that voted nearly two-to-one for Democrat Biden last November in a majority-Republican county – are now prodding the president to change his mind.

The land swap, if Biden approves, would also let the town of Superior buy more than 600 acres that officials say is crucial to diversifying the local economy by expanding the airport, developing an industrial park and building affordable housing.

“President Biden is going to have to make some courageous decisions,” said Mayor Mila Besich, a Democrat.

Mining is essential to accomplishing Biden’s goal of expanding EV production, she said. “We’re going to need more American copper,” she said.

While the region has long been popular with hikers and campers, it is better known as the “Copper Corridor,” with mines from Freeport-McMoRan Inc and others.

The closure of the Magma copper mine in 1996 devastated Superior’s economy. Officials have pinned their hopes now on Resolution. Since the copper deposit was first discoved in 1995, Rio and minority partner BHP Group Plc have spent more than $2 billion to dig an exploratory mine shaft and dismantle an old Magma smelter. They have yet to produce any copper. BHP declined to comment.

More than half of the buildings in Superior’s downtown sit empty. Several Tesla Inc charging stations hint at the town’s aspirations to be part of the EV boom. Nikola Corp and Lucid Motors are building their own EV plants less than 50 miles (80 km) away.

Rio has promised to hire 1,400 full-time workers at an average annual salary of more than $100,000. That’s nearly half the population in a town whose median income is a third below the national average.

“What’s sacred to my community is that people have a job and have a home,” said Besich, the mayor.

The mine would boost state, local and federal tax coffers by $280 million annually and add $1 billion to the state’s economy, Arizona’s governor said.

Besich pushed back when studies showed Rio would only pay the town $350,000 a year in taxes, far below the $1 million would need annually for increased police, firefighting and road maintenance.

Rio agreed to pay the town more, to guarantee Superior’s water supply and to donate $1.2 million to the school district. Superintendent Steve Estatico said without Rio’s support the district’s schools – where enrollment has dropped 13 percent since 2016 – may close.

“Rio’s had to learn over the last few years that it cannot take host communities for granted,” Besich said.

STALLED NEGOTIATIONS

The San Carlos Apache – one of the first Native American tribes to endorse Biden’s presidential bid – have not negotiated with Rio because its tribal council favors direct talks with the U.S. government, said Chairman Terry Rambler.

Rio’s copper chief, Bold Baatar, said he hopes to negotiate directly with the tribe when he visits Arizona as early as June, once pandemic restrictions allow.

“We are hearing the concerns from everyone,” Baatar told Reuters. “There will not be a mine until we achieve maximum effort to seek consent.”

Not all local Native Americans oppose the mine. Some members of the White Mountain Apache tribe, whose reservation is just north of the San Carlos Apache’s, say they do not consider the campground a sacred site.

“The belief that the site is religious, that’s news to me,” said Alvena Bush, a White Mountain Apache councilwoman who supports the project.

WATER WORRIES

Rio has dug a mine shaft nearly 7,000 feet (2 km) underground on land it owns near the campground. The bottom of the shaft has become a staging ground for future mining operations.

The miner is draining water from the nearby copper deposit to make it easier to extract. More than 600 gallons of water are pumped each minute to treatment plants on the surface for use in local farming.

Rio plans to mine the copper using a technique known as block caving. It involves carving a cave out of a large section of rock, which then collapses under the weight of the rock above, creating a crater 2 miles (3 km) wide and 1,000 (304 m) feet deep.

This method would damage aquifers that feed two local springs, according to an environmental study from the U.S. Forest Service. The entire mine would reduce available groundwater in the area, which has been in a drought since the late 1990s, the report said.

“This land is going to be worthless if there’s no water to go with it,” said Henry Munoz, who leads a group of retired Superior miners opposed to the project.

Biden is expected to decide later this spring on whether to give Rio the land for the mine. Lewis, the hardware store owner, hopes his plight will be considered among all the competing interests.

“If I had one thing to say to President Biden, it would be: ‘Let the mine open,'” he said.

(Reporting by Ernest Scheyder; additional reporting by Caitlin O’Hara, Sandra Stojanovic and Trevor Hunnicutt; editing by Amran Abocar and Brian Thevenot)

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Economy

Canada’s budget to include pandemic and childcare supports, luxury tax

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By Steve Scherer

OTTAWA (Reuters) – Canada will present a budget on Monday with billions of dollars for pandemic recovery measures as COVID-19 infections skyrocket, C$2 billion ($1.6 billion) toward national childcare, and new taxes on luxury goods.

Liberal Prime Minister Justin Trudeau’s first budget in two years will also set aside C$12 billion ($9.6 billion) to extend wage and rent subsidy programs to the autumn, the Toronto Star reported on Sunday.

Finance Minister Chrystia Freeland is due to present the budget at about 4 p.m. (2000 GMT).

The document promises in excess of C$2 billion as a “starting point” for a national childcare program, the Canadian Broadcasting Corp said, adding that the 2020-2021 federal deficit had come in under C$400 billion.

In November, the government forecast a deficit of C$381.6 billion, which would be its highest level since World War Two. [https://tmsnrt.rs/3wSJPcm]

The budget will also include a luxury tax effective from 2022 on new cars and private aircraft valued at more than C$100,000 ($79,970), and boats worth over C$250,000, government sources familiar with the document told Reuters.

There will be a sales tax for online platforms and e-commerce warehouses from July, and a digital services tax for Web giants like Alphabet Inc’s Google and Facebook Inc from 2022.

Freeland promised in November up to C$100 billion in stimulus over three years to “jump-start” an economic recovery during what is likely to be an election year, and the government so far not backed away from that commitment.

Environment Minister Jonathan Wilkinson, speaking to the CBC, confirmed that the budget would be “ambitious” and that the government would “invest for jobs and growth to rebuild this economy,” although he added there would be “fiscal guardrails” to put spending on a “sustainable track.”

Amid a spiking third wave of infections, Ontario, Canada‘s most-populous province, announced new public health restrictions on Friday, including closing the province’s borders to non-essential domestic travel.

Canada has been ramping up its vaccination campaign but still has a smaller percentage of its population inoculated than dozens of other countries, including the United States and Britain.

($1 = 1.2514 Canadian dollars)

 

(Reporting by Steve Scherer; Editing by Nick Zieminski and Peter Cooney)

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Economy

TSX extends gains as gold prices rise, set to rise for third week

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(Reuters) -Canada’s main stock index extended its rise on Friday after hitting a record high a day earlier as gold prices advanced, and was set to gain for a third straight week.

* At 9:40 a.m. ET (13:38 GMT), the Toronto Stock Exchange‘s S&P/TSX composite index was up 24.24 points, or 0.1%, at 19,326.16.

* The Canadian economy is likely to grow at a slower pace in this quarter and the next than previously expected, but tighter lockdown restrictions from another wave of coronavirus were unlikely to derail the economic recovery, a Reuters poll showed.

* The energy sector climbed 0.6% even as U.S. crude prices slipped 0.1% a barrel. Brent crude added 0.1%. [O/R]

* The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.3% as gold futures rose 0.7% to $1,777.9 an ounce. [GOL/] [MET/L]

* The financials sector gained 0.2%. The industrials sector rose 0.1%.

* On the TSX, 117 issues advanced, while 102 issues declined in a 1.15-to-1 ratio favoring gainers, with 14.26 million shares traded.

* The largest percentage gainers on the TSX were Cascades Inc, which jumped 4.2%, and Ballard Power Systems, which rose 2.9%.

* Lghtspeed POS fell 5.6%, the most on the TSX, while the second biggest decliner was goeasy, down 4.9%.

* The most heavily traded shares by volume were Zenabis Global Inc, Bombardier and Royal Bank of Canada.

* The TSX posted 23 new 52-week highs and no new low.

* Across Canadian issues, there were 160 new 52-week highs and 12 new lows, with total volume of 29.68 million shares.

(Reporting by Shashank Nayar in Bengaluru;Editing by Vinay Dwivedi)

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