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In the aftermath of the analysis published in Le Devoir and here on the blog, it is noted that the losses by the Fund announced today strong probably underestimate the negative returns by overstating way too optimistic value ABCP that the fund still holds.
See this analysis in the Report on Business .

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Sale of timberlands by AbitibiBowater: between liquidity and financial appropriation of the forest rent.

The shortcomings of "classical" model of economic development of the forest in Quebec, a model-dependent structures and continentalisées massified of large transnational corporations, continue to deepen, to lie down and feed back them. Like other large timber companies operating in Quebec and Canada, AbitibiBowater is undergoing a crisis of liquidity and solvency crisis it has itself helped to produce a pushing growth pattern at the end of its practical consequences. The last period of consolidation, which began booming stock market from the late 1990s, gave birth in 2007 of a behemoth named AbitibiBowater, incorporated in the United States and flown from Montreal, who is struggling to justify its burdens with industrial stakeholders of a financial system combining dysfunction. AbitibiBowater operates in a market for forest products that collapsed, manages industrial facilities with minimum profitability thresholds are evaluated on a global scale, and now behind a debt of $ 6.2 billion, which does no-doubt, determines a large part of discussions at business meetings and did nothing to make sexy rating this elephant in the eyes of financial analysts. This discount becomes very real when a loan of $ 350 million to be refinanced next March, and about 1 billion $ Loan must be repaid or refinanced at the end of the coming summer.

This crisis of solvency, which is the "symptom" of a crisis model, senior management of the company is currently trying to manage it by disposing of assets that have a very good liquidity. This is the case of hydroelectric dams that the company counts among its assets in at least three Canadian provinces - Quebec, Ontario and Newfoundland (although in the latter province claims ownership), but also For forested areas. If assets such as dams are now selling for high prices the North American energy, it is the same for forest lands, which constitute a sort of safe haven in times of crisis, and on the basis of which some organizations - especially financial - are likely to develop a funding strategy.

After announcing plans for a first round of sales of dams in recent months, including facilities in Ontario who planned to be sold to the investment fund Brookfield Asset Management for $ 200 million, AbitibiBowater said Friday February 20, 2009, it had completed the sale of three large areas under forest management (lordships Perthuis Mauricie, Nicolas Riou and Lac Mitis in the Lower St. Lawrence), totaling nearly 76,000 acres. As a result, the company fetched $ 70 million in additional cash, allowing it to increase its funds available for loan refinancing maturing after tomorrow. A little oxygen, yet.

Before being sold to Solifor, a limited partnership of the Solidarity Fund QFL, these woodlots had been a proposal to purchase the part of elected representatives of the Lower St. Lawrence. Having mobilized the most leverage regional, these officials have requested that the Quebec government - by through the FMS - also involved in this significant transaction, which would have put under regional governance these "assets" are the extraordinary lordships Nicolas Riou and Lac Mitis. It turns out that for nearly 15 years, these territories were used as experimental basis for developing an alternative model of forestry, forest sharecropping model framed by the federal government has met or exceeded all expectations that industry, local governments and fed to him. However, this experience, perhaps too successful in the eyes of some, has been arrested. And proposed a re-collectivization of lordships, proposed by the MRC Rimouski-Mitis and La Neigette and backed by the past experience of sharecropping, was denied. Offer too little interest, beaten by another? Maybe. Not Enough réencastrés in the economic fabric of the region, however, these lots have been acquired by a fund in Quebec, perhaps more concerned about economic and ecological aspects of long-term forest development:

"The fear that people the region is that the territories were in the middle of our region fall under interests Ontario or the U.S.. So here they are Quebecers who have acquired these territories. I do not think the Solidarity Fund is used to let her sleep investments, "said Richard Savard, head of the forestry file at the Regional Conference of Elected Representatives of the Lower St. Lawrence.

But it will see and closely analyze the business plans developed by Solifor. In the case of the lordship Perthuis Mauricie Fund QFL embarked on a joint venture with Sawmill & son Dion, a local sawmill. Remains to be seen what will happen in the Lower St. Lawrence, which formula will be tested. Between mandate of economic development that respects life forms, and that of superior financial performance, the Investment Fund QFL is a financial organization may make contradictory choices.

In many see the economic history of Quebec and Canada, we can see easily that a model in crisis does not mean an outdated model or radically transformed. One can see the emergence of a refurbished model, as is the case in Quebec for a long time. But this crisis continental characteristics of the model offers new opportunities to bring about a new, more respectful of economic and ecological areas. The sale of these lots forest, rich qualitative and a special long-term value for the region and Quebec, would indeed have been an opportunity for local communities, regionally and nationally to establish their bases development, including developing formulas socioeconomic allowing forest communities to reclaim much of the forest rent. Or rather, to try to avert the return of the same, that this is a dress rehearsal, and everything remains open for a new political economy forest.

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must close the PPP program

Andre Christmas Press revealed yesterday that the magnitude of the crisis on PPP projects in the Charest government. The CHUM project is particularly affected, the firm responsible for financial ENGINEERED each consortium are experiencing extreme financial difficulties that could lead to bankruptcy. The policy of infrastructure development through the PPP manifesto here any limitations.
infrastructure projects are central stimulus policies, or here in Quebec, a significant portion of these projects have been locked in the PPP process. Clearly, there will not see the day as long as the crisis and tightening credit. Expenses that we must do today to boost our economy and in particular support the construction sector hard hit by the crisis can not wait for the recovery of the international financial system.
The Quebec government should be compelled to adopt the following measures:

1. Finance Minister should list all PPP projects for which funding or whose tender process is not finalized.

2. amounts associated with these projects must be subtracted from the total amount that the minister said in January spending to stimulate and revive the economy of Quebec.

3. a policy of conversion of major PPP projects to public projects should be established so that they can start as soon as possible. This policy must combine the following elements:

• integration in managing a conventional mode of certain mechanisms of risk sharing between manufacturers and public promoter;

• adoptotion mechanisms and practices to control costs and especially by management actual costs rather than according to figures underestimated;

• project financing through a program of government bonds sold primarily to institutional investors in Quebec.

4. revise the mandate of the Agency for PPP to exclude all large scale projects and any project in the field of essential public services (health, education, transportation), remove the mandate of the agency's objective promotion of PPPs and replace it with a mandate to evaluate and audit projects based on a financial and social audits.

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Wool socks, gratuity to speculate or leverage for development?

What to do with the Caisse de dépôt et placement in a time of crisis?

text submitted to the Duty
loss of 38 billion the sum is staggering. Rumor layoff of 7 out of 11 executives of the institution, the answer is equally important. What happened to the Caisse de depot et placement du Quebec? In 2004, the Charest government, reacting to what was perceived as political interference in the activity of the Fund and poor governance that resulted, has revised the mandate of the institution by asking something : yield, yield and performance. The syllogism of the efficiency of financial markets passed by Henri Paul Rousseau took up an idea conveyed in the U.S. on GM in the '50s: in these times then "what was good for GM was good for America." Here, what is good for financial returns is good for economic development of Quebec.

The Fund has therefore launched headlong into financial innovation. Brilliant and ambitious young minds were exceeded in financial engineering schemes. All imagination and creativity of the organization were mobilized by a culture of speculative activity. Results, in 2007, 40% yield of the Fund come from an arbitration in the foreign exchange market. The Fund and put big wins following his challenge on the volatility of the value Canadian dollar on the futures markets. Volatility contributes, it must be said, to provoke. So it's completely wrong to maintain that the Fund is an investor "patient." Nothing is more short term approach that speculation on the exchange but it is a new market segments where it operates. The Fund, like many other funds, participates actively in the movement of financialization of the economy that many believe has set the stage for the current economic crisis. We must remember that the Fund is by far one of the biggest financial players in the Canadian markets. It can, given its weight, difficult to prevent that its actions become structural.

Problem interventionist governance or new mandate?

losses of 38 billion is related to the participation of the Fund ABCP market, commercial paper backed by assets. This market was central to the mechanism of securitization of U.S. and Canadian consumers. Essential to maintain growth in a decade, he allowed the expansion of household debt to unprecedented levels employed in modern economic history and "intoxication" by the famous markets of subprime mortgages. Currently associated losses the Fund to a problem of governance. " It is once again haunted by the specter of mismanagement. Rather, we believe that the Fund operates under its new mandate, which ultimately is just as interventionist than its previous mandate. The Fund does not play a passive role in the development or secondary market for securitized assets in Canada. Market is growing dramatically since the mid 1990s and a second wind from 2004, when the Fund began seriously in this segment of money markets. (See on this chart above)

It is important recall that in 2007 in Canada, when the bursting of the credit crisis that led to the economic crisis that we know, the market commercial paper met in Montreal in the offices of the Fund to attempt, unsuccessfully to find a solution to the collapse of this sector financial and currency markets. The Fund was perceived by all actors as the "" Market Maker "of the ABCP, the market maker, the buyer of last resort. Why Is the Fund has become a central player to the point where almost 25% of ABCP belonged to him?

Since the Fund is searching for high yields its sole objective, it has established, as several other financial institutions, internal incentive schemes, mainly bonuses to short-term returns that reinforce a culture of speculation in the organization. The measure of returns in the financial community today is relatively simple. To be rewarded, we must "do better than the market" (beat the market), as measured by the standard positive (or negative) investment performance of a manager relative to average performance of similar investments. In the very short term and occasionally a good challenge, a good load and access to inside information can "beat the market, but generally the only way to deviate systematically in the average yield is to play on the level of portfolio risk. Make riskier investments relate more to short-term. But what about the long and medium term? "I'll have a job somewhere else," said the manager may be used to move from one organization to another. The Fund, under Henri-Paul Rousseau, has diversified its investment strategies and participated actively in financial innovation that has characterized the period preceding the current crisis. Year after year, she "beat the market "And the shame associated with failures of investment more or less profitable in Quebec Inc. and entrepreneurs close to the political class have been forgotten.

The economy is growing at an annual rate of 2 to 4%, however, the Fund reported almost year in, year out, a return higher than 10%. What genius! 2007, the stock market is stagnating, the performance of the portfolios of large investors wavers. Despite this, the Fund keeps track of positive returns. In 2008, she gets her own game and towels massive loss of market it helped to establish.

Bottom of wool or development tool?

It must be remembered, the assets of the Fund is (for the time and fewer new listings disastrous) 40% of gross domestic product of Quebec. He has the ability to deeply affect the structure and dynamics of our economic activity, as demonstrated elsewhere in support of the Fund for the development of the securitization market in Canada. This demonstrates also that the attempt in 2004 to "neutralize" the political impact of the Fund was a decoy. Confine the Fund in terms of financial returns meant to direct its activities towards the development of financial sector increasingly speculative short-term approach and voracious returns, without regard to its impact on the real economy. It should also be emphasized that relatively speaking, the losses are associated with this debacle seem like paltry losses associated with the support of dubious projects of Quebec Inc. Scraire for years.

The Fund from its inception was designed to be more than a "nest egg". It is a tool of intervention options across partisan, that is to say a tool of economic sovereignty. If we wanted a nest egg, he would have just put several competing fund managers Quebec and Bay Street by giving them a part of the money savings of Quebecers institutionalized. The risk would have been distributed. External auditors and government officials have overseen the management of our various savings and assets would have thought and melted after the vagaries of the market and our abhorrence or our risk appetite. The architects of the Quiet Revolution chose instead to centralize these savings and make a lever of development. At first the "province of Quebec could free itself from its dependence on private finance, yet very British of Bay Street. Thereafter Crown corporations, such as Hydro-Quebec could finance large development projects of public infrastructure productive.

We are again confronted with critical challenges to our economic future. On the one hand, all to preach a revival of an economic crisis that has shown its limits in the social: inequality, debt, consumerism, crumbling public infrastructure. On the other hand, we are facing an ecological crisis increasingly palpable that challenges the very idea of reviving the growth of consumption. Several analysts argue for a plan to end the crisis that would shift significantly the development of our economies towards a more ecological, less dependent on international markets and more united. The Fund, as the weight of his active imagination and creativity of its workers could be made to serve this project to end the crisis. And I'm sure to focus on the development of our economic sovereignty will bring long-term yields necessary to sustain the growth of responsible and realistic in our collective savings.