Investment Climate in Canada: The Positive and Negative Factors

Instructions:

The share price of the Canadian loyalty program company, AIMCO, an initial public offering (IPO) last year, has taken a nosedive from C$17 to C$10 per share due to not meeting analysts’ earnings expectation. During IPO last year, AIMCO had completed a transaction with a major credit card company to offer air miles to the credit card company’s existing customers. At that time, AIMCO greatly enhanced the benefits to its air mile members by negotiating an increase in available seats with a major commercial airline company. However, the increased availability has put upward pressure on costs for AIMCO. At the same time, AIMCO was only able to secure a marginal increase in price per mile paid by the credit card company.

There is a timing issue associated with the new deal. As air miles members can now as a whole use many more miles that they earn due to the increased

Content:

Investment Climate: Canada

The greatest investor is U. S. U.S. investors are attracted to Canada’s strong economic fundamentals, proximity to the U.S. market, highly skilled work force, and abundant resources. Canada encourages foreign direct investment (FDI) by promoting stability, global market access, and infrastructure. The United States is Canada’s largest investor, accounting for 44 percent of total FDI.

Positive factors:

POLICIES TOWARDS FOREIGN DIRECT INVESTMENT

Canada actively encourages FDI and maintains a sound enabling environment. Investors are attracted to Canada’s proximity to the United States, highly skilled workforce, strong legal protections, and abundant natural resources. Once established, foreign-owned investments are treated equally to domestic investments. The Canadian government announced revised ICA foreign investment screening guidelines on March 24, 2021. The revised guidelines include additional national security considerations such as sensitive technology areas, critical minerals, and sensitive personal data. The new guidelines are aligned with Innovation, Science, and Economic Development Canada’s April 2020 update on greater scrutiny for foreign investments by state-owned investors, as well as investments involving the supply of critical goods and services.

BILATERAL INVESTMENT AND TAXATION TREATIES

Canada is a party to 14 free trade agreements (FTAs) covering 51 countries and 38 foreign investment promotion and protection agreements (FIPAs). Canada has a bilateral tax treaty with the United States and 93 other countries. Canada is a member of the OECD Inclusive Framework on Base Erosion and Profit Shifting, and the government is party to the Inclusive Framework’s October 2021 deal on the two-pillar solution to global tax challenges, including a global minimum corporate tax.

FINANCIAL SECTOR

Canada’s capital markets are open, accessible, and regulated. The Canadian government and Bank of Canada do not place restrictions on payments and transfers for curren

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