As we await Q3 statistics on Canada’s inward and outward foreign direct investment (FDI), the rebounding numbers in Q1 and Q2 have represented a step in the right direction. FDI is a macroscopic measure of private investment (in contrast to portfolio investment) and includes among other types of investment, mergers and acquisitions. The rebounding comes after a 2015 Q4 that saw inward FDI dip below $5 billion for the first time since 2011, while setting a historical high of $22.4 billion earlier that year in Q2. Strong inward FDI figures from Q3 will likely strengthen Canada’s attractiveness as an opportunity for foreign investors, and would be particularly timely in light of Prime Minister Trudeau’s initiative to raise private funds for infrastructure.

In spite of the weak figures in late 2015 and early 2016, a report on global investment from A.T. Kearney from earlier this year suggests that the rebounding performance may be a sign of bigger things to come. The report cites an increasing confidence in the Canadian economy among global investors, at least in a comparative sense relative to other countries. The report ranks Canada behind only the United States and China in foreign investor confidence. Speaking in general terms, the report cites geopolitical tension as the greatest driver of bearish investor behaviour in 2015. As a consequence, the stable political climate in Canada may represent a comparative advantage and an attractive investment opportunity for foreign investment.

A more direct factor that the A.T. Kearney Report points to is the 2015 reform to the Investment Canada Act as the catalyst for the rebounding interest in the Canada economy. Prior to April 2015, investments of $369 million from World Trade Organization members were subject to a net benefit review and potentially creating a chill in the market. That threshold (among other thresholds for other types of entities) has since been increased to $600 million. Details regarding the requirements of the net benefit test may be found here. Thresholds are set to increase further to $800 million in April 2017 and then to $1 billion in April 2019, with annual adjustments going forward in relation with nominal GDP growth. While it is unlikely that investment interest in Canada will increase in proportion to the increasing threshold, this reform should nevertheless attract a steady amount of additional foreign private investment for the next several years.

The author would like to thank Peter Georgas, Articling Student, for his assistance in preparing this legal update.

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