Canada’s strong growth prospects and superior economic position have created a favourable foreign investment climate. Canada’s pragmatic approach to economic management—strict banking regulations, stable banking system, low debt ratio, and economic immigration—has created a safe place to invest. Canada was better prepared than any other developed nation to weather the effects of the global recession.
Investors have been loading up on record amounts of Canadian bonds for the past 18 months and a report by CIBC World Markets shows this interest in Canada by foreign investors has real staying power. Foreigner investors added $12.4 billion in Canadian securities to their holdings during the month of April, the majority going into bonds, according to the most recent data from Statistics Canada. Since January 2009, non-residents have acquired Canadian investments in excess of $100 billion. The increase in demand is attributable to the eagerness of foreign central banks and sovereign wealth funds to diversify their foreign currency holdings away from U.S. dollars and euros.
Canada has several advantages attractive to foreign investors—a stable banking system, an attractive tax environment, and a low, and stable, debt ratio. Canada has already recovered from the global economic recession while the US still struggles. In 2010, for example, Canada’s fiscal deficit is forecasted to be $33 billion, well below the 3%-of-GDP threshold that economists consider manageable, while the US’s projected deficit will amount to 9.2%-of-GDP.
Canada's strict banking regulations and bankruptcy rules have certainly played a role in the strength of its recent economic recovery; however, Canada’s focus on economic immigration has also contributed to its overall economic success. While Canada admits 60% of its immigrants as economic immigrants (skilled workers, professionals, entrepreneurs and investors), in the US only 14% of immigrants meet that criteria. Canada has one of the highest immigration rates in the world, receiving about 250,000 new permanent residents annually.
Foreign investors seem to agree that Canada is a safe place to be and there is indication that Canada’s currency will appreciate further.
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