Between 2002 and 2007, the Canadian dollar rose 59.5% with respect to its American counterpart. It reached parity and even shattered all records. This dizzying rise, 14.9% in 2007 alone, stems from several factors, including higher prices for natural resources, the excellent state of Canadian public finances, sustained growth in the domestic economy and weakness of the U.S. dollar. On the other hand, the Canadian dollar did not evolve as vigorously with regard to the currencies of other main economic partners of Greater Montreal, such as the European Union and Japan. During the period going from 2002 to 2007, although our currency climbed 35 % compared to the Yen and more modestly towards the Pound Sterling (13%), it lost slightly, 3% to the euro.
Some industries in the Montréal economy have been closely affected by this situation, particularly the manufacturing sector which suffered a loss of over 25,000 jobs in 2007, posting a 9.4% decrease for the year, the largest drop since the recession of 1991. Conversely, the immense services sector posted a gain of 61,400 jobs in 2007. This represented an increase of 4.1% over 2006, the sharpest growth in the past 20 years. All sectors combined, employment in the Montréal region posted a 2.5% increase for the year, its strongest result since 2002. This increase in job numbers enabled Greater Montréal to lower its unemployment rate to 7% in 2007. A record since 1976, the year Montréal hosted the Olympic Games.
This excellent performance is in large part attributable to a strong trend toward a tertiary, knowledge-based economy over the past ten years. The knowledge economy is, in fact, less vulnerable to currency fluctuations than the traditional manufacturing industry.
On November 23, 2007, to offset the negative impacts of the rising Canadian dollar, the Québec government unveiled a $620-million Action plan to support the Québec manufacturing sector, comprising $178 million in taxation measures and $442.6 million in budgetary measures. The goal of this aid was to promote private investment, make Québec companies more competitive in foreign markets and encourage innovation and manpower training.
Although costs represent a major localization factor for the value-added projects of potential investors, the latter are primarily looking and finding in Greater Montréal a qualified, creative labour force, excellent infrastructure, a strong innovation potential, a favourable taxation climate and a great quality of life.
Finally, it should be noted that a strong canadian dollar also has positive effects on the regional investment climate. Montréal companies, particularly subsidiaries of foreign companies already established in Greater Montréal, are now able to acquire on foreign markets machinery and equipment at a lower cost. These new acquisitions then enable them to increase productivity and become more internationally competitive.
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