For Bellini, who dreamt of creating Canada’s first stand-alone pharmaceutical company, it’s a huge disappointment. But he feels he had little choice: when he wasn’t bending over backwards to convince skeptical local investors that a Canadian company was actually good enough to compete internationally, he was fending off stock market speculators who were pressuring him to cash in and make a quick buck. In 1998, several small bombs exploded outside BioChem’s offices. Bellini thought it was the work of aids or animal-rights activists. In fact, the culprits were short-sellers looking to push the company’s share price down so that they could buy the stock cheap and then cash in on their put options. “If you make a big discovery,” Bellini adds, “local investors will push you to sell it, to do a venture with an outside company, because they want the profit right away. They don’t realize that if you keep it, you can build something.” Bellini was finally convinced to sell the company when he couldn’t find anyone to replace him. Every potential manager he looked at “just wanted to ride the stock and get out.”
Despite Bellini’s frustration, the self-described “scientist–entrepreneur” couldn’t help but get back in the game. In 2002, he took the helm of Neurochem Pharma, which is developing a treatment for Alzheimer’s, pouring $25 million of his own money into the company. Bellini predicts it’s only a matter of time before his new venture suffers the same fate as BioChem. “I guarantee this company is going to grow very high and will be sold off — puff,” he says with a wave of his hand. “It’s like you have a good hockey team, and every time you go to the arena the people boo and tell you to get out — or they don’t come at all. Imagine playing to an empty arena.” It won’t affect Bellini, who has made a mint from the pharmaceutical business, but he worries about the big picture. “I win either way — I make my money and that’s it, I go fishing. The problem is for the local economy, which is going to suffer.”
It’s too bad, because if Canadians were just willing to stick it out and have the confidence to build something of their own, they could be world leaders. As Bellini points outs, one year after Shire sold BioChem’s vaccine unit, which at the time was one of the biggest in the world, for us$150 million, it was resold for approximately us$1.4 billion. “That shows we have good vision here, but we’re not willing to support it,” he says. It’s a quality that the Italian immigrant acknowledges has always distinguished him from his fellow Canadians. He mortgaged his house so that he could buy more shares in BioChem, but “a Canadian would never do that,” he admits. “I believed in what I was doing, and I believed that one day it would be a success. And for sure, I made a lot of money; my partners made money too, but much, much less. We could all have made a lot of money, the same amount, but I had a different attitude — you have to believe in yourself, and probably that’s what Canadians lack.”
But while Bellini is forgiving of his compatriots and grateful for the opportunity to pursue his dreams, Howard Balloch positively bristles at Canadians’ constant need to second-guess themselves. Canada’s former ambassador to China, Balloch left a twenty-five-year career in the civil service to open an investment boutique in Beijing. The crisply pressed, bow-tied diplomat is going head-to-head with bulge-bracket investment firms like Goldman Sachs and Merrill Lynch in one of the world’s most sought-after markets. “My goal is to build the best little investment boutique, and I don’t care who I’m up against,” he says. “I’m going to win.” What Balloch doesn’t understand is why so few Canadians seem to share his boundless confidence. “Where’s the belief that we can conquer the world? We’re every bit as bright, we have smart people from all over the world who come to live here, we speak a multitude of languages, and we have natural resources,” he charges. “What is it we don’t have that means we can’t compete? We should be on top of the world. We should be better than the Americans, faster than the Germans and more culturally conscious than the Japanese.”
After watching “the earth’s centre of gravity tilt” towards China in recent decades, however, there is one thing Balloch knows for sure: if Canadians continue to ignore these tectonic shifts, we will eventually fall through the cracks. The threat is all the more dangerous because it won’t be a calamitous collapse, like that of Argentina, but a slow, stealthy slide that will sneak up on us while we snooze, our bellies still uncomfortably full after gorging on a feast of oil sands and high copper prices. “Life is too easy, and Canadians are happy in their kind of graceful decline. We are determined to become the Argentina of the twenty-first century,” says Balloch. “We’re not under threat, we’ll just lose a little market every year, get a little smaller, another country will pass us on the scale and we’ll lose another hockey team.”
It’s a far cry from Sir Wilfrid Laurier’s bold pronouncement that the twentieth century belonged to Canada. From Laurier’s vantage point, overseeing a golden age of economic prosperity, an influx of immigrants eager to carve out a new life for themselves and the building of the country’s second transcontinental railway, Canada’s potential seemed to know no bounds. But like a locomotive that has run out of steam, Canada’s promising future has lost its momentum, sapped by decades of disastrous government policy and a complicit citizenry. Somewhere along the way, we lost the faith in ourselves and, with it, the opportunity that was ours for the taking. Now, left without the necessary tools— multinationals — for negotiating in a globalized world, we are in danger of becoming collateral damage.
A growing number of Canadians see the danger. Gary Comerford is one of them. Working as a branch manager for Canada Permanent Trust in Hamilton in the mid-1970s, Comerford concedes his most serious concern was whether a personal loan or mortgage went bad. “My world was the mountain in Hamilton,” he says. “It was a very limited, very parochial view of the world.” Thirty years later, as a vice-president with Sun Life Financial, spearheading the insurer’s entry into the Indian market as well as working on its entry into China, Comerford admits his perspective has been irrevocably altered. “It has become clear and unmistakable in my mind that you have to operate on a world platform. Speed to market and quality of execution: that’s what protects jobs, that’s just the reality,” he says from his Toronto office. “That micro world that you want to live in, the world of protecting what you had in the past, you realize is a fleeting thought. It’s like keeping a butterfly in a bottle; it’s beautiful and you want to keep it there forever, but if you keep it in the bottle, it will die.”
It’s time to set the butterfly free. To do that, Canadians will need to smash through a lot of myths that we have constructed about ourselves — myths about how the world operates and our place in it. We need to stop thinking of ourselves as victims and become “more than an expression of geography.” It’s time to boldly embrace who we are, and not just behind the comfort and security of our drawn curtains. Canada and Canadian companies need to learn how to brand themselves, and not only to their home audience but to the world. As one frequent traveller to China put it: “There is a Starbucks opening on every corner in China— they have a great brand. Canada doesn’t have a brand.”
Molson had a brand. But the company never really believed in it. If it had, its breakthrough “I am Canadian” ad campaign would have become a rallying cry for taking on the world instead of a tired rant predicated on, as one marketing expert observed, a “single-minded, almost simple-minded patriotism.”5 By opting to coast on a cheap appeal to Canadian pride while selling its beer in ugly old brown bottles, Molson chose easy profits at home over global conquest. It was a formula that was doomed to fail. “They had such a short-term emphasis on profit that they fucked their long-term prospects,” says Michael Palmer of Veritas. Molson, concluded one newspaper columnist, inevitably became “trapped in its own marketing impotence.”6 The question is, will the rest of Canada make the same mistake, or will it find a new anthem?
In 1998, while working as a reporter in South America, I took a trip to Patagonia. Having crossed over the border from Chile, I had made my way
to the windswept coastal town of Rio Gallegos in Argentina. Walking into a souvenir shop on the town’s deserted main strip, I noticed there wasn’t much to buy and I soon found myself talking with the store’s disconsolate owner. As he observed his empty shop, a layer of dust covering the leather boots and crude silver knick-knacks, he bitterly lamented the dire situation his country was in, made all the more evident when compared with the boom in neighbouring Chile.
Argentina produces more than twice as much wine as Chile and is believed to have even richer mineral deposits. Yet it is Chile, a tiny sliver of a country that is almost completely consumed by mountainous terrain and uninhabitable desert, that has emerged as the economic dynamo, while Argentina, a vast expanse of unmined opportunity, remains a backwater. “You know what the Chileans have that we don’t?” said the shopkeeper. “They know who they are.”
It’s something Canadians might do well to think about. At the time, Molson’s “I am Canadian” seemed to sum up the country’s essence. But on reflection, do we know what it really means?
* Interbrew subsequently acquired Brazil’s Ambev and is now called InBev.
PART ONE
WHY WE CAN’ T COMPETE ABROAD,
OR WHAT HAPPENED TO OUR
COJONES ?
1 TIME TO WAKE UP
“Canada is the most comfortable country in the world. You are nice people, but you are not a trading nation.”
BORIS ROUSSEFF, EUROPE AN TRADE EXPERT
IT’S 3 PM and the patio of El Coronito restaurant in downtown Mexico City is quickly filling up with businessmen in dark suits and open-necked dress shirts meeting for lunch. The smog that normally hangs over the Mexican capital like a dusty grey-brown shroud has temporarily lifted to reveal a cloudless, azure sky. A bright white sun beats down on tables cluttered with bottles of pale beer and tequila shots, its rays refracting in the mass of glass and crystalline liquid, creating a dazzling glare.
Bruno Perron orders his usual michelada, a Mexican beer doused with chili and a squirt of lime, before reaching for a tortilla and filling it with a mixture of melted cheese and chorizo. If it weren’t for the slight French inflection in his otherwise flawless Spanish and the Quebec licence plate on the suv he drives like a demon through the city’s crumbling streets, he could easily pass as Mexican.
Originally from the small Quebec town of Thetford Mines, Perron moved south more than a decade ago. He had just finished university and had a job offer from a large mutual fund company. But somehow, perhaps after watching his hometown, one of the world’s largest producers of asbestos, go from boom to bust, he figured he needed a competitive edge over the three thousand other students in his graduating class. The much-vaunted North American Free Trade Agreement, NAFTA, was just being signed. The twenty-something figured that if he learned Spanish and got a handle on the Mexican market, it would give him an advantage when he eventually moved back to Montreal.
“Looking ten years ahead, I thought Mexico was going to be important,” says Perron. “Unfortunately, it is not as important as I thought it would be.”
Far from it. More than a decade after NAFTA was signed, the road paved into the dense, jumbled market is largely deserted. While Americans, Europeans and Asians have piled in to sell product to Mexico’s young and underserved population or outsourced manufacturing to take advantage of lower labour costs, Canadians have eschewed Mexico’s arid northern industrial parks and rutted city streets for the silky-white sand beaches of Cancún.
Canadian business, either baffled by Mexico’s seemingly inscrutable business culture, leery of corruption or dismissive of its still developing market, has largely opted out. While bilateral trade has tripled since 1994, Canada sells a scant 0.7 per cent of its merchandise goods to Mexico. As of 2005, Canada had invested a measly $3.1 billion, equivalent to less than 1 per cent of its worldwide assets7 and a drop in the bucket compared with the more than $130 billion in foreign investment that has poured into Mexico since 1994.
It is not as if the Mexicans didn’t want Canadian investment. In fact, as they launched the largest sell-off of state-owned assets in Mexican history in the late 1980s and 1990s, they actively courted Canadians. Modest, manageable and politically neutral, the Canadians offered a middle road between powerful American interests still tainted by a history of war, annexation and economic imperialism and the powerful clutch of Mexican families whose sprawling, interwoven conglomerates dominate the economy. But there were few bites.
One Canadian banker recalls how he was approached by a Mexican cabinet minister looking to unload a vast copper mine in northern Mexico. The government was anxious to keep the mine out of the hands of Jorge Larrea, a hard-nosed tycoon who already controlled a number of privatized mines and railroads. Canada seemed like an obvious candidate. “The minister told me price was no object,” said the banker, who set up meetings with Canadian mining companies Noranda and Falconbridge. “The Canadians didn’t even want to look at it,” he said. In 1991 Larrea acquired the mine — Cananea — turning it into a springboard for his company, Grupo México, which went on to buy mines in the United States and Peru and is now the world’s fifth-largest copper producer. As for Noranda and Falconbridge, they no longer exist, having been acquired in a $20 billion hostile takeover by Xstrata and subsumed into its sprawling empire.
In 2001, President Vicente Fox took the unusual step of inviting twenty Canadian energy companies to his private ranch in a bid to coax them into investing in the creaking Mexican energy sector. His country was ramping up its industrial production and was in dire need of new energy capacity. The Canadians, mid-sized and without the political baggage of the Americans, seemed like the perfect fit. “There were twenty guys at the ranch— and only three went in,” said Michael Stewart, former president of B.C.-based Westcoast Energy International and one of the guests.
Of the three, including Westcoast, only the Alberta energy utility TransAlta is left. “People view Mexico as a wild, unsophisticated country, but parts of it are much more sophisticated than Canada, and some parts are much better to do business in than some parts of Canada,” said Stewart from his Calgary office. “You would think people in this town should look there. You can fly to Mexico City in the same time it would take you to get to Halifax — and the food’s better. But it’s tough to get people interested— they’re put off by the bureaucracy, the language and the built-in biases of what they think they can and cannot do.”
It’s the same story in banking. Canada’s Scotiabank and Bank of Montreal (BMO) were among the first foreigners to make careful inroads into Mexico’s tumultuous financial sector. Mexico’s banks had been nationalized in the 1980s and then reprivatized in the early 1990s before a currency crisis in 1994 prompted the collapse of the entire financial sector. In a cautiously astute manoeuvre, BMO swapped Mexican sovereign debt in 1996 for a minority equity stake in Bancomer, the country’s number two bank. The move was expected to position BMO, which already owned Harris Bank in Chicago, as the pre-eminent NAFTA bank. Instead, at the height of a foreign feeding frenzy in the sector, including the massive us$12.5 billion purchase by Citigroup of Mexico’s largest bank in 2001, BMO pulled out of Mexico.
David Winfield, Canada’s former ambassador to Mexico, was on the board of Bancomer at the time. He tried to persuade BMO to buy the bank. “They could have done so much better, and so much better throughout the Americas. BMO was well positioned with Harris Bank in the United States, and Bancomer was exceptionally well positioned to do Hispanic banking.”
Instead, Tony Comper, BMO’s president and chief executive, “was persuaded it was too big a risk and too expensive,” says Winfield. “I think it was the wrong decision. But it required a visionary to see there was a business opportunity there.” Comper, who was tapped for the “Don Knotts Award for Meekest Ambition” by National Post Business magazine, sold out to the Spanish, who along with the Americans and the HSBC Group dominate the amazingly profitable sector, which boasts returns of over 20 per cen
t.
It is not as if there are no Canadian companies in Mexico. Scotiabank survived the currency crisis to see its wildly profitable Inverlat subsidiary, which represents just 6 per cent of the Mexican market, contribute 11 per cent to the bank’s bottom line. A number of Quebec companies, like Bombardier, Quebecor and Transcontinental, have also made the trek. In many cases, however, companies such as auto parts maker Magna “were dragged down” by their clients. Others tried, but were unable to penetrate the market. “When I compare the number of Canadian companies going through my office and the rate of success, it was very, very low,” says longtime Mexico hand and former Scotiabank executive Pierre Alarie. “We missed the boat everywhere.”
Troy Wright, former president of the Canadian Chamber of Commerce in Mexico and the managing director of Inverlat’s capital markets division, admits Canada’s track record has been patchy. “The Europeans— Spain, France, Italy — have been aggressive. It’s an attitude you don’t see in Canada. The U.S., when they see an opportunity, they attack,” says Wright. “Canadian companies take the cautious route or no route at all.”
Why Mexicans Don't Drink Molson Page 2
