November 11, 1998
Lee Hochberg of Oregon Public Television reports on the devalued Candian dollar.
| LEE HOCHBERG: It's pure Hollywood - special effects lighting
- cameras rolling. A comic book here come to life soars through the air
to save the day. This TV series about "Nightman," a computer geek and
jazz saxophonist by day, enemy of evil by night, is standard Hollywood
fare. But this isn't Hollywood. Producer Allan Eastman films the program
in Vancouver British Columbia to take advantage of the US/Canada exchange
rate, a rate he says has saved his production $5 million.
ALLAN EASTMAN, TV Producer: It allows you to hire better quality of artists in many areas, acting, you know, in your wardrobe, and we spend more money on visual effects here because of having more money available.
LEE HOCHBERG: Nearby, another Hollywood team has built a 200-foot-wide, 14-foot-deep outdoor water tank to film a movie about a man-eating crocodile. Producer Peter Bogart brought his crew to Canada to take advantage of the exchange rate.
PETER BOGART, Film Producer: But it was the difference between making this movie and I believe not making this money. And I know people who don't think about shooting in the United States anymore. They just say, where are we going in Canada?
LEE HOCHBERG: The depressed Canadian dollar, nicknamed the "loonie" because it has a loon pictured on it, has made Canada a bargain for all sorts of Americans. It costs Americans only 65 cents to buy goods priced in Canada at $1. Twenty years ago the Canadian dollar was worth about the same as the US dollar. Then its value began to drop, reaching a low this summer of about 63 cents. The loonie's still close to that 140-year-low. Economists say it's fallen because Canadian industry has become less competitive. They blame some of Canada's industrial infrastructure, which they say is outdated and inefficient. Combined with high wages, that makes Canadian products expensive to manufacture. With 80 percent of the country's exports coming to the US and having to compete against American products, Canada has had to, in effect, discount its goods by lowering the value of its currency. Canadian economist David Bond.
DAVID BOND, Economist: The only way we could continue to sell goods to the United States was to take less American dollars for the same amount of goods, which means that the Canadian dollar was falling in value effectively.
LEE HOCHBERG: Bond, a consultant for Canada's Hong Kong bank, says economic problems in Asia have accelerated the loonie's dive. Asian demand for Canada's natural resources, like the sulfur at a Vancouver area dock, is down. This dampens demand for Canadian dollars and lowers the dollar's value.
DAVID BOND: If I'm in Japan and I want to buy a ton of wheat from Canada, I got to pay the Canadian in Canadian dollars, so I go to my bank and say here's some yen, give me some Canadian dollars. Well, if I'm not buying wheat, I'm not demanding Canadian dollars. Demand curve shifts down, the price falls.
LEE HOCHBERG: The falling Canadian dollar has been good news for some but bad news for others on both sides of the border. For companies like Oregon-based Pope and Talbot it's been a big plus. In February, this forest products company spent a bargain 69 million American dollars to acquire majority interest in British Columbia's Harmac Pacific. That's $4 million less than it would have needed to spend only weeks before. Pope and Talbot CEO Mike Flannery.
MIKE FLANNERY, CEO, Pope and Talbot, Inc.: The economy - the economic environment of the depreciating dollar certainly enhances that ability for us to do it. In a reverse situation we might have had cold feet on the subject.
LEE HOCHBERG: The weakness of the loonie may also be good for some Canadian sellers.
BOB RENNIE, Realtor: As long as our dollar says at these levels, American buying is going to continue, and I think we'll see an increase.
LEE HOCHBERG: With their land at a premium, Vancouver realtors like Bob Rennie are advertising the exchange rate in US newspapers.
BOB RENNIE: As a noticeable American buyer in town now, if I sell 20 sales here to American money at $150,000 average, you know, it's $3 million in real estate that I would not have sold if our dollar was stronger.
LEE HOCHBERG: And where are you two from? TOURIST: We're from the Ft. Lauderdale area of Florida.
LEE HOCHBERG: And at a time when the number of Asians visiting Canada has dropped dramatically, Canada's tourist industry is getting a boost from Americans.
ANOTHER TOURIST: What a time to go. You get so much for your money. I just bought a beautiful oriental rug. It's a good exchange rate.
LEE HOCHBERG: American tourists spent some $2 ½ billion in British Columbia this year, a 10 percent boost over last year. Tourism BC's Bill Eisenhauer.
BILL EISENHAUER, Tourism British Columbia: When they get up here and they see how far their dollar does go, our research has shown that they're staying longer and they're spending more than they had on previous trips.
LEE HOCHBERG: But some Canadian businesses are taking a solid hit from the loonie's fall. The Vancouver Canucks professional hockey team lost 35 million Canadian dollars last year. That's 20 million American. Canuck CEO Steve Bellringer says with the team collecting revenues in loonies but having to pay its players in more valuable US dollars, the exchange rate caused about half of that loss.
STEVE BELLRINGER, CEO, Vancouver Canucks: So our players are paid in US dollars, but our ticket prices are in Canadian dollars, our hotdogs are in Canadian dollars, our beer and programs are in Canadian dollars, and a Canadian dollar is worth that much less than a US dollar at this point in time.
LEE HOCHBERG: Other Canadians, who depend on American goods, are bracing for a long winter.
DAVID BOND: If you're a wine importer bring in California wine, California wine is getting expensive in this country. You're not going to do very well. Anybody who was really bringing in large amounts of American product is going to find that they're getting squeezed.
LEE HOCHBERG: And even some on the US side of the border are having tough times as the Canadian dollar languishes.
MAYOR JOHN HOBERLIN, Blaine, Washington: It's a terror. It's an absolute terror, and you can talk to any one of the merchants in this city, and they'll tell you the same thing. It's bleak.
LEE HOCHBERG: Blaine is a town of 3500, hugging the Canadian border in Washington state. It's the third largest border crossing in the US, and it built its economy on Canadians driving South to shop. But Blaine Mayor John Hoberlin says when the exchange rate began to plunge, Canadians stopped coming.
MAYOR JOHN HOBERLIN: If you look over to the right over here, we have a Mexican restaurant which has been out of business for about nine or ten months. The building behind us, it went out about two years ago, and we have had about four closures of the gas stations.
LEE HOCHBERG: Gas tax revenues that maintain roads are down $100,000. Some businesses at the nearby outlet mall have suffered a 40 percent drop in Canadian shoppers. Western Washington University economist David Merrifield says for every penny the loonie falls, retail sales in the county have plummeted 7 to 9 million dollars.
DAVID MERRIFIELD, Economist: We're probably talking $200/$250 million in retail sales lost to this area here, so that could be, you know, 10 to 12, 15 percent of what sales are in the region here.
LEE HOCHBERG: Merrifield says South bound traffic is also down at major border crossings in Maine, New York, Michigan, and Minnesota. And it's unlikely things will change soon. Economists say the loonie could hover beneath 75 American cents for at least another five years.