COVER

THE COLOR OF MONEY

A MIX OF PROFITS AND NATIONALISM

GREG W. TAYLOR September 25 1989
COVER

THE COLOR OF MONEY

A MIX OF PROFITS AND NATIONALISM

GREG W. TAYLOR September 25 1989

THE COLOR OF MONEY

COVER

A MIX OF PROFITS AND NATIONALISM

It is nearly 20 years since the Royal Trust Corp.—just days before the April 29,1970, Quebec election—used two convoys of armored

Brink’s trucks to trans-

fer hundreds of millions

of dollars in securities from Montreal to Toronto. This fuelled the dire warnings that Quebec’s rising tide of separatism, francophone national-

ism and sporadic violence was driving business, dominated by the English, out of the province. The message gained strength in the wake of the Nov. 15, 1976, election that brought the separatist Parti Québécois to power—officials in Ottawa announced that 118 federally incorporated companies had moved their head offices out of Quebec during the first six months of the PQ’s reign. Coupled with an already weak provincial economy, those departures gave credibility to a then-widespread view that the province could not survive on its own. Even avowed separatist and University of Montreal economics professor François Vaillancourt said at the time, “If I were a businessman, I wouldn’t put my money in Quebec either.”

Strength: Now, on the brink of yet another election on Sept. 25, the climate has changed dramatically. Quebec business is dominated by aggressive francophone entrepreneurs. Supported by interventionist and nationalistic PQ and Liberal governments, the business community has prospered and matured. Indeed, its highly successful leaders have long since outgrown the need for provincial government support. Still, they recognize that separatism remains a powerful force in the province. Notes Marcel -

Dutil, 47, chairman of St-Georges-de-Beaucebased gas and steel conglomerate Canam Manac Group Inc.: “There is no doubt in my mind that separation is still a possibility.” But now, Dutil and many other francophone businessmen say that Quebec would continue to prosper even as an independent nation.

Indeed, PQ Leader Jacques Parizeau capitalized on Quebec’s economic strength last week

when he told 7,000 cheering supporters at a Montreal rally that the province would be better off on its own because “Ottawa is broke.” Said Parizeau: “To those who are hanging on because they think they are hanging on to something solid, I say, ‘Open your eyes.’ ” And in a series of interviews with Maclean’s, some of Quebec’s new business leaders said that Quebec’s future in Canada depends to a large extent on decisions by nonQuebecers: the ratification of the Meech Lake

constitutional accord, which would recognize Quebec as a “distinct society,” and success in reducing the federal budget deficit.

Dropout: Meanwhile, the record of corporate Quebec’s achievement is impressive. Quebec-owned and -operated businesses are functioning around the world, dominating their competition. The multifaceted Power Corp.— with interests in finance and communications,

among other areas—and transportation giant Bombardier Inc. are two of the best known. Dutil’s lesser-known Canam Manac has become both a major natural gas distributor and North America’s second-largest producer of steel joists, with plants in Canada, the United States and Europe. In 25 years, Bernard Lemaire, 53, an engineering-school dropout, has expanded Cascades Group from a single, dilapidated paper mill at Kingsey Falls, 90 km northeast of Montreal, into an international pulp-and-paper giant—while making himself one of the richest men in Canada. The Laurentian Group Corp., led by chairman Claude Castonguay, 60, controls financial assets worth $14.9 billion in Canada, the United States, Europe, Hong Kong and the Bahamas. And Quebecor Inc., guided by Pierre Péladeau, 64, has become Canada’s biggest-volume printer and one of the country’s largest publishers.

Greed: The success of those businesses reflects a striking change in the preoccupations of francophone Quebecers. Indeed, Cascades’ Lemaire notes that, for most French Canadians 25 years ago, “doing business was not the right thing to do. You had to be a doctor, a lawyer or a priest.” As recently as 1978, the

lack of francophone business experience and a sluggish provincial economy led a Bank of America spokesman to say, “The people of the province realize that full independence is not economically feasible.” Since then, such pessimism has clearly diminished. Indeed, Canam Manac’s Dutil said that, now, “nobody in Quebec has doubts they can manage an independent Quebec.”

There are several explanations for the dramatic reversal in attitude. André Saumier, a former priest, Quebec senior civil servant and now chairman of his own investment consulting firm, links the new outlook to the decline in the influence of the Roman Catholic Church in the province. “Greed is now an accepted way of behaving g in Quebec, as it is elseo where,” he observed. For his s part, Quebecor’s Péladeau 0 described the changes among 1 Quebecers in a more positive ° light and attributed them in large part to former PQ premier René Levesque. Noted

the publisher of Le Journal de Montreal, Montreal Daily News and The Winnipeg Sun: “He created a movement on economic levels by having people believe in themselves.” Whatever the influences, young Quebecers began entering business schools in unprecedented numbers in the early 1980s, flooding the province with well-trained entrepreneurs. But equally important have been the initiatives

of a succession of provincial governments with nationalist economic agendas. One crucial development took place before the burgeoning of nationalistic sentiment—the establishment in 1965 of the Caisse de dépôt et placement du Quebec, an agency responsible for administering Quebecers’ retirement savings and investing in the provincial economy. Liberal Jean Lesage was premier at the time, but the chief

architect of the new agency was Parizeau himself, who was an economic adviser to Lesage. At first, the Caisse played a conservative role, supporting fledgling companies like the Provigo grocery chain but investing primarily in Quebec government bonds. In 1980, however, Parizeau, by then finance minister in Lé-

vesque’s PQ government, brought in his friend and senior Quebec civil servant Jean Campeau to head the organization, and the Caisse began investing heavily in Quebec businesses. It backed several of Quebec’s growing cadre of entrepreneurs, including Dutil and Lemaire. Partner: Last month, the Caisse—which over the years has amassed a capital fund of $32 billion—continued that tradition with its $ 1.3-billion joint takeover with Montreal shipping company Socanav Inc. of the Montreal-based Steinberg

Inc. grocery chain. In fact, the very size and financial clout of the Caisse worry some Quebec business leaders. Said former Secor Financial Consultants president Marcel Côté, now an adviser to Prime Minister Brian Mulroney: “The Caisse is too big. I have always thought it should be divided into two or three.”

Quebec’s new high rollers have horizons beyond their province, but few look to the rest

of Canada for fresh conquests. Cascades’ Lemaire, for one, noted: “Our partner is the United States. That’s our market.” Indeed, Montreal consultant Saumier asserts that Quebec firms export their products to the United States after an average of two to three years of operation, compared with nine to 10 years for Ontario-based companies. The reason, said Saumier, is that other Canadians often view

Quebecers as a foreign culture, but Americans, he said, see Quebecers simply “as businessmen.”

But international commerce has given some Quebec businessmen a renewed pride in their Canadian citizenship. Said Dutil: “You don’t want to become an American. You are proud to

be a Canadian.” But he added that such pride is likely to last only “as long as the rest of Canada wants you.” Many francophones are still uncomfortable in anglophone Canadian business circles. Dutil, for example, said that, three years ago, he and two associates were stranded in the rain at the Toronto Island Airport. They asked a local businessman for a ride, he said, only to be told: “Go back to Quebec. We don’t need you.”

Dutil and other Quebec executives also told Maclean’s that, if the Meech Lake accord

is not ratified, they and many other Quebecers would take the rejection to mean that they are not welcome in Canada. Cascades’ Lemaire went further, seeing the failure to bring Quebec into the Constitution as a threat to the French language. Said Lemaire: “If there is a movement against protection of our language, then I might change my mind and say, ‘Hey, there is no other solution than to separate.’ ”

But the potential failure of Meech Lake is not the only threat to federalism. Said Dutil: “Ottawa needs to solve its deficit problems, too. I will not be surprised—if you have a breakdown in Meech Lake and you continue to have a $30-billion to $35-billion deficit—that at the next provincial election another [separatist] party will form. And they will have a good chance of being elected.”

For the most part, however, the nationalism of Quebec’s business elite stops at the door of the boardroom. When asked whether they would sell any of their holdings to either American or Canadian “outsiders,” most executives replied, “Business is business.” Noted Saumier: “As long as there is no money on the table, everybody can wrap themselves in the flag of his or her own choosing.” Still, publisher Péladeau echoed the views of several executives: “The stronger Quebec is, the stronger Canada will be.” And Laurentian’s Castonguay argued that economic integration with the United States by both Frenchand EnglishCanadian companies could help hold Canada together. Said Castonguay: “As a rule, prosperous people don’t want to rock the boat.” Wealth: Still, the question of independence is far from closed for Quebec’s newly powerful business elite. But now, if the PQ were to win next week’s election, it is doubtful that new truckloads of securities would bolt down the highway to Toronto. What has changed, according to men like Dutil, Castonguay and Lemaire, is that, for the first time, Quebec has the economic muscle to back a drive for independence—and they say that it is up to the rest of the country to decide whether the province remains within Confederation. Either way, they appear to be determined that the outcome will not impede the impressive growth of their own corporate bottom lines—or the province’s expanding wealth.

GREG W. TAYLOR