Vic Fedeli's pretty jazzed up about the year ahead for Ontario's economy.
And it's not just because his mother — who, by his account, is in great shape — still plans to keep the quintessentially Italian tradition alive by making homemade tomato sauce later in the summer.
Why would Ontario's minister of economic development say anything else to a journalist (on the economy, not the sugo) in an on-the-record interview?
"We may be in for some pain" isn't exactly the type of quote any minister or press secretary would want. Unless, maybe, they're scared the pain could be so severe that it warrants prepositioning.
Fedeli, however, didn't do that during our 20-ish-minute call last week.
QP Briefing asked how a potential looming recession could condition his plans for 2023.
Fedeli was keen to take the question on because he doesn't see it coming.
Every day, Fedeli sends Premier Doug Ford a text.
"Every day I send him the name of a company, how many millions they're investing in Ontario, the city that they're investing in, how many people they're hiring, and whether we have any skin in the game or not."
Essentially, between the big auto investments and other ones that might not grab as many headlines, Fedeli is confident the work the PCs have done to "lower the cost of doing business" will pay dividends in a rocky macroeconomic environment.
Fedeli isn't alone in this thinking. His boss, Ford, isn't scared either. Quite the contrary.
"Make no mistake about it: are we all gonna see a few bumps? Sure. But I'm just not seeing it here in Ontario," Ford said of a potential recession on Monday. That line wasn't in the premier's script, either, so it's clearly on his mind.
READ MORE: <a href="https://www.qpbriefing.com/2023/01/23/roma-2023-ford-veers-off-script-to-praise-low-taxes-downplay-recession-fears/">ROMA 2023: Ford veers off-script to praise low taxes, downplay recession fears</a>
Economists and other finance folks, however, are ringing alarm bells.
<a href="https://thoughtleadership.rbc.com/rate-hiking-cycle-ending-as-recession-edges-closer/">RBC's latest economic outlook</a> said Ontario is "at a greater risk of recession in 2023" thanks to "high debt loads" which makes the province's "residents and businesses particularly sensitive to interest rate hikes."
Speaking of hikes, the Bank of Canada is widely expected to raise rates again this Wednesday — <a href="https://www.bankofcanada.ca/core-functions/monetary-policy/key-interest-rate/">the current overnight rate's 4.25 per cent</a> — when it meets for the first time this year. It would be the eighth straight rate hike since the central bank went headlong into the inflation fight, starting on Jan. 26, 2022. Before that, the Bank kept a low, steady 0.25 per cent rate for a while.
The RBC report predicts a 0.1 per cent drop in real GDP growth this year, which would be the worst among Canada's provinces. In fact, it's the only one expected to have negative growth. Ontario should get back to real GDP growth in 2023 — about one per cent — good for second last place in Canada, next to Newfoundland and Labrador.
<a href="https://news.ontario.ca/en/statement/1002629/ontario-creating-conditions-for-attracting-good-jobs-and-investments">The PCs have been using job growth figures to counter</a> the slow-growth, potential recession narrative.
Despite troubling macroeconomic signs, Statistics Canada's monthly job numbers "showed employment in Ontario increased by 42,100 jobs in December 2022, with total employment up by 104,500 in 2022," according to a recent press release. Fedeli also touted those numbers in the call.
Fedeli — whose ministerial title also includes job creation and trade, making the most cumbersome acronym (MEDJCAT) in provincial politics — was adamant 2023 will be a big year, especially for Ontario's auto sector.
Building on the past few years is no small task.
His office was kind enough to provide QP Briefing with a handy document outlining all the money various automakers have invested in Ontario since October 2020.
The running tally's about $16 billion, split between remodelling existing auto assembly plants and diving headfirst into next-gen auto manufacturing stuff like electric vehicle batteries. <a href="https://www.qpbriefing.com/2023/01/23/roma-2023-ford-veers-off-script-to-praise-low-taxes-downplay-recession-fears/">And there's probably more to come</a>.
Last year, the Toronto Sun <a href="https://torontosun.com/opinion/columnists/lilley-ontarios-auto-industry-looking-to-add-ferrari-to-the-mix">reported</a> on talks between Ferrari and Ontario. The luxury Italian automaker doesn't produce enough cars to justify building its own battery plant, so it's looking to outsource that — maybe in Ontario. The Stellantis/LG and Umicore plants produce what Ferrari's looking for.
Naturally, QP Briefing asked for an update on those rumoured talks. Not just with Ferrari, but with any others.
On what's in the pipeline, Fedeli played his cards close to his (unofficially) trademarked yellow tie.
"I will tell you," Fedeli said, preceded by a slight chuckle, "that we have talks with a lot of companies from around the world." Since the June election, Fedeli's been to Korea, Japan, India, Germany, Austria, Belgium and the U.K. to chat with various companies — mostly automakers and related enterprises — about Ontario's economic potential.
He didn't name names, but did provide a hint as to what exactly he'll be focusing on for the next stage of Driving Prosperity, the PCs’ strategy for Ontario's auto sector.
It's all about ensuring automakers can build electric cars in Ontario from start to finish. Closing the loop in the supply chain, in more corporate speak.
"Our job now is trying to fill in the rest of that supply chain for LG, as well as looking at and negotiating with further battery manufacturer prospects that we have worldwide," he said.
Ford was also nice enough to scoop Fedeli a bit at the Rural Ontario Municipalities' Association's big annual conference in Toronto on Monday. He told the delegates to "stay tuned" for another big battery plant announcement.
Flavio Volpe heads the Automotive Parts Manufacturers' Association and works hand-in-glove with Fedeli on auto issues. He provided a bit more details as to why 2023 could be such a good year for Ontario's auto sector.
While a recession may be on many minds, Volpe's read on the business environment is that it actually favours Ontario's electric vehicle push.
The new NAFTA trade deal has strong rules-of-origin clauses that essentially mean if a company wants to sell cars to the U.S. — one of the world's biggest markets — a good chunk of the final product has to be built in Ontario. That's thanks to labour standards, component parts rules and more.
As for the rules in NAFTA around battery components for electric vehicles, Ontario's way ahead of everyone else, Volpe said.
And, as enormously influential states like California move toward getting more drivers in electric vehicles, that means more business for Ontario factories, he added. The Golden State is leading an effort, with 16 other states, to strengthen tailpipe emissions standards. The U.S Environmental Protection Agency <a href="https://www.pbs.org/newshour/nation/over-a-dozen-states-grapple-with-adopting-californias-electric-vehicle-mandate">decreed</a> that other states either abide by stricter federal standards, or follow California's already strict standards.
The other thing Fedeli said he's pretty excited about is critical minerals.
"One area that we have not seen come to fruition yet, just because of the timing and the newness of the revolution here in Ontario, is critical minerals," he said.
There are a bunch of mines in the north, plus the entire Ring of Fire.
"We're talking billions of dollars of investment that's going to be required," he said.
"And I'm a northern boy — born and raised in North Bay," so seeing some of the facilities that'll convert those materials into stuff the automakers can use would be awesome, he said. But he recognizes that might not be possible.
"Nonetheless, they've got to be built."
The PCs are all in on the Ring of Fire.
Robust reporting by several outlets, however, including several stories by <a href="https://thenarwhal.ca/ring-of-fire-federal-briefing/">The Narwhal</a> and <a href="https://www.theglobeandmail.com/business/article-the-road-to-nowhere-why-everything-youve-heard-about-the-ring-of/">The Globe and Mail</a>, cast serious doubts on the viability of the project.
The reporting lays out a series of problems. Building the necessary infrastructure is going to be <a href="https://www.theglobeandmail.com/business/article-the-road-to-nowhere-why-everything-youve-heard-about-the-ring-of/">incredibly expensive</a>, and the PCs have had trouble getting the funding, according to one <a href="https://thenarwhal.ca/ring-of-fire-ontario-election/">Narwhal</a> story. The raw materials contained therein <a href="https://www.theglobeandmail.com/business/article-the-road-to-nowhere-why-everything-youve-heard-about-the-ring-of/">might not be worth</a> what the government thinks they are. Many Indigenous communities <a href="https://thenarwhal.ca/ring-of-fire-ontario-election/">aren't exactly on board with the plans</a>, either, and have launched a court challenge. <a href="https://thenarwhal.ca/ontario-ring-of-fire-explainer/">Ottawa has said</a> it's only interested in developing the region if First Nations communities sign on.
The federal government, initially mum on the prospects of funding it, <a href="https://thenarwhal.ca/ring-of-fire-federal-briefing/">may be moving closer</a>, though. The last federal budget included $1.5 billion for critical mineral extraction infrastructure development, <a href="https://thenarwhal.ca/ring-of-fire-federal-briefing/">but it's not exactly clear</a> whether that means it's for the Ring of Fire.
Seeing Fedeli as the government's chief salesman — chasing investments and doling out a lot of public money to private companies — may be a strange sight to some, considering his time as the PC finance critic.
While the finance critic, Fedeli dove deep into budgets of the day for his "<a href="http://fedeli.com/media/focus-on-finance/">Focus on Finance</a>" series. Back then, he was no fan of "corporate welfare" — giving public dollars to private companies — and <a href="http://fedeli.com/wp-content/uploads/2015/07/FF01-7-1.pdf">advocated for scrapping the practice entirely</a>, after the <a href="https://www.opsba.org/wp-content/uploads/2021/02/drummondReportFeb1512.pdf">Drummond Report</a> recommend the same thing.
Now, that he's in the MEDJCAT role, he's taking a different approach.
"We looked at the 100,000 auto jobs that were on the brink of being lost in Ontario. Then we looked at, what do we need to do to save these jobs?" he said.
That's where the incentives come in. Essentially, if other countries and subnational jurisdictions offer up public money, in a competitive market, what else is there to do?
"We understood loud and clear that, at this time in the business cycle, incentives are required as an opening bargaining chip in order to be looked at. We fully understand that and we fully understand that. And that will continue. The door is only open for so long in electric vehicles."

Vic Fedeli goes from focused on finance to attention on autos

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