Manitoba Hansard — Sitting 32B (32nd Legislature, 1st Session)

32-1-32b

Manitoba — Debates (Hansard)

LEGISLATIVE ASSEMBLY OF MANITOBA Tuesday, 13 April, 19 82 Time - 8:00 p.m. CONCURRENT COMMITTEES OF SUPPLY SUPPLY - CO-OPERATIVE DEVELOPMENT MR. CHAI RM AN, Har ry M. Har apiak (The Pas): We'll ca ll the co mmi ttee to order. We are on Co-operative Develo pme nt, No. 2.(

a) on Salaries. The Mem ber for La Verendrye. MR. ROBERT (Bob ) BANMAN (La Verendr ye) : That's okay, Mr. Chair ma n, they mixed us up all the time. I'd like to spend so me ti me discussing the financial package that was put together for C. I. and I'd like to ask the Minister who is now running C. I. , in other words, who makes up the Board of Co-op Imp lem ents Limited? MR. CHAI RM AN: Mr. Minister. HON . A. R. (Pete) ADAM (S te. Rose): Mr. Chair ma n, I wonder if the memb er wants individual na mes or if he just wants to know the ma keup of the board. MR.

BANMAN: Just the positions that are in place, I'm not interested in the exact na me s or anything but I wou ld just like to know who's running C. I. at present. MR. ADAM: There has been an adm inistrative co m mittee set up and there are two representatives from the Government of Canada; there is one representa tive from the Government of Saskatchewan; there are three from the Co-operate Group; there is one from the Co-operative Implements from Saskatchewan and one from Co-operative Imp le ments from Mani toba. That's the com position of the Board at the pres ent ti me . MR.

BANMAN: The representatives from C. I. Sas katchewan and C. I. Manitoba, how are they chosen? MR. ADAM: These were appointments, Mr. Chair ma n, arising out of the 1978 financial assistance package that the Member for La Verendrye, I believe, was perhaps involved at that ti me. I'm not sure or not, but perhaps he was. MR. BANMAN: It was my predecessor, I think, the Mem ber for Brandon West was in charge at that time, I'm not sure, but I wonder if the Minister co uld tell us if any of these people are elected by the mem bers of Co-op Impleme nts. MR .

ADAM: I am informed that the last two, the Co operative Imp le ments representatives are elected. MR. BANMAN: Is there a Board of Directors elected by the memb ers of Co-op Impleme nts at al l? MR. ADAM: There is, yes. MR. BAN MAN: Does that Board take their instruction 14 23 from this Board? MR. ADAM: Yes. MR. BAN MAN: So, rea lly what we're saying then, Mr.

Chair ma n, that under the new package that we've developed, the new financing package, the Board that's in pl ace right now that I guess you would refer to as the super Board is the board that is appointed; two representatives from the Federal Govern ment, one from Saskatchewan, three designates from I guess Federated and a few other groups. Then another two nom inated from the respective Cl groups from Saskatchewan Manitoba. MR. ADAM: But that is under the old agreement, Mr. Chair ma n, that's not the new agreement. MR. BAN MAN: Well, what's the new agree ment then? MR.

ADAM: There will be a representative from the Government of Manitoba. MR. BANMAN: So then the board composition will be, instead of eight will be nine, with Manitoba adding one nom inee. MR. ADAM: That is correct. MR. BANMAN: The three that sit on there from the co-op groups, which co-op groups? MR. ADAM: They represent 12 major co-operatives, I'm informed by staff. MR. BANMAN: How would they be chosen? MR. ADAM: This is decided by the co-operatives themselves, who sits on that board. MR. BANMAN: That's by management? MR. ADAM: Yes, I believe that is correct. MR.

BANMAN: I don't know, am I being repetitive, but out of which three groups do they co me? MR. ADAM: Credit Union Central, Federated Co-op and Saskatchewan Wheat Pool. MR. BANMAN: So, we've got two federal mem bers, we've got one from Saskatchewan Govern me nt, we've got one from Credit Union Central, one from Saskat chewan, from Central and Saskatchewan. MR. ADAM: That's Credit Union Central from Sas katchewan, Mr. Chairman. MR. BAN MAN: And then we've got one from the Sask Pool? MR. ADAM: One from Sask Pool and one fro m Fed erated Co-op.

Tuesday, 13 April, 19 82 MR. CHAI RMAN: I'd li ke to caution the mem bers that this is being recorded by Hansard and when you get into a conversation it's difficu lt to decipher who is speaking so please wait to be recognized. MR. ADAM: I apol ogize, Mr. Chairman. MR. BANMAN: So, what we're going to have now is a nine- memb er board. Who does this board report to? MR. ADAM: They wou ld report to their respective organizations, I presume. Mr.

Mccready was quite involved in the latest financial package, he's on the board representing the Federal Govern me nt and there's another ap pointee, and the answer to the Fed eral Government. The Government of Saskatchewan has an appo intee there too, he reports to the Govern me nt of Saskatchewan. The three co-operative app ointees report to their respective co-operative groups and the other two are from the Co-operative Impleme nts, one is fro m Saskatchewan and one is from Manitoba. MR. BANMAN: When the Ministers say, Co-o p Impleme nts, does that me an the Manitoba producer group, or consumer grou p? MR.

ADAM: Yes, the Mem ber representing the Co operative Impl eme nts fro m Saskatchewan is the Chair ma n of the Board, and the Manitoba representa tive is the Director of the Board. MR. BANMAN: Now, this is a Board that effective ly is running the op erations at C.I. right now, is that correct? MR. ADAM: Yes. MR. BANMAN: Do the memb ers elect their own Board? MR. ADAM: Yes. MR. BANMAN: And what does that Board do? MR. ADAM: That Board has the day-to-day opera tions under the supervision of the Adm inistrative Board. MR.

BANMAN: Wel l it wo uld be fair to say then, I guess, that this C.I. the way it is being op erated now wou ld be operated almo st li ke a Crown Corporation right now? MR. ADAM: We have held the position, Mr. Chair man, that we would have li ked to change the authority of this Board to al lo w the Board to operate Co operative Impl eme nts, the day-to-day operation of the C.I. Im pleme nts, and our position was that the Adm inistrative Board shou ld only be involved in liq uidation of assets or obtaining of financial assistance or whatever.

We are still negotiating on that point and under the new agreement we will have a Manitoba representative on that Board; and the reason why the arrange me nt is in this way is because of the financial input by the different groups. But we take the position that despite the fact that there has been financing ava ila ble from the Government of Canada, the Gov• ern ment of Saskatchewan - and the Government of Al berta doesn't have a rep resentative on the board - and the Co-op groups, we still feel that there shou ld be so me way that the Board can operate the day-to day op erations of C.I.

Im pleme nts apart from the major expenditures or sel li ng off of assets or arrang ing for financing, etc. Mr. Chairman, the Manitoba position is that the C.I. Board be responsib le for management, and the ad m inistration com m ittee be responsib le as a banker or supervisor to protect the investments of govern ment and others involved. It was a condition of our participation that management shou ld be the respon sibility of C.I. directors and not the adm inistration. MR.

BANMAN: Has the Minister in discussion with the other partners involved in this particular corpora tion, and I again put it to the Minister that really the new infusion of capital is what has been put in before, really what we're heading for here is another big Crown Corporation because the mem ber's equity I think now is overshadowed by what governments have put into the op eration.

I wonder if the Minister co uld tell me when he says, "The adm inistrative co mm i ttee is going to lo ok after the big descision s, " does that mean the hiring of for instance, the execu tive officers and that type of thing, senior manage ment people , or what are we talking about, day-to-day operations? MR. ADAM: The adm inistrative co mmi ttee wi ll be responsib le for poli cy and ma jor decisions apart from the day-to-day operation, al though the adm inistrative co mm i ttee does have the authority to do that as well.

But the financial assistance excepting the portion that has been forgiven by the Federal Government, are on ly loan and loan guarantees. MR. BANMAN: In the refinancing package that has been put forward, the Co-op mo vem ent itself, the consumers are being asked to put in $5 mil li on. Has the Minister had any indication from the system - and I'm tal king about mem bers, I'm not talking about Saskpool or the Centra ls of Saskatchewan, Al berta or Manitoba - but what are the prelim inary indications as to the $5 mil li on to be raised by the shareholders thems elves? 14 24 MR. ADAM: Mr.

Chairman, it is my understanding that they have 5 years to raise the $5 mil li on. The imp ression we get from management of the Co-op groups and the Co-op Impl eme nts, that they are con fident those funds wi ll be forthcoming and in fact they are proceeding further than that. They are now app roaching their memb erships for financing beyond the $5 mil li on. This is what they are prep aring for, whatever hap pens down the way so far as Co op erative Impl eme nts is concerned.

Before this financial package is co mpl eted it wil l take some ti me to develop it because it has to go through the Securi ties Com m ission of each province and that is in regard to the mem bership participation because there are securities involved and that can't be done in mu ch less than six months, to go through the different Se-

Tuesday, 13 April, 19 82 curity Commi ssions in the different provinces. They will be receiving preferred shares for the $5 mill ion. MR. BAN MAN: Is the Mini ster saying that the differ ent respective co-operative groups will be going out sel ling shar es to raise the $5 million and if so, how many shares are they going to issue and what are they going to ch arge a share? MR. ADAM: The Co-operative Implements will be the body that will contact its mem bers for sub scription of preferred shares.

I don't have that information because the amount of the shares. whether they be $10 a share or $1 00 a share, that would be entir ely up to Co-op Implements. MR. BAN MAN: I think just because it's the key in the whole packa ging agr eement was my concern when I was Minister, is to see what kin d of comm it ment is out there by the mem bers because go vernme nts have now, as I've in dicated, thrown a massive amount of money into this one fac ilit y. My concern is, where is this particular operation going to head?

In other words, is there a possibili ty in the future 5, 10 years down the road for the co-operative gr oups to take over this fac il ity again and operate it the way they have in the past? From the prelimi nary look at it, it looks li ke it's going to be a long, tough road to hoe. I would be very pleased to see the memb ership come up with $5 milli on to show their commit ment to this.

But I wonder if the Minister could tell us. how he envisions this company bei ng turned back to the mem bers, really gett ing the governm ents out of the busi ness of runnin g this plant because the way I see and the way it has been handled in the last couple of years is that is basi cally what has happened. We got into it because there were problems and we're gett ing into it deeper right now with this package. I'm wonder ing how the Minister feels with regard to how we're going to get this co-operative back into the hands of the mem bers. MR. ADAM: Mr .

Chair man, one of the conditions that was part of the financial agr eement was that the memb ers at large, the memb ers of the Co-operative Implements would raise $5 mil lion in equit y and that is a condition that has to be met if they want to li ve up to the agree ment. We hope that this new fina ncial pack age will assist Co-operative Implem ents to become profitable. Of cour se there are a lot of uncertainties out in the agr icult ural field at the mom ent.

The industry as a whole is going through a very very difficult period and one has only to look at the Massey Har ris and Whit e Com pany Lim ited, and other farm imp lement manuf acturers, to recogn ize that it's not a very good situation at the moment, but if gr ain prices remain strong and if the farmer gets a fair price for his production, he will regain the confidenc e in his opera tion and will start purchasi ng new equipment as he has in the past.

Of course, again, we migh t come back again to the high -i nterest rates which also is cause for concern by farmers who wish to make large pur chases of farm equipment; that is one area. Another area is the Federal Budget which only allo ws 15 percent depreciation, I belie ve it is, which last fall has had a negative effect on farm equipm ent 14 25 purchases. But, gi ven the fact, that the Province of Man itoba, with this financial arrangement, is in a much better position than, of course, the other partic ipants in this fi nancial agr eement in that the factory is located in the Provinc e in Man itoba.

Ther e are spi noffs involved; there's a $1 0 million payroll; there are over 600 emp loyees, and with the spino ffs we feel that this financial package is a very attractive one for Mani toba, for the provinc e's investment. I'm referring, of course, to the last financial package for an investment of less than $3 million the province had an injection of approxima tely $32 milli on com ing in from other areas of the province and this certai nly has to act as a stimula nt to the economy of the Provinc e of Mani toba.

We are certainly hopeful that this will allow the Co-operative Implements to become a viable com pany, providing that the farm economy is buoyant and, of course, hoping that the interest rates will come down so that farmers can go out and buy machi nery and not have to run for cover when he finds out how much the interest is going to cost him on a $1 00,000 combine, or a $1 00,000 four-wheel-drive tractor. So, there are some unkno wns out there that we can't judge at this time. I certainly can't and I don't think that anyone else can.

But in regard to the mem bers quest ion about the member participation in the $5 mil lion, it was recog nized that it may be diff icult to raise this $5 million and it was for this reason that we allowed the five-years time for them to do so.

But it was a condition that mem bers put up the $5 mil lion by way of equity over the next five years; that's $1 million a year. and the amount of memb ers that they have they should be able to do that and if the Co-op will retire its deficit and make money over a period of time, it should be able to pay off its creditors and control will go back to farmer memb ers and it's our hope that this will speed up that process. MR.

BAN MAN: The Min ister hit on precisely the rea son I think, that Man itoba is in this, not even apart from the philosophical one, and I guess any govern ment of any pol itical stripe has to look at the benefits that are derived from having this factory in the pro vince. You don't even have to get philo sophical about it when you can attract $32 million worth of capital and put out $3 million and have an annual payroll of $1 0 milli on. If you can keep the company going for another two to three years, you've got that com ing back in tax revenues plus the spi n-off.

I gu ess that is what every government was faced with; that's what we were faced with; because the majority of workers and the plant being in Transcona here, the majority of activity is in the Province of Manit oba and there was no way that you can't move on some thin g when you haven't got that kind of an injection of capital into the province.

The Min ister, in speaking to the Sp eech from the Thr one, said that the Federal Government was no longer talking to the provinces when he took over but was speaking to the Co-op package and that the package was much reduced as far as the financial inputs were concerned by the provinces and by the Federal Government. I wonder if he could just tell me what he meant by that.

Tuesday, 13 April, 19 82 MR. ADAM: Mr. Chairman. when I took over the port folio late in the year, I found that the position of the provincial governments were that the financial pack age should be based on a two-to-one federal - $2 from the federal and $1 from the provinces on that ratio - and what I found was that while the Federal Minister of Agriculture had agreed in principle to this. when he got back to Ottawa and tried to get that package through his Cabinet, he was unsuccessful.

What they had come up with was not $14 million in new money, but $7 million in new money, and they were willing to write the $7 million off the previous package - it was $6. 44 million that was in new money - but they were not prepared to go for the two-to-one ratio and we felt it was necessary in order for C.

I. to continue as a member, I just mentioned a while ago for another three or four years, that it was necessary that there be $1 4 million of new money in addition to the $7 million that the three prairie provinces were committed to, plus the $9.5 million that the Co-op group and plus the $5 million from the members.

Now I want to advise the Minister that this took a little bit of negotiating on the part of the Minister of Co-operative Development for Manitoba along with his counterparts from Saskatchewan and Alberta, but what I did find in addition to this was that the Co-op group had sent a telex to Ot tawa accepting the pro posal that the Federal Cabinet had accepted and that is where, when I mentioned that in the Throne Speech, the Federal Government had called in the Co-op group to present them with that pa ckage.

They were no longer talking to the province on the two-to one basis, therefore that is the reason of my remarks. Now with the co-operation of our two sister provin ces to the west, and I certainly want to congratulate the Minister of Co-operative Development, Mr. Don Cote and Mr. Dallas Schmidt from Alberta, the Minis ter of Agriculture and also to Mr. Eugene Whelan and to the staff that I had helping me. We had several conferences by telephone. We've had individual con versations with Mr.

Whelan, and when it looked as though the whole package was going down the drain, the Minister for Manitoba made a final proposal that was accepted by everyone. We are very pleased and I want to congratulate publicly all those who participated in this financing deal.

I think it's a very good deal for Manitoba and we sincerely hope that it will enable the Co-o perative Implements to continue and become a viable com pany in this province and to stimulate the economy of Western Canada, because there are several depots in Saskatchewan and there are some even in Alberta and we are pleased that Alberta saw fit to come in - they're a long way from Manitoba - but they saw fit to come in with $1. 575 million or 22.5 percent of the $7 million; Saskatchewan came in with at $2. 450 million or 35 percent of that $7 million; and Manitoba came up with $2.975 million and I believe it is a good deal for the Province of Manitoba.

MR. BANMAN: So in the remarks that the Minister made in the Legislature, he was saying that the diffi culties occurred after his government took over and that Whelan, the Federal Minister, was agreed to the financing package, the two-for-one package, but some time in the latter part of November his Cabinet colleagues shot him down. Is that what the Minister is saying? MR. ADAM: Well, Mr. Chairman, I had not spoken to the Federal Minister of Agriculture prior to being appointed and given the responsibility of the Depart ment of Co-operative Development.

So I am advised that he had agreed in principle and that he was not able to get tha t package through. The difficulty came about when the Co-op group were willing to accept less than the two-for-one position of the provinces and that's really where the diffficulty came in and of course the Federal Government was very happy to accet this. So why not? They were saving $7 million. So what happened in the final analysis as we got the two-for-one and they also wrote off the 7.56 that was owing on the previous loan, so we were able to come through with the package as had been negotiated or started by my predecessor.

MR. BANMAN: I guess that begs the question is what happened. Did some federal politicians do an end run on the provinces on this and go straight to the C. I. Admin Board, or what happened here? Because from my experience on dealing with this, it was developed at a ministerial level all the way through. I guess what I'm asking is, what happened? Because my last recol lection of this as of November 19th, everything was still on track and the Federal Minister, Mr. Whelan, had agreed to support the applications for 14 million federal and 7 million provincial. I'm just wondering where the whole thing went awry. MR.

ADAM: He had agreed to that in principle subject to approval by his Cabinet and the $7 million that was put up with the provinces was also subject to approval by their respective Cabinets. What happened was that when Mr. Whelan got approval for a $23-million pack age, he telexed the Co-op groups in the provinces saying that he was pleased to announce a $23-million package which was entirely unacceptable to the prov inces because our position was that we would put up $7 million jointly with our sister provinces, providing that the Federal Government put up the 14.

He had sent telexes out, I presume, to all the groups and the Co-op group went to the Federal Government with a different proposal which was not two-to-one as the provinces were expecting, and that is why when the Co-op group went to the Federal Government, it made it that much more difficult for the provinces to get things back on track. 14 26 I want to tell you that I don't necessarily blame the Co-op group. This package had been under negotia tion for several months. They needed financing.

It was time to build up inventory and the proposal that was presented by the Co-op group was for 24 million, but not two-to-one, but ten from the Federal Government and ten from the provinces. The provinces' position was that we wanted 14 million from the federal and 7 million from the provinces, 9.5 from the Co-op group and 5 million from the members. MR. BANMAN: Just so the record will be clear, Mr. Chairman, that is precisely the package that was negotiated and I appreciate the series of events and it seems to be sort of a tactic that the Federal Govern-

Tuesday, 13 April, 19 82 ment uses. I have correspondence here, telexes, dated the 17th of November, the election day, that indicate that everybody was in agreement with the 14-million federal progra m, 7 million provincial, sub ject as the Minister has said, that the Federal Minister would go to his Cabinet. That seems to be an easy way out for them and it is something, I guess, that we've learned to accept from the Federal Government.

Whe lan doesn't like the high interest rates, but he's going to do everything and he's even going to resign unless his government does something and then of course that makes him look good and makes his fellow col leagues look bad. I don't think that's the way the system should operate. However, be that as it may, I just want to indicate to the Minister when I was negotiating with them, it was my position that I didn't go for the ten-ten and that we wanted to divide it on the two-for-one basis, because that historically is what has happened with Massey and so me of the other industries out east.

The other question I want to ask the Minister is following up on this business of the Co-op group accepting the offer. Who was it that accepted the offer? Was it the Administrative Board? MR. ADAM: No, Mr. Chairman, I don't think it was. Let me explain that I believe because of the delay in nego tiations that took place, I guess the Co-op Implements found itself in dire needs of funds at the time and they were prepared to take less than what had been pro posed when the Member for La Verendrye was the Minister responsible for Co-operative Development and others involved.

It was the parent, or the CCCS on behalf of the Co-operative group acting as their agent, and they are the ones that said that the federal proposal was acceptable. That made it much more difficult for the provinces then to get them back at the bargaining table and we finally were able to.

Of course, I spoke to our counterparts from Saskatc he wan and Alberta and advised them that we were not prepared to accept that; I sought their opinion and the Province of Alberta were prepared to go along with whichever position Manitoba and Saskatchewan took and so, we sent a joint telex to the Minister of Agricul ture in Ottawa advising him that the proposal was not acceptable and we urged him to get back to the bar gaining table and meet with the Provincial Govern ments. As a result of that, we had a meeting in Win nipeg. It was on December 23rd, Mr. Chairman, that Mr.

Whelan came to Winnipeg and we got the negotia tions back again on track. I made a suggestion at that meeting that we sign an agreement in principle sub ject to ratification by the respective governments. This is a proposal that ca me from the Province of Manitoba. That proposal was taken back to their respective governments and subsequent to that, we received another telex from the Federal Government accepting our proposal subject to a number of conditions which were entirely unacceptable to the provinces and which we rejected.

As a result of our rejection, further discussions were held by telephone conferences and the end result was that we finally got an agreement fro m the federal people. The final agreement was signed by all parties concerned on March 30th in the Credit Union Central Building, Mr. Chairman. MR. BANMAN: This intrigues me, because you have three Ministers for the Prairie provinces dealing for a financial package for C.

I. and then you have CCCS accepting that offer without the Ministers, after your counterpart in Saskatchewan sends Whalen a telex copying Credit Union Central in Regina and the Executive Director or Chief Executive Officer of Co op Implements, saying that he wants to reinstate his belief that the financial package has to insure that the long run viability is taken into account and tha t too little financing or financing that arrives too late can not meet these objectives. So, is the Minister saying that without the Provincial Ministers having an input, CCCS said that they would accept the federal offer? MR.

ADAM: Well, as I mentioned a while ago, because of the delay in the negotiations there was a desperate need of funds and because of that, because of the shortage of cash flow they were prepared to accept a lesser package. I assure you that in our considered opinion, Mr. Chairman, and in the opinion of our counterparts from Saskatchewan and Alberta, it would not have been sufficient to keep C. I. going for more then two years or three perhaps at the most, providing everything went well.

The administrative committee would have accepted less in which, of course, this is exactly what the Fed eral Government wanted to hear and that is why we had a little bit of difficulty. I want to give credit to the Federal Minister for his frank discussions if we had, hard bargaining, but all the bargaining was done in good faith. I respected everyone's position in thi s exercise and I want to tell you, for myself personally, as a new Minister, I found it a very rewarding expe rience as well as a great challenge. 14 27 MR.

BAN MAN: To get at the nub of the problem, you had three provincial governments and one federal government in negotiations and I flew myself to Edmonton and we had telexes, I think, you could probably put a whole book together on the telexes that went whistling back and forth. I must say, I have enjoyed dealing with Mr. Whalen, he's quite a guy, when we were dealing with him. I want to get at whi ch I think is the root tha t's going to cause the Minister a lot of problems on this, and that is the delineation of authority and who is really running C. I?

He's telling me now that they were in such bad difficulties that they jumped at the first thing the Federal Government offered even though the provinces were negotiating. Now, what right did CCCS have to accept a federal offer when the provin ces were dealing on thi s matter, and really, in essence, along with the federal government, controlled the Administrative Board tha t's running that who le operation? MR. ADAM: Well, Mr. Chairman, the Director of Co operative Development advises me that it was the Administrative Committee that were prepared to accept a lower package but the CCCS is part of that group.

As I mentioned previously, Mr. Chairman, it was because of the shortage of the cash flow and because of the buildup of inventories from spring delivery and because of the federal budget which had

Tuesday, 13 April, 19 82 changed a lot of farmers minds of making fall pur chases to take the advantage of depreciation over the tax year. Those sales did not materialize and it's because of an extreme shortage of cash flow; there's lots of inventory, but it is on this precept I suppose that the Administrators Committee acted on behalf of C. I. as negotiators.

Again, I can only add - I've men tioned it now about three or fo ur times for the Minister that the cash flow position was such that they were prepared after these lengthy negotiations that had taken place; they were prepared to go for a smaller financial package in order to get things going and now that C. I. is run by the Administrative Committee and Manitoba position is that C. I. should be run by its directors and the Administrative Committee should assume the role of bankers or a credit committee. That's the way we would like to see the structure of authority at C.I. MR.

BANMAN: Well, I don't mind admitting to the Minister that's a pretty disturbing chain of events because everybody that was dealing with this wanted to deal from strength. The strength was that the three prairie provinces had agreed to assist them; that the Federal Minister had agreed to it and anything that stepped in between there to try and dilute that pack age either from the provincial or the federal level, just wasn't acceptable. I'm glad to see that the Minister held firm on it.

But, for them to have the Admin Board now, which is basically a government board, for them to overrule it, half of the board is government people on that board. MR. ADAM: Mr. Chairman, yes, that board is - you're referring to the previous board that was agreed upon back in 1978. We were in the position of finding that we had no representation on that board. Now, I don't know how that came about. I wasn't part of the process in 1978, Mr . Chairman, and I'm not faulting anyone for that, but we are insisting that we will have representation on that board now. That is part of our financial assistance. MR.

BAN MAN: Was the Minister aware that there had been an offer made to sit down and discuss the pur chase of C. I. by another major implement company? MR. ADAM: Yes, Mr. Chairman, I was aware that there was somebody waiting in the wings, perhaps, to see it go down the drain and maybe pick it up for 40 cents on the dollar, and let the members hold the bag or whatever it is. MR. BAN MAN: Was that offer to sit down and discuss it explored by the Minister? MR. ADAM: When I arrived on the scene, Mr.

Chair man, I had heard rumors that there was another firm that was interested in purchasing C.I., but I'm not aware that there was anything concrete behind it. As far as I was concerned it was only speculation at that point in time and as I mentioned previously, when I arrived on the scene, and I'm not casting any fingers or pointing at anyone because of what happened, but the fact was, that when I arrived on the scene and took over the portfolio, there was a $23-million package that was being negotiated which was unaccepta ble to the three Prairie Provinces.

So, whether or not any thing would have materialized with the sale of C. I. had they not been able to obtain assistance, that I cannot tell you. But, nevertheless, as I said previously, I think it was a good deal for Manitoba, C.I. is a good company. They're coming up with new lines, I understand. I haven't been down there yet to visit them, but I intend to go at the first opportunity to tour the plant and I understand that there are some exciting new lines coming up.

I hope that they will be lines that will be acceptable to the farmers of Western Canada, and if I go down there and have a look at it, having been in the implement business for many many years myself, I'm sure that I'll be able to give a pretty fair assessment on whether those lines will be acceptable or not. MR. BANMAN: I guess my concern, Mr. Chairman, is a very simple one.

If the operation could have been maintained at very much the same level, part supplies produced for the people that have that particular equipment, then somebody else could have taken the operation over without the provinces and the Federal Government going onto the hook for an additional amount of money.

I think that's something that should have been looked at, and I would ask the Minister to see if any of those avenues are still open, because the name of the game in this particular instance here is to ensure the jobs in Transcona and to ensure that peo ple that have purchased this machinery throughout the years receive a good parts stock and a good parts supply; that's the name of the game as far as I'm concerned.

I must say to the Minister that I will be watching very closely over the next little while, as I'm sure he will, to see what response the membership gives to this, because I come back to what I said early this after noon, that unless there's going to be a real commit ment from the members right across Manitoba, Sas katchewan and Alberta to support this company now in a financial way in the purchase of shares, I am very skeptical whether or not this company can succeed if there is not the input from the membership.

Because what we've got here now is a sort of semi-Crown Corporation right now, which is being run basically by appointments from government and from some of the larger institutions, and it really isn't the member ship anymore that's running this large facility. So, that is my concern, Mr. Chairman. 14 28 As we pointed out before, the deal the way it's struc tured, $32 million worth of investment into the prov ince for our 2.975 million investment in it, and fo r the payroll that we're looking at is a good -w e're looking at job-creation programs and things like that.

Per man hour I guess, if you'd look at the Federal Govern ment's statistics on what it costs to create a job, it might be not a bad deal. But I would ask the Minister to make sure that he watches this very closely, because if the membership is not going to get actively involved in it, it's going to end up being a Crown corporation in a few years from now, and we'll be sitting here discussing it, not in this committee, but we'll be discussing it maybe in the Economic Development Committee and we'll be look ing at other things.

Tuesday, 13 April, 19 82 I still believe that there is no better way of running som ething like this than if there are people out there that have a vested interest in it, that have an interest in seeing it survive, and the only way that you can do that is by having them put their hands in their pocket to make sure that their invest ment is protected. I'v e said, I'll been watching closely to see how the share sales are going and how they'll be moving on it.

Hopefully in the next five years the economy in the farming com munity does pick up and this company can be returned back to being run by a board which is elected by the members, and I think that's what we'd all like to see; that is the ultimate objective of getting this thing back into the hands of the people. Barring that, I think the Minister should have a look at so me of the other options that were possibly open awhile ago, and I don't know if they're still open, but he should have a look at them. MR. ADAM: Mr.

Chairman, I thank the honourable member for his com ments and I want to tell him that they are appreciated. I just want to, so that he doesn't get the wrong impression, that there was so me pros pective buyer of C. I. in the wings waiting. Perhaps I was a little too exuberant awhile ago when I said, that maybe there was a company waiting in the wings to pick it up for 40 cents on the dollar. As I mentioned when I assumed office all that it was, as far as I was concerned, was a rumor, that there had been an offer, and I am informed by staff that the offer was that C. I. had followed this up.

They had explored with a partic ular company and nothing happened, nothing came out of it, so that it wasn't that serious a proposition. In regards to the viability of C. I., as I mentioned before, there are a lot of uncertainties out there in agriculture Manitoba. There's always a risk that they may not be able to ride the rough water that we have at the present time. But in the opinion of the member, as he mentioned awhile ago and when he was a Minister, the gamble is worth the risk, because of the benefits that will accrue to Manitoba.

That is the position that I took when I took office, when I assumed the office of the Department of Co-operative Development. While the majority of the members of C. I., Co operative Implements, is in the Province of Saskatch ewan and that is the agriculture, the wheat growing and the grain growing province of Canada. That is where the machinery is sold, and no doubt that's where most of the membership input will have to come from, is from Saskatchewan. It's a group of people out there who believe in co-operation.

The credit unions there appear to be in a fairly well finan cial situation, much better than anywhere else as far as I know. They've had some proble ms in Quebec and · in Ontario, but I made some enquiries in Saskatche wan and it seems to be one of the better provinces where the credit unions are surviving. Of course, there are also a number of members, quite a few mem bers in the Province of Alberta, and there are some depots there, not to the extent that we have here - I'm not sure just about Manitoba.

I believe Alberta has a few less members than Manitoba, but approxi mately 50 percent of the members are in Saskatche wan I believe. Manitoba has 20 percent and Alberta has 30 percent. So on that ratio, and the last time that I spoke to the leaders and the management of the Co-op groups they didn't intend to wait until five years down the road to put the show on the road, they were going to start immediately. That statement was made at the annual meeting of which I was honoured to address. I am confident that they will go out there and find the dollars to assist for future financing of C.

I. , because when we me t on March 30th the Federal Minister made it quite clear, and he brought a nice ch eque along with him for their share of the financial pack age, the initial share of it, but he made it quite clear that there would not be another dollar coming fro m Ottawa to assist C. I. I said to him, "well, you know that's fine providing you don't provide any finances for anybody else or any other firm." So that's where it sits at the present time, Mr. Chairman. I appreciate that the Member for La Verendrye, who is a critic for this department, that he feels that it's a good deal for Manitoba. MR.

CHAIRM AN: The Member for Roblin-Russell. MR. J. WALLY McKENZIE (Roblin-R ussell): Mr. Chairman, I only have a couple of questions. I wonder can the Minister advise what interest rate is Whalen charging? MR. ADAM: If the honourable member will just give me an opportunity to find the information here. The federal and provincial loans will bear the interest rate of the Far m Credit Corporation. -(l nterjection ) Whatever is the rate of the FCC, which is about 14 - 14-V2. MR. McKENZIE: How about the Manitoba loan, what's the interest rate? MR. ADAM: That'll be the same thing, Mr. Chairman. MR .

McKENZIE: Saskatchewan's the same, and Alberta the same? MR. ADAM: That is MR. McKENZIE: I didn't hear the answer. They're all ... . MR. ADAM: Yes, it's all MR. McKENZIE: ... Credit Corporation rates. MR. ADAM: The Federal Government was insisting on parity and this was the last proposal that the Prov ince of Manitoba suggested to the Federal Minister, that was one way of having parity. The Federal Minis ter was insisting that we would provide an interest fr ee loan and we felt that that was a very dangerous prece dent and that we didn't want it to go by that route. MR. CHAIR MAN: The Member for Minnedosa. MR.

DAVID R. BLAKE (Min nedosa): Thank you, Mr. Chairman. I just don't know where I'm going to start with the one or two remarks I want to make, beca use as I have a great abiding faith in the agricultural com munity of our province and indeed of Western Can- 14 29

Tuesday, 13 April, 19 82 ada. I hope that in view of the remarks that the Minis ter has given us, I hope the Western Canada Concept holds the same views after the 26th in Saskatchewan, as he does to provide assistance to his party, because I know they're pretty strong on Western Canada and they'll want to keep any manufacturing enterprises viable and ongoing in Western Canada. Mr. Chairman, earlier on there was some points, and I'm sorry that I was a little late I missed some of them, but the offer to purchase that was mentioned earlier on, something like 40 cents on the dollar.

I want to remind the Minister that he's going to be appearing before this committee, hopefully for the next 2 or 3 years, and I hope that it doesn't turn out that might have been a pretty damn good deal, but I just want to remind him that figure is on the record books. Mr.

Chairman, I don't want to get into the financial arrangements because it's been touched on that 50 percent of it is in the Province of Saskatchewan, and probably 30 in Alberta, and 20 percent in Manitoba, and we're very happy to have that firm here adding to our good strong industrial manufacturing base that we have in Manitoba with the number of employees that we do have.

But I want to remind the Minister on previous remarks that we had about the Co-operative Movement, the Credit Union Movement earlier on in our discussions today, and remind him that when you get into big business, when you get into the big leagues, these are some of the problems that you run into. This is what happened with CCIL. They were a pretty strong vibrant company when they were smaller than they are today, and they decided to expand and get into the big competitive league. I realize the amount of assistance that's been pro vided to Massey and others, and I don't want to get into that tonight.

But I also want to remind the Minis ter that there are other small manufacturing concerns in the Province of Manitoba that are viable and ongo ing and they are not also, Mr. Minister, without problems. I refer to my particular area where we've had a small agricultural implement manufacturing firm get into very serious financial difficulties and went into receivership, and was taken over by another firm located in the Province of Saskatchewan that took over an agri deal in Minnedosa, the Morris Rod Weeder Co. Ltd., who are a smaller, vibrant, younger company doing very very well.

They have taken over and stabilized the industry in our particular little plant in the Town of Minnedosa providing stable working conditions for a lesser number of employees. They have their own dealerships and they have their markets. They weren't relying on sporadic sales to the Sudan or various other export deals where you had 150 men on for six or eight months until you filled the order and then you had to lay them off. They have stabilized the work force and provided good employ ment for that particular area.

That company also is experiencing the downturn that the Minister menti oned in the marketplace and with agricultural imple ment manufacturing, as the Minister well knows being a dealer in the industry, once that pipeline becomes full and the stockpile becomes the dealer's inventory, all of a sudden that has to stop and there's a backup or a backlog and we all know the results. That has happened in our particular small opera tion.

We have experienced layoffs and they haven't come crying for help; they haven't come to the Minis ter of Labour and said, you know, we've got to lay off 20 men in the next couple of months and can we work them three days a week and have the various other government ag encies walk in and help us. They're an enterprise that likes to go with their own management and their own expertise and their own sales group and try and manage with the staff that they have and they have good staff that can be laid off and can come back on short notice.

But when companies like this come to the government for help and for assistance, Mr. Minis ter, I hope that they receive the same sympathetic ear that this particular company has had and that others have had from the Federal Government, because they supply an excellent product throughout Western Canada and the Western United States and it's well recognized they are an extremely good company. They make an exceptionally good product. They have loyal employees and they can't be overlooked. The fact that they're small and maybe only employ 75 to 150 employees; they can't be overlooked as well.

I hope that the Minister keeps this in mind because of conditions in the agricultural industry continue as they have been, not only is this particular company going to be in further trouble - the one we're discus sing now - and as I mentioned earlier the 40 percent offer may look pretty good in the long run and I hope it doesn't. But if the crunch does come, I hope they look as favourably on assistance requested by smaller companies, such as the one I mentioned, as they have done to keep this particular company going, because it's only when they got into the big league, Mr.

Minis ter, that they got into some of the serious problems that they're in. I'm saying, as I said earlier this afternoon, there has to be great caution and some expertise brought to bear in which direction you want to take because the taxpayer eventually is the one that's going to bail them out and sooner or later, if he gets tired of it, you and I both know what the ultimate results are. MR. ADAM: Mr.

Chairman, I thank the member for bringing us this information about the local agri busi ness there are manufacturing in the Town of Minne dosa, is it, and I will assure that if that firm has the same kind of financial problems that other firms have and if we can get the same kind of co-operation from our Federal counterparts and our provincial counter parts, we will certainly be looking very closely at any assistance that we are able to provide. I want to say that when I mentioned the 40 cents on the dollar, that was more in a facetious vein than serious.

The only way that would happen would be if C.I. would have went into receivership or had to sell off its assets or whatever it was or had to be liquidated. That's the vein that I said it in. I wasn't being that serious about it. 14 30 I would remind members that it was the previous administration that agreed to assist C.I. It was the previous Minister of Co-operative Development that started the negotiations going with C. I. and the pro vinces. How did that come about? MR. BANMAN: Saul Miiier - it was a hangover just

Tuesday, 13 April, 19 82 like you are faced with here. MR. ADA M: When did the serious negotiation start? The staff informs me that the request for assistance came in January of 1980. MR. BAN MAN: The Minister said the first agreement, and I think he's referring to the first financial package for assistance to C.I. which was started, I believe, back in 1976 and I know that when we took over from the previous NOP government, I guess we were faced with almost the same thing that this Minister was faced with here. The negotiations had started and were well under way when we took over.

The Minister of Finance of the day at that time, Saul Miller, was involved in those negotiation so that's how we got started on this thing. MR. ADAM: I was referring, Mr. Chairman, to the recent package which began in January of 1981. This is the one I was referring to. I know that the previous financial package, which was for $23.75 million, and that was back in 1978 when that was completed. I don't know when that got started; I don't recall, but if the member says that it was 1975, well whenever it got started. I was referring to the latest financial package.

I am confident that if things level off in the agricul ture field and that we have a few good viable produc tive years in the agriculture sector that things will turn around. You have your ups and downs, you have your highs and lows and you have your cycles in agriculture. MR. BLAKE: Can I bank on that? I don't know what to even plant this year. MR . ADAM: We can't be too pessimistic. We have to look on the bright side of things, sometimes, Mr. Chairman.

We have to get out there and I hope hon ourable members on both sides of the House will go out there and encourage the farmers to han g in there and hang tough and things will eventually turn around and turn for the better because when things are bad, there's only one way to go and that's up, hopefully. MR. CHAIRM AN: We're on 2.(a)

(1) Salaries - the Member for Virden. MR. HARRY GR AHAM (Vi rden): Thank you, Mr. Chairman. I have to say off the outset that I have to agree basically with the philosophy of the Minister that we live and hope, but in this particular case the province is in a minority interest position and I would like to ask the Minister if things do go wrong, has he got a backup plan? MR. CHAIR MAN: Mr. Minister. MR. ADAM: I believe, Mr.

Chairman, that perhaps the Member for Virden wasn't here when I indicated to the honourable members that when we finalized the deal, the financial package on March 30th, the Federal Min ister made the statement, after all the nice things happened and the cheques were being passed around and the C.I. walked out with I don't know how many millions of dollars, that was the good news. The bad news was that before we left, that they had better not 14 31 come back for any more.

I said, "Well, that's fine, providing that you don't finance any other eastern manufacturing company in a similar way." So, I believe the Minister would appreciate that hav ing only recently completed this financial package, successfully, I might add, and with the co-operation of all participants in the negotiations, that we haven't, of course, at this time, except for the co-op group, the co-operative group themselves, have set themselves the task of going out to their members and encourag ing them to come up with the dollars to provide long term financing if you will, or extra financing to what has been provided up to this point in time.

So, to answer the Minister, "No, we haven't got a backup plan." We were assured by the management that the backup plans would be developed by them and one of the ways that they were going to do this would be, on the one hand, to go to their members and raise more equity capital in the form of debentures and shares, and once they have done this they may come back to government. If they come back with a reasonable proposal, I want to assure the honourable member the deals that we have just concluded, which was begun by my predecessor, the deals that we have just completed are far and few between.

Anytime you can get an injection of $32 million in new money coming into your province for an investment of less than 3 million and the spinoffs derived therefrom, I assure you as far as I'm concerned, and that's been agreed by honourable members here just a short while ago, that anytime that I can those kinds of deals I would be happy to look at them again. MR. GR AHAM: Mr. Chairman, whether it was 32 or 23 or 20, it really doesn't matter; the question that I was getting at was the long-term future.

The Minister has said that the Co-op Movement has to come up with $5 million over five years, and I believe that I heard him right when he said it would be one million dollars a year. Now, if they come up with 850, 000 in the first year, would the Minister consider that sufficiently close to the target area to carry on for another year? MR . ADAM: Mr. Chairman, the agreement calls for $5 million within five years.

It's assumed that they would try and raise one million dollars per year, but if they raise two million this year or one million this year or one-half million this year and one million-and-a-half next year; providing that they meet their objective within the five years, I think that that would be satisfactory. The staff informs me that part of the package is that in the event that the members are unable to come up with $5 million - it is not raised by all parties to the agreement - anything less than 5 million must be acceptable to all the other parties concerned.

The backup contingency plan, I believe, that the adminis tration intends to be more flexible in the future, more so than they have been in the past, I mean in the operation of C.1., and that is to expand or reduce operations depending on the agriculture economy and grain prices and interest rates, etc. They are going to streamline their operations so that they can respond more quickly to changing economic condi tions in the country or the province, so they can respond more quickly to fluctuating prices of grain

Tuesday, 13 April, 19 82 and so on. MR. GR AHAM: Mr. Chairman, then the C.I. member ship could in effect, if times are tough for the next four years. they could in effect raise nothing this year, nothing next year. They could go through four years without raising any of that capital and put it all up in the .fifth year, and that would be perfectly agreeable. Is that what the Minister is telling me? MR. ADAM: By the third year, Mr. Chairman, there must be at least half of the 5 million raised. MR. GRAHAM: So, they must have 2.5 million by three years time. MR. ADAM: So, I assume, Mr.

Minister, and I expect, and I'm confident, that the management are going to go out there and canvass their members rig ht across this country and impress upon them the importance of getting involved. That is what the Member for La Verendrye has indicated has to be done and they have indicated to me tha t that is what they intend to do, is to get out there and get their members involved. I hope that does happen, but these are tough times and something can happen. I don't know.

But that is the agreement tha t we have and if the 5 million is not raised in five years it would be a breach of the agree ment; there's no doubt about that. Then we would be able to renege on our part of the bargain as well; we could all renege on it. If one group or one participant of this financial package breaches the agreement, well you no longer have an agreement, do you? We could renege on any further involvement if tha t so happened. MR. GRAHAM: At the same time though, Mr.

Chair man, and through you to the Minister, we do know that the province has put substantial guarantees into the Credit Union Movement and it is entirely possible that through the Credit Union Movement the money could be lent to the owners of shares in the C.I., and actively encouraged through the Credit Union Move ment to purchase additional sha res in C.I. Would there be any particular program of special interest through the Credit Union Movement for the purchase of C.I. shares? MR. ADAM: Mr.

Chairman, that is not part of the financial package as such or a condition of the finan cial package that the credit unions would underwrite, if you will, purchasing of preferred shares by co-op members to finance C.I. That is not part of the pack age and there may be some members that will do that. Look, how many members do they have, 100,000? You know, if every farmer that buys C.I. equipment and has a line of that equipment on their farms, if they all put in $300-$400 in shares that pays interest, they would have quite a bit of equity there. I expect that's what is going to have to happen.

The suggestion he makes is an interesting thought, I'm not sure what kind of coll ateral that the credit unions would want. I'm not sure whether the other financial institutions lend out money to buy shares and that, I'm not sure. The Member for Minnedosa who is familiar with the banking system indicates very little of that. I was told 14 32 by one -(Interjection)- every day you do that. Well, the member says it is done every day. I was advised by one particular individual who walked into the Royal Bank and said, "I want to borrow $25, 000. 00." The manager said to him, "Well, what collateral do you have?

What do you want to do with the money?" He said, "I want to buy Royal Bank shares ." The manager said, "Well, what collateral do you have?" He said, "The shares, I am going to give you the shares as collateral ." The banker was pretty surprised about that because that's the Ii rst time that he had to take his own shares as collateral, for that fellow anyway. MR. CHAIRMAN: The Member for Minnedosa. MR. BLAKE: Thank you, Mr. Chairman. Just to finish that off, the next question the banker would ask to the Minister is how are you going to pay that loan back?

There's no problem with collateral because the shares are excellent collateral, but how are you going to pay the loan back? That sometimes becomes a problem. But, Mr. Chairman, I only have one or two questions and I just wondered what exposure does the Credit Union Central have in connection with these loans that are being granted to C.I. ? Is there any exposure there or any arrangement to lend funds to their m embers to buy shares? MR.

ADAM: No, C.I. has lines of credit I'm sure with CCCS and I suppose by virtue of the fact that those funds come from the credit unions to the Central and from the Central to the CCCS; by virtue of those loans they are investing, of course, receiving interest for the loans. The Credit Union Central is actually the banker for C.I. and they haven't been involved as far as I know individually unless they are perhaps members of a credit union and members of C.I., as well, if they are members of both groups.

There may be many credit union members that have shares in Co-op Imple ments; I would expect tha t there would be, especially in the rural credit unions, that may not be so prevalent in the city. MR. BLAKE: Mr. Chairman, what is the line of credit that your Credit Union Central is providing to CCIL? MR. ADAM: I am informed that the line of credit at the present time is approximately $60 million. MR . BLAKE: Well, having that information, Mr. Chairman ... MR. ADAM : Just a moment. Perhaps, Mr. Johnstone could ... Mr.

Chairman, that statement of $60 mil lion may not be correct, so perhaps we should take that question as notice because the staff don't have that information at the present time. MR. BLAKE: Could the Minister tell me now how much they owe to the Central now - Manitoba Cen tral that is . . . ? MR . ADAM: No, we don't have that financial informa tion between the C.I. and their bankers; we don't have that information available to us right now.

Tuesday, 13 April, 19 82 MR . BLAKE: Would the Minister be able to get that for us? MR . ADAM: I' m not sure whether that information is available for public, you know. MR . BLAKE: Yes, Mr. Chair ma n, I'll go one step further then. Obviously, they're borrowing so me sub stantial am ounts if that is their banker. In view of the fact that we've just provided $29.5 million to the Stabi lization Fund to mo re or less guarantee the investors in the movement that their funds are protected, has the company considered maybe looking at financial arrangements outside of the credit union movement?

Should the inevitable happen that they went to receivership, it would be a strain on a financial institu tion that might be mo re able to sustain it than the Stabilization Fund which obviously is having some probl ems. MR. ADAM: Yes, Mr. Chairman ... MR . BLAKE: We're getting into some double financ ing here and a very precarious position, Mr. Minister. MR. ADAM: Mr. Chairman, the honourable member who I know is very fam iliar with the banking system certainly would not provide information on custo mers' loans and financial transactions, that's privi leged information and what happens between MR. BLAKE: Mr.

Chairman, this is an entirely differ ent situation. There's taxpayers' money by the mil lions going into this company. It's a different situation than a shareholder of a corporation. MR. CHAIR MAN: Ord er, order. I believe you should let the Minister finish making a statement and wait for the Chair to recognize you. Mr. Minister. MR. ADAM: Mr. Chairman, in all due respect to the honourable member, I think it would be highly improper for the Minister even if he had that informa tion to go out and bare that information, ma ke it pub lic, because after all C.I. is also in competition with other companies.

I think that would be a disservice to C.I. to do that just as it would be a disservice if that kind of information was given out by a bank and not necessarily the Royal Bank which I believe the hon ourable member has been connected with, but any bank. I don't think that's ever done. MR. CHAIR MAN: The Member for Minnedosa. MR. BLAKE: Mr. Chairman, I appreciate what the Minister is trying to say, but that is just not acceptable.

Here is a company in great financial problems that has come with hat in hand to the taxpayers of this province asking for assistance in helping them out of a financial bind and a catastrophic situation, I must say, that there has been some sym pathetic feeling towards providing that assistance and I don't think it is untoward whatsoever for that company to bare the facts so to speak in public and say, we're in trouble. Here is our problem and this is our situation and this is what we're asking the shareholders of credit unions and the taxpayers of this province to help us out with.

I don't think it's untoward at all to make this info rma tion known because if in fact, Mr. Chair ma n, through you to the Minister this company fails to survive the financial crisis that we're facing and, God, let's hope that never happens, but should they fail to survive it and we find that they are at risk to $60 million or $50 million or whatever it is to Credit Union Central which we have just lent $29.5 million to firm up their stabilization ... MR. CHAIR MAN: On a point of Order. Mr. Minister. MR . ADAM: On a point of order, we're not on the sa me wave length.

The member I believe is talking about the credit union system and I was . MR. BLAKE: They're the bankers for CCIL, are they not? MR. ADAM: Yes, but I understood that the member was talking about C.I. and that he wanted information from C.I. and I say that would be an impropriety on my part even if I had that information which I don't have before me. I think it would be highly im proper for me to divulge the financial activities of ... MR. BLAKE: Yes, Mr. Chairman, I think the Minister missed my point entirely.

We want to know what the exposure to the system is to CCIL at the present time and I don't want it to the dollar. I want a ballpark figure of what their line of credit is and I think if they have come to the system requesting this type of financial aid fro m the public purse, so to speak, I think it behooves us to have that information in view of the fact that we're going to have pass a bill very shortly to provide $29.5 million to the Stabilization Fund.

If there is one particular risk - we know there are lots of risks out there within the movement - if there is one par ticular risk, we could take that down for $20, $30 million or more if the worst came to worst and as I say, God forbid that should happen. But should it happen and that's the ballgame that you operate in, Mr. Chairman, through you to the Minister that I menti oned earlier.

When you want to get in the big leagues, boy you've got to play in the big leagues and you're playing in the big leagues and you have to get all your marbles on the table so that everybody knows what the name of the ga me is and if there's an exposure here to the movement of $50, $60 million that could possibly be a call on that fund, we would like to know. 14 33 MR. AD AM: Mr. Chairman, is the Member for Minne dosa indicating now, for instance, all those people who have made loans from MACC to buy farm land and to finance their operations which the public is putting up ... MR.

BLAKE: You've missed the point, Mr. Minister. MR. ADAM: Well, this is analogous, Mr. Chairman. The member is ... MR. BLAKE: On a point of order, Mr. Chairman, I'm talking about CCIL. I'm not talking about MACC,

Tuesday, 13 Apr il, 19 82 Liquor Commission or any other government agency. I'm talking about CCIL. What is their exposure to their bankers which happens to be the Credit Union Cen tral? What is their exposure vis-a-vis loans or line of credit or whatever? What is the exposure? MR. CHAIR MAN: I believe the Minister is trying to make a parallel or a comparison, so I think you should let him complete his statement. Mr. Minister. MR. ADAM: The member is saying that we should make the transactions between C.I. and their bankers public. That's what he is asking us to do. MR. BLAKE: We're not asking that.

I'm asking what their line of credit is. MR. ADAM: I have advised the member some time ago that we do not have that figure. We do not have that information and by comparison, I say again that what he is asking for would be the same thing as if we asked for information for those people who go to MACC to borrow money. That is public; the public is putting up billions of dollars to buy land, to buy machinery, to buy everything. Let's make it public. Everybody that gets a dollar from the province, let's put it on the line. That's what the member is saying. MR. BLAKE: I'm not saying that, Mr. Chairman. MR.

CHAIRMAN: Order. MR. ADAM: I'm not prepared to do that, Mr. Chair man. I don't feel that it's proper. I don't have the information anyway and I think that every person or firm applying to the government for assistance pro vides certain information and they expect confiden tiality with this. They don't expect that their private businesses are going to be open to public scrutiny by all and sundry and such information ma y be revealed to others by the company themselves.

I'm sure that all the members of the credit union movement, all the members of individual credit unions, have a financial statement from their credit union and I'm sure that all the members from C.I. can obtain a financial state ment from Co-operative Implements. No w, the member is asking me for pr ivileged infor mation and I don't think it's right for him to do so. MR. BLAKE: Mr. Chairman, I take it from the Minis ter's remarks that he is not at liberty or won't tell us how much the CCIL owe the Manitoba Central. MR.

ADAM: I am unable to give you that information because in the first place, I do not have it here and I am not sure that we should provide that information. I think it's confidential. MR. BLAKE: Would the Minister undertake to get that information for the committee? MR. ADAM: I can take it under advisement, but I would doubt whether I would provide you with that information. I am very, very reluctant to do that. MR. BLAKE: Could the Minister tell me, when is the financial state ment of CCIL available and who is that statement available to? MR.

ADAM: The financial statement of Co-operative Implements is similar to any other company that have shareholders and it 's available at the end of the fiscal year and it's available to all their members. MR. BLAKE: Mr. Chairman, that figure will be avail able on that financial at the end of their fiscal year to all members, -(Interjection)- so I don't see where the confidentiality enters into it. I have constituents that are members and I'm sure I could obtain a state ment from them. In fact, I may even be a member myself; I'm not sure.

I could probably obtain that statement and find out what the line of credit was, so I don't see the point, where I'm asking for some deep, dark secret, privileged information. I think it's the Minister's duty to provide to this committee what the exposure of this particular com pany is to the Central who are going to be asked, as I say, in a very short time to pass a bill authorizing $29 million to beef up the stabilization fund that, as I say, could be at considerable risk with one entity, not the hundreds of thousands of borrowers that they have, but one very, very large corporation.

As I said to the Minister earlier, possibly they should consider transferring their financial transactions to another financial institution that removes the risk from the Stabilization Fund should the ultimate happen. MR. ADAM: The loan is not from the Stabilization Fund; it 's from CCCS, which is not - the Stabilization Fund ... MR. BLAKE: Mr. Minister, if the crunch comes, where does it come? MR. CHAIR MAN: Order please. Mr. Minister. 14 34 MR. ADAM: Mr. Chairman, the financial bankers of C.I. is CCCS. The Stabilization Fund is not involved in that transaction.

The Stabilization Fund, if the hon ourable member is familiar with the Stabilization Fund, is to guarantee depositors' savings accounts and deposits in their respective credit unions: that is the role of the Stabilization Fund, it's not to guarantee all the co-operatives that borrow money from CCCS. It is only there to guarantee deposits by depositors such as we discussed before the dinner hour under the Canadian Deposit Insurance Corporation. MR. BLAKE: Yes, I'm not just too sure that I really believe what I'm hearing, Mr. Chairman.

Maybe the Minister could tell me who CCCS is and what addi tional fund they have to provide for such contingen cies as the likes of - God forbid it doesn't happen MR. ADAM: Well, Mr. Chairman ... MR. CHAIRMAN: Order. You may continue, the Member for Minnedosa. MR. BLAKE: Yes, Mr. Chairman, through you to the Minister, I wonder what the exposure to CCCS is and

Tuesday, 13 April, 19 82 what difference it makes in the long run. I realize there is a national fund and a provincial one, but I'm afraid that we're going to have to get a little more informa tion on this before we can just put this thing to rest. Is the exposure to CCCS in the line of credit that CCIL enjoy or is it with the Manitoba Central? MR. ADAM: Yes, Mr. Chairman, the CCCS is the Canadian Co- Operative Credit Society, and it is MR. BL AKE: I have the initials figured out. MR. ADAM: Okay.

The Centrals from the different provinces, that is where they provide funds for the Canadian Co-Operative Credit Soceity, so that's where the liquidity is, that's where they put their money in , and there may be the Sask atchewan Central, there might be the Alberta Central, the Ontario Central; I'm not sure about the Quebec one, but possibly too, I don't know. -(Interjection)- The Quebec operates under a different system, but the other centrals are involved and that's where their liquidity is. MR. BLA KE: Yes, the Minister has got into liquidity now, Mr.

Chairman, and I wonder if he could tell us where the Co- Op Central for Manitoba and the Co-Op CCCS from Sask atchewan and Alberta and Ontario, where do they get their funds from? MR. ADAM: They get them from the credit unions. Mr. Chairman, the financial arrangements that the member is asking for are quite complicated because you have loan guarantees by the Federal Govern ment.

There are loan guarantees by the province and there are some funds provided by the central groups and there's a whole host of different groups involved in the information that he's trying to obtain and it 's almost impossible to - it almost has to be an Order for Return, and it's confidential information that we shouldn't really be getting into, and I don't know what the honourable member wants or what he hopes to achieve by this. I think if he reflects he will find that he may be doing a disservice to C.I. at the present time in this line of questioning. MR. BLAKE: Mr.

Chairman, I would reject the remark that I am trying to do a disservice to CCIL by request ing information from the Minister and from this com mittee. I go back to my original question, where do the funds for CCCS come from? -(Interjection)- From the membership, Mr. Chairman, to help the Minister. MR. ADAM: Well, the question is, the honourable member as ks where does the money come to finance C. I., that's what he wants to kn ow. He wants to know where it comes from. MR. BLAKE: No. MR. ADAM: It comes, I have answered him a while ago, and it comes from CCCS.

So to their depositors -(Interjection)- yes, that's the question he wants to know, where they get their money from and he wants to follow that up, and we don't have that information now at the present time. MR. BL AKE: Mr. Chairman, I read with great interest on the appointment of the Minister to the Co-op Development portfolio, that he was a member of five credit unions and six co-operative movements and had been involved in it for the last 35 years as a member, as a director and I don't know what. I am just amazed that he doesn't .understand the system any more than he apparently does.

The Co-operative Cen tral get their money from their memberships and if it 's the Central Co-op Credit Society, that's a mix of all the credit unions throughout, and the money comes from the members who deposit funds in those credit unions. I go back to my original question of where is the exposure? If there's $50 million or $60 million lent out of that fund, how much of member is at exposure? MR. ADAM: We don't know that because we don't know the fi gure, the line of credit.

You're back to the $60 million that was mentioned awhile ago which we withdrew, by the way, which the member keeps stat ing. -(Interjection)- We withdrew that figure, to the honourable member. The CCCS gets its money from their centrals, I mentioned that 20 minutes ago and from borrowings; that is the way it is handled. If the member is not satisfied to the answers I'm giving him, well, that's his problem. The financial transactions between the different components should be privileged information and I think the member is treading on thin ice.

I advise him that he is treading on very thin ice to proceed with this line of questioning. I don't think it is fair and he should understand that we have just completed a very suc cessful financial package. There were many many participants involved in this financial package with C.I. That is where the money is coming from. We have just the other day, on March 30, the co-op group walked out with, I understand, around 12 mil lion, was it? Approximately $1 2 million.

They walked out from the Central Plaza from the Province of Alberta, from the Province of Saskatchewan, from the Province of Manitoba, and the Federal Government and the co-op groups. The Minister wants to pursue where the money is coming from. I've just indicated where some of it's coming from. 14 35 So, the CCCS is the agent for the centrals in lending out the money; they are the agents. All the centrals across Canada are under that umbrella, they use that tool now. MR. BLAKE: Mr. Chairman, I just can't understand the last statement by the Minister.

I get very disturbed when he tries to scare me off by telling me that I'm skating on very very thin ice by following the line of questioning that I'm following. I asked him, when he said the funds were coming from CCCS, where CCCS got their funds from? He said that's from borrowings, it's from here, it's from there. He knows as well as I do it's from the depositors in the credit union movement that provide the funds to CCCS . Now, I don't under stand why I would be on thin ice if I was asking where the funds were coming from.

I suggested to him, could he give me some indication of what the borrow ings were by CCIL from credit union centrals, so that we'd have some idea what funds were at risk. We haven't got an answer to that; we've got a great

Tuesday, 13 April, 19 82 "around the rock-pile" answers from the Minister who I don't think knows where the hell the funds are com ing from. I should retract that statement, Mr. Chair man. He hasn't had an opportunity to find out where the funds are coming from. I apologize for that remark. But I think it's obvious to anyone that has some understanding of the credit union movement that the funds come from the depositors. They are placed in locals here and there, be it Pukatawagan, Minnedosa, Ste.

Rose du Lac, wherever, and these surplus funds are funneled into the Central, and the Central lend them out probably on to some of the bigger opera tions. I take it in this case, that CCIL conduct their financial transactions with Co-op Central in Winnipeg and I'm asking the Minister what their line of credit is, or what their borrowings are and to get some idea of what the exposure is of the depositors' funds? MR. ADAM: Mr.

Chairman, the honourable member knows and we've discussed it at length that the Fed eral Government has provided loan guarantees and the Provincial Governments have provided loan gua rantees and . . . MR. BLAKE: Mr. Chairman, on a point of order. MR. ADAM: They haven't? MR. CHAIRMAN: A point of order. MR. BLAKE: A point of order. The Minister has lost the point completely. I don't care what the guarantees put up by the Federal Government, by the Province of Alberta or Saskatchewan or the Manitoba Govern ment are.

I want to know what funds deposited by the little old lady on Spence Street and in Minnedosa in her credit union are exposed from surplus funds of those credit unions to CC Central to provide a line of credit to CCIL? MR. ADAM: I have just answered that question. The little lady that has her money in the credit union and loaned that money to C.I. through CCCS and Central have got the Government of Canada and the Govern ment of Saskatchewan and Manitoba guaranteeing that loan in case C.I. goes under. MR. BLAKE: The Government of Canada is guaran teeing that loan? MR.

ADAM: Partly and there are loan guarantees, Mr. Chairman, and the honourable member should know that a loan guarantee is there in event of a default, or that the C.I. borrows money and it's a guarantee by the governments. If that loan is defaulted, the gov ernment has to pay. Surely the Member for Minne dosa has been in the banking business a long time should know what a loan guarantee - everybody that goes in to borrow money has got to have a backer. Surely he's been in the banking business long enough to know that; I have and I'm not a banker. MR. BLAKE: Yes, Mr.

Chairman, I will admit that I'm a banker and I have had many many loans that have been guaranteed, and I have had many many loans that have gone bad. I have called on that guarantee and I have found that the guarantee wasn't worth much more than the person that I lent the money to. So you realize what the guarantee is worth and I'm not saying that's the case, but the Minister has on record as saying, "The Government of Canada, the Govern ments of Alberta, Saskatchewan and Manitoba gua rantee all loans made by the CCCS ." I am not just too sure that is a fact. MR. ADAM: We have guaranteed the loans to C. I.

The Federal Government has participated and the Provin ces of Saskatchewan and Alberta had a loan guaran tee since 1978 of $7 million - a loan guarantee. We never put up a dollar, Mr. Chairman. Back in 1978, all we did was provide a loan guarantee and the Federal Government has provided a loan guarantee, 1983, of $7 million, is it? Mr. Chairman, there are $7 million in loan guarantees from the provinces at the present time and there is also $5.5 million by the Federal Government that will be available in 1983. MR. BLAKE: I'm just not quite clear.

I just want the Minister to tell me in total now what the guarantees are from Manitoba. What are the guarantees from the Province of Manitoba to CCIL? MR. ADAM: Mr. Chairman, I do have that information for the honourable member. The loan guarantee for the Province of Manitoba is $2.8 million and the Gov ernment of Saskatchewan has a loan guarantee of $2.625 million and the Government of Alberta has a loan guarantee of $1. 575 million. MR. BLAKE: That is to date, or does that include the package that is under discussion now? 14 36 MR.

ADAM: That is a loan guarantee from the 1978 packages which is going to be all rolled in one. The Federal Government is providing a further guarantee for 1983 under the new arrangements, on the new package. They're coming in with a new guarantee. MR. BL AKE: All right, that's very clear now. The Manitoba government is guaranteeing $2.8 million to CCIL in total. Could the Minister tell us where those funds are coming fro m? MR. ADAM: They are only contingent liabilities and they will only come into play should C.I. default on the loan to that little lady that you mentioned a while ago.

If they default in repaying their loans, then this is a contingency here which comes into play. Then they can come to the government and say, well okay, C.I. hasn't lived up to its financial arrangements. You will now have to come in with the loan guarantee and that happens in the banking business. I think it happens every day, Mr. Chairman. I think it's a very common occurrence. MR. BLAKE: Mr. Chairman, we have the learned Attorney-General here now.

Maybe we should let him take over your Chair there and answer all these ques tions because he seems to be a complete authority on what's going on here and he's been here about 30 seconds and doesn't know what the hell is going on in

Tuesday, 13 April, 19 82 the committee. -(Interjection)- Well, you think don 't? MR. CHAIRMAN: Order. MR. BLAKE: Mr. Chairman, this is a contingent liabil ity of $2.8 million that they are obviously going to borrow somewhere and we'll go back to my original question away back when. Where are they borrowing thi s $2.8 million from? MR. CHAIRMAN: Mr. Minister. Order. MR. BLAKE: You don't have to guarantee a loan unless somebo dy's borrowing money. Where are they borrowing it? MR. ADAM: Mr. Chairman, we've gone over this ground several times now.

I mentioned to the honour able member that the money is coming from CCCS and they get the money from their Central which is guaranteed and from the little old lady in the credit union. It is guaranteed by the Province of Manitoba and the Province of Saskatchewan and Alberta and Can ada. If the provinces are unable to meet their commitments, like the honourable member menti oned awhile ago tha t he had taken loan guarantees and the guarantor was a bigger risk than the ... MR. BL AKE: The Member for Fort Rouge well knows what some guarantees are worth, I'm sure. MR. CHAIRMAN: Order.

The Member for Minn edosa, do you have a further question? MR. BLAKE: Through you to the Minister, but more correctly directly to the Minister of Natural Resour ces, I'm suggesting that if they were borrowi ng from a bank that the taxpayers of the province under the Stabilization Fund might not have to pick up the risk should the worst come to worst and they go down the tube, but tha t's beside the point, Mr. Chairma n.

The Minister has indicated now that they're borrowing $2.8 million from CCCS but that is only a small loan and he doesn't feel that he can tell us the total amount of their credit or what the amount is that they're borrowing . MR. ADAM: I don't have that figure. Mr. Chairman, and I think a transaction between the parties involved should not be ma de public. MR. BLAKE: But you have end eavoured to get it if it 's not confi dent ial information, is that correct? · MR. CHAI RM AN: If you people want to have a per sonal conversat io n, possibly you can do it when the committee rises.

Wait until the Chair recognizes you and then you can carry on your conversation. The Member for Minnedosa. MR. BLAKE: Mr. Chairman, I will defer to the Minis ter, let him answer that question. MR. ADAM: Mr. Chairman, as I mentioned previously, perhaps an hour, an hour-and-a-half ago, I think it would be improper for the Minister to divulge the transaction between the parties involv ed. I think tha t information is available to the members of either the credit unions or the C.I. for instance.

If the honour able member has a farm out in Minnedosa, I under stand he has, perhaps he is a member of the Co operative Implements at the present time. I am unaware. Perhaps he is. That information is available to him and it can be obtained from Co-op Implements and I would not want to give the honourable member a commitment that I would provide that information for him. MR. BLAKE: I defer to the Member for La Verend rye. He may have a little more luck than I've had in getting some of the answers. MR. CHAIRMAN: The Member for La Verendrye. MR. BANMAN: As I mentioned this afternoon, Mr.

Chairman, one of the concerns that we all have as committee members, as taxpayers, and looking after the public purse, I believe it is in the best in terests of the system not onl y of CCIL but of the co-op move ment in Manitoba to remove any of the doubts tha t are being cast on the loans and the loan guarantees that are being put forward by the government. I think tha t this type of information is very simple and straight forward and the only people that we're hurting by not releasing some of this information is the system itself.

I would ask the Min ister whether or not he knows of any lo ans that the Manitoba Central has given to CCIL? Is there a loan outstanding that the Central has with regards to CCI L? MR. ADAM: Mr. Chairman, that is a transaction between Central and C.I. MR. BANMAN: The reason I ask the questio n, Mr. Chairman, if the Central has a loan go sour, who pi cks up that loan? MR. ADAM: Mr. Chairma n, I have an swered that to the Honourable Member for Minnedosa that if C.I. didn't meet its commitments, the guarantees that have been prov ided, the loan guarantees would be cal led . I thought I made that very clear. MR.

BANMAN: Is the Minister saying that all the loans of C.I. wherever they are, whether they be at CCS, CCCS, Manitoba Central, Saskatchewan Cen tral , or wherever are guaranteed by the provinces and the Federal Government. MR. ADAM: They're guaranteed to the amounts of the agreement. The $7 million and 5.5 million by the Federal Governme nt. MR. BANMAN: So the Minister is saying that our exposure is close to $3 million and whatever the com pany borrows over that limit.

He used a figure and I know he retracted it, but just for a sake of argum ent, at $60 million we're only guaranteeing 3 million of that, and this is the question we've been asking here this evening. Who, then. if everything should go awry, and we are all agreed tha t we certainly hope that's not 14 37

Tuesday, 13 April, 19 82 going to happen, but to what exposure does the sys tem have on top of the guarantees, because we've just given the Central $25 million to look after some of their problems? Now this is the only question we've been asking here for an hour. MR. ADAM: Mr. Chairman, you know I'm sure that the entire operation of C.I. involves sale of farm equip ment to - it involves securities that they have, accounts receivable. I'm sure the Member for Minne dosa is familiar with that.

There are assignments of accounts receivable, there are machines that are sold to farmers which are financed in one way or another. I'm not sure whether the C. I. finances them or not but they have security and there's assets there; there's collateral and so on, and inventory. I don't know just what the inventory is at the present time at C.I. but there's inventory there. They have a line of credit the same as any other company would have; how far a banker, if you will, can go on a certain loan to a borrower.

For me to respond and to advise you what the exposure is, I don't have that information and I'm unable to give it to the honourable member. I don't have it. I don't know if I would even if I had it, because I think that is something that should be dealt with between the parties involved and their members. The Central also has reserves.

The different cen trals I suppose right across Canada has reserves to provide for its loan losses the same as any other financial institutions that provide, in their financial statement, there's always their contingency for losses and I' ve read many many many statements from banks. Not too many from banks but I have read some from banks and other companies and they provide contingencies and reserves for bad accounts and losses. -(Interjection)- There are reserves there at Central that are to provide for its loan losses and we don't have a list of their loans, Mr. Chairman.

The government risk is only to the extent of their guaran tees, that is all. The risk is ... . MR. BANMAN: Well, Mr. Chairman, I must say this has been a very frustrating last hour that we've gone through here. We've been trying to establish, and it was my understanding that the province had only guaranteed close to $3 million dollars of the borrow ings of C.I. In other words if everything went bad we owed $3 million, we'd have to cough up our $3 million because that's what we guaranteed.

But the Minister has been saying that it's all guaranteed, that every thing's guaranteed. -(Interjection)- Well this is what we're getting at. The Minister has indicated a number of times .. MR. CHAIRMAN: The Minister on a point of order. MR. ADAM: No, Mr. Chairman, if the honourable member got that impression I did not say that. I said that the three provinces had guaranteed $7 million. The Federal Governement has guaranteed $5.5 mil lion for 1983. That is the extent of our guarantees. It's not all guaranteed, just up to the maximum of $7 million.

Our share of that I believe I said it was $2.8 million, and that is from 1978. That is from the pack age that had been agreed upon by the previous administration. The present package does not pro- vide loan guarantees from the province. It is only a loan. I wonder if the member understood that correctly. Now I said that there's a carry over of a loan guarantee from the 1978 financial package. Is that clear? - (Interjection)- Okay.

The three provinces have made a loan, not a guarantee, not a loan guarantee, a loan, that wil l be interest-free, it will be carrying interest at FCC rates. -(Interjection)- No, it's not interest free, FCC rates. MR. BANMAN: Well, Mr. Chairman, the government today has a $2.8 million guarantee, plus there will be a loan in place for $2.97 million. So our exposure now is $6 million. Is that correct? MR. ADAM: That is the financial arrangement that had been, I suppose the beginning of the year negoti ations were undertaken by the previous Minister.

At the present time there is a loan guarantee from the first financial package and there is a current loan for the new financial package of - the loan for the new financial package is $2,975,0 00.00. MR. BANMAN: Okay, so we've determined now that we've got a loan which is going to bear interest at FCC rates. We've got a guarantee in place. . ... A MEMBER: A point of order, Mr. Chairman, or . . ? MR. CHAI RMAN: The Member for La Verendrye. MR. BANMAN: I had the floor. You know, we're not getting into a philosophical argument or any dis agreement with what has happened today.

It's a mat ter of getting the information and I think that whether it be Flyer Industries or any major amount of money that is either being put in by the Provincial Govern ment or is guaranteed by the government, when the bill comes in for the $25 million for the credit union movement and the $4.5 million for the Caisses Popu laires, I think some of these details have to be ready and have to be explained to the people because you've got massive amounts of public funds going into these things and all we're asking for some of this information.

If the Minister doesn't have it today, I would be perfectly willing to say to him, try and get the information, talk to the people at C.I. We don't want to put the company in a position where we jeopardize their competitiveness, not at all. But I think the com mitte here and the people of Manitoba have a right just to know what's happening with some of these things and not asking for great details, but just to see where we're going with the whole system because I think it's important to everybody because we're talking mas sive amounts of money. We're talking millions of dollars. 14 38 MR.

ADAM: I thank the honourable member. I want to point out that the assistance to the credit union sys tem is not part of the other financial deal to C.I. There's no connection and I want to make that clear, that the two are not relative to one another. I don't have the information they're asking for. They want to know how much line of credit that C.I. has; I don't know that. If the honourable members want to

Tuesday, 13 April, 19 82 allow me to take it under advisement and ask them if they are willing to provide that information, you know, providing that they agree to it. If they don't, well, I'm not going to do it; I don't have that information. If that is satisfactory, I'm prepared to say "let committee rise" and we'll come back some other time because I don't have that information and we're just beating around the bush at the present time. We don't seem to be getting anywhere. MR. CHAIR MAN: The Minister of Natural Resources. POINT OF ORDER MR.

MACKLING: On a point of order, I think it would assist the Minister if the honourable members would then indicate the specific questions that they want information on; that the Minister of Co-op Develop ment has some reticence to disclose because he doesn't want to provide information that might affect the operations of the two participating agencies, their companies. If the honourable members would give the specific questions, then the Minister can consult with staff and the parties and make sure whether the information can be revealed without any difficulty.

If the honourable members would then put those ques tions to the Chairman, then the Minister will be able to deal with them at the next sitting of the committee. MR. CHAIR MAN: The Member for Minnedosa. You had a specific question you would like ... MR. BLAKE: No, I've already asked the questions, Mr. Chairman. I can reiterate. I know that there is a gua rantee of $2.8 million, or whatever the figure that the Minister gave us, 2.8 and it was updated to 2.95 or something like that. That's close enough.

My question was, what was the line of credit with the CCIL with CCCS or the Central, their present financial institu tion that they are borrowing funds from? I want to know what their present exposure was and what their line of credit was so we'd have some idea of what the Credit Union Central of Manitoba was exposed to in lending funds to CCIL. MR. CHAI RMAN: The Member for La Verendrye, was that the same specific question you had or do you have a further question? MR. BANMAN: No, Mr. Speaker, I think that's what we've been trying to get at for the last little while.

I would say that if the Minister would undertake to try and get that information to us, I think we don't neces sarily have to come back to the committee here, as we have said all along, as long as it doesn't harm the competitive position of the company with releasing that. But I think that is something that is put out in their Annual Report and should be quite easy to get a hold of. So if the Minister would undertake to provide us with those answers, we might have a few more.

I hasten to say that if there are some more questions we have another opportunity at the passing of the bill for the credit union movement at which time we can ask some more questions. I would just ask the Minister to acquaint himself with the facts and try and get that back to us. If we have some more questions, we will ask them during the debate on second reading or in Committee of the Whole on the bill which will provide the credit unions with the funds that they have been promised. MR. CHAIRMAN: On the same point of order? MR. MACKLI NG: Yes, Mr. Chairman.

On the point of order, the question is clear and then the Minister, as I indicated, I think it would be helpful if the Minister -he will undertake to determine whether or not he can provide that information. He'll check with the parties involved to make sure that they have no prob lem about him disclosing that information because that is, I think, a legitimate concern. Certainly, he can -(Interjection)- okay, that's understood. MR. CHAIRMAN: Okay, we're on 2.(a)

(1) Salaries pass; 2.(a)

(2) Ot her Expenditures-pass; 2. (b)

(1) Salaries-pass; 2.(b)

(2) Other Expenditures -pas s. Resolution No. 41.

Be it resolved that there be granted to Her Majesty a sum not exceeding $1 ,0 63, 500 for Co- Operative Development for Co-operative and Credit Union Development Regulation for the fiscal year ending the 31st day of March, 1983-pass. We have to go to one more motion, it's 1.(

a) Minis ter's Salary-pass. -( Interjection)- I'm sorr y it part of Resolution - No. 3 was part of 41. -(lnterjection) Okay. No. 3. Acquisition/C onstruction of Physical Assets-pass. Resolution No. 42. Resolved that there be granted to Her Majesty a sum not exceeding $1 00,000 fo r the fiscal year ending the 31st day of March, 1983-pass. Now, the Minister's Salary 1.( a)-p ass. Resolution No. 40. Resolved that there be granted to Her Majesty a sum not exceeding $1 00,800 for Co-operative Development for General Administra tion for the fiscal year ending the 31 st day of March, 1983-pass. MR.

CHAIRMAN: This concludes the Estimates of Co-operative Development. 14 39 Committee rise SUPPLY - AGRICULTURE MR. CHAIRMAN, Jerry T. Storie (Flin Flon): The Committee will come to order. Continuing with the Agricultural Estimates on Resolution No. 13, Item No. 6.(c)

(1) Salaries. 6.(c)(1)-pass; 6.(c)

(2) Other Expenditures-pass; (c)-pass. 6.(

d) Economics Branch. 6.(d)

(1) Salari es. The Honourable Member for Pembina. MR. DONALD ORCHARD (Pembina): Mr. Chairman, could the Minister indicate whether the Economics Branch has undertaken or verified, or done any calcu lations on the Crow benefit studies that have been put out? HON. BIL L URU SKI (I nterlake): Mr. Chairman, that work is undertaken in the Department of Transportation. MR. ORCHARD: So that this department has not

Tuesday, 13 April, 19 82 undertaken to verify any of the fi gures developed by the Transportation Di vision, offered any comments on some of the agricu ltural positions? MR. URUSKI: Mr. Chairman, there would have been in fact, if the member knows, there has been involve ment of staff in terms of all the departments, but spe cific al ly to tell you that in the product io n there wou ld have been co-operation and there has been over the years between the two departments and the agencies involved in terms of doing the analysis and do in g the work on those matters. MR.

ORCHARD: Wel l, to specific al ly answer, has the Economics Branch agreed, disagreed or commented on some of the positions about livestock production, special crop production, and some of the statements that are currently being made by the Minis ter of Transportation? MR. URUSKI: There would have been some involve ment in the analysis from the Economics Branch on that, yes. MR. ORCHARD: Well, speci fic al ly, Mr. Chairman, co uld the Minister indicate whether the Econom ics Branch has done the an alysis on the spec ial crop potential for Manitoba?

There has been in the mate rial handed out a development that special crops shou ld not enter into the debate; that special crops are a finite market; that special crops don't offer any new opportunity outside of what's al ready there, and I just wondered if the Economics Branch had develop ed that information for this admi nistration. MR. URUSKI: Mr. Chairman, the work which would have been involved from our branch would have been statist ical in formation and advice to put this package together to assist the Department of Transportat ion in putting the package together.

The member is trying to indicate whether there was a cri tique or an anal ysis of another analysis upon analysis, Mr. Chairman. To the honourab le member, no, there was no analysis of analysis. MR. ORCHARD: Mr. Chairman, does the staff of the Econ omics Branch believe that there is no future benefit for the Province of Manitoba in the special crop production field? MR. URUSKI: Mr.

Chairman, if the honourable member had read that document, he would know what the analysis is, that special crop product io n has been of great benefit to the Provi nce of Manitoba and has expanded notwithsta ndi ng the matter of the Crow rate being in pla ce and special crops have grown immens ely in the Province of Manitoba since the turn of the Seventies. MR. ORCHARD: Precise ly the point I'm making, Mr.

Chairman, the special crop industry has grown pay ing compensatory rates and the indication is that with a potential change in the transportation costs, shou ld the Federal Government achieve its seemed objective of chang ing the freight rates, does the Economics Branch and this Minister agree that special produc- lio n wou ld not increase in the same increments that it in creased in the Seventies? MR. URUSKI: Mr.

Chairman, I believe that special crops have expanded in the Province of Manitoba notwithstanding and I don't believe that a change in the Crow rate wi ll have any measurab le potential of expansion of the crops. What will increase and enhance the expansio n of special crops wil l be markets and, of course, the one thi ng price, which wi ll be the two major factors that will increase on the expansion of any kin d of comm odi ty; whether it be beef, whether it be spec ial crops, whether it be any other kind of commodity. MR.

ORC HARD: Well, fol lo wing the Minister's logic, and I wo uld assume it's his logic as well as the Minis ter ofTransportation's logic, that farmers will have to pay increasing costs, increasing amounts for trans portation, as has been la id out in a number of the handouts that the Mi nister of Transportation has given us, and gi ven the fact that the Minister of Trans portation has indicated that the rate for ship pin g grain may increase by a mu ltiple of 5 by approximately 1985, and by a mu lti ple of 10 by 1995; given those kinds of project ions by the Minister of Transportat io n and I assume the Minis ter of Ag ric ulture, that those transportation costs wi ll be borne by the producer and hence come out of the, I suppose, deli vered pr ic e of wheat, oats, and barley, ad being as the situation on special crops is that farmers already are paying the ful l freight rate and fin d them economic to produce; shou ld the economics of product io n of wheat, oats, barley, rye, rapeseed, and fla x decline because of paying increasing freight rates, as the Minister of Transportation would seem to indicate, wou ld this not make the rela tiv e position of spec ial crops more favourab le hence more production emphasis on them?

MR. URU SKI: Notwithstanding what the farmers wil l be paying, I want to take them to the issue, for exam ple , of rapeseed, which has been argued that the rapeseed industry has been discriminated against and we believe that in terms of equal treatment within this country. -(Interjection)- Wel l, Mr. Chairman with respect to special crops, what wi ll enhance spe cial crops, and I don't believe that there has been any impediment.

Let's look at what has happened in the spec ial crop area in the Province of Manitoba. 14 40 In 1967 the special crops accounted for approxi mately 12 percent of the total value of crop production in the province. By 1979, this percentage had increased to 36 .4 percent and the potentia l, of course, has as yet for further advances. In '69 there were 65, 000 acres, and in 1970 it had gone up to 155,000 acres in spec ial crops. So, Mr.

Chairman, even though the Crow rate was in effect at that point in ti me, what has made the special crop production expand in the Province of Manitoba was the factors that there was a market and that there is a price that made it favourable for special crops to grow. Mr. Chairman, right now I venture to say, for exam ple, in the area of special seeds or sm all seeds, the timothy market has fal len right out in the North Amer ican market. I venture to say that the grass production

Tuesday, 13 April, 19 82 of timothy will decline, many timot hy crops will be pl oughe d under, not because of the Crow rate or some other matter; it will be a matter of price and market potential that will be the dictating factors and not the issue of the Crow rate. MR. ORCHARD: Mr. Chairman, the Minister maybe hasn' t understood what I'm saying. The information developed by his colleague, the Minister of Transpor tation, indicates that farmers will pay a multiple of the current Crow rate to move their statutory grains to market.

The clear implication that the Minister of Tran sportation is making is that will decrease the net farm income because the farmer will have to pay freight. Hence, his farm gate price on wheat, oats, barley, rye, rapeseed and flax will decline. Now, in the years from 1967 to 1979, there was an in cre ase from 13 to 36 percent in special crop acreage, the vast majority of which have moved at a compensa tory freig ht rate.

Is the Minister saying that there will be no further increase in that when, if the Federal scenario happens according to his Minister of Trans portation's figures and the relative advantage of grow ing wheat is removed by a change in the freight rate proposed by the Federal Government? Would he not concede that special crops will become even more im po rtant in the Province of Manitoba because right now, when they are paying their full freight rate, the farm gate price is reflective of a freig ht rate that the Min ister of Transportation is saying will happen to wheat, oats and barley?

They are now offering 36 percent of the production spectrum in the Province of Manitoba and would he not concede that they could well occupy a greater portion of this perspective because his argument about the market being there would seem somewhat foggy when one considers the dramatic increase in grain-corn acreage in the Prov inc e of Manitoba and that facing over the last five years abundant supplies of corn in the world market, the U.S . being a major supplier of corn and Canada being a very small supplier of corn.

Corn has taken off in the areas and as the Minister well knows the resear ch program at the Un iversity of Manitoba and the various agricultural stations in this province are developing corn varieties that will produce grain corn in wider and wider areas of the Province of Manitoba, so that grain corn is no longer a crop which is res tricted to the Pembina triangle, the so-called Pembina triangle, from Morden, Portage la Prairie over to Altona. It is fast gaining a place in the south Interlake, in the Parkland region, and in Western Manitoba, because of improvements in variety.

That has hap pened with corn leaving the farm gate paying full transportation costs, and I find the analysis made tha t there would be no advantage or disadvantage to spe cial crop production to somehow fall between the benches, and that's why I'm asking, if his Department of Economics had agreed with the position put for ward in the Minister of Transportation's paper? MR. URU SKI: Mr. Chairman, while the member takes an argument and has developed that argument in terms of his thinking on the changes in the Crow rate and the effect on special crops, Mr.

Chairman, what could happen, and the member is right, that if the Crow rate is changed, it will have an impact of reduc- 14 41 ing net-farm incomes, deducing from his argument, that all of a sudden farmers will shift their operations and special crops will become more important. Mr. Chairman, I hope that special crops, like any other crop, or any ot her commodity that is grown or raised in the Province of Manitoba, if the market and the price is there, farmers will produce it and if developed they will go into it. But what can happen, Mr.

Chairman, when the honourable member indicates that whether one agrees or doesn't agree? I believe that what will happen is that the ch ange will not, in the Crow rate, won't improve, for example, the market conditions or the returns to farmers for the sale of special crops, but may, in fact, Mr. Chairman, induce, as the member indicates, the additional production of special crops which could have a detrimental effect on the market that is already there because the member well knows, and his party well knows, the law of supply and demand.

As soon as you produce more than the market will bear, what usually happens? Boom, the price goes down, Mr. Chairman, and then what will happe n, Mr. Chairman? Then, the argument that he is putting doesn't really bear out in terms of their posi tion, in terms of what impact it will have. I would hope, and we have as a department and as a government before your time and now after your time, have encouraged, your government has encouraged, we have encouraged the production of special crops in the Province of Manitoba. Mr.

Chairman, I believe thatthe honourable member, whi le I hope he continues to make that argument, and I think what will come out and what will determine the eventual either expansion or diminution of the special crop will be price and will be market potential. MR. OR CHARD: Mr. Chairman, the Minister says it's my argument, it's my logic, it's my fault. That isn't what I'm asking him. His government has put out a position that special crop production will not change under their scenario, the figures that they've given us of the Crow rate being paid by the farmer increasing in multiples.

It's their argument that number one, the Crow rate is going to increase in multiples. It's their argument number two, that when it does that special crops will not have any impact on the Province of Mani toba. All I'm trying to find out, Mr.

Chairma n, is how did the Minister arrive at that kind of an analysis, and all I'm asking him is did his Economics Branch agree with the kind of information, the kind of position that's being put forward by the Minister of Transporta ti on, not my position but the government's position, the Minister of Transportation's position that a multi ple change in the Crow rate won't significantly increase, decrease or alter special crops in the Prov ince of Manitoba? What I've been trying to point out to him is that maybe they didn't think their own position through quite completely. MR. URUSKI: Mr.

Chairman, obviously the honour able member either wishes deliberately to twist and distort or he hasn't read the documents that have been presented to him. Maybe he wishes someone to read the documents for him and to indicate to him what analysis was done and what the position of the government is. I'll just read a part of it, I won't even

Tue sday, 13 April, 19 82 read for him the entire analysis and the entire work that was done and condensed into layman's lan guage, but I'l l read him a part of the analysis done. He obviously will, like many of the producer and farmers in Manitoba who will be receiving thi s information, be able to judge for himself as to whether he agrees or doesn't agree with the analysis done and he will make up his own mind as to whether he wants to accept the position put forward, Mr. Chairman. Mr.

Chairman, I want to quote from page three of the document dealing with the analysis on the impact of removal of statutory grain rates on the Manitoba special crops industry, "Concentration of special crops production in Manitoba and its development over the past 10 years resulted from the interaction from many factors of whi ch the cost of transportation and the availability of the service would have to be a consideration, partic ula rly in the view of the fact tha t special crops are priced on a world market basis.

Despite the fact tha t most special crops are trans ported at compensatory rates, the industry has devel oped and prospered over the years. Thi s would sug gest tha t the existence of statutory rates has not adversely influenced the production of special crops nor does thi s removal offer any new opportunities for prosperity. "The fact tha t special crops prod uction has expanded in Manitoba on a par with those areas where statutory rates are not applicable suggest tha t the exi stence of the rate did not hinder the develop ment of the industry, nor does removal of the rates assure further expansion.

In fact, removal of statutory rates could seriously threaten production of buck wheat in Manitoba as the commodity moves to Van couver for export to Japan under these rates. Com pensatory rates may force buckwheat production to be concentrated in Ontario and Quebec where it would be closer to water transportation facilities. "The major facts limiting expansion of special crops production, has been the size of the market. Crops are considered special when the markets are small and therefore production is limited.

When a crop increases to become a significant proportion of total crop production, it is no longer special. "The development of rapeseed canola is a case in point. For a greater crop diversification to occur due to a revision in the statutory freig ht rates; there would have to be an unfilled market opportunity tha t the ch ange made it possible to exploit. There does not appear to be any evidence of such an opportunity. "The proposed ch anges to the Crowsnest Pass statutory freig ht rates for Manitoba's crop producers will reduce their net return to statutory grains and seeds.

At the same time the ch ange will not improve eit her market conditions or returns for special crops, but may in fact induce additional Manitoba produc tion of special crops. Thi s could deteriorate the market prices for special crops and reduce the returns for them even though the freig ht costs are unchanged. The total net crop farm returns to Manitoba producers would then of course be reduced." MR. ORCHARD: The Minister has answered exactly what I'v e been saying. In fact, I'm glad tha t he's read his own information for t he first time and concurs with the position I'm putting forward.

Did the analysis tha t's put in there, did it pass the scrutiny of your economics department, who I believe in the lo ng run know a great deal about the production of special crops, their viability and their firm place in the produc tion spectrum of Manitoba and the potential for increase in those acres? The Minister in his special crop analysis has casu ally avoided the corn production in thi s province, whi ch I mentioned just a few minutes ago.

Our government, and I believe even his government before hi m -(Interjecti on)- the Minister for Natural Resources is yapping from his seat and the Minister doesn't really make much of a farmer. Now, Mr. Chairman, the Minister should realize that the efforts tha t have been put into corn as a crop, as a special crop, as an alternate crop in the Province of Manitoba, has been covered many fold from many angles.

The Provincial Government over the last number of years, I know for four years we supported research and I'm quite sure tha t his Minister of Agri culture in the previous Sch reyer years did the same thing. Corn has a great increase in potential in the Province of Manitoba. It has been developed, as I say, over the past number of years amidst some very fierce production competition from the United States. It has come, Mr.

Chairman, because the very thing tha t the Minister alludes to were there in corn produc tion; i.e., cash flow - not waiting two years to get your money out of the crop you produce, but cash flow wit hin probably eight months of production; cash flow whi ch has been at a level tha t can return a posi tive contribution to farm capitalization and make a profit for the grower. That's why corn acreage has increased and the potential in thi s province is great for increasing it further. We are now serving practi cally the entire distillery market in the Province of Manitoba.

That has been the situation that has only come to bear in the last thr ee years. As well, Mr. Chairman, the Minister of Agriculture should know tha t the corn grown in Manitoba is replacing the imported U.S . corn in the Alberta and B.C. feed markets.

It has been a very significant con tributor to the well being of the farming community in Manitoba and its potential is large for the future because it is moving further and further beyond the original Pembina triangle that it was developed ... 14 42 The Minister's own analysis confirms what I've been saying and I only ask him, did the Minister have tha t analysis on special crops; did his Economics Depart ment, who know considerable about special crop production and their economies, give their nod of approval to that position? MR.

UR USKI: Whether the member wants to accept or not accept the analysis; he can make whatever

interpretation he likes on the analysis. No matter what I would answer to thi s honourable member, obviously he has his mind made up and he can stick to his position on thi s matter. Mr. Chairman, the member can speak all he wants and chi rp all he wants, I have given the member the government position with respect to our position and its impact on the Crow rate. Mr. Chairman, the governmental position in terms of involvement of all departments were the result of thi s production. It was prepared, and I told the honourable member, it was

Tuesday, 13 April, 19 82 prepared by the Department of Transporation in rela tionship to the available data within government, which means the Department of Agriculture, Mr. Chairman. MR. CHAIRMAN: The Member for Turtle Mountain. MR. RANSOM: Will the Minister advise the commit tee if he intends to have the Economic Branch do a study of the impact of his Beef Stabilization Plan upon the economic welfare of feedlot operations and lives tock auction markets in this province? MR. URUSKI: No. MR. RANSOM: Well, Mr. Chairman, the obvious question is why not?

Does the Minister know that there will not be any impact on these two sectors of the industry? MR. URUSKI: Mr. Chairman, whether the program that was announced was announced for the cow-calf industry, in terms of the impact of the market on some of the industry, there has always been an impact on an open market system on whoever is involved in it. MR. RANSOM: Mr. Chairman, does the Minister think there's no obligation on the part of the government when they intervene in the system and interfere in the system to the detriment of other segments of the industry? MR. URUSKI: Mr.

Chairman, obviously the honour abl e member doesn't like all the announceme nts that have been made and he calls them "interference ." Mr. Chairman, I don't accept that what we have done is interference. I accept and we've made the announce ment to assist the industry, which his members sat on their hands for several years

Document details

Collection	Manitoba — Debates (Hansard)
Citation	32-1-32b
Type	hansard
Volume / chapter	32nd 1st hansardpdf 32b.pdf
Language	en
Format	pdf
Source	PROVINCIAL
Identifier	5601ce9c1ebc7b9cf62b71515f04de6e9efc08e6

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