Tuesday, October 2, 2018

The CAQ and the Caisse?

Paul Chiasson of The Canadian Press reports, Coalition Avenir Québec wins historic majority as voters soundly reject old-line Liberals, PQ:
Quebeckers have elected a right-leaning government for the first time since 1966, choosing the upstart Coalition Avenir Québec while soundly rejecting the two parties that governed the province and drove Canadian national unity debates for five decades.

The CAQ, a collection of federalists and former separatists, including leader and long-time politician François Legault, swept vast regions of the province right up to the doorstep of Montreal to win a strong majority.

“Today we made history. Today many Quebeckers set aside a debate that divided us for 50 years. Today Many Quebeckers have demonstrated that it’s possible to make adversaries from yesterday work together for tomorrow,” Mr. Legault said in his acceptance speech.

The results were a historic reversal for a province where the Parti Québécois and Liberals dominated 13 straight elections and fought two referendums on independence that threatened to tear Canada apart. Both suffered record defeats in popular vote. This was only the third election for the CAQ and the first win by a right-leaning party since the Union Nationale 52 years ago.

Mr. Legault considers the CAQ a conservative party, but in many ways it defies labels and has moved steadily toward the centre. It includes former federal Conservatives, provincial Liberals and ex-péquistes, including Mr. Legault himself. The party campaigned on cutting taxes and immigration levels, but also promised to boost subsidies to the public daycare program to bring it back to an $8 universal fee. It favours maintaining Quebec’s carbon-pricing regime. It is pro-choice on abortion, but promised to raise the legal age for using marijuana to 21.

The CAQ’s candidates took suburbs near Montreal long held by Liberals and areas of sovereigntist rural heartland that had belonged to the PQ. Only in the big city did they fail to dominate: Montreal was mostly split between the Liberals and the left-wing Québec solidaire, although the CAQ was confirmed in one seat late Monday.

Liberal Leader Philippe Couillard wished Mr. Legault well as he conceded defeat in front of a somber, sparse crowd in Saint-Félicien, where he resides and won his seat. “We must remain united,” he said. "I’m leaving him a Quebec in financial health, ready for all challenges. I will pitch in for a harmonious transition. It was a great honour to serve Quebeckers.” Mr. Couillard said he will take some time to consider his future. "I am not bitter and I ask you not to be. I am proud and you should be also,” he said.

The result was particularly devastating for the PQ. The party of René Lévesque brought Quebec to the cusp of declaring independence with Jacques Parizeau in the 1995 referendum. The PQ, led by Jean-François Lisée, who apprenticed under Mr. Parizeau, was set to lose official party status with fewer than 12 seats. Mr. Lisée lost his own riding.

By 11:30 p.m. on Monday, the CAQ had won or was leading in 74 seats to 32 for the Liberals, 10 for QS and 9 for the PQ.

Prime Minister Justin Trudeau issued a statement congratulating Mr. Legault and saying he looks forward to working with him.

Mr. Legault, 61, renounced sovereignty about six years ago and says Quebec’s place is within Canada. But whereas Mr. Couillard was never shy to express his love of Canada, Mr. Legault is a nationalist, and says he will demand power from Ottawa.

Election day events pointed to the challenges for the CAQ government: The new trade agreement with the United States and Mexico would open the Quebec dairy and poultry industries to greater U.S. competition without eliminating the aluminum tariffs harming the province’s mills.

Mr. Legault said he would “explore all options” to defend Quebec’s interests.

In a second election-day development, Robert Lafrenière, the head of the province’s anti-corruption police unit, UPAC, resigned. UPAC is in turmoil over low morale, constant leaks and few arrests in recent months. Mr. Legault, a stringent critic of the Liberal corruption scandals under Jean Charest, was likely to replace him anyway, but the resignation will add urgency to get the unit back on track.

Mr. Legault promised quick action on two top items. He said he will cut school property taxes by $700-million, which would decrease the average bill by $500, and introduce a per-child family allowance of $2,400 at a cost of $763-million. He also promised to hire thousands of teachers, speech therapists, counsellors and other specialized education professionals to help children with learning disorders and bring stability to classrooms.

“My first priorities will be around putting more money in Quebeckers' pockets, and second is education. I want to help each and every child with learning difficulties,” Mr. Legault said in his final campaign appearance.

Mr. Couillard’s Liberals made no new tax-cut promises, pledging instead to make sure public services were running smoothly. They also made a plea for re-election to carry on managing the province’s hot economy, robust real estate market, record-low unemployment and, according to the Parliamentary Budget Officer, the healthiest long-term outlook for public finances of any province. Voters were not listening.

The campaign launched on Aug. 23, and in the beginning was a match for the lazy summer days. The sovereigntist PQ pledged it would not hold a referendum on independence for at least four years, and the absence of the divisive issue, which had dominated elections since the 1970s, left a void.

The three leading parties tried to fill the space, making small, conventional promises. They pledged to increase spending on improvements to health and elder care and education while balancing budgets. There was little to help the casual follower discern the differences among the plans.

Quebeckers expressed a deep desire for change and the CAQ’s six-point lead did not budge until Sept. 6, when a Quebec identity issue popped up. Mr. Legault struggled for days to explain his plan to cut the province’s quota of immigrants by 20 per cent to 40,000, and to expel new arrivals who fail language and values tests. He cited the threat to the French language from newcomers speaking English as the rationale.

Mr. Legault finally admitted he did not know all the intricacies of his own policy but promised to learn. The unusual admission, combined with a solid debate performance, stabilized his support and allowed a major rebound.
Alright, so Quebec elections are now behind us and Quebeckers resolutely voted for change, sweeping change and decided to vote CAQ "en masse" except on the island of Montreal which remained a Liberal stronghold.

I'm not surprised with the outcome, the CAQ was leading in the polls and people were fed up with the Liberals which have been in power for a very long time.

Let me first congratulate Eric Girard who easily won the riding of Groulx. Eric was recruited by the CAQ from the National Bank where was the senior vice president of corporate treasury. I've known him for many years going back to 2000 when I worked as an economist at the National Bank.

He's a solid markets guy who used to run a global macro fund at the bank. He knows the Quebec, Canadian and US economy extremely well and had political aspirations for years so I'm happy he ran and won. I think he should be Quebec's next finance minister taking over from Carlos Leitão who performed well balancing the province's budget and lowering the debt (with a few tricks according to Eric).

The last time I ran into Eric was back in July at Innocap's office here in Montreal where he met up with his friend François Rivard, the firm's CEO. Before then, we crossed paths last summer at the Montreal pension conference where he gave a great presentation on markets.

Apart from Eric, my former PSP colleague Jean-Martin Aussant was defeated in the riding of Pointe-aux-Trembles by CAQ candidate Chantal Rouleau, the current borough mayor of Rivière-des-Prairies–Pointe-aux-Trembles and a former member of the city executive committee.

I don't share Jean-Martin's political views but he's a bright guy, politics is in his blood and he is an articulate speaker so I'm sure he will be back one day.

Apart from Eric and Jean-Martin, the other "star" candidate was Christian Dubé, the former senior vice president of the Caisse de dépôt et placement du Québec who left his position and returned to provincial politics as a CAQ candidate. He won the La Prairie riding on Montreal's South Shore.

Mr. Dubé was in charge of the Quebec portfolio at the Caisse, had huge responsibilities there and did a great job. He too might be considered for the job of minister of finance but given his close ties to Michael Sabia, the optics might not look good (I would stick with Eric Girard, a powerhouse in economics, as the new minister of finance).

Of course, Michael Sabia was probably sleeping a lot better last night knowing he has a close ally at the CAQ, a party which regularly attacked the Caisse's independence during Michael's mandate.

Importantly, Mr. Dubé will defend the Caisse's multibillion REM project and likely vouch for Michael to finish his mandate before being replaced.

In any case, as I've stated plenty of times, even if there is a new government in Quebec, the governance at the Caisse should stay the same and there should be no political interference in its day to day operations.

That's the primary message I want to convey in this comment discussing the CAQ and the Caisse. Leave it alone, it's doing well under Michael's watch, he has cleaned up shop, focused on delivering great risk-adjusted returns and should be left alone to complete his mandate.

Who will be Michael Sabia's successor? Interestingly, I was approached by someone close to the CAQ and after some reflection, I said Louis Vachon, the current president and CEO of the National Bank and Eric Girard's former boss.

Why Louis Vachon? Like Michael Sabia, he's an accomplished business leader, independently wealthy (doesn't need the job for money) and he would be a great leader of the Caisse. And unlike Michael, Louis has great markets experience, he was the one who cofounded Innocap at the National Bank prior to selling its stake to the Caisse (BNP owns the other major stake).

Basically, Louis Vachon is a classy guy, fully bilingual, sharp as hell, and he is preparing to leave the bank at one point so he would make a great successor to Michael when that time comes.

That's my opinion, there are a few other qualified candidates at the Caisse and outside the organization but when they asked my opinion, his name came up (probably because I ran into him at Andrew and Eric Molson's birthday event last year; make sure you read Back to Beer...and Hockey: The Story of Eric Molson written by Andrew's wife and family friend of mine, Helen Antoniou, it's a great book).

Those are my thoughts on the CAQ and the Caisse. A lot of influential people read my blog and I remind everyone, these are my opinions, you don't have to agree with me.

Below, François Legault's victory speech from last night. There's a new leader and governing party in Quebec, wish them a lot of success and hope they respect the Caisse's independence and governance.

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