WorldCity Business Magazine

(2) The Almighty Loonie

by Karen-Janine Cohen

As Canadian Snowbirds flock south this winter season, South Floridas tourism industry and retail sector will reap a windfall. The robust Canadian currency may also boost investment locally, but dont expect Canucks to rescue the housing market unless tax policy changes.

Gerry Brissenden arrived at his St. Petersburg home in early November escaping Torontos chilling winds. When Brissenden, a retired sales executive, returns north in the spring he may be toting a brand new flat-screen television. Not only does it sell for about $200 less in St. Petersburg than back home, but the shrinking U.S. dollar means he will reap a further big dscount. We wouldnt have dreamed of buying these things when we were paying 1.6 Canadian
dollars for one U.S. dollar, said Brissenden, a seasonal resident and president of the 70,000-strong Canadian Snowbird Association whose members winter mainly in Florida.

The strong Canadian dollar termed the loonie after the waterbird that appears on the one-dollar coin was the talk of association meetings in Toronto in September and October. With the loonie at a 30-year high against the U.S. dollar, many decided to come earlier to Florida, stay longer and play that extra game of golf, said Brissenden. Florida is one of the lucky areas in the United States that can expect to see a bright silver lining in the decline of the U.S. dollar, which has been falling steadily against other major currencies including the Euro and the Canadian dollar. In September the Canadian and U.S. dollar reached parity for the first time since November 6, 1976, 31 years ago. Since then the loonie hit a high of $1.08 before settling back down near parity. As this issue went to print, the loonie was still hovering above parity at $1.01.

While a weak U.S. dollar means higher prices for oil and more costly imported goods, and may make selling U.S. debt challenging, it will likely usher in a record tourist season for South Florida, luring more Europeans as well as visitors from Canada who just three years ago were rceiving only $0.80 for each Canadian dollar and help fill the coffers of hotels, restaurants and retailers.

The high-flying loonie also comes at a time when South Florida is making a determined effort to attract more Canadian investors and three years after Canadas official presence in Miami was upgraded from a Consulate to a Consulate General. Marcy Grossman, who took over as Consul General in August 2005, has placed a premium on promoting economic and cultural ties between South Florida and Canada. Whats more, this year the business development groups from Palm Beach, Broward and Miami-Dade counties, in a historic first, joined forces on a trade mission, going to Canada in September, to further develop the relationship.

That mission seems to be yielding results said Kelly Smallridge, President of the Business Development Board of Palm Beach County. The county is increasingly attractive to potential investors from Canada, said Smallridge, because of the presence of the Scripps Research Institute and the fact that the Max Planck Society, the prestigious German research giant, has also unveiled plans for a facility. Weve seen a significant increase in our pipeline of Canadian companies interested in pursuing the South Florida market as a location for an expanded facility, she said.

That Canada-South Florida pipeline has a logic all its own. Often, vacationing Canadian executives buy a parttime home in Florida, then decide it makes sense to open a branch of their business in the region as well. We are expecting to see an increase in vacationing CEOs who want to do business in Palm Beach County year round, said Smallridge.

Holly Wiedman, executive vice president of economic development with The Beacon Council, Miami-Dade Countys economic development arm that took part in the September mission, said that the agency is now following up with six Canadian companies interested in South Florida. Sectors include aviation, international commerce and information technology, as well as biotech. The results and the interest were very strong, she said.

According to Beacon Council statistics, some 36,000 full-time South Florida residents are Canadian-born. Meanwhile, WORLDCITYs Whos Here multinational database includes 25 Canadian companies with operations in South Florida. With Miami the undisputed gateway to the Americas, the Canadian Consulates promotion of this concept to Canadian firms, plus the snowbird-slash-tourist connection, the foundation is laid for greater Canadian investment.

Still, South Florida should not be counting any northern chickens just yet high tech or otherwise. The states inability to deal with the escalating property tax issue for non-homesteaded homeowners may be disrupting the typical route that Canadian companies find their way to South Florida. The Snowbird Associations Brissenden said that with taxes going up every year, many peoplpe are rethinking their Florida connection.

Strong Ties

While Canada doesnt often get much attention from local media, ties between Canada nad Florida are strong and multi-layered. Canada and Florida are big trading partners, with Florida exporting nearly $3 billion in goods and commodities to Canada last year, according to Enterprise Florida, the states economic development arm, which expects exports to grow by more than 25 percent in 2007.

Canada is a backbone of the tourist industry, with more than two million Canadians visiting the State each year, according to Visit Florida, the states tourism agency.

Meanwhile, more than 200 Canadian companies have some kind of presence in the State, according to Enterprise Florida. Canadian companies in South Florida range from well-established giants such as telecom manufacturer Nortel Networks, to smaller firms such as Experience Media, a web-based learning and communications site set to formally launch its South Florida operation.

Canadian firms come here because of the access to Latin America. However, many people who decide to move here are already familiar with South Florida. Ruth Bastedo, president of Continuum Media, the Toronto-based parent of Experience Media, first came to know Florida as a winter vacation spot.

She said several factors were behind the decision to open a branch of the firm in Weston. Her business partner (and husband) Michael McHale, is American. And the companys web development expert, Anthony Lazarro, already lives in South Florida. Its in the same time zone as Toronto, which is a big advantage. And South Florida is a much cheaper testing ground than alternative sites such as Los Angeles. We see a great amount of opportunity in the U.S. market, and particularly in the Florida region there is a tremendous sense of diversity and a more international focus, she said.

The company, which personalize e-learning and communications for various companies and already serves many U.S. clients, officially opened its South Florida office on December 1. Bastedo said the high Canadian dollar will help with expenses because rent will be paid from the Toronto office. Still, she said, the parity of the two currencies may prove a double-edged sword for some Canadian firms that for years have relied on Canadas lower cost of doing business to lure U.S. firms north. For a lot of companies that was a crutch, Bastedo said. They didnt diversify their client base or the kind of products they developed.

Tourism Windfall

In the short term, South Florida is bracing for a banner tourist season fueled by Canada and Europe, where the Euro is towering over the dollar at close to $1.50. The tourist influx will not only buoy the local economy but perhaps bring in those visitors who in turn may become investors.

Its already clear that traffic is up. According to Visit Florida, Canadian travel to Florida jumped 6.8 percent for the third quarter of 2007. That extends a trend that has seen more Canadian visitors flock to Florida since 2002. In 2006, 2.1 million Canadians visited Florida, up 3.2 percent from 2005.

Robert Poirier, owner of the Winterset Motel in Fort Lauderdale, said in the early fall that he was already booked for February and March. Most of his clientele are longtime Canadian customers who have stayed at the Winterset for a decade or more. While reservations were running about the same as last year, hes bracing for a bumper crop of walk-ins due to the strong loonie particularly from folks who visit Orlando then decide to drive to South Florida. The Canadians are like the Germans, he said. They like to come without reservations.

Whats more, he said, he was surprised that four long-time customers cancelled their reservations because they decided to buy a condo or trailer in the area.

The combination of a softening real estate market and a low U.S. dollar could mean tremendous bargains for Canadian snowbirds. But brokers need not get their hopes up to see Dudley Do-Right charging in with a sheaf of condo contracts. Skyrocketing property taxes have many Canadians selling their own properties and renting instead or going to places without such high taxes, said Lawrence Barker, executive director of the Canadian Snowbird Association.

Interest has cooled, he said, referring to snowbirds buying Florida property. Weve had some people with double-digit tax increases in just one year, Barker said. Earlier this year the Florida Legislature finally came up with a proposal that would, among other things, impose a 10 percent cap on annual assessments of non-homesteaded homes. But that, said Brissenden, the groups president is still unacceptably high. The proposal will be voted on in January.

Brissenden and Barker both said that other areas are emerging as alternatives. They include Arizona, South Carolina and Mexico, all of which have been in touch with the association. Meanwhile, Visit Florida expects to spend about half a million dollars on a campaign in Canada to encourage visitors to come to Florida.

Still, the drag on property ownership will likely not dampen Canadian investment prospects especially with Canadas trade to Latin America of increasing importance. Consul General Marcy Grossman, instrumental in promoting the Tri-County economic development trip in September, has also spearheaded a strategy to help Canadian companies take advantage of Floridas access to South and Central America and the Caribbean. She said that it is likely the low dollar will only help fuel Canadian interest in the region, building on the ongoing relationship between Florida and Canada.

Canada has been a strong but stealthy investor, Grossmann said, noting that Canadians began investing in South Florida real estate developments as well as homes in the 1970s and 1980s, investments which grew along with the number of snowbirds and tourists. You are going to see a lot of feeling-rich Canadians coming down this winter, she said, noting that they would not be surprised to see tourism jump by as much as 20 percent this coming year. And some firms may see that the time is right to create a more permanent presence in South Florida.

A strong Canadian dollar will bring more investment to Florida, predicted Grossmann. Canadian companies are able to make a play in the U.S. market that they were not able to make before.

INTERVIEW: Coaxing South Florida to look north

Marcy Grossman, Canadas consul general in Miami, is now more than halfway through her four-year posting. She is widely recognized within South Floridas international community as a formidable representative of her country, who has succeeded in injecting new energy into the Canada-Florida relationship. She spoke with WORLDCITYS Karen-Janine Cohen about her experience so far in the Magic City and what she hopes to accomplish before saying adieu.

WORLDCITY: What surprised you about Miami when you arrived?

MARCY GROSSMAN: A lot I thought I knew South Florida well having visited this region often. First, so many people speaking Spanish. But that was the tip of the iceberg. I found out that it was a whole different world here, a different way of living, a different culture, a different economy, a different philosophy. People dont even drive the same [in Miami] as they do in Broward.

WC: What is the biggest misconception Canadians have about South Florida?

MG: They dont understand Miami as the capital of Latin America, as the gateway to the Americas. And that understanding is really what has changed the direction of the Canadian Consulate General. We were a small office in 2004. We went through a huge expansion basically to serve the Florida market. We always knew there was a market here. In the last 10 years, particularly in the last five years, that economy has transformed from a largely tourist-based
economy to a business economy, to a biotech economy. Everybody [in Canada] sees Miami as an American tourist destination with beautiful beaches. They dont understand the transformation
of the economy.

WC: How successful have you been in changing perceptions about South Florida?

MG: A lot of Canadians do come here to do business we have a lot of investment holdings, real estate holdings, companies and economic relationships. But given what I would call our economic primacy in this region, as a country we dont take advantage of the gateway. What weve tried to do in the last 12 months is to unravel the gateway idea, to name it, what is it, how it works, who is here to support it, how the logistics work, and where would be the best markets to address from Miami. The next phase of our strategy is to market that to [Canadian companies] because we feel they didnt understand it, dont know about it.

WC: What is the impact of a strong Canadian dollar?

MG: This is a exciting new addition to the equation[Canada has] a track record of being a huge partner here in terms of international visits and in terms of investment and trade. Now we have the strength of the dollar, weve unraveled the gateway and in the next phase you are going to see more and more Canadian companies popping up here to take advantage of this perfect storm, so to speak.

WC: What is the biggest misconception South Floridians have about Canadians?

MG: The misconception is that we are not a big player here. But when you look at the international statistics and talk to The Beacon Council (the Miami-Dade economic development agency), we are actually always in the top three of everything. We are geographically disadvantaged. Nobody looks up, nobody looks past GeorgiaOur problem is less about any kind of misconception but that were just not on the radar because all of these businesses [in
South Florida] are looking south.

WC: So its important to get the business community in South Florida to adopt a more hemispheric view?

MG: That would be one objective for sure. And that is what we do, that is part of our branding, we try to get the name out. Canada is part of the Americas, and when people acknowledge Canada as part of the Americas, I thank them because not everybody does.

WC: If you could whisper one thing into the ears of South Florida political leaders about what needs to be done to make the region better for business and trade, what would it be?

MG: Its infrastructure, everything from the airport to public transportation to roads. I ask myself every single morning when I come into the downtown core: Are they really going to keep the streets like this when all the condos open? [What is needed is] clear leadership and a vision not what are we going to do next week, but a long-term vision. The port [of Miami], what is the gateway to the port going to look like? How are we going to support all the people wed love to bring downtown to live when the roads and parking and facilities just dont seem able to support them? [Miami has] so many good pieces how is it all going to fit together?

Q: What do you hope to accomplish in your remaining time as Consul General here?

MG: I wanted to get the gateway study done and we did it. So now I want to keep pushing and see some results from that, get Canada on the radar again. Its been sustained effort. From the feedback I get, I think weve done a lot to accomplish that.