Economists reject subsidies for Northvolt and warn about the damaging effects of this mega-factory on the region.
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A few days ago, the CEO of the National Bank, Laurent Ferreira, admitted to the Chamber of Commerce of the Montreal Metropolitan Region that he was not a “big fan of subsidies to attract foreign companies to the country,” alluding to the billions recently granted Battery sector.
Other economists do not hesitate to point out that even if certain companies will benefit from the battery sector, it is far from certain that this is a good thing for Quebec and even the Mauricie region.
“Subsidies for companies are only justified if they contribute to the enrichment of the population. “But this does not apply to the giant Northvolt battery factory, despite the euphoria that has gripped the Quebec premier,” thunders Pierre Gouin, an economist who worked at the Ministry of Finance and the Caisse de dépôt, among others.
“Quebecers work hard, they pay a lot of taxes, schools and hospitals are overwhelmed. Public money should be handled much more consciously,” he adds.
Very little added value
Despite the fact that electric vehicle batteries involve new and innovative technologies, the fact remains that their production at the Northvolt factory in Bécancour remains “assembly line work”.
“It is a production activity. No high added value activities. It should not be subsidized, especially in this period of very low unemployment and labor shortages,” says Mr Gouin.
Pierre Gouin
“If unemployment were high in Quebec, perhaps this generosity would be worth it to give people jobs,” he said. But at the moment we no longer have any real unemployment and average salaries are high. “This investment will not increase salaries,” he explains.
Job relocation
Miguel Ouellette is director and economist at Mallette in Trois-Rivières. And although he is positive about investments and business opportunities for companies in the region, he emphasizes that there are major challenges to be overcome in the Bécancour region.
“Currently the unemployment rate in the region is below 4%. It’s not like we have a lot of unemployed people willing to work. So there may be job relocations. People who, for example, work in factories here in Trois-Rivières and go to the Bécancour industrial park. This could harm our SMEs in the region. This is another side of the coin that should not be overlooked,” he explains.
The other regional challenge is housing construction, emphasizes the economist. “Does Bécancour have the capacity to accommodate all these new employees? The answer at the moment is no. The vacancy rate for housing is currently between 0 and 1%. “There is a huge housing shortage in Bécancour,” he said.
For financial agreement
If some of the aid offered by Quebec to Northvolt comes in the form of loans that could earn interest, Pierre Gouin still expresses reservations. “Let’s not forget that the government itself has to borrow to provide these loans and grants. The state has no money, it is in debt. The income must therefore at least cover this interest. However, in general, this type of loan is often given to companies at very low or no interest rates,” he points out.
As for the “equity” portion of the aid, where the government becomes owner of part of the project, Mr Gouin is once again playing devil’s advocate. “Multinational companies like Northvolt have methods for repatriating profits to places where they pay little or no taxes. For example, the company will entrust the subsidiary here in Quebec with managing its headquarters, research and marketing to direct profits to tax havens. There’s not much added value for us here either,” he says.
Also export metals
Mr Gouin also wonders whether it would be better to sell the raw material lithium directly rather than subsidizing multinational companies with billions for conversion.
“In this agreement, was the company guaranteed special prices for metals by the government? If the international price is $300 and we tell them we guarantee them $200, these are hidden subsidies that are not charged. The same goes for low-cost electricity,” he says.
The economist argues that prices for rare metals on international markets are currently high. You might as well sell them directly and make a profit without having to subsidize anyone, he suggests. “Are oil-producing countries trying to build refineries for the entire planet? No,” he introduces himself.