Canada’s aboriginals have their own emerging economy. What is an emerging market, you ask. Emerging markets are struggling countries with large resources, youthful demographics, massive infrastructure and housing unmet needs. Such countries are pushed in a transitional economy, expected to play a significant role in major political and economic affairs in the global markets.
However, Ian Bremner, president of Eurasia Group, the leading global political risk consulting firm provides a better definition in his book, The Fat Tail, where he defines an emerging market as "one in which politics will matter at least as much as basic economic fundamentals".
Most of those characteristics apply to Canada’s indigenous populations, save for one big feature: Canada’s aboriginal communities have no interest at all to adopt a free market economy to their communal markets. As they now deal with the world pressing for resources on their historical lands, the political leaders of aboriginal nations are struggling to balance the need for investments and access to capital markets without alienating their underlying historical title.
Defining an aboriginal emerging market is important because it will help provide guidelines on how to deal, invest and lend in a closed aboriginal economy. The current difficulties in financing deals on aboriginal lands include:
- lack of secured interests on lands subject to aboriginal title;
- domestic lenders are hesitant to accept clear aboriginal property rights as assets for project financing purposes;
- no defined process of realization of security in the event of a default;
- competing conflicting interests from aboriginal communities in the consultation and accommodation process;
- understanding collective property rights vs. aboriginals’ private property rights.
Despite the lack of secured transaction laws, Canada’s aboriginal communities are redefining the rules for sustainable investments in future major projects across Canada. Next major resource and energy projects will not go ahead without firstly, the prior collective approval of all impacted indigenous communities, secondly, an equity participation in the resource project by aboriginal economic organizations and thirdly, strong local content suppliers.
It is time to understand this emerging aboriginal economy. As a developer client quipped recently, “it is up to me to relearn my Canadian constitutional history. The other version no longer works”.