Deals for aluminum firms hurt province, report says

The Quebec government is doing itself no favours agreeing to sweetheart deals with aluminum companies, the Montreal Economic Institute says.

In an economic note made public yesterday, the institute pegs at $274,338 the cost per job, per year, of a Dec. 14 agreement with Alcan Inc. on a new $2-billion smelter in the Saguenay. That's based on 740 jobs over 35 years at the new plant, and using a conservative number for the market value of electricity.

Quebec has offered the company a $400-million interest-free loan over 30 years, tax benefits worth $112 million, bargain-rate electricity and extension of Alcan's rights over the water of the Peribonka River for power production.

Universite Laval economics professors Gerard Belanger and Jean-Thomas Bernard, authors of the note, project the total cost to taxpayers of Quebec's assistance at $2.7 billion, "whereas Alcan's expected investment is $2 billion."

"The gap between the government subsidy and the expected investment by Alcan leads us to question the advantages of this partnership with respect to the wealth of Quebec society," Belanger and Bernard said, noting that rival company Alcoa is seeking assistance as well for its Deschambault and Baie-Comeau expansions.

At the announcement of the Alcan project, Premier Jean Charest said the government "is proud to associate itself with a project this important for the Saguenay," and Alcan president Dick Evans mentioned the "sustainable benefits for the region and shareholders."

While the industry maintains that such projects generate economic spinoffs, "all spending generates economic spinoffs," the Laval professors say, and it's quite possible they'd be greater if the government directed the money elsewhere.

The era of low-cost hydro-electric development in Quebec is coming to an end because the prime locations already have been tapped, the economic note states. "Whether we consider the cost of developing new sources of electricity in Quebec or the export market, the low-price sale of electricity to aluminum smelters represents a loss for the Quebec state. The Quebec government's industrial policy does not reflect this new reality."