BUCK092107

On the homepage

Scanners

Full-body scanners headed for MSP

Out There

Gas lines

10 years later, same fire, anger

Club Outdoors

Behind closed doors

Home | Business

There's some good news in a weak dollar

With the Canadian loonie matching the dollar's value, Minnesota exports to Canada, already rising fast, could soar further if the trend continues, experts say.

By Mike Meyers, Star Tribune

Last update: September 20, 2007 - 8:28 PM

Print this story

Minnesota business by the numbers

See Minnesota's top earning companies, CEOs and non-profits

U.S. DOLLAR

A Canadian dollar will buy

99.9 cents

A euro will buy

$1.41

CANADIAN DOLLAR

A U.S. dollar will buy

$1.001

A euro will buy

$1.42

More from Business

A months-long slide in the dollar turned into a free fall this week, with the greenback hitting a record low against the euro and trading for the same value as the Canadian dollar for the first time in 31 years.

While the dollar's weakness is likely to drive up prices for many imported goods, it should also give a boost to the Minnesota economy.

Minnesota exports to Canada, the state's largest trading partner, already are booming. The latest sag in the value of the U.S. dollar should make Minnesota goods easier to sell across the northern border.

"This is good news for Minnesota companies who export to Canada or who would like to export to Canada," said Paul Anton, chief economist for Wilder Research, a division of the Wilder Foundation in St. Paul.

University of Minnesota economist Tim Kehoe said the swooning value of the buck should also whet the appetite of Canadians for U.S.-made goods. Sales to Canada already represent 24 percent of Minnesota's manufactured exports, compared with a 21 percent share of all U.S. exports.

"If you're a U.S. exporter to Canada, that's just great," Kehoe said. "Your market is bigger. You're able to charge higher prices."

In the first quarter, Canada not only was Minnesota's biggest export customer -- buying $931 million in goods -- but also the state's fastest-growing foreign market, up 13.3 percent from the same period a year earlier.

The comparable rise nationwide was 1.7 percent.

Because of changing international currency values, a U.S. product that in January would have cost a Canadian $1.17 in loonies today costs about a dollar.

The flip side for Canada, which relies on the United States for 80 percent of its goods exports, is the prospect of fiercer competition with U.S. companies in their home market.

"If you're a Canadian trying to sell in the U.S., you're in trouble," Kehoe said.

The same goes for U.S. importers of Canadian goods.

"We sell and buy from Canada," said Scott Lutjen, vice president of finance at Capital Safety, a company in Red Wing, Minn., that sells harnesses and other protective gear for construction workers.

"Since we buy more than we sell, as the dollar continues to weaken, it's actually costing us money."

Minnesota trade officials also foresee an upswing for Minnesota's hospitality industry as a result of the weak dollar.

"Canadians may come across the border to shop and stay at hotels and eat in restaurants," said Kirsten Morell, spokeswoman for the Minnesota Department of Employment and Economic Development.

If the decline of the dollar against Canadian currency holds, states such as Minnesota also may become a more attractive place for Canadian companies to invest in manufacturing plants.

"Companies may decide it's cheaper to move here rather than to export to the U.S.," Morell said.

But Kehoe, the University of Minnesota economist, said that the trend may have to continue for some time before Canadian firms write large checks to build or buy U.S. factories.

"One way to lose your money fast is to predict which way exchange rates go," Kehoe said.

Mike Meyers • 612-673-1746

Mike Meyers • meyers@startribune.com

Recent Business stories

Viacom's 4th-quarter results to offer latest read on advertising markets - September 20, 2007

Viacom's 4th-quarter results to offer latest read on advertising markets - Viacom Inc., the media conglomerate controlled by Sumner Redstone, reports fourth-quarter earnings before the market opens on Thursday. More