Bolstered by low inflation and low interest rates, Canada has enjoyed a sustained period of prosperity since emerging from a recession in the early 1990's. With a Gross Domestic Product (GDP) in excess of $1 trillion and low unemployment, the Canadian economy has been experiencing a 3% growth rate per annum.

Businesses are wise to consider the impact of exchange rates in their approach to the Canadian market. Between 2002 and 2005, the Canadian dollar (CAD) rose 30% against the U.S. dollar (USD).

Five years ago, one USD would fetch $1.59 worth of Canadian goods or services, but in recent years, the exchange rate has been trending closer and closer toward USD/CAD parity:

Purchasing Power of One USD in the Canadian Market
 

U.S. companies that became accustomed to low operating costs when north of the border are now feeling the pinch created by a much stronger Canadian dollar (CAD).

But along with its challenges, the weaker USD also represents opportunities for U.S. exporters. The low USD may give American products and materials shipping to Canada a price advantage, making these goods more attractive to Canadian importers.