Independence Efforts Of Quebec Separatists Make Wall Street Jittery

ON his first trip abroad since his September election, Quebec's hard-line separatist premier, Jacques Parizeau, told Wall Street that an independent Quebec can prosper financially and benefit United States investors.

When governments ``do a good job, people invest,'' Mr. Parizeau said at a Dec. 12 luncheon speech here. If ``they don't do a good job, even though they are highly federalist and in favor of the status quo, then investment won't come.''

Parizeau did not mince words on his intention to secede from Canada and bluntly told the US to stay out of the process. ``Here is a case where neither Canadians nor Quebeckers would feel that American involvement would be welcome,'' he said.

Financially, the premier's goal in New York was simple: ``He's trying to get investors to continue to buy his debt,'' says Peter Plaut, a senior analyst who follows Quebec's economy at Salomon Brothers, a New York investment-banking firm.

On Dec. 12, Parizeau, who likes to call himself ``Prime Minister,'' also met with New York's Governor-elect George Pataki to discuss expanded economic ties, while his finance minister carried on briefings on Wall Street.

At home, Parizeau has pressed ahead with separatist plans, last week unveiling a six-point program to win Quebec full independence. Yet, he clearly wants to calm foreign investors, and he advocates using the Canadian dollar and sustained economic ties - including the North American Free Trade Agreement - with existing partners.

Drumming up foreign investors' interests is vital to Quebec's future, whether or not the province ends up independent. That's because foreigners hold almost 40 percent of Quebec's $45.2 billion (Canadian: US$32.5 million) in direct debt, of which about $11 billion (US$7.9 billion) is denominated in US currency, Canadian statisticians note.

Parizeau's separatist rhetoric can only make investors jittery. Yet many on Wall Street view a separate Quebec, which is three times larger than France, as unlikely in the near future.

``Thus far, there is very little alarm in the New York financial community,'' says Stephen Blank, director of North American affairs at the American Society in New York, a nonprofit education group that hosted Parizeau's speech. ``The assumption by most Americans is that the Canadians will work this out.''

Wall Street's major short-term concern is Quebec's $5.7 billion fiscal year 1995 deficit, a figure twice revised upward in recent months. That is well over $1 billion more than the original forecast. It could imminently worsen Quebec's bond ratings and cost them even more in higher interest payments, analysts say.

``What you need from Mr. Parizeau is some sort of sense that the economy is important to him, and the continued smooth functioning of the Canadian economy is important to him,'' says Ravi Bulchandani, an economist at Morgan Stanley, a New York investment house.

To that end, Parizeau told investors he plans to freeze spending while boosting revenues. Expenses next year ``will be frozen as a whole at this year's levels; this has never been done before.''

He also said that Quebec will assume its fair share of Canada's national debt, adding that he would consider paying 23 percent, equal to Quebec's contribution to Canada's national output. But he wants to calculate pension obligations differently.

A few Quebec-watchers, such as Mr. Plaut of Salomon Brothers, think that improving economic signs make the region's bonds a bargain for long-term investors. ``Investors should be investing in Quebec issues despite the uncertainties,'' Plaut says.

Other experts are more guarded and want to wait and see how Quebec votes during a referendum on independence in 1995. ``There's still concern on the Quebec market, depending on how the referendum will go,'' says Patrick Paradiso, an analyst specializing in Canada at Deutsche Bank. We are ``still saying: `Stay moderately underweighted on Canada.' ''