Foreign direct investment

Canadian direct investment abroad was down 7.1% at the end of 2003, mainly as the result of the soaring Canadian dollar.

The value of assets held abroad by Canadians reached $399.1 billion down from a record $429.6 billion at the end of 2002. This decline halted a string of increases that dated from 1948.

At the same time, foreign direct investment in Canada rose 2.5% to $357.5 billion, up from the level of $348.9 billion observed at the end of 2002.

As a result, the net direct investment position-the difference between Canadian direct investment abroad and foreign direct investment in Canada-decreased to $41.6 billion at the end of 2003 down from a revised $80.7 billion a year earlier.

US assets accounted for only 41% of total Canadian direct investment abroad, the lowest proportion on record. American investors accounted for about 64% of foreign direct investment in Canada.

The major reason for the important decrease in direct investment abroad was the appreciation of the Canadian dollar against foreign currencies. Canadian direct investments abroad are denominated in foreign currencies. Consequently, the strengthening dollar lowered the value of assets held abroad by $55.0 billion.

In 2003, the Canadian dollar gained 17.8% against the US dollar, 9.0% against the pound sterling, 9.1% on the Japanese yen and 1.7% on the Euro.

Direct investment abroad: Assets fell in the United States

Direct investment assets in the United States declined in value by $32.2 billion, or 16.3%, to reach $164.9 billion.

Again, the strengthening Canadian dollar was responsible for most of the decrease, accelerating the decline in the US share of total direct investment assets.

Canadian direct investment abroad is continually more and more spread among different countries.

The value of Canadian direct investment in all countries, excluding the United States, increased a slight $1.7 billion to $234.2 billion from the end of 2002.

The reinvestment of funds by Canadian parent companies and an important acquisition in the fourth quarter more than offset the appreciation of the dollar against other major currencies during the year.

Canadian direct investment in France rose a substantial $7.1 billion, or 157%, to $11.6 billion at the end of 2003, the largest gain in investment for any single country.

France is now one of the five top countries for Canadian direct investors. It follows the United States, United Kingdom, Barbados and Ireland, which is the destination country with the highest increase over a four-year period.

At the end of 2003, foreign direct investment assets held abroad were mainly in the finance and insurance industry (42%) and in the metallic minerals industry (12%).

Foreign direct investment in Canada increased

The 2.5% increase in foreign direct investment in Canada was mostly as the result of capital inflows of funds to existing operations by parent companies located abroad. The acquisitions component of foreign direct investment in Canada was slightly negative in 2003.

American investors held $228.4 billion in the form of direct investment at the end of 2003, up $5.2 billion. At the end of 2003, the net direct investment position of Canada with the United States was a negative $63.5 billion, a record low.

Net direct investment with the United States has never been positive, meaning that American investors have always held more assets in Canada than Canadian investors have held in value south of the border.

The most important direct investor countries in Canada were, for a fourth consecutive year, the United States, France, United Kingdom, the Netherlands and Japan. Combined, these five nations held just over 87% of direct investment in Canada at the end of 2003.

Finance and insurance industries accounted for 19% of foreign direct investment in Canada at the end of 2003, followed by energy at 17% of the total.

Available on CANSIM: tables 376-0038 and 376-0051 to 376-0054.

Definitions, data sources and methods: survey number 1537.

For general information or to order data, contact Client Services (613-951-1855; infobalance@statcan.gc.ca). To enquire about the methods, concepts or data quality of this release, contact Éric Simard (613-951-7244; Eric.Simard@statcan.gc.ca), Balance of Payments Division.