Statistics Canada
Symbol of the Government of Canada

International investment position

Warning View the most recent version.

Archived Content

Information identified as archived is provided for reference, research or recordkeeping purposes. It is not subject to the Government of Canada Web Standards and has not been altered or updated since it was archived. Please "contact us" to request a format other than those available.

Fourth quarter 2007

International investment position note to readers

Canada’s net international investment position continued to deteriorate in the fourth quarter, fuelled by the largest inflow of foreign direct investment in eight years. Net foreign debt rose by $13.3 billion in the fourth quarter to $156.3 billion at the end of 2007, representing 10.0% of Canada’s gross domestic product (up from 9.1% in the previous quarter).

Chart G.1 Canada’s international investment position
Chart G.1 Canada’s international investment position

International liabilities increase more than assets

Canada’s international liabilities increased to $1,338.7 billion, an increase of $27.0 billion from the third quarter. The increase in liabilities was mainly due to strong direct investment inflows, driven by near record merger and acquisition activity. On the other side of the ledger, Canadian holdings of foreign assets increased to $1,182.4 billion, up by a modest 1.2% from the third quarter. Direct investment abroad increased after two quarters of decline while Canadian holdings of foreign bonds and money market instruments continued to decline.

Canadian dollar has largest ever yearly impact

The total effect in 2007 of the appreciating Canadian dollar was an increase in net foreign debt of $72.5 billion - the largest impact on record. It gained 17.6% against the US dollar, 16.0% against the British pound sterling, 6.3% against the Euro, and 10.4% against the Japanese yen. However, the appreciation of the Canadian dollar against major currencies stalled during the fourth quarter. The net impact of the exchange rate fluctuations, in the fourth quarter of 2007, was to raise the net foreign debt by a marginal $300 million.

Direct investment


Direct investment abroad by Canadian firms rose by $12.8 billion to $508.6 billion in the fourth quarter. This 2.6% increase reversed most of the decline in the third quarter and was mainly due to additional working capital provided to foreign affiliates. Mergers and acquisition activity was relatively modest, accounting for 37.9% of the direct investment increase. Year-over-year there was a reduction in the value of the position by 2.8%, mainly caused by the strong appreciation in the Canadian dollar.


Foreign direct investment in Canada rose by $27.3 billion to $521.1 billion in the fourth quarter, an increase of 5.5%. This was mainly due to near record mergers and acquisition activity by foreign investors, accounting for 68.1% of the change in the foreign direct investment position in the fourth quarter. The year-over-year change was an increase in the value of the position by 16.1% despite the strong Canadian dollar.

Net direct investment moderately negative

Canada’s net position on direct investment - the difference between Canadian direct investment abroad and foreign direct investment in Canada - was moderately negative in the fourth quarter. However, over the course of 2007, this position went from a net asset of $74.4 billion to a net liability of $12.5 billion.

Chart G.2 Direct investment position
Chart G.2 Direct investment position

Portfolio investment


There was a $3.3 billion decrease in portfolio assets during the fourth quarter mainly due to divestment in foreign bonds. The impact of the Canadian dollar on foreign portfolio assets in the quarter was negligible. However, foreign assets of Canadian investors decreased by $18.7 billion (-5.1%) in 2007, mainly due to the re-statement of these foreign currency denominated assets in respect of a strongly appreciating Canadian dollar and strong divestment of more than half the position in short term money market paper.


There was a $7.4 billion decrease in portfolio liabilities during the fourth quarter mainly from divestment in portfolio stock being transferred to foreign direct investors resulting from significant mergers and acquisitions. For 2007, there was decline of $43.9 billion (-8.1%), attributable mainly to Canadian bonds and stocks.

Other investment

Other assets went up by $4.2 billion, mostly explained by continued increases in deposit assets. Year-over-year these deposits increased by 17.3%.

Other liabilities sharply rebounded to $7.1 billion during the quarter, led by a reversal of the decline in deposits by foreigners in the previous quarter. In 2007 the position increased by 7.0% due to strong flows throughout the year.

Decrease in net international indebtedness with portfolio investment at market value

Canada’s overall net international investment position can also be calculated with assets and liabilities of tradable portfolio securities valued at market prices. Net foreign debt is lower by this measure. In the fourth quarter, net international indebtedness decreased by $3.9 billion to $91.9 billion. This change reflects both the decline in Canadian and foreign equity markets during the quarter and large divestments of foreign portfolio holdings of Canadian securities, due to merger and acquisition activity at market prices. This resulted in total liabilities remaining relatively flat, as opposed to a large increase in total liabilities at book prices.

For 2007 as a whole, net international liabilities rose by $53.4 billion, which is slightly smaller than the $57.3 billion increase at book value.

Statistical table

Information on methods and data quality available in the Integrated Meta Data Base: 1537.