The value of Canadian direct investment abroad assets declined by 7.5% in 2009. This was largely the result of the revaluation effect of a substantially stronger Canadian dollar at year-end, and declines were concentrated in assets in the United States.
Figures released this morning by Statistics Canada say the appreciation of the Canadian dollar against most foreign currencies subtracted about $72 billion from the overall Canadian direct investment position abroad, while foreign direct investment in Canada was up 1.6%. This was well below the average annual growth of 9% of foreign direct investment in Canada over the last decade, and reflected considerably slower investment activity in the year, especially from the United States.
The nation's number crunchers add that the net direct investment asset position narrowed to $43.9 billion, from $100.8 billion in 2008.
The United States and the United Kingdom remained the two top destinations for Canadian direct investment abroad, though investment continues to diversify geographically. Canadian direct investment assets at the end of 2009 were spread over countries on most continents, with 35 countries having at least $1 billion in investment.
Foreign direct investment in Canada was more concentrated, with 26 countries having more than $1 billion in direct investment in Canada at the end of 2009. In fact, about three-quarters of the direct investment in Canada originates from three countries: The United States, the United Kingdom and the Netherlands.
Canadian direct investment assets in the United States decreased $36.4 billion to $261.3 billion. The stronger Canadian currency relative to the US dollar removed $41 billion from the investment position in that country. The share of direct investment in the United States to total direct investment abroad declined to 44%, compared with 46% in 2008.
On the other hand, foreign direct investment from the United States increased by $4.8 billion at the end of 2009 to $288.3 billion. American investors still hold the majority of the direct investment in Canada at about 52%. However, this proportion has steadily declined over the past years and fell below 60% in 2007, in comparison to 67% in 1998.
Canada had a net direct investment liability of $26.8 billion with the United States at the end of 2009, compared with a net asset of $14.2 billion a year earlier. This swing was dominated by declines in the value of Canadian direct investment assets in the US economy.
Canada posted a net direct investment asset position with most other countries at year-end 2009, amounting to $70.7 billion. Nevertheless, the year was marked by a narrowing in the net asset position, resulting mainly from declines in the value of Canadian direct investment abroad.
Canadian direct investment in the United Kingdom rose $5.6 billion to $65.4 billion on strong investment flows, further solidifying its position as the second most popular destination for Canadian direct investment abroad. A modest gain of about 4% by the Canadian dollar against the British pound had very little impact on Canadian direct investment assets in the United Kingdom. The United Kingdom remained the country with the second largest direct investment position in Canada, at 11.5% or $63.5 billion. Canada's net direct investment position with the United Kingdom swung from a net liability position of $7.0 billion in 2008 to a net asset of $1.9 billion in 2009.
The value of Canadian direct investment assets abroad decreased in all other major European countries at the end of 2009, largely as the result of the strengthening of the Canadian dollar relative to many currencies. Nevertheless, Canada's most significant European destinations of direct investment remained Ireland, with investments totalling $22.7 billion; France with $15.9 billion; Hungary at $12.2 billion; the Netherlands and Germany with $9.8 billion and $9.6 billion, respectively; and, Switzerland at $6.7 billion.
In terms of foreign direct investment in Canada, the Netherlands stood at 8.5% or $46.5 billion. In 2009, four other European countries topped the list of nations with foreign direct investment in Canada. They were Switzerland ($21.2 billion), France ($18.2 billion), Germany ($13.9 billion) and Luxembourg ($9.9 billion).
Canadian direct investment in Caribbean countries was also affected by the currency appreciation in 2009. Total direct investment in Barbados, Bermuda and Cayman Islands combined declined by 7.9 billion to 78.4 billion. Canadian direct investors were also active in South America, with investments of $11.4 billion in Brazil and $8.3 billion in Chile.
The share of BRIC (Brazil, Russia, India, China) countries in total Canadian direct investment abroad continued to trend upward, rising to 3% in 2009, from 2% in 2008. Similarly, the proportion of BRIC countries in total foreign direct investment in Canada strengthened further, up to 5% in 2009 compared with 4% in 2008.
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