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FDI flows between the United States and Canada

The United States was the main driver of FDI flows to Canada in 2021 and also the first origin of this type of investment, according to Canadian government data.

Globally, the United States led FDI arrivals last year, with $367 billion, while Canada was fifth in that ranking, with $60 billion.

Global Affairs Canada notes that it is not surprising that the United States remains Canada’s top investment partner, as it was the destination for two-thirds (C$78 billion) of Canadian direct investment abroad (CDIA) and the source of nearly half ($35 billion) of all FDI inflows in 2021.

About 66% of the C$61 billion increase in CDIA flows between 2020 and 2021 went to the United States; it was the source of nearly half of the C$44 billion growth in FDI inflows.

Luxembourg ranked second among the top destinations for CDIA flows in 2021, followed by France and Australia.

The large growth in outflows to these three countries contrasts with limited flows to the United Kingdom and Switzerland, two major destinations for CDIA prior to the pandemic.

FDI flows

Interestingly, in 2021, CDIA flows to the top destination countries reached their highest levels since 2012, when data on flows were first recorded.

In terms of Canada’s sources of FDI, the Netherlands was the second largest source in 2021 (after the United States) and was followed by the Cayman Islands and the United Kingdom.

With the exception of the three Asian partners (China, Japan and Hong Kong), Australia and Switzerland, FDI flows from the top 15 FDI source economies exceeded their pre-pandemic levels.

To note: FDI flows refer to the last country from which investment originates before arriving in Canada, including intermediary countries through which investment is channeled.

Intermediaries

Although the Canadian government does not have data on the last country of origin of FDI flows, Statistics Canada produces data on FDI stock or FDI “positions” on both an ultimate investor country (UIC) and immediate investor country (IIC) basis.

These data reveal that investments from some countries that are often intermediaries, such as the Netherlands and Luxembourg, may have originated in other countries.

Conversely, FDI flows data may underestimate FDI from countries that invest more through intermediaries, such as Japan and China.

 

Redacción Opportimes

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