Concept: Direct investment liabilities registers financial flows of liabilities issued by Brazilian residents to nonresident creditor when the institutional agents have a relationship of control or strong influence between them. The account is divided in two main instruments: equity and investment fund shares and intercompany lending.

Equity and investment fund shares considers inflows of resources in currency or goods related to purchase/subscription/increase of whole or partial capital of resident corporations. Amortizations relate to returns stemming from whole or partial disposal of capital of resident corporations and capital gains related to such disposal. This subaccount is divided in reinvested earnings and equity other than reinvested earnings.

Intercompany operations comprise credits granted by the corporation headquarters in Brazil to its subsidiaries or branches established abroad. It also registers the granting of credit by the subsidiaries and branches abroad to their headquarters in Brazil (cross investment). Cross investment is a rectifying account of direct investment asset since it is an item of liability nature recorded in a group of the nature of an asset. Trade credits, direct loans and placement of securities, with no regard to maturity, are included. Loans granted between linked banks are not considered as being intercompany loans. They are debt instruments and are divided in transactions where a parent company in Brazil sends credits to its subsidiary abroad; subsidiray in Brazil sends credits to parent company abroad (reverse investment); and between fellow enterprises.

Source: Central Bank of Brazil – Department of Economics