The components of the BoP are grouped as follows: current account, capital account, financial account, errors and omissions and change in reserves. Tables that display data on the BoP are described in what follows:
1. Current Overall balance account:
- 1.a. - Trade balance - exports (FOB), imports (FOB) and balance.
- 1.b - Services - includes services related to transportation, travel, insurances, financial services, computer and information services, royalties and licenses fees, equipment rental, government services and other services.
Financial services comprise banking intermediations, such as brokerages, and commissions, and other ancillary charges on foreign debt.
Other services consolidate information related to brokerage service and trade commissions, professional technical, personal, cultural and recreation services.
- 1.c - Income - records compensations for employed work (salaries and wages) and income from investment that corresponds to compensation to the modes of investments listed in the financial account. Therefore, direct investment income include income on equity related to all intercompany loans made as direct loans and securities of any maturity. Capital gains, classified as direct investment in the financial account, are not included.
Portfolio investment income - comprises income derived from investments in shares, securities, money-market instruments and financial derivatives, except those related to intercompany loans. Income derived from other investments record the remaining interests on loans, financing, trade credits, deposits and other assets and liabilities.
Therefore, it includes interests related to export and import financing, such as buyer's and supplier's credits, government agencies, international organizations and banks, in addition to interests on direct loans, except those related to intercompany loans, which are recorded as direct investment.
- 1.d - Current transfers - comprise unrequited transfers, either in goods or currency, for current consumption. Transfers related to assets of international migrants are excluded and recorded in the capital account.
2. Capital account - records transfers of capital related to assets of migrants and acquisition/disposal of non-produced, non-financial assets, such as assignment of patents and marks brands.
3. Financial account - records flows stemming from transactions with financial assets and liabilities between residents and non-residents. The financial account is broken down into four groups:
- direct investment,
- portfolio investments,
- derivatives, and
- other investments.
Each group is divided into assets and liabilities, where the previous records flows involving foreign assets held by residents in Brazil and the latter records the issue of liabilities of residents with non-residents. Assets and liabilities are further broken down to evidence specific details of each account.
- 3.a - Direct investment
- 3.a.1 - Direct investment abroad - records foreign assets held by residents in Brazil as direct investment. Direct investment abroad is broken down into two types:
- Equity capital - includes outflows in currency or goods related to purchase/subscription/increase of whole or partial capital of capital of non-resident corporations. Inflows relate to returns stemming from whole or partial disposal of capital of non-resident corporation and capital gains related to such disposal.
- Intercompany loans - comprises loans granted by the corporation headquarters in Brazil to its subsidiaries or branches established abroad. Records, in addition, 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.
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.
- 3.a.2 - Foreign direct investments in Brazil - records liability account of direct investment. Likewise, it is broken down into two types:
- Equity capital - comprises inflows of currency and goods, and conversions of foreign liabilities into foreign direct investment, including sums channeled to the privatization program, related to purchase/subscription/increase of whole or partial increase of authorized capital of resident corporations.
The counterparts of conversions are recorded in appropriate items, such as amortization, income from direct investment (interests) and services.
Outflows comprise whole or partial disposal of authorized capital of resident corporation and realization of capital gains.
- Intercompany loans - comprises credits granted by the corporation headquarters abroad to their subsidiaries or branches established within Brazil. Records, in addition, the granting of credit by the subsidiaries and branches in Brazil to their headquarters abroad (cross investment). In this case, cross investment is a rectifying account of direct investment liability, since it is an item of asset nature recorded in a group of the nature of a liability.
Direct loans and placement of securities, with no regard to maturity, are included. Amortization of intercompany loans within the group direct investment in Brazil include the principal of loans converted into direct foreign investment. Loans granted between linked banks are not recorded as intercompany loans.
- 3.b - Portfolio investments - records flows of assets and liabilities created by the issue of equity securities and debt securities normally traded in secondary markets and money market instruments.
- 3.b.1 - Assets - Assets of portfolio investment relate to Brazilian investment in foreign portfolio assets, traded either in Brazil or abroad. Such assets comprise:
- Variable income securities traded abroad: stocks of non-resident corporations purchased in stock exchanges abroad by residents within the country, not accountable as direct investment.
- Variable income securities traded in Brazil: securities of the Brazilian Depositary Receipt (BDR) program, which are receipts representing stocks of non-resident corporations traded in Brazilian stock exchanges.
- Fixed income securities: bonds and notes traded abroad issued by non-residents. Up to April 2006, included transactions of purchase and sale of securities that are collaterals in the context of the foreign debt renegotiation accord (Brady Plan).
- 3.b.2 - Liabilities
Liabilities of portfolio investment record purchases by non-residents of variable income securities (stocks) and fixed income securities (debt securities) issued by Brazil. Resolution no. 2,689, of 01.26.2000, enabled foreign investors to operate with any instruments and operating modes in existence in the financial and capital markets available within Brazil.
The recording of balance of payments flows in different instruments follows the portfolio composition as informed to the Central Bank of Brazil (Foreign Capital and Exchange Department - DECIC) by the administrators of such funds.
Investments in stocks record the direct transactions in Brazilian stock exchanges (traded within the country), including capital gains, which shall be recorded. Stocks traded abroad are represented by Depositary Receipts (DR), which are receipts for stocks of Brazilian corporations traded in foreign stock exchanges.
Foreign investments related to "debt securities" record separately amounts "traded within the country" and "traded abroad".
Sums "traded within the country" relate to investments made under Resolution no. 2,689, of 01.26.2000, in short- middle- and long-term debt securities outstanding in the domestic market issued by the Central Bank and the National Treasury and by private emission as well.
Securities "traded abroad" relate to Brazilian placements of Bonds, Notes and Commercial Papers in capital markets abroad. This mode also records debt swap operations.
The following accounting entries are used to reflect such transactions: a credit of the face value of the newly issued security; a debit of the face value of the redeemed security; and another credit accounting for discounts granted in the transaction. Any residual value relate to interests paid through newly issued securities or to amounts in currency that may have been paid to even the value of securities batches issued and redeemed.
Short-term securities, maturing in less than one year, are recorded in the item "short-term securities". These securities, whenever traded within the country, relate to that portion of funds entered into the country under Resolution 2,689, of 01.26.2000, and invested in securities issued by the Central Bank or the National Treasury and by private emission.
- 3.c - Financial derivatives records the financial flows related to the settlement of assets and liabilities consequent upon swap, options and future operations, as well as the flows related to option premium.
Flows of margin deposits of collaterals earmarked to future exchange operations invested in other short-term assets and liabilities are not included.
- 3.d - Other investments
- 3.d.1 - Other investments - Assets
- Loans comprises Brazilian short- and long-term loans and credits granted to non-residents, including those related to the Export Financing Program (PROEX) and by financial institutions.
- Cash and deposits relates to transactions with deposits maintained abroad as cash, collaterals, judicial deposits, and guarantees of loans linked to exports. Includes changes in deposits abroad of commercial banks. Up to April 2006, included also transactions of collaterals, made as deposits, constituted in the context of the foreign debt renegotiation accord (Brady Plan).
- Other assets comprises the Brazilian capital sharing in international organizations and deposits of long-term collaterals. In the short-term are recorded deposits of margin deposits related to operations with derivatives.
- 3.d - Other investments - Liabilities.
- Trade credits. The long-term item records changes in liability related to the direct granting of credit by foreign exporters to their customers within Brazil (suppliers' credits). The short-term item comprises prepayment of exports and other commercial credits, including those stemming from lack of coincidence between the times in which goods are shipped and paid.
- Loans comprises direct loans (except intercompany loans), import credits granted as buyers' credits, and credits granted by international organizations and government agencies. These loans are taken separately as short-, middle- and long-term credits, depending on their original maturity. Also comprises loans made to the Monetary Authority, including autonomous credits and regularizing operations stemming from balance of payments financing accords.
- Currency and deposits relates to cash held by non-residents in deposits within Brazil.
- Other liabilities relates to collateral and judicial deposits made in Brazil by non-residents for a term exceeding one year.
The short-term item includes the change in debt balance of the Reciprocal Payment and Credit Agreement (CCR) and margin deposits related to transactions in commodity exchanges within Brazil.
4. Errors and omissions corresponds to the difference between the overall balance and the sum of current account and capital and financial account. It derives from statistical discrepancies in the compilation of these items, and compensates for any over- and underestimation of the recorded components.
Credit and debit entries in the BoP stem from different sources, which in practice yield a net total different from zero. The main reason are temporary discrepancies in the different origins of data used in the accounting. With this, the recording of a balancing entry is necessary to even the BoP figures.
5. Change in reserves represents the change in the country's international reserves, held by the Central Bank, in the international liquidity concept, after deductions are made for adjustments related to valuation/devaluation of foreign currencies before the United States Dollar and gains/losses related to fluctuations in security prices and gold price.