United States. Bureau of Economic Analysis. "U.S. Direct Investments Abroad in 1972, BEA 73-62," Bureau of Economic Analysis (BEA) News Releases (September 17, 1973). https://fraser.stlouisfed.org/title/6148/item/597101, accessed on May 8, 2025.

Title: U.S. Direct Investments Abroad in 1972, BEA 73-62

Date: September 17, 1973
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image-container-0 U^J ITED STATES D E P A R TM E N T OF C O M M E R C E W ASHINGTON, D.C. 2 0 2 3 0 So cia l a n d Eco n o m ic St a t ist ics Ad m in ist r a t io n BUREAU OF ECONOMIC ANALYSIS F O R R E L E A S E M O N D A Y , S E P T E M B E R 1 7 , 1 9 7 3 Leo nard A. Lupo: 523-0659 BEA 73-62 U.S. DIRECT INVESTMENTS ABROAD IN 1972 The value of U.S. direct investments abroad increased $7.8 billion in 1972 to $94.0 billion at yearend, according to the Bureau of Economic Analysis, an agency of the Social and Economic Statistics Administration of the U.S. Department of Commerce. The 1972 increase was almost as large as the 1971 increase, but differed markedly in financing. Reinvested earnings in 1972 accounted for $4.5 billion and net capital outflows for $3.4 billion of the increase. In 1971, reinvested earnings had contributed $3.2 billion and net capital outflows $4.9 billion to the increase. Valuation and related adjustments were relatively small in both years. The net inflow of funds to the U n i t e d States r e s u lting from the U.S. corporate transactions w i t h foreigners, including additions to the direct investment position, total ownership benefits, and borrowings abroad, was a record $8.9 billion in 1972, compared w i t h a $4.9 billion infl o w in 1971. W i t h additions to the direct investment p o s i t i o n about the same in bo t h years, the improvement largely refl e c t e d a $1.1 bill i o n increase in corporate borro w i n g from u n a f f i l i a t e d foreigners and a $2.3 billion increase in direct investment earnings and related receipts from foreign affiliates. Statistical a d j u s t m e nt s - - i n c l u d i n g changes in valuation, changes in coverage and statistical d i s c r e p a n c i e s - -a c c o u n t e d for $0.3 billion, and the smaller g r owth in direct investment and other claims accounted for another $0.3 billion of the 1971-72 improvement. These corporate transactions are not an exact measure of the balance of payments impact of U.S. direct investments. Data for some major transactions of direct investors, such as their exports and imports, are not available while some transactions shown in table 1 cover U.S. corporate dealings with foreigners that are not related to direct investment abroad but cannot be separately identified.
image-container-1 2 The 1971-1972 increase in net corporate borrowing from unaffiliated foreigners largely took the form of dollar-denominated bonds convertible into the stock of the U.S. parent. Sales of these bonds on attractive terms, concentrated in the first half of 1972, were facilitated by improved conditions in U.S. equity markets, and by increased confidence in the U.S. dollar. In the last half of 1972, there was an increase in medium-tern foreign bank borrowings, particularly from Japan, which for the first time became a major source of foreign funds for U.S. corporate b o r r o w e r s . The higher earnings by foreign affiliates in 1972 reflected both faster growth and rising prices in foreign countries, as well as the December 1971 dollar devaluation which increased the dollar value of the affiliates' earnings. The total return on direct investments, comprising earnings, interest, and fees and royalties, was $15.0 billion in 1972, an increase of $2.3 billion over 1971. Of the total, $10.4 billion was paid to owners in the form of interest, dividends, branch earnings, and royalties and fees, and $4.5 billion was reinvested abroad. The big 1972 earnings increase gave a larger role to reinvested earnings in financing the addition to the U.S. direct investment position abroad. The dollar devaluation reduced the amount of foreign currency affiliates needed to maintain dollar remittances to the United States. In addition, U.S. Government policy limited the growth in dividend payments by U.S. parent corporations in 1972, reducing the incentive to remit the increase in foreign affiliates' earnings to the U.S. parent. The sterling crises of 1972 to the decrease in U.S. net capital outflows. Capital reflows to the United States from affiliates in the United Kingdom, where expectations that sterling would depreciate, accounted for nearly half of the total decrease in U.S. net capital outflows. Additions to the value of U.S. direct investments in developed countries w ere $5.5 billion in 1972, about the same as in 1971. U.S. direct investment capital outflows to these countries were $1.1 billion less than in 1971, while reinvested earnings rose $1.2 billion. Additions to the value of U.S. direct investment in other areas were $2.3 billion in 1972, somewhat lower than the $2.6 billion increase in 1971, reflecting a reduction in reinvested earnings in petroleum affiliates, and lower U.S. capital outflows to other non-manufacturing affiliates. Additional details will be given in "U.S. Direct Investments Abroad in 1972," an article that will appear in the September issue of the Survey of Current B u s iness, the monthly publication of the Bureau of Economic Analysis. The Survey is available from District Offices of the Department of Commerce, or from the Superintendent of Documents, U.S. Government Printing Office, Washington, D.C. 20402, at an annual subscription price of $20, including supplements, single copy, $2.25.
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