Balance of payments

The balance of payments is a national accounting method that seeks to show the trade between the nation and other countries that there is a commercial relationship.

This registration is carried out by the monetary authority of the country, in transactions where there are exchanges between residents and non-residents of the nation, during a certain period of time.

The balance of payments is used to analyze the economy as a whole when it comes to a country’s ability to trade with the rest of the world. In addition, it can help the Central Bank when it is necessary to intervene in exchange rates, for example.

Balance of payments structure

The balance of payments is structured to record  current transactions, capital transactions, and financial transactions between the country and the rest of the world  .

Current transactions

Current transactions record income, in addition to exports and imports that are traded between countries with the rest of the world.

For this part of the balance of payments, there is the balance of trade and services. In common, they show exports and imports of goods with trade partners or the contracting of services between countries.

Also in this part, primary and secondary gains are recorded. Interest, dividend or salary income is considered primary income and unilateral transfers, mainly bank transactions, as secondary income.

Capital account

This section includes capital operations in which financial assets are transferred unilaterally, such as donations, forgiveness of external debts, or transfers of immigrant assets.

The capital account also considers acquisitions or sales of non-financial and non-produced assets, such as trademarks, patents, copyrights, or embassy land, for example.

Financial account

The financial account covers all financial assets, such as direct investments and portfolio investments, of foreigners in the country or of nationals in the rest of the world.

In addition, this account records the monetary inflows and outflows of the country, and is mainly used to clear other accounts. As an example, if a resident of the country imports some goods, the record is made in the trade balance as an import and in the financial account to record the payment.

Errors and omissions

The balance of payments also has an account that is used to correct errors and omissions that appear in the calculation of the values ​​of each component.