Structure of the Balance of Payments

The Current Account Balance

The current account balance is divided into four basic components: goods, services, income, and transfers. The balance of goods, also called freight, uses basic statistical data collected and processed by the Customs Department of the State Tax Administration Agency, although it reworks them with appropriate adjustments.

The Services Balance

The services balance involves the following concepts:

• Tourism and travel
• Transport and communications
• Construction and insurance
• Financial and information services
• Cultural and recreational services
• Business, personal, and governmental services
• Royalties and intangible property income

In fact, in Spain, almost the entire amount of the services account is based on tourism.

The Income Account

In the income account, income is received by owners of productive factors (labor or capital), such as Spanish workers abroad. Conversely, income payments are sent to foreign owners of productive factors used in our country. This account collects labor income, including compensation for border, seasonal, and temporary workers.

The Current Transfers Account

In developing the current transfers account, the main difficulty is distinguishing which transfers are common and which are capital. Current transfers are recorded as:

• Emigrants' remittances
• Taxes, benefits, and Social Security contributions
• Donations for the purchase of consumer goods
• Pay for personnel serving in overseas aid programs

The Capital Account

The capital account collects mainly Spanish capital transfers from the government to the European Union; that is, transfers from cohesion funds, the ERDF (European Regional Development Fund), and the EAGGF (European Agricultural Guidance and Guarantee Fund).

The Financial Account

The financial account is divided into five scales: direct investment, portfolio investment, financial derivatives, other investment, and changes in reserves.

Investment and Financial Derivatives

Direct investments are those in which the investor is guided by the aim of ensuring long-term profitability and influence in the management bodies of the invested company. Portfolio investments are purchases of securities that represent a smaller percentage of the invested company.

Financial derivatives include:

• Options, futures, and warrants (whether stock or securities)
• Sale of foreign exchange forwards
• Forward Rate Agreements (FRA)
• Currency swaps or interest rate swaps
• Other financial swaps based on indices, average prices, or any other asset class

In the Other Investment category, data is collected from commercial lending operations and finance.

Changes in Reserves

The statement of changes in reserves reflects the movements in foreign assets controlled by the monetary authorities that are used to finance imbalances or for intervention in currency markets.