Peruvian Economy Research Articles

The informal economy and its impact on tax revenues and economic growth. The case of Peru, Latin America and OECD countries (1995 – 2016)

The main goal of the research will be to determine the size of the informal economy in Peru, Latin America and OCDE countries as well as to estimate the impact of the informal economy on tax revenues and the economic growth. To achieve the goal, the approach is made through MIMIC (multiple-indicator and multiple-cause) model. The main results show that the estimated average size of the informal economy as a percentage of the GDP in Peru is 37.4%, in Latin America is 34%, and in OCDE countries is 19.83%, which represents less than half of the Latin America average.

The Economic Legacy of General Velasco: Long-Term Consequences of Interventionism

We apply synthetic control methods to study the long-term consequences of the interventionist and collectivist reforms implemented by the Peruvian military junta of 1968–1975. We compare long-term outcomes for the Peruvian economy following the radical reforms of the early 1970s with those of two controls made of similar countries, one chosen in the Latin American region and another one chosen from the world at large. We find that the economic legacy of the junta includes sizable loses in GDP along two decades, beyond those that can be attributed to adverse international circumstances. The evidence suggests that those loses can be attributed both to a decline in capital accumulation and to a fall in productivity.

Importancia de la mineria y la agricultura en la economía peruana

This article presents the contribution of the mining, agricultural and other sectors to the Peruvian economy. It describes the performance of the mining and agricultural sectors during the last two decades, using macroeconomic indicators; In addition, it describes how in this period the Peruvian economy shows an impressive growth of 5.4% in terms of gross domestic product (GDP); This period is also known as the "mining boom". The excellent performance of mining and agriculture sectors contributed to this economic performance. However, despite the economic growth and changes during the last two decades, extreme poverty, malnutrition and childhood anemia are still a serious problem. To eliminate the extreme poverty Peru has to grow at least 6% per year in terms of GDP. This study proposes that mining and agriculture should continue to grow, as well as the other sectors to ensure Peruvian development. The recent recovery of the Peruvian economy is due to the latest mining investments and the interest of the current government in the promotion of private investments.

Importancia de la minería en Puno

This document deals with the Peruvian economy, Peruvian mining and Puno region, its potential, its social problems, the urgent issues to solve, among them: malnutrition, infantile anemia, employment generation, among others. The regional economy is described in terms of GDP, employment and per capita income indicators. Also includes some recommendations to be implemented. After the deep economic crisis (late 1989); the Peruvian economy presents a recovery and during the last two decades, we lived an amazing economic recovery in which mining plays a very important role, putting value on other activities. What made this possible? A new legal framework that promotes and guarantees private investment in addition to the right management of fiscal and monetary policies. However, mining in the Puno region has not been similar to the national advancement, because, Puno is not a mining region like the other regions of Peru, although it may seem otherwise, due to the news of informal mining and the illegal mining that is practiced in the region. Mining in Puno in terms of production, mining reserves, problems and future perspectives on what should be done. The great challenge is to incorporate informal miners to be formal so that they can receive benefits from government services and can pay their taxes. In recent weeks, the discovery of a lithium deposit in Macusani, Carabaya Province, that has been reported. The development of this mining project would change the regional economy and the country, even more if it is given added value.

The rise of a capitalist subsistence economy in Peru

The Peruvian economy depends for its growth on the export of its mineral resources. This dependency is derived from the country’s role in the international division of labour and is expressed in its export structure, economic structure and business structure. Peru’s dependency on its mineral resources, an economic structure that is principally made up of non-tradable sectors and a business structure dominated by micro businesses, make lasting economic progress very difficult. We argue that although the Peruvian economy is divided into an advanced economy and a capitalist subsistence economy, the country is not a dual economy where two sub-economies are economically and socially separated from each other and have structurally different modes of operation. The capitalist subsistence economy is characterized by low productivity levels and is expressed in remuneration rates at or near the minimum wage level. This structural feature of the Peruvian economy impedes the successful implementation of a process that would make the country less dependent on its natural resources and would set it on a development course of increased value-added production.

The Impact of Agricultural Exports to China on Economic Growth of Peru: A Short- and Long-Run Analysis

This study aimed to analyze and quantify the short and long-run impact of agricultural exports to China on economic growth in Peru using an annual time series data from 2001 to 2016 obtained from the Central Bank of Peru, the World Bank, and Trade Map. Agricultural exports value, labour force, and fixed capital formation value for each year of the stipulated period were used as determinant factors of the economic growth. Vector Autoregression (VAR) Model, Augmented Dickey-Fuller test, Johansen Co-integration test, and Granger Causality test was employed for data analysis. The findings revealed that, in the short run, the agricultural sector and agricultural exports value to China have a positive, but non-significant effect on economic growth of Peru. At the same time, both fixed capital formation and labour force have a positive and significant impact on the GDP. ADF test showed that all determinants achieved stationary at a level I (0). Moreover, the Co-integration test result revealed a long-run relationship between the studied variables, and a unidirectional causality in the relationship between all variables and the economic growth except the relationship between the economic growth and the fixed capital formation, which revealed a bidirectional link. This study recommends policy options including the substantial investment in commercialization of agricultural products with added value and human capital development to improve the agriculture sector’s performance in the Peruvian economy as a driver of sustainable economic growth.

Innovation, learning and performance in a resource-rich emerging economy

Background: This article compares the performance of firms in resource-rich sectors of the Peruvian economy with that of businesses operating in service sectors. Objectives: In so doing, the research seeks to examine whether innovation is managed differently by firms operating in different sectors of a developing-country economy and whether the performance of firms in an emerging economy may be influenced by innovation and learning practices at the sectoral level. Method: Data were acquired through a survey of overwhelmingly middle managers working in Peru. Results: According to the survey findings, the performance of firms in the resource-rich sectors appeared to be uninfluenced by innovation or involvement in organisational learning. In contrast, firms in the service sectors not only exhibited an innovation orientation and involvement in learning but also reported higher sales growth. Conclusion: The study concludes that firms operating in the resource-rich sectors of Peru’s economy do not appear to benefit from engaging in innovation or learning at this point in time, whereas such activities are advantageous for service sector businesses. Therefore, the relationship between innovation, learning and performance may be influenced not just by the type of economy but also by the sector in which the firms are operating.

Balance sheet and currency mismatch: evidence for Peruvian firms

In the Peruvian economy, as in other emerging economies, a significant portion of the debt held by firms is denominated in US dollars. While an exchange rate depreciation is likely to increase firm debt and influence investment and production plans, the literature finds weak or no evidence of this balance sheet effect. In this paper, I argue that this effect is observed in firms with a significant currency mismatch. I estimate the currency mismatch (defined as assets minus liabilities in US dollars and expressed as a percentage of total assets in domestic currency) from which the exchange rate has negative effects on firms’ investment. Using financial information from 74 non-financial Peruvian firms from 2002 to 2014, I find significant balance sheet effects for firms with a currency mismatch below − 10.4%.

The New Keynesian framework for a small open economy with structural breaks: Empirical evidence from Peru

We present evidence from Peru that the New Keynesian Phillips Curve, Dynamic IS and Taylor Rule derived by Galí and Monacelli (2005) are unstable. The results from methodology of Bai and Perron (1998, 2003) suggest that the change of the policy rule (January 2006 and May 2009) induces a break in the inflation process (January 2008) and in the market equation (October 2008); the latter due to the existence of nominal frictions and incomplete information in the Peruvian economy. Moreover, results from the estimation of the method of Qu and Perron (2007) reaffirm that there are breaks in the entire reduced system (May 2008 and May 2010). In both cases, the channel of expectations is strengthened since 2008 and it is related to changes in the monetary policy during those years. Furthermore, we also discuss and estimate the presence of the nominal exchange rate in the policy rule.

Charting the course for a blue economy in Peru: a research agenda

Ocean- and coastal-based economic activities are increasingly recognised as key drivers for supporting global economies. This move towards the “blue economy” is becoming globally widespread, with the recognition that if ocean-based activities are to be sustainable, they will need to move beyond solely extractive and exploitative endeavours, aligning more closely with marine conservation and effective marine spatial planning. In this paper we define the “blue economy” as a “platform for strategic, integrated and participatory coastal and ocean development and protection that incorporates a low carbon economy, the ecosystem approach and human well-being through advancing regional industries, services and activities”. In Peru, while the seas contribute greatly to the national economy, the full potential of the blue economy has yet to be realised. This paper presents the findings of an early career scientist workshop in Lima, Peru, in March 2016. The workshop “Advancing Green Growth in Peru” brought together researchers to identify challenges and opportunities for green growth across three Peruvian economic sectors—tourism, transport and the blue economy with this paper exploring in detail the priorities generated from the “blue economy” stream. These priorities include themes such as marine spatial planning, detailed evaluations of existing maritime industries (e.g. guano collection and fisheries), development of an effective MPA network, support for sustainable coastal tourism, and better inclusion of social science disciplines in understanding societal and political support for a Peruvian blue economy. In addition, the paper discusses the research requirements associated with these priorities. While not a comprehensive list, these priorities provide a starting point for future dialogue on a co-ordinated scientific platform supporting the blue growth agenda in Peru, and in other regions working towards a successful “blue economy”.

Income inequality and macroeconomic activity: A study of the Peruvian case

The relationship between income inequality and macroeconomic activity has been extensively investigated for many countries, with mixed evidence over the years. In this context, the aim of the paper is to study this relationship for the Peruvian economy with emphasis on the variables statistical properties. To that end, unit root time series bootstrap simulations are applied, additionally, social and financial variables are used to explain changes in inequality. As a result, no evidence of this relationship is found when variables time series properties are taken into account so new empirical evidence on this issue is critical in light of rising income inequality worldwide and its pervasive effects on society.

Inmigración masiva, salarios reales y empleo: un modelo keynesiano

The mass arrival of Venezuelan immigrants escaping the macroeconomic catastrophe caused by the Maduro government is a unique event in Peru’s recent economic history. This text uses a Keynesian model, where employment depends on aggregate demand, in an attempt to identify the two channels through which mass immigration reduces, in the short term, employment and real wages. These two channels are the increase in the labor force, which reduces nominal and real wages; and the decrease in employees’ propensity to consume if immigrants substitute local workers in the labor market. Venezuelan workers bear no responsibility whatsoever for bringing about this situation. Like the many Peruvians who have emigrated since the 1980s, they only look for the best for their families. All of the responsibility lies with the Kuczynski government and its policy of free immigration, which artificially extends the surplus of urban labor in the Peruvian economy

Size Dependent Policies, Informality and Misallocation

We examine the effect of size-dependent policies in developing economies by focusing on a set of regulations that are applicable to firms with 20 or more formal employees in Peru. Firms can adjust to the regulations by (a) reducing their size, (b) shifting employment composition, or (c) splitting into subunits that fall below the regulatory threshold. We show that these actions are consistent with observed discontinuities in the distributions of firm size and employment composition. We extend the framework proposed by Garicano et al. (2016) to model and estimate the Peruvian economy and perform counterfactual exercises. Size-dependent regulations are costly for the economy, especially in the presence of labor market rigidities, and lead to lower aggregate wages, profits, and output. We also find that access to informal labor does not mitigate the economic impact of the size-dependent regulations, as the increase in informal employment is largely offset by a decline in formal employment.

Recovery investment to boost Peruvian economy

Recovery investment to boost Peruvian economy

Peru: The External and Internal Adjustment Challenge

This paper sketches some of the main external and internal macroeconomic challenges confronting Peru over the nearand medium-term. It argues that Peru’s main macroeconomic challenges could be summarized in three main headings: First, the Peruvian economy is currently in a period of transition from the biggest resource boom since the mid- 1950s to a “new normal” characterized by weaker foreign demand, falling metal prices and expectations of rising interest rates at the international level. Transition to a “new normal” has its own challenges, which, in the case of a small open economy like Peru, are currently being heightened by the abovementioned global conditions. Second, transition to a new normal is happening under robust initial conditions, which could be summarized by the Peruvian economy’s sound macroeconomic fundamentals, and its underlying flexibility. Such flexibility helped the economy dealing with the upswing of the mining development boom and should help us in the downswing. Third, macroeconomic policy—particularly monetary and exchange rate policy—is helping in this adjustment, although a successful transition may need to be supported by a number of structural policies, that are noted in the paper.

La inversión extranjera directa en el Perú y sus implicancias en el crecimiento económico 2009-2015

La economía peruana viene presentando un crecimiento económico sostenido que se ha prolongado ininterrumpidamente por más de dos décadas, pese a mostrar algunos episodios de desaceleración a raíz de las últimas crisis en los mercados financieros internacionales2. Dentro de este contexto, un factor que ha contribuido decisivamente al dinamismo de la producción nacional ha sido el flujo de inversión extranjera directa (FIED), que ha significado el ingreso de importantes sumas de capitales del exterior orientadas hacia distintos sectores de nuestra economía, favoreciendo su expansión. Estos flujos de capital se han generado por las oportunidades que viene ofreciendo el país, como la posibilidad de obtener altas tasas de rendimiento con un entorno económico favorable a la inversión privada y de respeto al libre mercado. En el presente artículo se busca explicar cuál ha sido su impacto en el crecimiento económico a través de un modelo de cointegración entre el producto bruto interno (PBI) y el FIED.

The lean times in the Peruvian economy

ABSTRACTThe growth rate of “nonprimary gross domestic product (GDP)” (Perú’s urban economy) dropped to 3.6 percent in 2014 and to 2.4 percent in 2015, far below the annual average of 7.3 percent recorded over the previous decade; moreover, an equally low growth rate of 2.8 percent per year is projected in 2016. In the macroeconomic history of Peru, the times of plenty —that is, the more or less prolonged booms—are also times of high prices of the commodities that the country exports; meanwhile, the lean times—that is, the more or less intense recessions in which economic activity slows down—are times of low commodity prices. This article describes the negative external shock undergone by the Peruvian economy and its recessionary and inflationary effects over 2014–15, analyzes the fiscal and monetary policies applied in response to the external shock, and outlines the macroeconomic challenges faced by the new government of Pedro Pablo Kuczynski.

The Informal Economy in Peru: A Blueprint for Systemic Reform

The Informal Economy in Peru: A Blueprint for Systemic Reform

Control de fusiones, ¿Una necesidad?

The sustained growth of the Peruvian economy has generated a series of changes in the business world. Thus, the question arises about the role of the State regarding the rise of acquisitions of already consolidated companies. Is merger control an inefficient mechanism that will only scare away investments or is it necessary in order to be able to protect and implement Competition Law? Throughout the presentRoundtable, three lawyers experts on the matter will debate the correct implementation of said proposals and solutions to the controversy.

La macroeconomía de la flotación sucia en una economía primario exportadora: el caso del Perú

The current Peruvian exchange regime is neither pegged nor free-floating. The Peruvian Central Bank sails against the wind in the exchange market, tending to buy dollars when the exchange rate falls, and tending to sell when the exchange rate rises. It is a dirty float regime. In this paper we present a simple macroeconomic model where the central bank fixes the interest rate and maintains a dirty floating exchange rate regime, assuming a small, open, and partiallydollarized economy that exports raw materials, faces imperfect capital mobility, and has a structural fiscal deficit limit as a rule for its fiscal policy. The predictions of the model are consistent with the rule of foreign exchange intervention by the Central Bank and the main stylized facts of the Peruvian economy since the decline in the international price of raw materials in late 2011: drastic fall in private investment, decline of GDP growth, rising nominal exchange rate and reduction of international reserves.