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Technological
University of Peru

TECHNOLOGICAL UNIVERSITY OF PERU

ECONOMIC PHENOMENON:

LACK OF INVESTMENT IN PERÙ

GENERAL ECONOMY

TEACHER:

JAVIER EDGARDO CABRERA ALARCON

MEMBERS:

ALEXANDER CCACYA GONZALES

LIMA PERU
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INTRODUCTION:

In this final Economics project, I am interested in explaining how private and public
investment is affected in Peru, in addition to investigating changes in taxes and public
spending, and also looking for evidence in favor of whether general, and as important points
the economic school with which the lack of investment is related will be determined and
developed. Explain what economic concepts are related to the lack of investment, its
macroeconomic perspective. And an analysis from the microeconomic perspective.
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INDEX:

Technological University of Peru................................................................................................2

INTRODUCTION:...............................................................................................................3
INDEX:....................................................................................................................................4
THE INVESTMENT............................................................................................................6
CAUSES OF THE FALL OF PUBLIC INVESTMENT?...................................................6
CAUSES OF THE FALL IN PRIVATE INVESTMENT?.................................................7
THE RISKS DUE TO POLITICAL INSTABILITY FACING PERU................................7
RECOMMENDATIONS AGAINST LACK OF INVESTMENT......................................8
Options to optimize public investment in the post-pandemic..............................................8
EVOLUTION OF PUBLIC INVESTMENT (PUBLIC EXPENDITURE) AND
PRIVATE INVESTMENT IN LATIN AMERICA.............................................................9
PERUVIAN INVESTMENT THEORY..............................................................................9
THE KEYNESIAN THEORY...........................................................................................10
PUBLIC AND PRIVATE INVESTMENT........................................................................12
DIFFERENCE BETWEEN PUBLIC AND PRIVATE INVESTMENT FUNDS............12
ECONOMIC CYCLES AND THE LACK OF PERUVIAN INVESTMENT..................12
GDP:...................................................................................................................................13
Background and development............................................................................................15
Areas of application............................................................................................................15
ABOUT IPAE BUSINESS ASSOCIATION.....................................................................17
ECONOMIC POLICY.......................................................................................................17
Objectives of economic policy...........................................................................................17
Regarding long-term objectives we can distinguish eight:.................................................18
Disciplines of economic policy..........................................................................................18
Features of economic policy...............................................................................................19
FINANCE SYSTEM..........................................................................................................19
Peruvian financial system...................................................................................................20
Who regulates the financial system?..................................................................................21
Actors.................................................................................................................................22
The importance of the financial system..............................................................................22
WHAT IS MACROECONOMICS?...................................................................................22
What is macroeconomics?..................................................................................................23
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Objectives of macroeconomics...........................................................................................23
Macroeconomics helps us as consumers............................................................................24
Macroeconomics helps us as investors...............................................................................24
WHAT IS MICROECONOMICS?....................................................................................25
Microeconomics studies the following areas:....................................................................25
Microeconomic indicators..................................................................................................26
Objectives of microeconomics...........................................................................................26
What is microeconomics for?.............................................................................................27
Does it help you better understand the world of work?......................................................27
Does Microeconomics help to understand the financial world?.........................................27
And the business world?.....................................................................................................28
Does Microeconomics help to understand the State?.........................................................28
Does it help understand History?........................................................................................28
Is Microeconomics very theoretical?..................................................................................29
CONCLUSIONS:...............................................................................................................29
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CONTEXTUALIZATION QUESTIONS

THE INVESTMENT

Investment is an important component of Peruvian GDP. According to figures from the

Central Reserve Bank of Peru (BCRP), this represents around a quarter of GDP in each year of

the current decade, making it the second most important component after private

consumption. Private investment energizes the economy, since its greater flow increases

employment levels and boosts consumption; Therefore, their behavior has an impact on

economic growth and social well-being. In particular, private investment represents almost

80% of gross fixed investment for 10 years, according to figures from the

BCRP. However, due to the pandemic, this decreased by 13.4% in 2020 compared to 2019,

although this result is expected to be reversed in subsequent years thanks to the economic

recovery. (COMEXPERÚ, 2022, para.1)

CAUSES OF THE FALL OF PUBLIC INVESTMENT?

For the analyst, the main reasons for this level of public investment are, first of all, "the issue

of acts of corruption that have started in Peru, not only in the country but in Latin America,

has put much more assets into the control bodies, particularly the Comptroller's Office, and,

in turn, public officials are much more concerned and reluctant to make decisions.

The Odebrecht scandal has opened corruption investigations against the last presidents, from

Alejandro Toledo and the late Alan García, to Ollanta Humala and Pedro Pablo Kuczynski, in

addition to dozens of local authorities, officials and politicians. Peñaranda added that "the

fear of public officials, fundamentally those who have to make investment decisions, is one of

the aspects. The other is the high turnover of officials" due to the change of regional and
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municipal authorities at the beginning of 2019. "The entry of new governors and new mayors

entails the incorporation of new advisors and people they trust, so a very high turnover of

officials has been generated, which certainly affects the dynamics of investments," he noted.

The third reason for the reduced execution of budgets, especially at the regional and local

level, "is the lack of training and experience in managing public investment, which generates

poor management," said the economist.

Peñaranda recalled that "public capital spending, public investment, with respect to GDP, was

more or less 6% in the period between 2012-2015, in 2016-2018 it fell to 5% of GDP and last

year to 4.9% of GDP." (EFE, 2020, para.9).

CAUSES OF THE FALL IN PRIVATE INVESTMENT?

The Peruvian economy has been seriously affected due to three major post-COVID-19

international shocks: the Russia-Ukraine war; the sharp rise in the United States interest rate;

and the slowdown in economic growth in China, the country's main trading partner. It is

urgent that Peru take the necessary measures to respond to these problems, and thus

resume economic growth, development and responsible policies in order to provide greater

well-being to citizens. (IPAE, 2022, para.1)

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THE RISKS DUE TO POLITICAL INSTABILITY FACING PERU

The low investment in El Salvador and all the consequences that this has are currently one of

the main obstacles to development, says Juan José Barrios, chief economist of the IDB in the

country. "The lack of investment has a causal chain: low investment, lack of job creation as a

result of it, which generates pressure for migration, opens a window of opportunity for

organized crime and generates this vicious circle in which a macro variable that sounds

ethereal to you is really affecting the creation of opportunities and the feeling of citizenship.

(EL ECONOMISTA, 2019, para.1).

RECOMMENDATIONS AGAINST LACK OF INVESTMENT

What can governments do with limited fiscal space? Part of the solution will be to focus on

the essential fundamentals of good public investment to adopt measures that help countries

do more with less.

Options to optimize public investment in the post-pandemic

- Use technical and transparent criteria to prioritize public investment

The limited fiscal space will lead to a rationalization of the current portfolio of investment

projects. The budget may not be enough to allocate resources to all projects in execution, so

the stoppage of works in the post-pandemic should not be surprising. (WELL-BEING, 2020,

para.5).

- Consider private participation strategies to resume public investment and

avoid tax traps

Given the limited fiscal space, it is possible that many countries in the region will regain

interest in Public-Private Partnerships (PPP) as an alternative to finance new infrastructure or

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maintain current infrastructure. (WELL-BEING, 2020, para.8).

- Strategically manage public assets to extend their useful life

In a context of limited fiscal space, extending the useful life of existing assets makes it

possible to delay infrastructure replacement decisions and reduce pressure on investment

decisions. (WELL-BEING, 2020, para.13).

EVOLUTION OF PUBLIC INVESTMENT (PUBLIC EXPENDITURE) AND PRIVATE INVESTMENT IN

LATIN AMERICA

There are different types of private investment. National private investment and foreign

private investment. The first is investment coming from people within the country. Foreign

private investment is that which comes to the country from abroad. In this work we will not

differentiate in the econometric analysis of the third section between whether it is national

or foreign; but only between whether it is public or private (like Caballero-Urdiales and

LópezGallardo (2012)). In order to understand how investment has evolved in recent years,

we show below graphs in which you can review the behavior of this variable. Investment is

one of the key elements for the development of a country to be sustainable over time, since

it generates work, technology and production, promoting a virtuous circle of development.

The economic growth and development of nations are based on a fundamental determinant

that is investment (also known as gross fixed capital formation-FBKF). This constitutes the

basis for the growth of production, the generation of employment and the advancement of

living conditions in general through the provision of goods and services. (ECLAC, 2013).

DETERMINES AND DEVELOPS THE ECONOMIC SCHOOL TO WHICH THE ECONOMIC

PHENOMENON IS RELATED
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PERUVIAN INVESTMENT THEORY

It is the set of ideas that seek to explain the movements, directions and volume of

investments within an economy and the factors that determine them. Investment is one of

the possible destinations for money. Therefore, it is a fundamental element of

<development. Advanced countries are characterized by having high rates of savings and

investment. Which means that there are high rates of capital accumulation that are allocated

to production activities. Savings and investment are closely linked in the development

process. Savings are oriented towards investment, whether it is done directly by the saver or

whether their money is used to satisfy the financing needs of another person.

Economists usually differentiate between real investment and financial investment,

depending on whether the economic resources are allocated to the acquisition of productive

goods or to profitable financial assets, such as bank savings or term deposits, short- or long-

term bonds, titles representing commercial credit, shares and participations in companies.

The main difference between these two forms of investment is that the funds allocated to the

first serve to acquire productive capital goods with which the future production of the

economy will be increased, while financial investment is the transfer of funds from some

economic units to others, aimed at increasing spending in general, including consumer

spending. (POLITICS, 2018, para.1).

THE KEYNESIAN THEORY

Keynesianism is the theory that states that the State must intervene in the economy to

maintain balance and reverse crisis cycles. He argues that the market is not regulated

naturally, so governments must minimize economic fluctuations. Its ideologist was the British

economist John Maynard Keynes ( 1883-1946), who expounded it in his work General Theory
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of Employment, Interest and Money (1936), for which he is considered the founder of

modern macroeconomics. His model was revolutionary because it opposed the minimal state

intervention promulgated by classical liberalism.

According to Keynesianism, the variable that drives economic activity is demand. This is made

up of the goods and services that citizens consume, the investments of companies and banks

when purchasing new equipment or shares, public spending and the goods that are exported.

The economy is in equilibrium when demand is equal to supply, but the market is incapable

of regulating itself, according to Keynes, so governments must intervene to avoid imbalances.

And they do it with countercyclical policies: saving in times of growth to face future

recessions and avoid rising prices, and spending in periods of recession to generate wealth.

This reduces the impact of each economic cycle and solves unemployment and inflation.

(EOM, 2021, para.1).

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EXPLAIN WHICH CONCEPTS OF ECONOMY STUDYED IN CLASS ARE RELATED TO THE

ECONOMIC PHENOMENON

PUBLIC AND PRIVATE INVESTMENT

When a person wants to start in the world of investments, but does not have enough capital to do so,

the best alternative is investment funds, a type of investment where an administrator pools the

capital contributions of a group of people and the They invest in financial instruments to obtain the

returns expected by investors. For this, there are public and private investment funds, and choosing

between one or the other will depend on the profile and investment horizon of each person. Let's

look at the differences between public and private investment funds. (RANKIA, 2019, para.1).

DIFFERENCE BETWEEN PUBLIC AND PRIVATE INVESTMENT FUNDS

In investment funds, people, both natural and legal, place their capital in a certain portfolio

offered by fund managers, which manage this money in order to offer the shareholders the

expected profitability of the investment portfolio.

There are many types of investment funds and several ways to classify them, one of them is

based on where it is invested, in which case the investment funds can be public or private.

And to know the difference between them it is necessary to know what each one is. ( RANKIA,

2019, para.2).

ECONOMIC CYCLES AND THE LACK OF PERUVIAN INVESTMENT

The business cycle is a phenomenon that corresponds to repeated oscillations in the growth

rates of production, employment and other macroeconomic variables, in the short term, over
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a given period of time, generally several years. Economic cycles have a series of common

characteristics that tend to repeat themselves, but they have highly variable amplitudes and

periods. Economic cycles are the variations in aggregate supply and demand expressed in ups

and downs that are repeated with certain periodicity over the years.

The business cycle consists of recurring, non-periodic fluctuations in business, general and

economic activity that take place over a period of years.

Fluctuations in the economy are often called the business cycle. As this expression suggests,

economic fluctuations correspond to changes in the economic situation. When real GDP

grows rapidly, the economic situation is good. During these periods of economic expansion,

most companies find that they have many customers and that profits increase. When real

GDP declines during recessions, businesses get into trouble. During these periods of

economic contraction, sales and profits decline for the most part. The term business cycle is

somewhat misleading, as it seems to suggest that economic fluctuations follow a regular and

predictable pattern. In reality, economic fluctuations are not regular at all and are almost

always impossible to predict with much precision. (GESTIOPOLIS, para.1,2,3)

GDP:

The Gross Domestic Product (GDP) is the value of the final goods and services produced

during a period of time in a territory. It only refers to final goods and services because their

prices incorporate the value of intermediate goods. Therefore, including intermediate goods

would lead to double counting.

There are 3 methods to calculate GDP: expenditure method, production method and income

method. The first two are the most common forms. In the first method, the aggregate

purchase of goods and services in the economy is accounted for, that is, the spending of:
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consumers of local goods and services (private consumption), the government (consumption

and public investment), the companies ( private investment) , foreigners who buy our

products (exports), and, finally, spending on goods not produced in the country (imports) is

excluded from the calculation. For its part, in the production method, the market value of the

product is added at each stage of production in each productive sector and the value of the

inputs used is subtracted. Production sectors are classified as: manufacturing, mining,

agriculture, fishing, commerce, etc. Finally, the income method consists of quantifying the

income received by all agents in the economy based on their participation in production. The

following are considered income: remunerations, consumption of fixed capital, taxes on

production and imports, and operating surplus. (IPE, 2021, para.1).

THE FINANCIAL ECONOMY

That is, this discipline studies how companies and people manage their assets. This, taking

into account variables such as investment time, uncertainty about certain events, interest

rates, inflation, among others. To understand this branch of the economy, we must

understand that in the financial market there are agents who seek to invest and others who

require capital to develop their plans. In addition, the Government usually has an entity that

supervises financial operations and their participants. However, even if there is regulation,

we must remember that the financial sector reflects changes in investor demand very quickly

and is exposed to local and external shocks. Thus, share prices, for example, fluctuate

constantly, and can vary strongly from one moment to the next. That's what we mean by

decisions under uncertainty. (ECONOMIPEDIA, 2022).

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Background and development

The history of Financial Economics is very short, compared to that of other academic

disciplines. In fact, not more than 40 years ago, Financial Economics simply consisted of a

collection of anecdotes and rules without any scientific rigor, with a vision aimed exclusively

at enhancing merely descriptive knowledge. The relevance of Financial Economics as an

academic discipline had its special public recognition when in 1990 the Nobel Prize in

Economics was awarded to three distinguished financial economists "for their pioneering

work to establish the theory of financial economics." These three economists were Harry

Markowitz, Merton Miller and William Sharpe. Later, in 1997, Myron Scholes and Robert

Merton also received the Nobel Prize for their contributions to derivative asset valuation.

Finally, it should be noted that three of the economists who previously received the Nobel

Prize (Kenneth Arrow, Gerard Debreu and Franco Modigliani) obtained it, to a large extent,

for laying the foundations of what is currently understood as Financial Economics.

(For more information, consult the Nobel Foundation website).

Areas of application

The different fields of action of Financial Economics can be grouped into the following major

areas:

—The mean-variance analysis.

— The determination and interpretation of the prices of financial assets and the assessment

of risk.

— The efficient organization of financial intermediation and capital markets.

— Efficient decision-making within the company.

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The four previous areas, although it may not seem like it, are interrelated within Financial

Economics. Thus, through the aggregation of the demands for financial assets by individual

investors (mean-variance analysis), theories are developed that determine the relevant

factors in the prices of financial assets, it is in a position to decide which types of assets are

necessary and what decision rules companies should use to efficiently attract the necessary

capital.

(ECONOMIPEDIA, 2020, para.1).

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ABOUT IPAE BUSINESS ASSOCIATION

IPAE is a private, independent, non-profit association that convenes, reflects, proposes and

executes initiatives for the development of institutions, market economy, business and

education to make Peru a developed country. For 63 years, it has contributed to the

formation of institutions and initiatives such as ESAN, SENATI, IPAE Escuela de Empresarios,

CONFIEP, Identicole and Ponte en Carrera, among many more. Throughout its institutional

life, IPAE has consolidated the CADEs as the most recognized forums in the country thanks to

its continuity and active participation of leaders from the private, public and academic

sectors. (IPAE, 2022, para.10).

ECONOMIC POLICY

As a government establishes a certain economic policy, it is responsible for controlling

different economic factors that are important in the life of the country, such as the state

budget or the labor market. So to speak, the State conducts the economy of its territory with

the tools of economic policy.

Objectives of economic policy

Among the objectives of economic policy we can distinguish short-term objectives

(temporary) and longer-term objectives (structural).

Regarding short-term objectives we can distinguish three:

Full employment.
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Price stability.

Improvement of the balance of payments.

Regarding long-term objectives we can distinguish eight:

Production expansion.
Satisfaction of collective needs.
Improvement of the distribution of income and wealth.

Protection and priorities for certain regions or industries.

Improvement in private consumption standards.

Security of supply.

Improvement in the size or structure of the population.

Reduction of the working day.

Disciplines of economic policy

By controlling economic variables a government can stimulate the economy. Depending on

the tools used by the authorities, we can distinguish two disciplines of economic policy:

Fiscal policy: C entry into the management of the resources of a State and its Administration.

It is in the hands of the country's Government, who controls the levels of spending and

income through variables such as tax collection and public spending to maintain a level of

stability in the countries. It can be expansive or restrictive.

Monetary policy: Controls monetary factors (mainly monetary mass and interest rates ) to

guarantee price stability and economic growth. It can be expansive or restrictive.

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Features of economic policy

Economic policies must have a high level of coherence, coordination and integration of the

fiscal and monetary measures with which they are based, in order to achieve the set

objectives and the search for well-being. Thanks to good use of economic policy, a country

can deal with important social and current problems such as inflation and poverty, in addition

to trying to contribute to the economic growth of the country.

Economic policy is specific to each country or region, since it is developed taking into account

the characteristics of each territory in which it is applied and it is generally not possible to

obtain identical results by testing it equally in two different countries. This happens because

there are social, geographical or ideological factors that make each country unique.

However, depending on the ideologies and economic approaches that exist in the world,

different positions can be found regarding the level of intervention that a government must

adopt in the economic life of its country.

There are international organizations that influence decision-making when proposing a

specific economic policy, such as the International Monetary Fund (IMF), the Federal Reserve

or the World Bank. Likewise, economic policy is closely related to the ideological and political

trends existing in the world and represented by the political powers of each country.

(ECONOMIPEDIA, 2020, para.1).

FINANCE SYSTEM

The financial system is the set of institutions, intermediaries and markets whose main

function is to direct funds from savers to investors. To achieve this, there are two

mechanisms to carry out such a transaction with respect to funds: direct finance and indirect

finance.
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Indirect finance: This mechanism requires a financial intermediary in order to transform

primary assets into indirect financial assets.

Direct finance: In this case, a financial intermediary is not required, since the transactions

occur in the same financial markets for bonds, shares and other financial instruments.

In a practical way we show you the following case:

Juan has a pharmacy at his home and given the current situation, in which health is so

important, he has decided to invest in his business by adding a new location. Although Juan

does not currently have the financial capacity to make such an investment, he is thinking

about contacting a financial institution to request a loan. In his search for that capital, he

visited banks, municipal savings banks, and traditional financial institutions and all of them

denied him the loan. It was then that, when looking for other options outside of this group,

he found the fintech Prestamype, who work with micro and small businesses that need a loan

for their business in a more inclusive and agile way.

Peruvian financial system

In our country, the financial system brings together both public and private institutions in

order to capture, manage and regulate financial resources, which are traded between the

economic actors of Peru. In that sense, the financial system functions as an intermediary

between people who want to lend their excess money (investors) and those who require

financing (companies?)

There are two types of systems in our country, formal and informal.

Formal financial system: Companies that, in order to operate, must have an operating

authorization, appropriate physical infrastructure and be governed by a specific legal

framework. Informal financial system: As it is not governed by a legal framework that

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regulates and supervises it, it does not guarantee the security of the operations that people

can carry out through it, which implies greater risk (informal lenders)

Another disadvantage of the informal system lies in the interest rate, because although the

amounts to be paid are small due to the amount lent and the short term, a BCR study

indicates that the average monthly rate charged in informal credit is 20% and annually the

rate reaches approximately 800%. In the same way, the collection methods used by some

informal lenders are dangerous, harming the economy and physical integrity of the borrower.

Who regulates the financial system?

The Peruvian body in charge of regulating and supervising said system is the Superintendency

of Banking, Insurance and AFP (SBS), thus guaranteeing the protection of savers' money and

the solidity and stability of the system (Banks, Municipal Savings Banks , Rural Savings Banks,

Financial, etc. Likewise, there is support in matters of supervision and operations with the

Superintendency of the Stock Market (SMV) and the Lima Stock Exchange (BVL).
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Actors

The following graph shows the relationship between the actors that make up the system

financial, such as companies authorized to raise funds from the public (intermediaries

financial) through different modalities and place them in the form of credits or

investments towards private consumption, business investment and public spending.

The importance of the financial system

Having an adequate financial system allows for capital investment for different productive

activities, such as construction, industry, technology, etc., which contribute to the economic

development of the country and the progress of society, since it not only provides liquidity to

who requires it, if not also, it stimulates savings and investment options or access to credit.

(PRESTAMYPE, para.1,2,3,4,5,6)

ANALYZE FROM THE PERSPECTIVE MACROECONOMIC HE

ECONOMIC PHENOMENON

WHAT IS MACROECONOMICS?

Economics is a broad term that encompasses the general study of how people affect markets

and industries. There are several divisions of the economy, each specialized in an aspect or

concept. All of these divisions work together to help

inform the world economy.

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What is macroeconomics?

Macroeconomics is the branch of economics that studies the behavior of the economy as a

whole, the market or other systems that operate on a large scale. Macroeconomics studies

general economic phenomena such as inflation, the price level, economic growth rates,

national income, gross domestic product (GDP) and the evolution of unemployment.

Economics is a broad term that encompasses the general study of how people affect markets

and industries. There are several divisions of the economy, each specialized in an aspect or

concept. All of these divisions work together to help inform the global economy. ( CESUMA,

2022, para.2).

Objectives of macroeconomics

Among the objectives of macroeconomics, the achievement of the economic objectives of the

country or region stands out through the analysis of macroeconomic data and the application

of appropriate economic policies (monetary or fiscal) that contribute to the economic growth

of the country or region. Its results are effective in the medium or long term.

John Maynard Keynes is considered the founder of modern macroeconomics, which was born

in 1936, when Keynes published General Theory of Employment, Interest and Money.

(MacroData, para.1.).

What is macroeconomics for?

In the short term, it provides us with instruments to understand the environment and make
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decisions that impact society. That is, Macroeconomics has many applications in our daily

lives.

Macroeconomics helps us as consumers

When we manage a family budget we are interested in knowing if the economic situation of

the country is going to improve or worsen in the coming months. In addition to providing the

sectors that suffer the greatest impacts from the improvement or worsening of the economy.

We do not consume the same things if we think that a crisis can affect us in a particular way

as if we believe that we can benefit intensely from a moment of prosperity.

Macroeconomics helps us as investors

Macroeconomic uncertainty is quoted on the stock market and affects our investments.

Depending on our greater propensity or aversion to risk, we will make investment decisions.

But also depending on the availability of alternatives with greater or lesser risk. For example,

in turbulent times, there is a lack of knowledge of how the economy will evolve in the short

term, so there will be greater risk.

A key macroeconomic concept for investors and savers is inflation. Macroeconomics makes it

easier for us to understand what inflation is, and helps us understand the returns on our

investments. And the same happens with interest rates, which are subject to the

macroeconomic context. (BBVA, 2016, para.1).

ANALYZE THE ECONOMIC PHENOMENON FROM THE MICROECONOMIC

PERSPECTIVE
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WHAT IS MICROECONOMICS?

Microeconomics analyzes the decisions of individuals and different economic agents

theoretically. This discipline proposes simplified models of reality in order to understand the

implications of personal decisions and how to decide.

(BBVA, 2016).

Microeconomics studies the following areas:

Consumer needs and action patterns (what, how much and when to buy). Decision-making
models in the economic activities of companies (what, how and how much to produce).

Economic relations between manufacturers in the market (issues of prices and market

functioning).

Demand patterns (how they work) and supply.

“The task of microeconomics is to explain how economic decisions are made at the agent

level and what affects the adoption of these decisions under conditions of limited resources.”

Obviously, the buyer cannot acquire everything he likes in life, because he has limited

financial resources.

The manufacturer cannot afford to produce products that he likes, because the buyer will not

demand them, since the production and financial resources of the producer are also limited.

Limited resources (what is this?). It is the main condition for consumers and business entities

to make decisions in the course of production, consumption, distribution and exchange

activities.

Microeconomic indicators

The study of microeconomics is based on the evaluation of certain economic indicators

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(growth, reduction, stabilization).

Methods used to analyze microeconomic indicators:

Marginal analysis is an evaluation (study) of the changing part of any indicator. Example:

labor productivity is estimated in a certain production section. This indicator is rising and

falling. The marginal analysis method does not evaluate the indicator as a whole, but only its

changing part: growth or reduction. The dependence of the increase or decrease on the

influence of external factors is derived.

Functional analysis is an evaluation of the processes occurring in microeconomics by

compiling mathematical functions.

This method allows you to calculate the numerical dependence of some of the analyzed

quantities on others. For example, determine the dependence (in numerical terms) of labor

productivity on the skill level of workers and the financial capital invested in the technical

equipment of the work.

Graphical analysis is an evaluation of microeconomic indicators through the preparation of

graphs and tables. This method allows you to determine how the situation will develop in the

near or distant future. (CEUPE, para.3,4).

Objectives of microeconomics

Microeconomics relates the objectives of economic agents with their possibilities. These

economic actors will try to achieve their objectives as much as possible within their

possibilities, but taking into account that other economic agents will also try to do the same.

The purpose of analyzing individuals' decisions is to provide tools to think about different

aspects of people's lives. It also serves as a tool for argumentation and to build the

theoretical basis of models that, through data, allow us to contrast whether reality is as we
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think.

What is microeconomics for?

During the last decades it has approached decisions about the domestic economy, leisure and

non-material aspects. For example, life as a couple or having children. In these areas, it

provides an important part of the theoretical tools through which Economics studies these

facets.

Does it help you better understand the world of work?

Yes, it helps to understand participation decisions in labor markets or the distribution of time

between work and leisure. In addition, it also helps other aspects such as labor negotiations

or incentives and salary policies. The variety and knowledge that Microeconomics offers is

very extensive within the workplace.

Does Microeconomics help to understand the financial world?

A lot, more every day. Finance involves many decisions such as how much to save and how

much to consume, what to invest in or how to cover that risk. In addition, it provides tools to

understand the strategies that occur in the interrelation of the agents participating in the

financial system.

And the business world?

One of the growing interests of Microeconomics is to understand decisions of all kinds that
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occur in the company. Aspects such as: commercial, financial, human resources decisions,

etc. are studied. It also focuses on the company's objectives or its information flows.

Does Microeconomics help to understand the State?

Microeconomics has greatly developed the theoretical framework for decisions related to the

State. The impact of taxes is studied and how they change society beyond collection.

In addition to taking into account other important decisions such as those of voters, public

regulation or public spending. The actions of the State in the face of market and government

failures are also studied. How does Microeconomics get along with Macroeconomics?

Microeconomics is the theoretical basis of all Economics, which is why it is connected to

Macroeconomics. T he models of today's macroeconomists almost always have a

microeconomic basis. There were some notable exceptions in the past, such as Keynes, but

today his followers usually base their models on microeconomic models.

Does it help understand History?

The study of decisions helps to understand the reasons why certain events occurred. Also the

reasons for changes in the main institutions (family, company, State, law, etc.) over time.

Is Microeconomics very theoretical?

Yes it is. Its relationship with the other areas of Economics is to provide tools to think, to

develop theories and models. The other areas use these theories to analyze the data through

statistical procedures. In addition, they relate the theoretical models with contributions from

other fields of knowledge, whether they are specific to Economics or other disciplines. (BBVA,
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2016).

CONCLUSIONS:

INVESTMENT: Investment is an important component of the Peruvian GDP. According to

figures from the Central Reserve Bank of Peru (BCRP), this represents around a quarter of

GDP in each year of the current decade, making it the second most important component

after private consumption. (COMEXPERÚ, 2022).

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CAUSES OF THE FALL OF PUBLIC INVESTMENT?: The main reasons for this level of public

investment are, first of all, "the issue of acts of corruption that have begun in Peru, not only

in the country but in Latin America. (EFE, 2020).

CAUSES OF THE FALL IN PRIVATE INVESTMENT?: The Peruvian economy has been seriously

affected due to three major international shocks post COVID-19: the war

RussiaUkraine; the sharp rise in the United States interest rate; and the slowdown in

economic growth in China, the country's main trading partner. (IPAE, 2022).

THE RISKS DUE TO THE POLITICAL INSTABILITY THAT PERU FACE: "The lack of investment has

a causal chain: low investment, lack of job creation as a result of it, which generates pressure

for migration, opens a window of opportunity for crime organized and this vicious circle is

generated in which a macro variable that sounds ethereal to you is actually affecting the

creation of opportunities and the feeling of citizenship. (THE ECONOMIST, 2019).

RECOMMENDATIONS AGAINST LACK OF INVESTMENT: Use technical and transparent criteria

to prioritize public investment; The limited fiscal space will lead to a rationalization of the

current portfolio of investment projects. Consider private participation strategies to resume

public investment and avoid fiscal traps Given the limited fiscal space, it is possible that many

countries in the region will regain interest in

Public-Private Partnerships Strategically manage public assets to extend their useful life, in a

context of limited fiscal space, (APP) (BIENESTAR, 2020).

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EVOLUTION OF PUBLIC INVESTMENT (PUBLIC EXPENDITURE) AND PRIVATE IN LATIN

AMERICA: There are different types of private investment. National private investment and

foreign private investment. The first is investment coming from people within the country.

Foreign private investment is that which comes to the country from abroad. In this work we

will not differentiate in the econometric analysis of the third section between whether it is

national or foreign; but only between whether it is public or private (ECLAC, 2013).

PERUVIAN INVESTMENT THEORY: It is the set of ideas that seek to explain the movements,

directions and volume of investments within an economy and the factors that determine

them. Investment is one of the possible destinations for money.

THE KEYNESIAN THEORY: Keynesianism is the theory that states that the State must intervene

in the economy to maintain balance and reverse crisis cycles. He argues that the market is

not regulated naturally, so governments must minimize economic fluctuations. (EOM, 2021,

para.1).

PUBLIC AND PRIVATE INVESTMENT: When a person wants to start in the world of

investments, but does not have enough capital to do so, the best alternative is investment

funds, an investment modality where an administrator pools the capital contributions of a

group of people and invest them in financial instruments to obtain the profitability expected

by investors. (RANKIA, 2019, para.1).

DIFFERENCE BETWEEN PUBLIC AND PRIVATE INVESTMENT FUNDS: There are many types of
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investment funds and several ways to classify them, one of them is based on where it is

invested, in which case the investment funds can be public or private. And to know the

difference between them it is necessary to know what each one is. (RANKIA, 2019).

ECONOMIC CYCLES AND THE LACK OF PERUVIAN INVESTMENT: The economic cycle is a

phenomenon that corresponds to repeated oscillations in the growth rates of production,

employment and other macroeconomic variables, in the short term, during a given period of

time, usually several years. (GESTIOPOLIS)

GDP: Gross Domestic Product (GDP) is the value of final goods and services produced during a

period of time in a territory. It only refers to final goods and services because their prices

incorporate the value of intermediate goods. Therefore, including intermediate goods would

lead to double counting. (IPE, 2021).

FINANCIAL ECONOMICS: That is, this discipline studies how companies and people manage

their assets. This, taking into account variables such as investment time, uncertainty about

certain events, interest rates, inflation, among others. The history of Financial Economics is

very short, compared to that of other academic disciplines. In fact, not more than 40 years

ago, Financial Economics simply consisted of a collection of anecdotes and rules without any

scientific rigor, with a vision aimed exclusively at enhancing merely descriptive knowledge.

(ECONOMIPEDIA, 2022).

ABOUT IPAE BUSINESS ASSOCIATION: IPAE is a private, independent, non-profit association

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that convenes, reflects, proposes and executes initiatives for the development of institutions,

market economy, business and education to make Peru a country developed. (IPAE, 2022).

ECONOMIC POLICY: As a government establishes a certain economic policy, it is responsible

for controlling different important economic factors in the life of the country, such as the

state budgets or the labor market. (ECONOMIPEDIA, 2020).

FINANCIAL SYSTEM: The financial system is the set of institutions, intermediaries and markets

whose main function is to direct savers' funds to investors. To achieve this, there are two

mechanisms to carry out such a transaction with respect to funds: direct finance and indirect

finance. (LOANYPE)

WHAT IS MACROECONOMICS?: Economics is a broad term that encompasses the general

study of how people affect markets and industries. There are several divisions of the

economy, each specialized in an aspect or concept. (CESUMA, 2022).

WHAT IS MICROECONOMICS?: Microeconomics analyzes the decisions of individuals and

different economic agents in a theoretical way. This discipline proposes simplified models of

reality in order to understand the implications of personal decisions and how to decide.

(BBVA, 2016).

BIBLIOGRAPHY

COMEXPERÙ (2022), PRIVATE INVESTMENT PROSPECTS FOR 2022, ComexPerú-Sociedad de Comercio

Exterior del Perú, Lima, February 18, 2022, para.1, 2020.
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https://www.comexperu.org.pe/articulo/perspectives - of - private - investment - for - 2022

EFE (2020). Corruption and controls impact lower public investment in Peru in 2019, – AGENCIA EFE,
Lima, February 6, 2020, paragraph 9, 2020 https://www.efe.com/efe/america/economia/corrupcion -
and - controls - impact - on - minor - public investment - peru - 2019/20000011 - 4167717

IPAE (2022), CADEx: To face the crisis, Peru needs clear rules that promote private investment, IPAE –
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EL ECONOMISTA (2019), The lack of investment and its effects are the biggest obstacle to
development, says the IDB, Lima, Villa el Salvador, August 19, 2019, para.1, 2019.
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BIENESTAR (2019), Doing more with less: Recommendations to improve public investment in the post-
pandemic, LIMA, June 23, 2020, para.5,8,13, 2020.
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ENCYCLOPEDIA OF POLITICS (2020), Investment Theory, July 16, 2018, para. 1, 2018.
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THE WORLD ORDER (2021), What is the economic theory of Keynesianism?, May 21, 2021, para. 1,
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RANKIA (2019), Difference between public and private investment funds, May 25, 2019, paragraph 1,
2019.https://www.rankia.cl/blog/fondos - mutuals - agf/4259851 - difference - funds - investment -
public private

GESTIOPOLIS, What is the economic cycle?, para.1,2,3 . https://www.gestiopolis.com/what is

the economic cycle/

IPE, GDP, Gross Domestic Product WHAT IS GROSS DOMESTIC PRODUCT (GDP)?, November 3,
2021, para. 1, 2021). https://www.ipe.org.pe/portal/producto - gross - internal/

IPAE (2022), CADEx: To face the crisis, Peru needs clear rules that promote private investment, IPAE –
Business Association, Lima, May 26, 2022, para.10, 2022.
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promote - private - investment/

ECONOMIPEDIA (2020), Economic Policy, September 29, 2020, para.1, 2020.

https://economipedia.com/definiciones/politica - economica.html
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PRESTAMYYPE, What is the Peruvian financial system and how does it work?, para.1,2,3,4,5,
https://www.prestamype.com/articulos/que - es - el - peruvian - financial - system - and how it works

CESUMA (2022), WHAT IS MACROECONOMY?, July 2022, para.2, 2022.

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DATAMACRO, MACROECONOMY, para.1.

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%20objetivos% 20de%20la,econ%C3%B3mico%20del%20pa%C3%ADs%20o%20regi%C3%B3n
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BBVA, What does Macroeconomics have to do with our daily lives?, August 16, 2016, para.1, 2016,
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CEUPE, WHAT IS MICROECONOMICS?, para.3,4.https://www.ceupe.com/blog/que - es - la

microeconomia.html?dt=1658728186701

BBVA, What does Macroeconomics have to do with our daily lives?, August 16, 2016, para.4,5,6,7,8,9,
2016, https://www.bbva.com/es/ver - the - macroeconomics - our - daily - life/