The Determinants of Private Investment in a Mining Export Economy. Peru: 1997-2017

Peru is an economy where about 60 percent of exports are mineral, of which copper, in turn, represents half. What is the weight of international factors and domestic factors in determining private investment in this mining export economy? In this paper, we identify the dominant influence of international conditions on the evolution of private investment in Peru, as well as the enormous individual weight of the price of exports in this evolution. In the period 1997-2017, external factors explained 54, 64 and 38 percent of the variance in the growth rate of total private investment, mining investment, and non-mining investment, respectively; while more than, half of the weight of external factors was explained by the price of exports. On the other hand, domestic factors explained 46, 36 and 62 percent of the variance in the growth rate of total private investment, mining investment and nonmining investment; while about 40 percent of the weight of domestic factors was explained by public investment. These findings are important because they show the price of exports to be the main channel connecting private investment in Peru with the world economy, and public investment as the most effective policy variable affecting it. Keywords: Total private investment, private mining investment, non-mining private investment, export price, public investment, fluctuations, impulse-response, variance decomposition, historical decomposition. JEL Codes: C32, E22, E32, H54, L72, L74.