Institutional Capacity Building and FDI in Peru

There is a wide consensus among economists and policy makers on the fact that foreign direct investment play a key role in fostering industrial and economic development. It is increasingly important, thus, for industrializing countries to build an institutional capacity able to attract investors and to maximize their positive impacts on the local economy. In this content, institutional capacity building consists in a group of policies finalized to the creation of a legal framework, and of an institutional, economic and social environment which permit at the same time to attract international investments and to maximize their positive effects on the local economy. Economic theory and evidence tell us that positive effects of the FDI presence in a country are not naturally given; there is a need, indeed, for the presence of many conditions in order to produce these virtuous effect. In this sense the idea of institutional capacity building should go well behind the pure incentives to attract FDI. In this book we analyse the issue of the institutional capacity building from both a theorical and a practical perspective. Latin America has experienced a great boom in FDI received during the 1990's: than, after a slow down during the first years of the 2000's, it is, in recent years, well recovering. Peru, in particular, represents an extremely interesting case from the point of view of FDI and policies. Thanks to several surveys and interviews carried out on the field, we go through the evolutions of nine different sectors (agro-industry, electricity, hydrocarbons, mining, textiles and clothing, agriculture, fisheries, telecommunications and tourism) in Peru describing their characteristics and designing future perspectives. The policy mix to approach the link between multinational enterprises, local firms and institutions should take into account the peculiarity of each sector as the degree of physic and human capital intensity, or the degree of foreign direct presence and export orientation. We propose a specific development strategy for each sector, based of different forms of innovation systems, industrial clustering and human capital policy. We also suggest which role universities, research and technical institutions, big firms and financial institutions could have in this process. The contribution of each and any of these actors is necessary for building a successful institutional capacity in Peru and, more generally, in the whole Latin America.