La Sangre de la Tierra: The Good, the Bad, and the Ugly of Foreign Direct Investment in Peru

Abstract

This thesis analyzes the potential connection between foreign direct investment (FDI) into the Peruvian mining sector and development outcomes over the past thirty years (1980-2012). This research presents the economic and political background for the period before analyzing trends over time and by bivariate analysis with FDI as the independent variable and development indicators as the dependent variables. Development indicators were defined as poverty rates, gross savings rates, health expenditure, and malnutrition with analysis occurring at the national level and at specific departments (Ancash, Arequipa, Cajamarca, La Libertad, Moquegua, Puno, and Tacna); canon minero, a specific tax on mining profits for regional use, was substituted for FDI at the department level. Trends over time were discussed. Bivariate analysis yielded none or weak correlation between indicators and FDI. Analysis discussed the potential causes for patterns referencing neoliberal policies such as privatization and decentralization that altered the system structure and government support for in healthcare and poverty measures. Poor regulatory measures, mismanagement at regional levels, and the growing influence of multinational mining firms have altered the landscape and power dynamics. The recent shift in mineral prices and environmental concerns from social protests was also discussed along with potential solutions for improvement.