chapter  4
31 Pages

Measures of Growth

WithAlfred H. Saulniers

This chapter examines the weight of a few large firms in explaining Peru's principal macroeconomic indicators within a broader context of public enterprise theory. Peru's public portfolio grew after 1968 with a few large companies, mostly in energy and mining, weighing most heavily in a portfolio that exceeded 150 firms. Peruvian accounting practice defines accounting profits as net of income taxes and of mandatory legal deductions including: workers' share of profits; sectoral community share of profits; research and development funds; and a compensatory nutritional fund. The hypothesis that the Peruvian financial system contains mechanisms that caused profits to be consistently transferred from the government's producers and marketers to its financial middlemen merits some investigation. The chapter discusses macro data on the largest companies to gain important insights into overall portfolio behavior. Control over profits opposed company managers to government bureaucrats, as the planners continually expected to use public enterprise surplus for financing overall public sector expansion.