CEPAL Review No. 105, December 2011
  • E-ISSN: 16840348


This paper develops a model and explains the determinants of profit margins in the Peruvian business sector in the 1998-2008 period. These are established in a fixed-price scenario, with reference to a set of variables such as the price elasticity of demand, the behaviour of possible industry entrants and any regulatory intervention by government. In addition, there is a direct relationship between profit margins and self-financing of investment. Profit margins and profit ratios in the business sector are rising and exceed international norms. The paper also identifies a trend towards lower levels of debt and leverage. It does not reject the hypothesis of linkage between profit margins and investment at the aggregate and sectoral level. The output-to-capital ratio or sales-to-assets ratio is directly linked to profit margins. Most investment is self-financed.

Related Subject(s): Economic and Social Development
Countries: Peru

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