Risk indicators and expected returns on foreign direct investment in the mining sector of Peru and Chile (2006-2023) Indicadores de riesgo y el retorno esperado en la inversión extranjera directa en el sector minero de Perú y Chile (2006-2023)

Abstract

The aim of this study is to analyze the impact of the expected return on capital and risk indicators on investors’ decision-making in the mining sector of Peru and Chile during the 2006-2023 period. The research focuses on three exogenous variables: the cost of capital calculated using the CAPM model, the corruption perception index, and the governance index. The endogenous variable is Foreign Direct Investment, with all variables expressed in annual periods. Additionally, the methodology employed corresponds to the Autoregressive Distributed Lag (ARDL) model. As main results, it is shown that the political risks captured in the Corruption
Perception Index (CPI) and the governance index (WGI) are not significant for the flows of foreign direct investments for Peru, however, if they are significant, it is said that they do influence Chile’s foreign direct investment flows. On the other hand, the expected performance of the mining sector presents positive effects on the investment flows for the study countries, that is, there is a direct relationship, with an increase in the expected performance of the sector, foreign investment from the countries of study
will increase.