Critical Examination of Peru´s Business Environment Using PIE Model

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In order to be able to develop a critical examination on the strengths and weaknesses of Perù’s business environment, this paper is using the PIE framework as a baseline analysis. The PIE models stands for Politics, Institutions, Economics. Unlike other models such as PEST or PESTLE that are static and neglect the importance of institutions, the PIE framework captures the dynamics within the three environments and the interdependence between them. The PIE framework can be used as a good indicator for the overall business environment in a given society. The PIE model suggests that misunderstanding these elements and considering them as individual entities often make the difference between success of internationalisation and
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Politics are the driving force for institutional change and at the same time the institutions set the framework for how this political change process is run. The institutions determine to a high degree the functioning of the economy and the dynamics in the economic system are decisive for the living conditions for different social groups and thus their political reaction to the economic performance.


According to North (1990) institutions are any form of constraints that human beings devise to shape human interaction. High institutional quality results in reduced uncertainty and lower transaction costs for the actors in the economy. Formal institutions are legally introduced and enforced by state institutions, which are embedded in state operations based on laws that are enforced and monitored by the government. Institutions structure human interaction by setting rules for the distribution of power and protection of property rights, enforcement of laws, etc. There are formal as well as informal institutions. Informal institutions are unwritten practices and norms that are deeply embedded in the societal behaviour. They have roots in the local communities and are

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