Financial instruments for the management of companies in the construction sector in Peru

Successful strategies flow like water; it is the circumstances of the conflict that shape them. Water, when flowing, avoid high spots and seek low ground. Similarly, successful strategies avoid difficult methods and find easy ones.

Sun Tzu

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The philosophy of competitive strategy is this: If your customer base is already five to ten times that of your competitors, push hard on the competition with your aggressive service. Dominate the situation with your presence. Invest your resources in research and innovation.

Sun Tzu

In recent years we have experienced a particularly difficult situation. The chain of several crises coupled with structural problems, such as the excessive increase in the population and technological delays, have caused more and more broad sectors of the population to live in the midst of despair and anguish due to the lack or loss of motivation, unemployment, economic uncertainty, and the reeling of values and traditions that had kept our society afloat. At this time, more than ever, a reunion with the best that has accompanied us as a culture is necessary, and the urgent assimilation of the most modern approaches to human quality and the search for excellence at both personal and social, professional and business.These are times of change and these require the adoption of positive and committed attitudes by people interested in living well.

MIGUEL ANGEL CORNEJO

SUMMARY

In this research work we start by analyzing the problems faced by companies in the construction sector in relation to the use of financial instruments. The construction sector mobilizes sources of financing and investments, mobilizes other sectors of the economy; It could be a very good profitability alternative for investors, managers, officials, employees and workers; It also contributes with its tributes to national development and is currently at its highest point of growth, so it is necessary to use financial, financing and investment instruments in the best way to obtain the best results.

In this sense, the objective pursued is to identify financial instruments and weigh the risk and profitability of these instruments within the framework of tactical and strategic planning, in such a way that companies in the construction sector can achieve the optimization of their management.

On the other hand, the answer to the problem is that the selective use and technical weighting of the risk and profitability of investment and financing instruments within the framework of tactical and strategic planning are the true facilitators of the optimization of the management of assets. companies in the construction sector.

Keywords: companies in the construction sector, financing instruments, investment instruments, other instruments, risk, profitability, planning and optimal management

ABSTRACT

In this work of investigation we started off analyzing the problematic one that faces the companies of the construction sector in relation to the use of the financial instruments. The construction sector mobilizes financing sources and investments, mobilize to other sectors of the economy; it could be a very good alternative of yield for investors, directors, civil employees, employees and workers; in addition it contributes with his tributes to the national development and at the moment he is in his upper point of growth, so that it is necessary to use the financial instruments, of financing and investment of the best form to obtain the best results. In that sense, the objective that is persecuted,been to identify the financial instruments and within the framework to weigh the risk and the yield of these instruments of the tactical and strategic planning, in such a way that the companies of the construction sector can reach the optimization of their management. On the other hand, the answer the problematic one is that the selective use and the technical ponderation of the risk and the yield of the investment instruments and financing within the framework of the tactical and strategic planning, are the true facilitators of the optimization of the management of the companies of the construction sector.the answer the problematic one is that the selective use and the technical ponderation of the risk and the yield of the investment instruments and financing within the framework of the tactical and strategic planning, are the true facilitators of the optimization of the management of the companies of the sector construction.the answer the problematic one is that the selective use and the technical ponderation of the risk and the yield of the investment instruments and financing within the framework of the tactical and strategic planning, are the true facilitators of the optimization of the management of the companies of the sector construction.

Keywords: companies of the construction sector, instruments of financing, instruments of investment, other instruments, risk, profitability, planning and optimal management.

INTRODUCTION

The research entitled: "PERU: FINANCIAL INSTRUMENTS IN THE OPTIMAL MANAGEMENT OF COMPANIES IN THE CONSTRUCTION SECTOR", aims to: Identify financial instruments and weigh their risk and profitability within the framework of tactical and strategic planning, of in such a way that companies in the construction sector can achieve the optimization of their management.

Companies in the construction sector need financing on a permanent basis to be able to develop the activities of their line of business, therefore making decisions regarding financial instruments related to indebtedness and the use of it in the investments that companies need, It constitutes one of the most important aspects of business management, so it requires doctrinal and technical input so that it can be carried out advantageously.

It is necessary for managers, officials and workers of companies in the construction sector to be convinced that the only way to optimize management is by ordering the organization, administration and especially business finances and as it is to be deduced, this happens by identifying and using the instruments financial that best suit this type of company.

An important aspect in this sector is the use of commercial banking as the main and strategic partner in the exploitation of the activity. With this mechanism, the construction company does not assume the risks to the extent that it properly negotiates its participation in the contract and also uses the financial instruments properly.

For the development of this work, the methodology, techniques and instruments necessary for adequate research have been applied, within the framework of the rules of the Graduate School of our National University Federico Villarreal.

In order to contrast the objectives and hypotheses, the research work has been carried out in the following chapters:

The Chapter I presents the methodological approach of investigación.El Chapter II, is referred to the treatment of the construction.The industry companies Chapter III, is referred to identify investment and financing instruments that companies need the construction sector, the framework of weighing the profitability and risk of this type of activities Chapter IV refers to the optimization of companies in the construction sector with the intervention of financial instruments Chapter V refers to the presentation, analysis and interpretation of the survey conducted Chapter VI, presents the verification of the objectives and the contrast of the hypothesis.

Below we present the conclusions, recommendations, bibliography and Annexes of the research work.

CHAPTER I:

METHODOLOGICAL APPROACH TO THE INVESTIGATION

1.1. BIBLIOGRAPHIC BACKGROUND

In this work, the following bibliographic antecedents have been taken into account:

The Actualidad Empresarial Magazine (2003), in the so-called Manual of the Sector Tax System, Pages 153 to 189, deals with the tax aspect of the Construction and Housing Sector. According to this document, the construction activity is considered as third category income, affecting the Income Tax, in addition to the General Sales Tax and other taxes for the remuneration of its workers. In this document, the financial aspect or the business management of the companies in this sector are not discussed.

The El Pacífico Research Institute and the Actualidad Empresarial Magazine (2004) publish the document called: Manual of the Sector Taxation System. This document, on pages 217 to 261, makes a diagnosis of the construction activity for the year 2003 and tests the economic outlook for 2004. Furthermore, this document deals with the tax aspect of the construction sector.

The Ministry of Economy and Finance (2005), in the Framework

Macroeconomic Multiannual 2005-2007, presents the statistics of the National Institute of Statistics and Informatics on the different sectors of the Peruvian economy. In relation to the Construction Sector, a growth in the Gross Domestic Product is estimated that goes from the year 2003 = 4.8, 2004 = 6.1, 2005 = 5.7, 2006 = 5.9 and 2007 = 6.0. For the rest, this document focuses on the treatment of the tax regulations of the sector.

The Caballero Bustamante study (2004), in its specialized magazine, presents several cases of the treatment of salaries in the Construction Sector, which in some way affects the management of construction companies and therefore will be taken into account.

Vizcarra Moscol, Juan (2003), in his Thesis: Costs of Construction companies, makes a very didactic approach to costing this type of business activity.

Campos Choquehuanca, Pedro (2004), in his Accounting Thesis of Construction companies, refers to the process of accounting for the transactions of this type of companies.

Asenjo Castro, Víctor Manuel (2000), in his thesis Financing of micro and small companies by non-financial institutions in Metropolitan Lima, analyzes the sources that SMEs can use, among others, those of the construction sector, to finance investments they need to carry out your activities in the short and long term.

Chu Rubio, Jesús Manuel (2000), presents his thesis called access of Peruvian companies to the international capital market via ADR ”s. The author in a part of his work refers to the access that large construction companies can have to international markets in order to develop their activity competitively.

Cruzado Ribeyro, Víctor Raúl (1999), in his thesis Accounting and tax aspect of Joint Venture contracts; In part of this work, it refers to the possibility that companies in the construction sector can enter into this type of business collaboration contract in order to finance their activities under the best conditions.

On the other hand, a large number of general works have been determined that refer to the use of financial instruments to develop business activities; however none of these refers to the construction sector. Thus, for example, there are works on financial administration, business finance, financial management and direction, financial analysis, financial organization, financial planning, and more.

There are also works on business collaboration contracts, financing through the capital market, financing with financial leasing, financing with supplier credits, financing with contributions from the clients, etc, etc; however, none of them refers directly to companies in the construction sector.

1.2. DELIMITATION OF THE INVESTIGATION

For the investigation to be efficient and effective, it must be adequately delimited, otherwise what is going to be obtained would be generalities, which would not favor either the business sector or the academics.

SPACE DELIMITATION

This research has included companies in the construction sector, which is setting the guidelines for growth in our economy and therefore has deserved to be analyzed to establish the prospects of the case.

TEMPORARY DELIMITATION

This investigation will understand the current situation. However, for the purpose of diagnosing your situation and projecting your future results, the past, present and future will be taken into account.

SOCIAL DELIMITATION

It will cover investors (owners, owners, partners and shareholders), officials and workers of companies in the construction sector. It will also take into account the legal representatives of the supplier companies, customers, public officials, officials of the union bodies of the sector and other interested parties.

CONCEPTUAL DELIMITATION

FINANCIAL INSTRUMENTS CONSTRUCTION SECTOR COMPANIES OPTIMAL MANAGEMENT

1.3. STATEMENT OF THE INVESTIGATION PROBLEM

According to the INEIIn 2003, the construction sector grew 4.0% of the Gross Domestic Product, in 2004 this growth increased to 6%, due to the development of housing programs promoted by the State, such as Mivivienda, Techo Propio and others.

Despite the development of the sector, companies in the construction sector have experienced serious problems in determining the sources of financing and their efficient, effective and economic application in the investments they require to carry out large, medium and small contracts of private construction; contracts framed within the programs sponsored by the Ministry of Housing and Construction; contracts with the Peruvian State for the construction of highways, bridges, roads, irrigation canals, dams, schools, police stations and other public agencies.

In several cases analyzed, it has been determined that construction companies have limitations in accessing financing instruments, due to the fact that they have administrative, civil and even judicial processes for the debts contracted by entities of the financial system and others. This situation has caused companies to be identified in the Risk Centers of the financial system and others, which does not allow them to be considered for the granting of financing instruments to apply it in the investments they need.

In the same context of financial instruments, the inappropriate use of credits has been determined; having been used in the purchase of vehicles for use by officials, rather than machinery and equipment to carry out construction contracts. Another aspect is obtaining loans with very high interest rates in institutions where some officials of the construction companies have economic interests, which does not allow the fulfillment of the debts contracted.

It has also been determined the lack of financial sense to use the most appropriate and convenient instruments for construction companies, there are several cases where instruments of high financial cost are used, leaving aside instruments that do not represent any cost, all this due to the lack of handling of the instruments.

Regarding the investment instruments of construction companies, it has been determined that several companies have excess liquidity, which remains without being used advantageously by the companies. The companies in the sector have not been using securities adequately in the short or long term, which does not allow them to obtain better profits and have dominance over other companies. The portfolios of marketable securities and permanent investments are not adequately diversified, which creates a high risk and not always the best profitability.

It has been determined the excessive use of temporary investments, compared to permanent investments, which should predominate in companies in the sector, causing losses due to the action of nature, theft, etc.

To these financial aspects, some economic aspects are added, such as high costs and operating expenses; high financial expenses that do not allow obtaining the profitability required by a company in the sector to be competitive with transnational construction companies.

All these negative aspects in the use of financial instruments in business investments in the construction sector do not allow the optimal development of the institutional management of this type of entity.

MAIN PROBLEM:

How to use financial instruments, so that companies in the construction sector can optimize their management?

SPECIFIC PROBLEMS:

What investment instruments should be considered in the tactical and strategic planning of companies in the construction sector; in a way that facilitates the management process of this important sector of our economy? What financing instruments should companies in the construction sector use, so that management achieves efficiency, effectiveness and economy as a previous step to the competitiveness that is needed in the framework of economic globalization?

1.4. RESEARCH OBJECTIVES

MAIN OBJECTIVE:

Identify financial instruments and weigh their risk and profitability within the framework of tactical and strategic planning, in such a way that companies in the construction sector can achieve the optimization of their management.

SPECIFIC OBJECTIVES:

Determine the temporary and permanent investment instruments that should be considered in the tactical and strategic plans of companies in the construction sector, so that they achieve the optimization of their management Indicate the most convenient financing instruments so that companies in the construction sector can minimize its risks and increase its profitability, which will facilitate the efficiency, effectiveness and economy of the resources managed by the management, within the framework of business competitiveness.

1.5. JUSTIFICATION OF THE INVESTIGATION

JUSTIFICATION:

According to the INEIIn 2007, it is estimated that the construction sector will register a growth of 8.1%, mainly explained by the increased construction of new homes associated with the Mivienda and Techo Propio Programs, and by the execution of works within the framework of the Mi Barrio Program. Likewise, the dynamism of self-construction will continue due to the growth of internal demand, the execution of civil works, the execution of municipal works related to the construction of road networks and the construction of infrastructure associated with mining projects, etc.

But for this growth to be maintained and even increased, companies in the sector must solve a series of problems that they have been facing. These problems are organizational, administrative, financial, accounting, labor and others. Within all these aspects, the financial one stands out, which specifically refers to the management of financial instruments (financing and investment) of companies in the sector.

Companies must use specialized advice and consultancy to select the financing instruments that create fewer obligations for companies and, on the contrary, give them the most optimal use to obtain the highest returns.

A new way of financing works in the sector is customer advances, loans from suppliers of construction materials, financial leasing, factoring and others. These financial instruments used technically will allow companies to have the temporary and permanent investments they need to carry out their activity. Bank loans can also bring advantages to the company, when they are taken under the best conditions.

Companies in the construction sector need financing on a permanent basis to be able to develop the activities of their line of business, therefore making decisions regarding financial instruments related to debt and the use of it in the investments that the company needs, It constitutes one of the most important aspects of business management, so it requires doctrinal and technical input so that it can be carried out advantageously.

IMPORTANCE:

The importance, is given on the one hand, that allows to capture the knowledge and experiences of those who in one way or another participate in the sector.

Our experience has made it possible to identify the financial instruments related to financing and investments that provide the most advantages to companies, taking into account the way in which they carry out their activity.

As it is a specialized job, it provides the necessary elements so that investors, managers, officials, workers and other interested parties can use this work as a guide in their activities.

1.6. HYPOTHESIS OF THE INVESTIGATION

MAIN HYPOTHESIS:

The selective use and technical weighting of the risk and profitability of investment and financing instruments within the framework of tactical and strategic planning are the true facilitators of optimizing the management of companies in the construction sector.

SECONDARY HYPOTHESES

Companies in the construction sector must use temporary and permanent investment instruments that allow them to develop their business with less risk and maximum profitability and within the framework of tactical and strategic planning; which will facilitate the optimization of the management of companies in this important sector of our economy.

National Institute of Statistics and Informatics

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