Although pre-investment is a term that is not part of the dictionary of the Royal Spanish Academy (RAE), its meaning is easy to understand. You just have to pay attention to its components: the prefix pre- and the noun investment.
Pre- alludes to a temporary or local anteriority, while a investment supposes the use of a resource or flow to obtain some benefit in the future. Pre-investment, therefore, is a stage preceding the action of investing.
The pre-investment phase involves the preparation and the evaluation of a draft. The objective is to analyze the feasibility of the investment and determine how it can deliver the highest possible return in the longest term.
The pre-investment encompasses the development of various studies and research. These tasks seek to reduce the costs and the risks and increase the returns of the investment.
It is common for the State have agencies dedicated to preinvestment tasks. In this way it is intended to assess the convenience, or not, to specify a particular public investment.
Pre-investment, in this framework, determines whether a public investment is profitable from the social point of view, if it is sustainable and if it is in line with the policies established by the government. This is how the viability of the investment in question is defined.
On Argentina, by example, There is National Directorate of Preinvestment (DNPRI), which works under the orbit of the Secretariat of Territorial Planning and Coordination of Public Works, which in turn is part of the Ministry of the Interior, Public Works and Housing. The DNPRI carries out pre-investment studies according to the priorities established by the national government.
While most people agree that pre-investment is a necessary stage to carry out a successful investment, as it consists of a series of designs and studies prior to the implementation of a process in which we will put our money and other valuable resources at stake, when the moment of action comes only a few proceed responsibly, while the rest allege a lack of resources or time to pre-investment.
This means that a large number of investment projects are carried out and are completed without covering the stage pre-investment. As a consequence of this omission, a greater number of difficulties appear and an increase in costs that could have been avoided. The professionals in charge of the pre-investment work, that is, the consultants, must have a solid theoretical base combined with an intuition that allows them to direct their investigations in the right direction, anticipating the potential results to offer their clients the best advice .
Like everything in a society that is sustained thanks to economic resources, these studies also require the disbursement of a certain sum of money, which we could define as an investment prior to the investment itself, which is used to enhance the effects of the latter. . For this there are various organizations prestigious, but new ones are always emerging that offer incentives to attract the attention of investors who want to try their services.
Let us not forget that pre-investment is a relatively complex stage, which does not simply consist of a period of reflection prior to a major decision, but rather of a series of studies from various fields, including technical, organizational, financial and economic. It is on the basis of the data that is collected after all of them that useful information can be elaborated to understand if the investment project is viable or if we should reject it.