Word: soto
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...seems too easy a fix for a problem that has bedeviled development experts for a century. But De Soto's commonsense simplicity, laid out in his latest book, The Mystery of Capital, has heads of state from Haiti to Pakistan lining up for his advice...
...Soto, 59, an economist, first cited the potency of shadow economies in his seminal 1989 book, The Other Path. His new work argues that most market-oriented reforms have failed to help the poor because clubby oligarchs and red tape have shut them out. In Peru it takes a year or more to legally start a business--and it costs, in government fees, 31 times the minimum monthly wage. To legally own a home in the Philippines, De Soto says, requires a wait of as long as 25 years and 168 often venal bureaucratic steps. As a result, the Third...
Granting the poor title to their homes and businesses would allow them to use that collateral to borrow or raise capital for business expansion, De Soto says. He notes that the property-title revolution of the 18th and 19th centuries was a catalyst for capitalism's triumph in Western Europe and North America...
With the collapse of crony capitalist regimes like the one in Indonesia, and as oligarchic nations like Mexico elect more democratic presidents, De Soto's timing is propitious. His Third World clients hope that property-title reform will especially benefit industries like clothing, auto parts and agriculture--where the foreign-trade potential for extralegal businesses is enormous. Haitian President Jean-Bertrand Aristide wants to slice through medieval red tape and legalize his nation's extralegal assets, which amount to $5.2 billion--four times its legal assets. "We would," he says, "finally put our people in partnership with the system...
...Soto's thesis is simple, registering extralegal property is not. Third World elites, who often control legislatures, tend to eschew reforms that empower workers. But De Soto, a former governor of Peru's central bank, insists the plan showed success while he was ex-President Fujimori's chief of staff in the early 1990s. Some 276,000 underground businesses--including large bus-assembly plants--were legally titled, helping generate $1.2 billion in new tax revenue...