Institute for Liberty and Democracy

Promotion of property rights in developing countries


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PE Peru


About the project Edit

The Institute for Liberty and Democracy (or ILD) is a Lima-based think tank devoted to the promotion of property rights in developing countries. It was established in 1979 by Peruvian economist Hernando de Soto. The ILD has emerged not just as an intellectual force in the field of development but also as an agent of change in the developing and post-Soviet world in the effort to move the assets of the poor from the extralegal economy into an inclusive market economy. Many legal systems exclude ordinary citizens from the very legal institutions that should empower them. Forced to function outside the rule of law, they have no legal identity, no legal property, no legal businesses --and thus no credit, no capital, and no way to prosper. In order to do business, poor entrepreneurs create a parallel economy with its own rules and practices that are full of shortcomings that not only breed more poverty but also frustration and social unrest.

ILD researchers go deep into the grassroots of the extralegal sector of each country, talk to local leaders and entrepreneurs, observing them at work and following their transactions. They identify hidden patterns of social interaction: how transactions are conducted, how records are kept, how people are identified, what works (and what doesn't) --while simultaneously analyzing the barriers of the existing legal framework. The economic, social and political context of the existing legal framework is also examined, analyzing what role tribal affinity, feudal obligations, mercantilism, and corruption might play in exclusion. The result is a fact-based view of extralegality and a country-specific Program for reform that can assist developing and post-Soviet countries in merging their two economies --the extralegal and legal-- into one inclusive market economy

In what ways is this project unique and creative? Edit

De Soto’s concept of formalization of property right by which the ILD goes by has earned him praise around the world. He received praise from two United Nations Secretaries-General Kofi Annan—"Hernando de Soto is absolutely right, that we need to rethink how we capture economic growth and development"—and Javier Pérez de Cuéllar—"A crucial contribution. A new proposal for change that is valid for the whole world."

What is the social value of this project? Edit

Between 1988 and 1995, De Soto and the Institute for Liberty and Democracy (ILD) were responsible for some four hundred initiatives, laws, and regulations that changed Peru’s economic system. In particular, ILD designed the administrative reform of Peru’s property system which has given titles to more than 1.2 million families and helped some 380,000 firms which previously operated in the black market to enter the formal economy. This latter task was accomplished through the elimination of bureaucratic "red-tape" and restrictive registration, licensing and permit laws that made the opening of new businesses very time-consuming and costly.

What is the potential of this project to expand and develop? Edit

Since its work in Peru in the 1980s, the ILD has worked in 23 countries. Heads of state in 35 countries have sought the ILD’s services, and ILD staff has personally met with 29 of them to discuss precisely what the ILD might do to help their economies prosper.

What was the triggering factor of this project? Edit

What is the business model of this project? Edit

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