Angus Laurie
After a bloody conflict between indigenous Amazonians and
FORMALISATION
AN INTERVIEW WITH
HERNANDO DE SOTO
The Peruvian economist Hernando de Soto
is internationally renowned for his writings on
the informal economy. Through his work as
the President of the Institute for Liberty and
Democracy (ILD) in Lima, he has effectively
advocated the creation of a legal system to help
the poor access property rights. In his latest
book, The Amazon is not Avatar, he makes a
significant shift away from the problems caused
by massive urban migrations to cities to focusing
on the benefits of property and business rights
for resource-rich indigenous communities in
the Amazon. Angus Laurie interviews De Soto
on his current thinking and highlights why he
has had such an important influence on social
housing in Latin America.
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national security forces on 5 June 2009, the remote Peruvian
jungle community of Bagua was making international
headlines.1 The conflict started as a response to new policies
providing petroleum, mineral and forestry companies with easier
access to the resource wealth of the Amazon Basin.2 The death
of more than 30 people and injury of a further 155 marked
with an exclamation mark the arrival of globalisation to the
unprepared heart of Latin America.
This was a window into a region set to change immensely
over the coming years.
Shortly after the clash, the Peruvian economist Hernando
de Soto travelled through the region to discover the roots
of the conflict. De Soto is the president and founder of the
Institute for Liberty and Democracy (ILD), a Lima-based
think tank devoted to property and business rights reform in
developing countries, and his findings will form the content
for his forthcoming book, The Amazon is not Avatar.3 His new
work marks a departure from the problems caused by massive
migration into the cities throughout the developing world to the
benefits of property and business rights in the predominantly
rural Amazon and similar resource-rich indigenous
communities elsewhere in Latin America and Africa.4
James Camerons film Avatar (2009) serves De Soto as
a useful metaphor; but unlike in the film, he does not think
leaving the region alone is a viable option. Firstly, most of the
miners are informal and come from the region itself. Secondly,
he says the Amazonians should not be treated as museum
pieces, and I believe that those who say leave them alone
maybe that argument was relevant 450 years ago. Im not
saying it was correct to do what the Spaniards did, or what the
Republic did. Im not saying that at all. But the fact is weve
got what weve got. And at this time, most of them are talking
about integration: integrating into modernity so that they, too,
can start and grow businesses, protect those assets, afford a
decent education for their children and healthcare.
[People] talk about them as if they were living in splendid
isolation. They are not living in splendid isolation. They
are already integrated in the Peruvian economy, and theyve
got the raw side of the deal. Im sure there must be a few
tribes who are isolated and dont want to integrate, and thats
fine. But again, they still need rights, otherwise somebodys
going to come and take away from them the valuable natural
resources they have that could benefit their communities the
gas, lumber and agricultural land.
According to De Soto, all Perus Amazonian communities
are currently in litigation,5 and their lack of property rights
or titles leaves them in a precarious position. A great deal of
resource wealth is being discovered in their areas, and they
are at risk of not benefiting from this boon as they do not
understand, or indeed have, a system of law which protects
them. They are living extralegally, without the legal tools that
we take for granted: property rights, formats for organising
their businesses productively, ways to expand their markets.
 Entrance to the Torres de San Borja
(completed in 1983), one of the large-
scale social housing projects initiated by
ex-President Fernando Belande Terry
(in power between 1963 and 1968,
and 1980 and 1985). The project
was predominantly residential, with
segregated movement of pedestrians
For De Soto: There is no possibility of progress unless they and cars through an internal network of
pedestrian-only streets.
have their rights well spelt out. This is what he means by
legally empowering the poor.
In contrast to expert-led consultation, where outsiders
advise local people on what they need, De Soto is trying to
draw the Amazonian communities into a position where they
can propose things on their own, giving them a level of legal
autonomy that would allow them to govern and to prosper
from their region. His goal is to help the people of this volatile
region to adapt, and to provide them with the tools necessary
to participate and direct how globalisation will affect their lives.
While De Soto is not against government or NGO provision
of physical infrastructure such as roads, sewerage or electricity,
he says they do not help in getting communities organised in a
way to protect their assets and benefit economically from their
natural resources. Organisation will come through a process
that begins with holding legal titles for land, resources or
businesses. In this way, people can participate in the judiciary
with legitimate documents in order to resolve disputes. This will
help to empower remote communities and bring them closer to
democratic participation.
Once organised in this way, the Amazonian people can
even start getting to their own natural resources. I mean here
youve got these big mining companies and big oil companies.
Whats the difference between those and the indigenous
people? That the big companies are organised in legal ways that
make them productive and prosperous. Thats the difference
What [the indigenous] have got is land, and the bushes that
grow on land, and thats what they fight and die for. So first of
all, why not give them control. The advantage of doing that is
its an exercise that allows them to understand the importance
of organisation and rules.
Some have criticised this aspect of De Sotos work, claiming
that titles will weaken the position of indigenous people in
settling disputes. They argue that De Soto is parcelling land and
therefore dividing indigenous communities in their fight against
would-be invaders.6 Furthermore, some state that land in the
Amazon is generally held communally, and that parcelling land
goes against indigenous peoples cultural identity.7
For De Soto, these critiques miss the main point:
Essentially, as time has gone by, the concern is not so much
private property as such or even public property, but the
importance of being precise about control. In other words,
I really, deep inside, dont very much care if people decide
to organise something collectively or they do privately. For
me the important thing is how much of your destiny can
you control if you live in a world where the law asks you for
definitions and you have none.
De Soto goes on to explain that the so-called collective
rights held by the Amazonian people are not property rights,
but have to do with giving a form of sovereignty to certain
ethnic groups or communities. The problem with community
organisation through these collective rights is that there are
around 5,000 communities in the Amazon. How successful
65

De Sotos work is decidedly
in the realm of economics
and law; yet here he is being
featured in an architecture
publication. His relevance
spreads well beyond the
immediate field of his work
into policy, housing and
urbanism.
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do you think youre going to be with 5,000 sovereign systems
with an average of between 200 and 250 people per sovereign
system? he asks. Do you really want to be sovereign on such a
small scale? What does that do to your economics, what does
that do to your capacity for getting organised productively?
For De Soto, then, it is not just about property rights: it
is about control. The people of the Amazon have no control
over their territory. They need to be legally empowered to take
advantage of what they already have.
De Sotos work is decidedly in the realm of economics and
law; yet here he is being featured in an architecture publication.
His relevance spreads well beyond the immediate field of his
work into policy, housing and urbanism. He says that the
self-built informal cities of Latin America were admirable
and beautiful, but very expensive for their inhabitants. The
cost of informal self-construction is three times as high as the
same construction carried out by a developer. For this reason,
in The Mystery of Capital he advocates the development of
mass housing for the poor through economies of scale, where
inhabitants could build more for less cost, and receive titles and
utilities from the inception of their project.8
This idea, along with De Sotos broader work in providing
titles, has influenced how city governments and architects
approach housing issues in Latin America and throughout the
world. In Mexico City, for example, recent housing policies have
tried to reduce the amount of self-built construction, and to
lower construction costs for poorer residents through economies
of scale, create jobs and allow a new group to enter into the
capital market.9 This is done through the governments Prosavi
programme, which provides mortgages for families who earn
less than five times the minimum wage. The construction of the
actual houses is done for profit by developers who build small
houses, provide infrastructure, give titles and help negotiate
mortgages for potential buyers. Images from these projects show
rows of identical detached houses stretching across vast areas
of the city. They have been criticised by the Mexican architect
Arturo Ortiz Struck among others for selling credit rather than
housing, leaving some families indebted for years with a final
cost more than three times that of the original house.
Alejandro Aravena from Elemental in Chile has also
quoted and taken inspiration from De Sotos work, the result
being something totally the opposite of the housing projects of
Mexico (see pp 327). Elementals Quinta Monroy project in
Iquique provides a flexible design where units are constructed
as a shell left for residents to finish over time. The design
facilitates a wide range of uses and inhabitants, and judging
from the metamorphosis of the housing units since their
inception, they have been a success.
On being shown one photo of Quinta Monroy and another
of a mass housing project in Mexico to illustrate how his ideas
opposite top: Mototaxis wait for a fare opposite bottom: Example of an below: Main public space at the San bottom: Arturo Ortiz produced and handed
outside the informal market in San Juan informal, self-built house in Medalla Felipe housing development (completed out these four stickers as a critical political
de Miraflores, one of Limas many informal Milagrosa, one of Limas consolidated in 1966) in Lima. Photograph by statement against mass affordable housing
barrios jovenes. informal pueblos jovenes. Philippe Gruenberg and Pablo Hare. programmes in Mexico (2009).

are being made manifest, De Soto recalled another occasion

when he was presented with two similarly contrasting photos:
I remember talking to [the Peruvian ex-] President Belande
when our ideas first started coming out and he called me in.
He was a trained architect and an eminent public housing
specialist, and he brought out a big picture and said, This is
something Ive done the Torres de San Borja and this is
the kind of thing that youre promoting. He showed me an
informal settlement, a Lima shantytown, and said, What do
you think about these two pictures?
I replied, Well youre looking for a fight so I like the
informal settlement better. He asked why, to which I responded:
To begin with, the thing that you did before, Residencial San
Felipe, you did it for these people supposedly the poorest and
after two years 90 per cent of them had moved out because
you didnt figure out right the social housing. It was too expensive
for them. They would have rather had part of that income go
towards a smaller house, probably not so well located, but also
have an automobile, or have some education. So thats why 90
per cent moved out in two years. Thats a lot of moving out. So
the question is, how much demand can you satisfy according to a
governments idea of what looks like an orderly city?
But I tell you, I dont go into those things. What I do go
into is the general idea that youve got to ask what [people] want,
and its never exactly what you would like them to have. 1

Notes
1. Simon Romero, Protesters Gird for Long Fight Over Opening Perus
Amazon, The New York Times, 11 June 2009.
2. Simon Romero, 9 Hostage Officers Killed at Peruvian Oil Facility, The New
York Times, 6 June 2009.
3. Due to be published by Grupo Editorial Norma in Autumn 2011.
4. Fourteen years have passed since the publication of The Other Path, the
book that launched De Soto into international recognition. It was a direct
challenge to the terrorist movement The Shining Path and largely invalidated
the terrorists claims that Perus poor lived communally. The conflict in Bagua
is a reminder that there is still underlying frustration among Perus poor.
Hernando de Soto, The Other Path, Harper & Row (New York), 1989.
5. Unless otherwise stated, all figures and quotes are from Hernando de Soto
during his interview with the author on 23 September 2010.
6. Argument of Margarita Benevides of the Instituto de Bien Comun (IBC)
from her interview with Ricardo Marapi in the video El Misterio de Hernando
de Soto, CEPES Peru, Lima, September 2009.
7. Ibid.
8. Hernando de Soto, The Mystery of Capital, Basic Books (New York), 2000,
p 194. De Soto also writes in The Mystery of Capital that elites will benefit
financially through housing reform that brings the extralegal into the formal
market. The Mexican housing developer, Consorcio ARA, proves this point,
having made a return of 25 per cent on its progressive units (under $20,000)
and 29 per cent on affordable housing units (under $35,000) in 2005. See
www.consorcioara.com.mx.
9. Housing Situation in Mexico, 2005, Centro de Investigacion y
Documentacion de la Casa (CIDOC) and Sociedad Hipotecaria Federal. See
www.jchs.harvard.edu/publications/international/som2005.pdf.

Text 2011 John Wiley & Sons Ltd. Images: p 64 Hernando de Soto; pp 65-6
Angus Laurie; p 67(t) Philippe Gruenberg & Pablo Hare; p 67(b) Arturo Ortiz Struck/
Taller Territorial de Mxico

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