Looking Exclusion in the Face

From 1980 to 1984, De Soto and the ILD team began walking the streets and shantytowns of Peru during late afternoons and weekends, talking to all sorts of people about their work and counting their businesses and enterprises.

They interviewed contractors, fishermen and grocers. They spent full days in small industrial shops. They sat hour after hour in little informal buses to understand their business model. They researched property titles. They got acquainted with the day-to-day activities of street vendors, cooperativists, coca growers. They carefully registered their observations, and about four years later they got a new set of statistics about life and work in Peru.

Their data was astonishing --and offered a picture of poverty that was very different from that mythologized by the traditional left: 90 percent of all small industrial enterprises, 85 percent of urban transport, 60 percent of Peru’s fishing fleet (one of the biggest in the world), and 60 percent of the distribution of groceries emerged from the city’s extralegal sector.

Far from being the pests that the government and elites saw them as, Lima’s poor, in fact, were carrying the economy on their backs. The more people the ILD researchers talked to, the more they realized that it was not so much that the poor were breaking the law as that the law was breaking them. Even those who had tried to get into the system by applying for titles for their houses and other real estate or licenses to legalize their businesses complained that it was impossible to succeed; wending their way through the bureaucratic obstacles simply took too much time and cost too much money.

The results of the ILD fieldwork created a major stir in Peru. Packaging the new data and interpreting the statistics, De Soto worked with the nation’s top news magazine and highest-rated television channel. The result was a 14-page cover story and a one-hour TV documentary about the new way to look at “the Peruvian reality.” The rest of the press followed with a flurry of articles, and by January 1984, politicians across the ideological spectrum were picking up their phones.

The ILD’s First Reforms in Peru

The most important call to the ILD came from Peruvian President Fernando Belaúnde Terry, who assured De Soto that the ILD’s work had “got under the nation’s skin” (agarró carne). What should the next step be? De Soto advised that the most important thing he and the government could do was to try to get the nation’s law in line with how people actually lived and worked. That could be accomplished, he argued, not by articles, TV programs, or books, but by projects and plans to change the law and put the results into motion. Belaúnde agreed. They soon decided that the ILD’s first project would be reforming decision-making procedures at the level of the executive branch so that the feedback on their effects on the poor could be quickly obtained. From that moment on the ILD’s future was set: It was about to become an unusual “think-tank,” one that developed and ran projects.

With that information in hand and a measure of imagination, the ILD began trying to reform the Peruvian situation. Working with the President’s office, legislators, and local authorities, regional as well as municipal, the ILD began an all-out effort to draft proposals for building institutions that brought the law closer to the needs of people and the creation of a widespread market economy. To make sure the laws were enacted, they used a set of strategies to target different audiences and to lobby for change. And once the new laws were in place, the ILD began designing and running projects that allowed government to find out what people really wanted and needed and then to create the institutions that would integrate them into the legal mainstream and thus make them more productive. Because politicians supervised these projects, the ILD found itself immersed in the public life of Peru, albeit in a non-partisan way.

In April 1984, the ILD handed President Belaúnde a draft for legislation, the goal of which was to keep lawmakers informed about the public’s concerns and make them accountable by giving the people an opportunity to comment on the drafts of the laws as well as their effects. The President accepted the ILD draft and enacted Legislative Decree No. 283 and Supreme Decree No 071-84-PCM, stipulating that all laws and regulations issued by the executive branch except those relating to public security and foreign affairs must be published first in draft form for public scrutiny along with a statement of their objectives plus an estimate of the costs and benefits for Peruvian society. Citizens and the press would then be given one month to submit to the appropriate ministry or agency comments and suggestions about the draft. The government would also be required to provide adequate opportunities for people to discuss the new procedures in public.
Mixed Results

Initially, Belaúnde’s ministers went along with new procedures, albeit grudgingly. But within a month they returned to their old ways, disregarding the law. The ILD and the great majority of media publicly pressured the President to demand that his ministers obey the law and return to publishing drafts of new regulations. The President, also under pressure from his own cabinet, demurred, and the ILD was forced to end its working relationship with Belaúnde.

This, however, was not the end of the ILD but a new beginning. The genie was already out of the bottle: The ILD’s message that government decision-making in Peru was fundamentally flawed and in need of reform had received widespread support from the media and the public.

From that point on, the practice of publicizing drafts of laws gradually increased, though too often only when it benefited the government. Nevertheless, bringing the people’s voice into the law-making process had become an established political ideal in Peru.

The ILD had thus established its presence in Peruvian life.