Hernando de Soto is the president of the Institute of Liberty and Democracy (ILD), a think tank based in Lima, Peru, that advocates for property rights in developing nations.

October 2012 | McKinsey interview by Rik Kirkland

McKinsey: Tell us about your mission at ILD and why you think it's so important?

Hernando de Soto: ILD specializes in something very broad—namely, how do you go from having a society where the majority of trade, business, and assets are controlled through customary or unconventional systems, rather than through law? How do you take that society and move it to the rule of law.

Now, that’s something you did, of course, in the United States and Europe, but that was in the 18th and 19th centuries. But that’s where we are today—not in terms of automobiles and all that, because we’ve got the same machines you do. Technology gets shared a lot, but societies can be left behind over time. Or only part of the society moves into the rule of law and the rest is outside, which then means that it’s the rule of law for a few who predominate over the anarchy of the informal economy—the rest of us.

So we’ve learned to move people from one sector to the other on the basis of some very interesting successes in Peru and a couple of other countries. We’re basically 18th- and 19th-century specialists because that’s when this phenomenon happened in the United States and in Europe. In Japan, it happened in the 20th century.

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