http://www.superscholar.org/wp-content/uploads/2010/12/Hernando-de-Soto-570x570.jpg

Angela Carlos

Principles of Macroeconomics ECO 215-SP12-B1

Jack Cutone

23FEB2012

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TABLE OF CONTENTS:

PAGE

1. TABLE OF CONTENTS 1

2.

2.1. PERU 2-3

2.1.1. Geography 2

2.1.2. Politics 2

2.1.3. Economy 2-3

3.

3.1 HERNANDO DE SOTO 4-5

3.1.1. Early Life 4

3.1.2. Education 4

3.1.3. Professional Work 4-5

4.

4.1 CONTRIBUTIONS TO SOCIETY 7-8

4.1.1. Recognition 6-7

4.1.2 Institute for Liberty and Democracy (ILD) 8

5.

5.1 PERSONAL ANALYSIS 9-10

6.

6.1 WORK CITED 11

6.1.1. Sources 11

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2.

2.1. PERU

A little background of Peru includes some geography, politics, and its economy. Here is a brief

introduction into Peru’s vast resources, trade, and practices.

2.1.1. Geography

Peru, whose official name is Republic of Peru, is the third largest country in South America

(which amasses to be three times the size of California, United States) with the primary

language being Spanish. Peru is a Latin country that boarders Ecuador, Colombia, Brazil, and

Bolivia.

One of the major cities in the division is Arequipa, south of Peru’s capital Lima. This is the birth

place of controversial economist Hernando De Soto.

2.1.2. Politics

Peru’s political strategies include electing their head officials rather than opting for a long-term

monarchy. Peru’s government is a constitutional republic because of these elections of state;

their government represents the people according to the constitutional laws that limit

government’s power over all citizens.

Peru is divided into regions and provinces and legislation consists of 130 members. These

members pass laws, authorize government loans and approve government budgets. At the

highest ranking position in the hierarchy is the incumbent president Ollanta Humala that was

elected (direct) president on 28JUL2011 for a five year term.

2.1.3. Economy

According to sources:

Peru’s resources are (natural) copper, gold, silver, zinc, and iron ore; fish, forestry,

natural gas, and petroleum. Peru’s economy includes a Gross Domestic Product (GDP)

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for 2010 that was $153.92 billion (Per capita GDP $5,224) with an annual growth rate of

0.9% in 2009 and 8.8% in 2010. The GDP’s for 2010 are percentages of 55.6% for

service; 5.2% for mining, 6.7% for construction, and 0.3% for fisheries.

Trade with Peru’s resources produce:

Exports of $35.07 billion involve gold, copper, fishmeal, petroleum, zinc, textiles,

apparel, asparagus, coffee, and others. 

Imports include $ 27.91 billion of petroleum and petroleum products, vehicles, plastics,

steel, telephones, wheat, soy oil and soy products, corn, chemicals, commercial

machinery, processed food, and electronic goods.

Major markets include: U.S. (16.3%); China (15.5%); Switzerland (11.0%); Canada

(9.5%); Japan (5.1%); Germany (4.3%); Chile (3.9%); and Spain (3.3%). 

Major suppliers include: U.S. (19.5%); China (16.8%); Brazil (7.4%); Ecuador (5.0%);

Japan (4.5%); Colombia (4.6%); and Mexico (3.8%).

(2010 Government of Peru customs statistics)

Manufacturing (2010) includes: 15.0% of the GDP: food and beverages, textiles and

apparel, nonferrous and precious metals, nonmetallic minerals, petroleum refining,

paper, chemicals, iron and steel, fishmeal, footwear, chemicals, paper, machinery,

furniture.

Agriculture (2010) includes: 7.5% of the GDP: coffee, cotton, asparagus, paprika,

artichokes, sugarcane, potatoes, rice, banana, maize, poultry, milk, fruits, others.

3.

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3.1 HERNANDO DE SOTO

3.1.1. Early Life

Peruvian economist and son of a diplomat, Hernando De Soto, known for his work on the

informal economy and the importance of business and property rights was born in Arequipa,

south of Peru’s capital Lima in 1941. In 1947 De Soto and his family, including a brother, left

Peru to be educated abroad.

3.1.2. Education

Educated in Switzerland before returning to Peru in 1979 at the age of 38, De Soto attended the

International School of Geneva and attended the Graduate Institute of International Studies to

complete his post graduate work.

3.1.3. Professional Work

Hernando De Soto an economist, an advisor, and consultant founded the Institute for Liberty

and Democracy (ILD) in Lima and serves as its president.

Sources provide Hernando De Soto’s time line including but not limited to:

Between 1968 and 1971 De Soto was a political economist for the General

Agreement on Tariffs and Trade.

From 1971-1973 De Soto was President of the executive committee for the

CIPEC (copper-exporting countries) organization.

De Soto was the director to the Swiss Bank Corporation Consultation Group

before 1973.

Upon return to Peru in 1979 De Soto managed enterprises in the mining industry

and was appointed governor of the Central Bank of Peru.

In 1980 De Soto founded the Institute for Liberty and Democracy (ILD) and

headed the office of Lima and began work over the informal sector.

During 1986 De Soto began publishing his writings.

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In 1989, under Alan García Pérez presidency De Soto became an advisor

(informal economy Lima).

Under Alberto Fujimori's presidency from 1990 to 1992 De Soto became the

economic advisor.

Sources provide De Soto’s published worked:

1986 The Other Path: The Economic Answer to Terrorism

2000 The Mystery of Capital” Why Capitalism Triumphs in the West and Fails

Everywhere Else

2003 The Economist versus the Terrorist. Economist, Feb. 1: 62.

2003 Listening to the Barking Dogs: Property Law against Poverty in the Non-

West. Focaal: European Journal of Anthropology 41: 179–185.

Albright, Madeleine. 2007. The World in 2007: It’s Time for

Empowerment. Economist, 21st special yearly edition: 65.

Institute for Liberty and Democracy (ILD). http://www.ild.org.pe/home.htm, The

Mystery of Capital Deepens. 2006. Economist, August 24: 58.

Rossini, R. G., and J. J. Thomas. 1990. The Size of the Informal Sector in Peru:

A Critical Comment on Hernando de Soto’s El Otro Sendero. World

Development 18 (1): 125–135.

Samuelson, Robert. 2001. The Spirit of Capitalism. Foreign Affairs 80 (1): 205–

211.

Woodruff, Christopher. 2001. Review of de Soto’s The Mystery of

Capitalism. Journal of Economic Literature 39 (4): 1215–1223.

4.

4.1 CONTRIBUTIONS TO SOCIETY

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4.1.1. Recognition

Hernando De Soto, one of the Leaders of the New Millennium, was listed as one of the five

leading Latin American innovators by Time magazine in May 1999. In Time’s 2004 issue De

Soto was listed amongst the 100 most influential people in the world.

According to Forbes magazine’s 85th anniversary edition Hernando De Soto was listed as

one of the 15 innovators "who will reinvent your future".

The German development magazine, Entwicklung und Zusammenarbeit, described De Soto

as one of the most important development theoreticians of the last millennium, January

2000.

According to the

www.uwinnipeg.ca/index/cms-filesystem-action/pdfs/global-college/bs_hernando_desoto.pdf

source Hernando De Soto’s other accomplishments include prizes.

Among the prizes De Soto has received are:

The Freedom Prize (Switzerland)

The Fisher Prize (United Kingdom) 2002

The Goldwater Award (USA)

Adam Smith Award from the Association of Private Enterprise Education (USA)

The CARE Canada Award for Outstanding Development Thinking (Canada) 2003

Received the Downey Fellowship at Yale University

The Democracy Hall of Fame International Award from the National Graduate

University (USA) 2004

The Templeton Freedom Prize (USA)

The Milton Friedman Prize (USA)

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The Royal Decoration of the Most Admirable Order of the Direkgunabhorn, 5th

Class, (Thailand) 2005

An Honorary Degree of Doctor of Letters from the University of Buckingham

(United Kingdom),

The Americas Award (USA)

Named the Most Outstanding of 2004 for Economic Development at Home and

Abroad by the Peruvian National Assembly of Rectors

Received the Prize of Deutsche Stiftung Eigentum for exceptional contributions

to the theory of property rights the 2004 IPAE Award by the Peruvian

Institute of Business Administration

The Academy of Achievement's Golden Plate Award 2005 (USA) in tribute to his

outstanding accomplishments

The BearingPoint, Forbes magazine’s seventh Compass Award for Strategic

Direction named as a “Fellow of the Class of 1930” by Dartmouth College.

2006

The 2006 Bradley Prize for outstanding achievement by the Bradley Foundation.

The 2006 Innovation Award (Social and Economic Innovation) from The

Economist magazine (December 2, 2006) for the promotion of property

rights and economic development

The Poder BCG Business Awards 2007, granted by Poder Magazine and the

Boston Consulting Group, for the "Best Anti-Poverty Initiative".

4.1.2. Institute for Liberty and Democracy (ILD)

Hernando De Soto’s controversy comes from his belief that capitalism can defeat terrorism. He

believes the problem with the people in poverty isn’t a lack of possessions or assets but the lack

of acknowledgment of property rights. The titles to these rights to real estate and land are

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difficult to obtain which makes it hard for people in these societies to gain equity to borrow

against and make purchases such as capital for factors of production as stated in the course

text (Schiller) of chapter one in the section on Scarcity: The Core Problem on the inputs needed

to produce desired outputs. This type of practice denies those in need the access to advantages

such as bank credits and investment capital.

Through Hernando De Soto’s efforts approximately four hundred initiatives, laws, and

regulations changed Peru’s economic system in 1988 to 1995. De Soto’s work included helping

cocoa growing farmers of the Amazon get recognition from the farmers’ informal militias, and

grant land title and decriminalize the growth of cocoa.

As a result of the changes in economic reforms De Soto and the ILD have been attacked by

opposing groups such as the Shining Path, a leftist revolutionary Peruvian movement who tried

to assassinate him.

5.

5.1 PERSONAL ANALYSIS

Hernando De Soto is an honorable economist who is still fighting for the rights of the people at a

disadvantage. His courageous battle relates to the other pioneers of the past and those of the

present that fought and fight for the rights of all people.

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In De Soto’s five mysteries of capital in The Mystery of Capital, his arguments about the

problems with the poor are legit and are due to the lack of rights to possessions in order to

obtain licenses to legitimize businesses which ultimately leaves their capital dead preventing

standardization, transferability or property and collateral.

Hernando De Soto’s views on making values on assets transparent as stated in the Forbes

interview have made major contributions to economics and the impacts we are seeing today.

The implementations De Soto and the ILD have designed to empower the poor in many poor

areas, including but not limited to Africa, Asia, Hispanic America, etc.

The Obama Administration has proposed moving most derivatives trading onto

exchanges in order to encourage transparency, and a bill that would do so is

wending its way through Congress. The European Commission is also considering

new derivatives rules.

Transparency might delay the next meltdown. But what do we do to extricate

ourselves from the last one? "I think that all the causes of the recession are still

around, and on top of that, somewhere along the line we should fear inflation," he

says. All devalued paper, be it in the form of cash or other instruments, is in De

Soto's view inflationary. Between stimulus dollars and toxic paper, the U.S. has both.

De Soto’s idea behind the informal economy can be read in his published book The Other Path,

where he explains how although it isn’t recognized by law, informal housing, trade and

transportation occur.

Hernando De Soto has the underdeveloped society’s best interest at heart and although his

critics believe his ideas are imperfect his progress in economics and society are an important

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process in legalizing the unrecognized assets of the poor and empowering other nations by

preventing dead capital.

The recipients of De Soto’s crusade will gain greater independence to protect ownership; written

statements of ownership; and integration of property rules; the creation of greater

consequences of punishment for unethical economic transactions and the availability of loans;

easier access to credit history for worthy assets; and national markets for easy transportation of

property through networks and other entities.

I believe that everyone deserves a fair chance in life. If the people in the societies in Peru and

other places abroad are willing to make use of their labor as a factor of production why shouldn’t

their land be acknowledged as their own, both ethically and legally? It seems as though the

fierce battle isn’t to motivate those able and ready to obtain employment to find labor but the

bitter battle lies within the governments in these countries. The business cycles described in the

course text (Schiller) is a good example of why government intervention is both stable and

unstable. Alternating growth and contraction in the economy results in unemployment and

resources drained from other sources in order to maintain some sort of balance within the

marketplace. If denying individuals their right to property which inevitably denies them the

benefits of capital growth in order to thrive, the devastation is guaranteed.

6.

6.1 WORK CITED

6.1.1. Sources

Work Cited:

http://www.munkdebates.com/The-Debates/Foreign-Aid/Pro/Hernando-de-Soto

http://www.uwinnipeg.ca/index/cms-filesystem-action/pdfs/global-college/

bs_hernando_desoto.pdf

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http://www.forbes.com/forbes/2009/1214/opinions-soto-wealth-transparency-ideas-

opinions.html

http://www.time.com/time/magazine/article/0,9171,994020,00.html

http://www.merriam-webster.com/dictionary/conquistador

http://www.biography.com/people/hernando-de-soto-38469

http://www.state.gov/r/pa/ei/bgn/35762.htm

https://www.cia.gov/library/publications/the-world.../geos/pe.html

"De Soto, Hernando." International Encyclopedia of the Social Sciences.

2008. Encyclopedia.com. 25 Jan. 2012 <http://www.encyclopedia.com>.

http://www.economist.com/node/1559905?fsrc=rss

http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/int_hernandodesoto.html

http://www.multilingualarchive.com/ma/dewiki/en/Hernando_de_Soto_(%C3%96konom)

Frederick P. Miller, Agnes F Vandome, John Brewster (Ed.). Hernando De Soto Polar,

Alphascript Publishing, 2010. Print.

De Soto, Hernando. Mystery of Capital: Why Capitalism Triumphs in the Western and Fails

Everywhere Else, Basic Books, 2003. Print.

Schiller, Bradley R. The Macro Economy Today. Twelfth Edition. The University of Nevada-

Reno: McGraw-Hill, 2010. Print.

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