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Hernando de Soto on Land Title

Thursday, March 1, 2007

I came across an interesting insight from Hernando de Soto, on his views why land reform fails:

If a government does not give to everyone the impression that it is really trying to improve things, it opens the possibility for the left to protest in the name of all the discontented people. One main reason why the informal sector has not become formal is that from Indonesia to Brazil, 90 percent of the informal lands are not titled and registered. This is a generalized phenomenon in the so-called Third World. And it has many consequences.

The question is: How is it that so many governments, from Suharto's in Indonesia to Fujimori's in Peru, have wanted to title these people and have not been able to do so effectively? One reason is that none of the state systems in Asia or Latin America can gather proof of informal titles. In Peru, the informals have means of proving property ownership to each other which are not the same means developed by the Spanish legal system. The informals have their own papers, their own forms of agreements, and their own systems of registration, all of which are very clearly stated in the maps which they use for their own informal business transactions.

If you take a walk through the countryside, from Indonesia to Peru, and you walk by field after field--in each field a different dog is going to bark at you. Even dogs know what private property is all about. The only one who does not know it is the government. The issue is that there exists a "common law" and an "informal law" which the Latin American formal legal system does not know how to recognize.

In Indonesia, a person can get a lot of money by titling and registering a land. First they check out on the map which area is going to be projected for public-infrastructure development, and then they purchased the land from the poor people that owns them through customary law with a very cheap price and then they register the land at the land registrar. When the government come with their buldozer, land speculants show their certificate and demand compensation, of course, at a very high price.