Recent unrest in Peru, where thousands of Amazonian Indians blocked roads and seized hydroelectric plants and oil and gas pumping stations, prompted the government of President Alan García to have armed police confront the protesters. Numerous protesters and police were killed and injured in this bloody manifestation of a deeper underlying problem: unresolved property rights issues.
A year ago, the government issued decrees that allowed for development of “unproductive” land in Peru’s vast Amazon jungle. These laws were passed outside of the Congress and had not been properly consulted with key stakeholders – Indians who inhabit the land in question. The Economist reports that around 70 percent of the jungle has now been either granted or offered as concessions for oil and gas exploration. Indians, who claim much of it as communal or private property, have been trying to force the repeal the decrees.
This situation leaves many in Peru wary of a repeat of the Shining Path’s terrorist violence in the 1980s and 1990s. And it brings to mind The Other Path, Hernando de Soto’s renowned book on the underlying institutional causes of that movement, which are very similar to the roots of the current unrest. It all comes down to the costs of the absence of good law on property rights. The Economist highlights that:
“Mr García argues that the Indians should not be allowed to block investment in oil and gas that he hopes will turn the country into an oil exporter, benefiting all Peruvians. AIDESEP [an umbrella-group that organized the protests] counters that his decrees ride roughshod over the property rights of the Indians. (…) Force is not the answer. Instead of bluster, Mr García should be offering Peru proper consultation and vigorous debate about these issues.”
That debate should aim to make property rights and their surrounding legal framework deliver for all. In that respect, de Soto’s response is as relevant today as when The Other Path was first published over 20 years ago. Only well-defined and secure property rights for all can prevent the government from arbitrarily choosing winners and losers – an act that inevitably leads to social conflict, not economic development:
“The absence of a legal system of efficient property rights is detrimental to all. (…) The law, then, allows citizens to specialize because it enforces property rights, promotes reliable contracts which enable these rights to be organized and transferred, and attributes liability when it is not established by a contract. These three elements are essential if a society is to make the best use of its citizens’ initiatives and labor and of its material resources.”