A widely cited report from the International Labor Organization (2002) estimates that 70 percent of workers in developing economies operate in the informal sector. Throughout the 1990s the sector generated a majority of jobs across Latin America, a story with which CIPE is very familiar. A new story in Good Magazine renews the vivid, dynamic informal economy that emerged from the “shadows” thanks to Hernando de Soto and others. It’s a story set in Paraguay’s Ciudad del Este, but recurring around the world:
A fat Lebanese man emerges from a room behind the cash register holding an AK-47 as though it were a full cup of coffee.
“Four fifty,” he says, sucking on a toothpick. “American. And if you want help getting it across the border, that can be arranged.”
His storefront is about the size of a walk-in closet, barely large enough for the five shoppers here today, and made to feel even more cramped by the half-dozen targets hanging from the ceiling.
“Four hundred,” I counter.
“Four twenty-five,” he replies.
“Four hundred,” I repeat, feigning confidence and experience.
“Four fifteen is absolutely as low as I will go,” he grumbles, “but I will give you the first 15 bullets for free.”
Not only are informal markets robust and dynamic, many have also gone as global as the rest. No longer the shadow or underground economy, they take nicknames like the kiosk economy or the bootleg economy. Basic as well as intellectual property rights, and the governments administering them, face similar challenges in Ciudad del Este as in Shanghai, Calcutta, and Nairobi.
If the process is supposed to create widespread, inclusive economic growth for the haves and the have nots, those challenges go alongside formalizing the entrepreneurial talent and commercial networks of places like Ciudad del Este, while keeping out the bribery and tit-for-tat relationships with government officials that are currently part of those networks, as the Good article illustrates. Today’s formal sector already has enough corruption to purge.
Published Date: July 22, 2008