The Foreign Service Journal, July-August 2003

68 F O R E I G N S E R V I C E J O U R N A L / J U LY- A U G U S T 2 0 0 3 police, some politicians and union officials, and moneylenders will be pre-empted because the poor will no longer be dependent upon them. However, to implement what is tanta- mount to a social revolution will give whatever political administration implements it enormous power and credibility with the people. Why? It means that poor people who work at their own businesses — perhaps five to 10 million people in Mexico — will no longer have to live in fear that they will be discovered, thrown off their land, have their busi- ness disrupted or closed down, and be denied the commercial tools they need to make a living. With legal title as collateral, they should be able to secure loans at current rates like any other businessperson. With proper documentation, they should be able to transfer assets to heirs. In short, they will be able to sleep better at night because, for the first time in their lives, they will be legitimate businesspeople with all of the rights and prerogatives due them. It is likely that Mexico would not need foreign investment at all if it could turn its “dead capital” into money for growth. After all, Mexicans are already respected around the world for how hard they work and the long hours they put in with only the most limited tools. Imagine how much more productive they could be if they had legal title to what they own, like land and buildings and houses, and could collateralize those assets for financing. While he was still governor of the state of Guanajuato, before being elected president of Mexico in 2000, Vicente Fox consulted closely with Hernando de Soto about his ideas. As a businessman, Fox was already sym- pathetic to de Soto’s approach and well-equipped to implement it. Yet even though de Soto has consistently warned that the process takes from 10 to 15 years to carry out, President Fox has done little to start. So the ques- tion is: when will Mexico begin? It is long past time for the Mexican government to put into practice its recognition that micro-businesses not only exist but benefit the nation- al economy. Doing so will bring in additional public tax revenues, which are badly needed to finance schools, health services, and other social services for the working poor. Last fall, Hernando de Soto’s new book, The Mystery of Capital, was published. It has sold 100,000 copies in Peru alone and is currently being translated into a dozen lan- guages. De Soto has a wonderful metaphor for his work as an econo- mist: in Bali, when you cross onto someone else’s property, a different dog barks. He says his job is to trans- late those barks onto paper so that people can use these documents pro- ductively. The same is true for USAID and the other international development agencies operating throughout the Third World. Until they learn the cul- ture of the streets and how the lives of the working poor really function, and encourage governments to act on that knowledge, their aid and loans won’t benefit those who need help the most. ■ It is likely that Mexico would not need foreign investment at all if it could turn its “dead capital” into money for growth.