property systems will lead to an essential progress in their prosperity and interests. In the book he said, “A well-integrated legal property system in essence does two things: First, it tremendously reduces the cost of knowing the economic qualities of assets by representing them in way that our sense can pick up quickly; and second, it facilitates the capacity to agree on how to use assets to create further production and increase the division of labor (De Soto, 63). It proves the way he is thinking and what he is seeking to get out of using the formal system.
For example, the land they cultivate is not held legally because they have not been properly surveyed, mapped, and recorded which makes these assets dead capital. A dead capital means an asset that cannot easily be bought, sold, valued or used as an investment. So, basically, they cannot easily be sold or used as security for a loan. The difference between developing countries and Western countries is that the latter have legal structures and established property rights, while the former have informal and often local ownership structures which do not allow them to create capital. It’s not that legal structures are non-existent it just that they are often there, but it is out-of-date, overwhelmed by unreachable to ordinary people. That is what De Soto is trying to prove that having the formal system would be easier and it would increase the wealth of people even to those that are poor and have their farms and lands. De Soto’s team demonstrates the obstacles people from the developing countries go through by following a series of legal procedures. In developing countries in order to the idea of how difficult it was, De Soto, decided to open a small garment workshop on the outskirts of Lima,
Peru. Their goal was to create a new and perfectly legal business. The team began by filling out forms, standing in the lines, and making the bus trips into central Lima to get all the certifications required to operate, according to the letter of the law, a small business in Peru. The spent six hours a day at it and finally registered the business in 289 days later, the cost of legal was $1,231, thirty-one times the monthly minimum wage. In order to obtain the legal authorization to build the house on stated-owned land took six years and elven months requiring 207 administrative steps in fifty-two government offices (De Soto, 18-19). This example presented by De Soto illustrates the obstacles developing countries go through unlike Western countries. That is why De Soto believes that the formal system will change the assets into living capital that can be used to bring great development to their owners’ live.