The informal economy and legal constraints

As De Soto’s work illustrates, restrictions on economic activity imposed by the bureaucracy and the sheer inertia of the formal banking and legal communities make any scale up into the formal sector all but impossible. In a widely cited experiment, the De Soto team tried to legally register a small garment factory in Lima, Peru. This took more than 100 administrative steps and almost a year of full time work to achieve.[i]     


[i] Hernando de Soto, The Other Path (1989)

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