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the markets were too open, but that they were controlled by the
state, and the state got into bad deals.
Secondly, in terms of the notion that there is no initiative in
developing countries, the very fact that 95 percent of public trans–
portation in a city like Lima is dominated by the informal sector,
that seven out of every ten buildings being built in Peru are built by
the informal sector, and that twelve out of every thirteen producer's
markets being built in the country are being built by the informal
sector clearly show that the initiative is there. But the informal sector
has no credit, is persecuted by the law, has no contracts that can be
enforced in courts, no legal business organizations, no way to cover
against risk through insurance, no limited liability or large percent–
age of shareholderships , and yet it still accounts for 40 percent of the
gross national product. This is an indication that there's plenty of
initiative in the country.
KA :
Could you give us some details with respect to how long it takes
a small business to get licensed and what the cost is in your country?
HS:
Yes, we have found out that the law in developing countries
such as ours affects people differently according to what their re–
sources are, what their class level is, if you want . So, for example,
someone like myself will not spend more than six hours with his
lawyer to incorporate a firm . But we simulated the process for set–
ting up a small business in which two sewing machines would be the
capital equipment of a small workshop. We put a lawyer and four of
his administrators in charge of going through all the red tape re–
quired to operate those two sewing machines legally, and, working
six hours a day, it took them 289 days . No low-income person could
hold out for that amount of time; the cost would just be too pro–
hibitive .
KA :
You recommended a reform of Peru's regulatory procedures
and presented it to the previous administration's government . What
did the reform entail, and what was the outcome of it?
HS:
Peru's former president had been impressed by the fact that we
had demonstrated that more than half of the population of Peru
worked outside the law, following extralegal norms. He asked us if
ILD would suggest some reforms. Since he had only about six
months before the termination of his administration, we proposed
only one reform, which had to do with rule-making. We said that the
reason there was so much senseless overregulation in Peru was be–
cause, in contrast to countries like yours , there were no rule-making
procedures . On the average, my country produces 27,400 regula-
