Evidence of meeting #12 for Foreign Affairs and International Development in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was property.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

10:35 a.m.

Conservative

The Chair Dean Allison

Thank you.

We have almost 10 minutes left, so we have time for one more question each, one from the government and one from the NDP.

Mr. Dechert, I'll turn it over to you for five minutes.

10:35 a.m.

Conservative

Bob Dechert Mississauga—Erindale, ON

Thank you, Mr. Chair.

Thank you, Señor de Soto, for your appearance here this morning and for the very important information you've been able to provide to our committee.

You've talked about the importance of property rights. I think that is significant and it is something that we haven't focused on before in our study.

I think you were also touching on commercial dispute resolution systems. In my previous life, I was an international commercial lawyer. I often saw the difficulties in bringing foreign investment to developing countries because of the lack of legal systems that would allow commercial disputes to be resolved in a commercially reasonable and viable way.

Two years ago, I travelled with a Canadian parliamentary committee to Afghanistan and was told by local people there that one of the things the Afghan people liked about the Taliban system was that they had a commercial dispute system. Although there wasn't a democratically elected government, there was a local imam they could go to. If there were a property dispute between two farmers, they could rely on the imam to give them a reasonable and fair resolution to the dispute, and he wasn't corrupt. Later, under an elected government, they had a rather corrupt legal system, and the local people couldn't trust the decisions the system made with respect to commercial disputes between two farmers.

Could you give us your views on how western countries, such as Canada, could assist countries in developing legal systems that would support enterprises? Do you think that's important, and if so, how would we go about doing it?

10:35 a.m.

President, Institute for Liberty and Democracy

Hernando de Soto

I think what you've said is really crucial because in our case we don't even talk about property rights: we talk about property and business rights. That's the way we've packaged it together to be understood. In other words, wherever we go and we're hired—we're a not-for-profit organization—we think it doesn't make any sense to let people have fungible assets if what they're going to face is a system that can't sort out exchanges and unfair exchanges and can't help women defend their rights. So we put the whole thing together.

We also knew that this was crucial because the way we were born in Peru is that we were able to get our reforms through at the time that we were fighting the Shining Path, a terrorist system that prevailed in Peru in the 1980s, and we drew up the strategy, the civilian strategy, that ultimately helped us beat them, which was that we found out that the Shining Path did not simply educate people in Marxism; Marxism is 56 volumes, a lot of them very hard to understand even if you're well educated, and half of them have never been translated from German to Spanish--or even English. So what was it that they did to preserve the loyalty of people? Well, we found out that what they did, essentially, was protect the property rights, especially in the coca farms from which cocaine is derived, and secondly, settle committal disputes...in other words, put in commercial law.

In 1990, one of the first things that actually occurred with the government of Fujimori, which is now very discredited...but you know, like all discredited governments, there's a sunny side and there's a dark side. The sunny side was that we went in and titled them and gave them the rules. In a matter of about one year, we actually brought down Peru's total contribution to the production of the coca leaf from somewhere around 70% to 26%. The reason was that the farmers were kept in this tight ring simply because, like the Taliban in Afghanistan, from what you tell me, and probably like terrorist movements all over the place, they gave a service, and that service had to do with how the farmers carried out day-to-day business and how they settled property or territorial disputes. It's that simple.

So we went in and we brought a mechanism into place, which is what we do in whatever country we're called into. We've actually been to Canada a few times, because we thought it was an ideal place to find a joint venture partner. Among other things, I don't know of any other country that is versed both in Roman law and in the Anglo common law. We work in both kinds of countries, and in the end, it really doesn't matter which you use, provided you use them well.

So you can do an awful lot about it, but there's a way to look at it, we have found, and it may be useful to you. If one simply talks about, in our case, property rights or business rights, they'll ask, “Do you like Newt Gingrich or do you like Obama?” It's that kind of thing. In other words, that's the way you're going to be placed. You have to get out of that, because once you're in that you're in a game that's not going to go anywhere, at least not in developing countries. The idea is to stick it into an issue.

In the case of Afghanistan, we've been called in various times. We've had missions come over here. We're just Peru and we don't have the money to do it, but they've come in because we know how to title in conditions of war, and we know that the war has a lot to do with who is solving day-to-day problems. That's not going to be broken as long as the property records and the rules that refer to how you settle property disputes or any transaction disputes remain in the hands of the warlords, because if the Taliban doesn't do it, the warlords will. If the warlords don't do it, the Taliban will.

In the end, the rule of law means that you are going to replace various little fragments of systems that could be called anarchic with one law. That's the rule of law: when there is one system and there's one standard for the whole nation. It's just like when you brought in electricity—I think it was in the United States—it was very hard to do anything until one person who I think was called Marconi, came around and said we're going to create.... There were about 300 voltages and 32 plugs in the United States, and he said there would be one voltage system, one plug, and one nation.

Once you put all of that together, you put the Taliban out of business, you put the rebels out of business, you put the oligarchs out of business, and you put the government back into business, which is where it should be. Because it's sovereign, it should decide how property rights will be awarded.

10:40 a.m.

Conservative

The Chair Dean Allison

Thank you very much.

10:40 a.m.

President, Institute for Liberty and Democracy

Hernando de Soto

But you see, again, it's a huge leap. It means understanding that over the last 150 years, westerners did a huge leap forward with the Industrial Revolution and the rule of law. You have to repeat that now, in the 21st century.

It's not a technical issue; it's a political issue.

10:40 a.m.

Conservative

The Chair Dean Allison

Thank you.

We'll finish up with Madam Groguhé, for five minutes.

10:40 a.m.

NDP

Sadia Groguhé Saint-Lambert, QC

Thank you, Mr. Chairman.

Mr. de Soto, thank you for all of that information.

Two things that seem relevant and essential stood out for me. You talked about political and financial freedom. You also talked about super guarantees for these businesses that are going to settle in these developing countries, and hyper-guarantees.

How can we ensure that these aboriginal peoples have these hyper-guarantees? How can we ensure that they have this political freedom, this financial freedom, in the context of the development of entrepreneurship? Concretely speaking, what action could a country such as ours take?

10:40 a.m.

President, Institute for Liberty and Democracy

Hernando de Soto

As we speak, we are trying to determine how to deal with these problems in Peru. Indeed, we are grappling with some serious conflicts in our Amazon. The Peruvian Amazon makes up half of the country. Indeed, the Amazon begins with Peru. The crisis in the western world that caused a sharp drop in securities on the stock market, though it did not necessarily affect you here in Canada, certainly had an impact on our American neighbours and Europe, and as a result a large proportion of investments was redirected toward us. That is what is happening.

Recently, there were some conflicts between indigenous Amazonians and certain mining investors, both local and foreign ones. There were fatalities on either side. This was a national crisis. The issue was to see how we could help the aboriginal people and give them some guarantees. As I already said, the first issue is that all of those who traditionally defend the aboriginal peoples, and who have a lot of merit because they have given their lives to help them, believe that they want their territory to be protected, but in the form of collective property.

However, when the indigenous people came to negotiate with the government, they very clearly wrote that even if they constitute a political community, they feel different from the rest of the country regarding the control of their financial activities. They are very poor, but they do not believe that the community should control their natural resources in some collective fashion. They are individual or family owners. This is spelled out in their documents. We have just published a brief summary of these findings. It includes documents in which they say this in connection with their own organizations. We are not putting words in their mouth: they are the ones who are making these statements. Be that as it may, a large part of the Peruvian political class traditionally believes that they are dealing with Asterix and Obelix. But they have evolved and we have to find a way of integrating them.

With that in mind, we have imported—and this may not be the best way of putting it—aboriginal people from Canada and the United States. Manny Jules is one of them; he is Chief of the Kamloops Indian Band in British Columbia, and there were others. The idea was that they could talk with our indigenous people and compare the Canadian reality with the Peruvian one. The point was to see whether, by comparing their different situations and geographical areas, some truths would emerge. As the philosophers say, truth can emerge out of friction.

The Chief of the Kamloops Indian Band and the Canadians we “imported” told us that a distinction needs to be made—and this is why we maintain close contact with your aboriginal people—between sovereignty and property. They told us that one of your former prime ministers, Mr. Trudeau, wanted to set some conditions, and assimilation was one of them. They did not want to be assimilated; they did, however, want property. Assimilation is something else altogether. That is a very important distinction, and it has guided our recommendations, be it for Peru or any other country.

Here are those recommendations. The first political decision must be whether you want to govern yourselves as a separate nation, like Puerto Rico or Alaska. Do you want a separate political regime, because you feel different? It is a question.

That question having been settled, the next matter is to know whether you want the same type of property rights as we have in the western world, in Poland or in France, or if you want something different.

In any case, the important words of Manny Jules, from Canada, when he was among us—in English, since he did not speak French—were the following:

“Whatever you decide you want to do, you Peruvian indigenous people, make sure that you're not treated as a museum piece. Let everybody understand that you have your own opinion, that you're in the 21st century, and that you'll decide by yourself”.

My feeling is that the first problem is a political one. It reveals a vast difference between sovereignty on the one hand and the economy on the other.

Finally, there is a problem that is common to Canadians and Peruvians. Even if our indigenous people opt for sovereignty, we don't have a single aboriginal nation in Peru, we have 5,000 of them. How can a country function if it contains 5,000 other countries, with an average population of some 200 inhabitants? It seems you have the same situation in Canada. That is why I was saying that this is extremely complex, whether you are in Arabia or elsewhere. However, it is not mysterious, since these are problems that you have resolved for the most part with your citizens in the past. The big mistake is to think that some nice gentleman who invents a

software for a geographical information system,

or a cartographer who will be making maps of the area will be able to solve these property rights issues. We are dealing with a political problem.

10:50 a.m.

Conservative

The Chair Dean Allison

Mr. de Soto, thank you very much. We know that you're busy. We thank you for taking time today. By all means, if you're ever in our part of the world, we'd love to have you come back here in person.

We understand how extremely busy you are, so we're grateful for the hour you were able to spend with us this morning. Thank you very much.

10:50 a.m.

President, Institute for Liberty and Democracy

Hernando de Soto

I would simply say that I'd like to not play hard to get. Actually, to go to any of the contracts we go to, whether we're in China or whether we're going to the Middle East, we have to go up north toward Canada, to New York, and turn right or left. It's just about another hour to go to Ottawa. We're not that busy. We love going to Canada. A lot of us learned our English in Canada. A lot of us distributed milk in horse-drawn carriages in Canada in our youth. We'd love to come back if you invite us.

10:50 a.m.

Conservative

The Chair Dean Allison

Thank you very much. We'll keep that in mind and see if we can work something out.

10:50 a.m.

Conservative

Lois Brown Newmarket—Aurora, ON

Mr. Chair, may I make a motion that we have them back?

10:50 a.m.

Conservative

The Chair Dean Allison

We'll discuss it with the committee, but I think....

10:50 a.m.

NDP

Hélène Laverdière Laurier—Sainte-Marie, QC

I second that.

10:50 a.m.

Voices

Oh, oh!