Illegal tamales

Last month, I was drawn to the window of our 9th-floor apartment in Lima, Peru, by a loud commotion outside. I saw about 30 police running alongside a couple flatbed trucks that slowly made their way along the streets of our well-to-do neighborhood. The vendors who sit for 12 hours a day with the Miraflores Municipality candy and fruit carts did not appear flustered. Meanwhile a policeman grabbed and threw onto a flatbed the plaid plastic bag of an independent vendor of modest means selling tamales for S/. 1 (approximately US$0.30) each. The police parade then slowly snaked its way out of my view. On my way out that morning, I asked our doorman why the police had confiscated the tamale vendor’s goods. “Because it’s illegal to sell things on the streets.”

Twenty years ago, Peruvian economist Hernando de Soto published El Otro Sendero (The Other Path), a then-groundbreaking study of Peru’s black-market phenomenon. The book argues the country’s thriving informal economy to be a response to the economic needs (business, housing, transport, etc.) of a disenfranchised majority without the economic or political means to brave the bureaucratic mountains standing between them and formal entry into the legal market. Yet their activities are defined as illegal competition for law-abiding, tax-paying companies and industries. The real problem, Mario Vargas Llosa explains in a New York Times Magazine article adapted from the book’s preface, “is the state, whose byzantine legal system seems designed to favor those already favored and to punish the rest by making them permanent outlaws.”

Twenty years later, Alan Garcia is once again president, and legal hurdles for small businesses are, if not quite as nightmarish, still priced out of the reach for many. In addition, some informal entrepreneurs, such as the tamale vendor on our street, continue as outlaws.

While Peru’s economy has shown remarkable growth over the past five years, more than half of the population is considered to live in poverty (on less than $2 per day) and has not seen the benefits of the consistent rises in GDP.

The realities behind Lima’s 49.5% underemployment rate are ugly. At major intersections throughout the city, adult men and women weave through traffic during every red light, trying to sell chocolate, pens, or peanuts. Newspaper headlines read, “200 Thousand Taxi Drivers Without Work,” and it’s common to count more taxis than private cars on Lima’s polluted streets.

My shock over the difficulty faced by the average person in Lima trying to make a living makes me want to learn more about economics. I’m not sure what a solution looks like, but I suspect it has more to do with the work of Hernando de Soto’s NGO that advises governments on how to incorporate the informal economy into legal markets, and less with a parade of police bullying off the sidewalks of our well-to-do neighborhood those trying to make an honest living.