GMA: Poor can be wealth generators

In waging her war against the decades-old problem of poverty in the country, President Arroyo has adopted the strategies of a renowned Peruvian economist bearing the name of a 16th century Spanish conquistador who explored America in search of El Dorado, the legendary lost city of gold.

Mrs. Arroyo believes that the answer to making life easier for millions of impoverished Filipinos may lie with Dr. Hernando de Soto’s concept of tapping the vast potentials of the thriving "informal or underground economy," also known as the De Soto principle.

De Soto’s study noted that the Philippines’ underground economy has accumulated assets of $132 billion, spread throughout slum areas, railroad tracks, esteros, river banks and fishing villages.

He noted that if the government allowed informal settlers or squatters to acquire titles to the idle government land which they occupied and let them borrow money — using these titles as collateral — they would be able to break out of poverty.

In a recent TV talk show, Mrs. Arroyo said that she has adopted the De Soto principle in her urban land reform program.

The Housing and Urban Development Coordinating Council (HUDCC), under the leadership of Michael Defensor, has already met its target of providing shelter and land tenure for some 150,000 squatter families living in idle government-owned property.

"The 150,000 families were able to acquire the right to buy the lands. That is the De Soto principle, that is people empowerment," the President said.

She pointed out that for people who have already "built their own houses, land tenure is very important."

To promote the government’s agrarian reform program, Mrs. Arroyo proposed in her recent State of the Nation Address (SONA) a measure that would allow beneficiaries to use their lands as collateral for loans to be used as capital in business ventures.

She said the framework of her administration’s anti-poverty program is anchored on such empowerment and providing people with livelihood.

"Another is social protection for those vulnerable to exploitation," she added.

Her specific strategies utilizing the De Soto principle calls for the redistribution of 100,000 hectares of public lands and another 100,000 hectares of private lands added from now till 2004. It calls for awarding of lots to 150,000 urban poor families per year till 2004 and the building of houses for 50,000 urban poor families per year for the same period.

For lending purposes, she’s allocating the amount of P20 billion for microfinance from the Development Bank of the Philippines for the next three years. The SSS and GSIS were tasked to earmark P20 billion for housing while the HUDCC was given a budget of P5 billion for the year 2002. All these strategies or promises were among the few mentioned in her SONA, which adhered to the De Soto principle.

De Soto said in a report that during the last 40 years, while Philippine leaders were lamenting the condition of the poor and spending billions to solve poverty, "the poor were actually doing much more."

The popular economic guru, recognized by Time in 1998 as among the "Leaders of the Century," said that growth has only been hampered by "economic apartheid," or discrimination by banks and other lending institutions against small informal entrepreneurs who may want to secure loans to increase their working capital.

De Soto believed that the Third World must learn from US history itself. He said that in 19th century America, immigrants from Europe were pouring in and were occupying tracts of lands without titles.

"These pioneers believed that if they occupied government land and improved it with houses and farms, it was theirs. State and federal governments believed otherwise, and sent troops to burn farms and destroy buildings.

"When the soldiers left, the settlers rebuilt and returned to scratching out a living...The first Connecticut settlers were legally trespassers. These colonial American squatters had occupied and improved 100,000 acres of land without legal permission. That past is the Third World’s present," De Soto wrote in his best-selling book, "The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else."

De Soto argues in his book that poor countries actually have the assets to make capitalism flourish except that these have not yet established the invisible network of laws that turn assets from "dead" into "liquid" capital.

For him, a "dead" asset can be idle government land occupied by informal settlers or squatters, who can’t use it to improve their lot in life.

A "liquid" asset would be that same piece of land titled in the name of the occupant, which he may now use to borrow money for a new venture, or improve an existing underground or informal business to make more money.

De Soto, who is president of the Institute for Liberty and Democracy in Lima, believed that "the dead capital of the poor" can be leveraged to generate wealth for the country and lift the poor out of poverty.

In Third World Philippines, by adopting De Soto’s principles, Mrs. Arroyo believes so too.