Hernando de Soto (economist) facts for kids

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Hernando de Soto

De Soto in 2014

Prime Minister of Peru

Incumbent

Assumed office
23 February 2026

President

José María Balcázar

Preceded by

Ernesto Álvarez Miranda

Personal details

Born

Hernando Soto y Polar

2 June 1941 (age 84)
Arequipa, Peru Academic career

Spouse(s)

Gerarda of Orleans-Borboun and Parodi Delfino (div.)
María del Carmen Toro (div.)

Institution

Institute for Liberty and Democracy

Field

The economics of the informal sector and property rights theory

Influences

Contributions

Dead capital

Hernando de Soto

Education

University of Geneva (BA)
Geneva Graduate Institute (MA)

Hernando de Soto Polar (born 2 June 1941) is a Peruvian economist. He has been serving as the Prime Minister of Peru since 23 February 2026. He is well-known for his ideas about the informal economy and the importance of having clear property rights for businesses. He leads the Institute for Liberty and Democracy (ILD), an organization in Lima, Peru, that works to help countries grow their economies.

In Peru, de Soto's advice helped shape economic policies. These included making some economic rules less strict and using new economic ideas. These policies were adopted by the government of Alberto Fujimori and included in Peru's 1993 Constitution. De Soto also advised Alberto Fujimori's daughter, Keiko Fujimori, during her presidential campaigns. He worked with various Peruvian governments and helped negotiate the Peru-United States Free Trade Agreement. In the 2021 presidential election, de Soto ran for president, finishing fourth among many candidates. He later met with Pedro Castillo and asked Dina Boluarte to step down during public protests in 2022–2023. He also planned to run in the 2026 elections but later decided not to.

Internationally, de Soto's ideas influenced the "Washington Consensus," a set of economic guidelines for countries in crisis. Economist John Williamson, who named the consensus, credited de Soto. De Soto also supported the North American Free Trade Agreement (NAFTA). Former U.S. President George H. W. Bush praised de Soto for promoting easier trade between countries. Other world leaders, including Bill Clinton, Vladimir Putin, Emmanuel Macron, Ronald Reagan, and Margaret Thatcher, have recognized de Soto's work. The ILD has also received praise from notable figures like Nobel laureate Milton Friedman and former UN Secretary-General Javier Pérez de Cuéllar.

Early Life and Education

Hernando de Soto was born on 2 June 1941 in Arequipa, Peru. His father, José Alberto Soto, was a Peruvian diplomat and lawyer. After a big political change in Peru in 1948, his parents chose to live in Europe, taking their two young sons with them. His father worked for the International Labour Organization during their time in Europe. He often sent Hernando back to Peru for summer visits.

While in Europe, de Soto went to school in Switzerland, attending the International School of Geneva. He later studied how people think and behave in groups at the National University of Saint Augustine in Arequipa, Peru. He then returned to Geneva and earned a bachelor's degree in economics from the University of Geneva. In 1967, he completed a master's degree in international law and economics from the Graduate Institute of International Studies in Geneva.

His younger brother, Álvaro de Soto, worked as a diplomat for Peru and the United Nations. He held a high-ranking position at the UN before retiring in 2007.

There has been some discussion about Hernando de Soto's surname. His father's surname was Soto, while Hernando's is de Soto. Some, like Peruvian writer Mario Vargas Llosa, have suggested he added "de" to sound more "aristocratic."

Economics Career

After his studies, de Soto worked as an economist for the General Agreement on Tariffs and Trade, which was a step towards the World Trade Organization. He also served as president of the Committee of the Copper Exporting Countries Organization and as a CEO for an engineering company.

Founding the Institute for Liberty and Democracy

De Soto returned to Peru in 1979, at age 38, when new economic ideas favoring free markets were becoming popular. He met Friedrich Hayek, an economist who supported free markets. Hayek helped connect de Soto with Sir Antony Fisher, a British businessman who created the Atlas Network. This network helped fund and support organizations that promoted free-market ideas in developing countries.

With help from Fisher and the Atlas Network, de Soto founded the Institute for Liberty and Democracy (ILD) in 1981. It was one of the first organizations of its kind in Latin America. De Soto later said that Fisher gave them "enormous amounts of information and advice" on how to organize the ILD. In 1984, the ILD received more support from the U.S. government, including funding and help with advertising campaigns. Other organizations also provided funding, helping the ILD spread its ideas. The ILD gained public support in Peru by focusing on the issue of unofficial housing.

Working with the Fujimori Government

Between 1988 and 1995, de Soto and the ILD played a key role in creating many new laws and rules that changed Peru's economic system. The ILD became involved with the Peruvian economy during the end of President Alan García's time in office. De Soto's group grew and promoted its goals to the Peruvian public.

De Soto then served as a personal advisor to President Alberto Fujimori for his first three years. De Soto had initially advised another presidential candidate in 1990. However, Fujimori later asked for de Soto's help to solve the big economic problems Peru faced in the 1980s. The New York Times described de Soto as someone who promoted Fujimori's government abroad, especially when meeting with countries and organizations that lent money to Peru. Some even called de Soto the "informal president" for Fujimori.

De Soto suggested a "sudden and big change" for Peru's economy. He convinced President Fujimori to meet with leaders of major international financial organizations in New York City. These leaders encouraged Fujimori to follow economic guidelines set by international groups. These policies included higher taxes, letting prices be set freely, and selling off many government-owned businesses. De Soto's policies led to a more stable economy and slower price increases, but many people still lived in poverty in 1998. Peru's economy did not see significant growth until the 2000s, when prices for natural resources increased.

University of Chicago political scientist Susan C. Stokes believes de Soto's influence helped shift Fujimori's economic approach towards free markets. De Soto also inspired Fujimori's efforts to stop illegal activities. Some, like the Cato Institute and The Economist magazine, have argued that de Soto's policies helped weaken the violent group called Shining Path. By giving official ownership to small farmers, they argued, it became harder for the Shining Path to find safe places, new members, and money. This forced the group's leaders into cities, where they were arrested. Because of his work, the ILD and de Soto faced threats from the Shining Path.

Land Title Initiative

Between 1992 and 1994, de Soto's ILD started a program to officially record ownership for 200,000 Peruvian homes. Two years later, the program expanded to Lima and seven other large cities, where most unofficial housing developments were located. By 2004, the program had registered 1.4 million homes and provided 920,000 official land titles.

The ILD reported that homeowners saw their work hours increase by 17 percent. Working at home decreased by 47 percent, and child labor was reduced by 28 percent. The group suggested these changes happened because homeowners and their children no longer needed to protect their homes from being taken away. However, some experts questioned the exact reasons for these changes. Following these findings, the ILD focused less on promoting access to loans and more on encouraging increased work hours among official landowners.

Resignation and Criticism of Fujimori

De Soto resigned from his advisory role in January 1992, two months before a political event where the government was changed suddenly. He criticized Fujimori's actions, expressing concerns about fairness and proper conduct in government. In his resignation letter, he mentioned "problems with illegal activities within the government" that hindered efforts to stop them. He also cited disagreements with a key government official. Both this official and Fujimori were later accused of corruption and other serious issues.

Two months after de Soto resigned, Fujimori took more power for himself. De Soto again criticized this action as "stupid, unproductive and blatantly unconstitutional." According to de Soto, the Minister of Economy contacted him in desperation after many countries stopped economic support to Peru because of the undemocratic event. The Minister resigned, and de Soto traveled with Fujimori to a meeting of American countries in 1992. There, de Soto urged Fujimori to hold fair elections to prevent another economic crisis.

International Policy

Washington Consensus

De Soto was a major contributor to the Washington Consensus. This was a set of ten economic rules suggested by the International Monetary Fund, World Bank, and United States Department of the Treasury for countries facing economic crises. Economists in the United States used de Soto's ideas to promote these rules. English economist John Williamson, who created the term "Washington Consensus," partly credited de Soto for these guidelines.

These policies sometimes led to some people feeling left out and worker groups becoming less powerful in Latin America. This resulted in public unhappiness and changes in political leadership in the region by the late 1990s.

North American Free Trade Agreement (NAFTA)

De Soto supported the creation of the North American Free Trade Agreement (NAFTA). When announcing NAFTA in 1989, U.S. President George H. W. Bush praised de Soto for helping inspire easier trade between countries. Bush stated that de Soto's ideas offered a clear way to improve economies in Latin America and other parts of the world.

De Soto believed that NAFTA helped introduce the "benefits of a modern way of life" to Latin America. He also said that Mexico's economy and government would improve because of NAFTA.

Advisory Work

Hernando de Soto and Muammar Gaddafi in 2008 after Libya signed a contract with the Institute for Liberty and Democracy

After its start in Peru, de Soto's ILD has worked in many countries. Leaders in over 35 countries have sought the ILD's help to discuss how their ideas on property rights could improve economies. After his split with Fujimori, de Soto and his institute designed similar programs in El Salvador, Haiti, Tanzania, and Egypt. They also worked with the World Bank. De Soto has advised leaders in many countries, saying that his focus is on the economic solutions.

In 2006, de Soto advised President Alan García and helped negotiate the Peru-United States Free Trade Agreement. In 2009, the ILD focused again on Peru and the challenges faced by native communities in the Peruvian Amazon jungle. The ILD studied the situation and published a short video documentary, The Mystery of Capital among the Indigenous Peoples of the Amazon. This video summarized their findings from native communities in Alaska, Canada, and the Peruvian jungle.

De Soto joined Keiko Fujimori's election campaigns in 2011 and 2016, supporting her promise to implement his property rights reforms. He believed his ideas could help solve big global problems.

Political Career

2001 Peruvian General Election

For the 2001 Peruvian general election, de Soto wanted to run for president with his Popular Capital party. However, he couldn't register his party in time to participate. At that time, he sought support from different political groups for his candidacy. He later became a critic of some of these groups.

After learning de Soto couldn't register, former president Alan Garcia offered him the presidential nomination for his APRA party. De Soto declined, saying he would not have much real power. Garcia then offered de Soto the position of Prime Minister, which Alberto Fujimori had also offered him. De Soto declined again, not wanting to be responsible for Garcia's government policies.

2021 Presidential Campaign

De Soto announced his candidacy for president in September 2020 under the party Go on Country. Before this, he had hesitated to run, worried it might make his work on "dead capital" seem too political.

On 30 October 2020, De Soto introduced his team of experts for the campaign. This team included business leaders, former government officials, and diplomats.

In December 2020, de Soto shared an alleged secret poll on a TV show, which he claimed showed him in first place. He suggested that people close to the government were upset by the difference between their internal polls and public ones.

In January 2021, there were some challenges to his candidacy regarding the formation of his party's electoral court, but these were resolved. Another challenge questioned his academic qualifications, but he continued his campaign.

On 24 February 2021, de Soto announced the first Peruvian "shadow cabinet." This group of experts offered alternative advice to the government on managing the COVID-19 pandemic.

De Soto also supported Rafael López Aliaga, an electoral rival, when López Aliaga faced exclusion from the elections.

De Soto faced questions about how he received his COVID-19 vaccine during a controversy where some officials received special access to vaccines. He had initially denied getting a vaccine "from any Peruvian," but it was later reported he traveled to the United States for vaccination. During presidential debates, de Soto proposed working with international organizations to manage who enters Peru. He also suggested reforming Peru's education system to rely less on foreign ideas and increasing the health budget.

Ultimately, de Soto finished fourth among many candidates in the election.

Prime Minister of José María Balcázar's Government

On February 22, 2026, the government of José María Balcázar announced Hernando de Soto as the new prime minister. He began serving on February 23, 2026.

Main Ideas

De Soto's main message is that countries need good systems to record who owns what, so their economies can grow strong. He argues that unofficial economic activities mean many small business owners don't officially own their property. This makes it hard for them to get loans, sell their businesses, or make them bigger. They also can't easily find fair solutions for business problems in court.

If governments don't know about all the economic activity, they can't collect enough taxes or help people. De Soto explains that this creates two separate economies: one legal and one unofficial. A small group enjoys the benefits of the law, while most entrepreneurs remain in poverty. Their assets, worth trillions worldwide, are like "dead capital" because they aren't officially recognized.

To survive, people in the unofficial economy create their own rules. But these rules have problems and are hard to enforce, leading to social and economic issues. De Soto believes that many developing countries have tried to build market economies but have failed. He argues that the real problem is flawed legal systems that make it almost impossible for most people to participate in the market.

People in these countries have talent and enthusiasm, but they lack easy access to the legal system. In advanced countries, and for the wealthy in developing nations, the legal system helps create official property documents. This official record-keeping allows society to identify people and their assets, understand their rights and responsibilities, and value their property. These systems make it easier to get loans, create identification, provide housing, and do many other economic activities that drive a modern economy.

Work and Research

Since 2008, de Soto has been improving his ideas about how property rights are important for development. He found that many new global problems are caused by "problems with how property ownership is recorded." He wrote that the reason for economic slowdowns in the U.S. and Europe was a "knowledge crisis," not just a financial one. He calls homes that can't be used to create more wealth "dead capital" in his writings.

De Soto explained that a strong economy needs both visible things (like buildings) and invisible things (like official records of ownership). He argued that if these official record systems are not fixed, economies will struggle to recover.

In other articles, de Soto used research from Egypt, Tunisia, and Libya to explain the "economic roots of the Arab Spring." He argued that these political changes were mainly "economic revolutions." They were driven by the frustrations of millions of ordinary people who relied on unofficial ways to earn a living. He pointed to research showing that in Egypt, 92% of property was in the unofficial economy. He also highlighted the story of Mohamed Bouazizi, a street vendor whose protest against his goods being taken away helped start a revolution in Tunisia.

After losing some of its main funding, the ILD reduced its staff. From 2014–2015, de Soto and a small team worked to find solutions for Peru's mining industry problems. De Soto has strongly supported helping unofficial miners become official. He believes that former members of the violent Shining Path group, who now focus on environmental issues, were causing problems for mining investments in Peru. De Soto's goal is to understand why unofficial groups are hostile towards big international companies. He wants to find ways for local people and big international companies to work together fairly.

De Soto Applies Ideas to Challenging Violent Groups

In October 2014, de Soto wrote an article called "The Capitalist Cure for Terrorism." He argued that a strong plan to help people gain economic power was needed in the Middle East to overcome violent groups. He suggested that the U.S. should promote a plan similar to what was used in Peru to challenge the Shining Path in the 1990s. He also mentioned that if ordinary people cannot participate in the legal economy, it's harder for them to resist violent groups. The article received praise from some high-level politicians.

In January 2016, de Soto released another article, "How to Win the War on Terror." This article focused on defeating violent groups by promoting strong property rights. It was published in many countries and languages, including by the World Economic Forum.

De Soto Challenges Thomas Piketty

In 2014, de Soto began to disagree with the ideas of French economist Thomas Piketty. Piketty had written a popular book, Capital in the 21st Century, which criticized wealth. De Soto argued that Piketty's statistics ignored the many people in developing countries and former Soviet states who hold their wealth in the unofficial economy.

De Soto's research showed that most people actually want more wealth, not less. He also argued that economic struggles, like those seen in the Arab Spring, had already begun.

De Soto Addresses Pope Francis

In February 2016, de Soto wrote an article about Pope Francis’s trip to Mexico. He encouraged the Pope and the Vatican to address the problem of poor people not having official ownership of their property in countries like Mexico. He saw this as a way to help solve global refugee crises.

A week later, de Soto published another article in Fortune Magazine. This article discussed the public disagreement between the Pope and U.S. Republican presidential candidate Donald Trump over the idea of building a wall on the Mexican-USA border. De Soto's article suggested five property rights-related ideas the Pope could use to respond to Trump.

Blockchain Work

In May 2015, de Soto attended the 1st Annual Block Chain Summit hosted by British billionaire Richard Branson on his private Caribbean island, Necker Island. De Soto was one of the moderators at this event. Supporters of blockchain technology believe it can act as a public record to help achieve de Soto's goal of making unofficial property ownership official for groups like the native peoples of Peru.

De Soto presented an idea for using Bitcoin for property applications to a leader from the United Arab Emirates and financial authorities of Abu Dhabi at a second Blockchain summit in 2015.

Awards and Accolades

Time magazine recognized De Soto as one of the top five Latin American innovators of the century in 1999. In 2004, they included him among the 100 most influential people in the world. Forbes magazine also listed him as one of 15 innovators who would "reinvent your future." In 2000, a German development magazine described de Soto as one of the most important development thinkers. In October 2016, de Soto received the Brigham–Kanner Property Rights Prize for his strong support of property rights reform as a way to reduce global poverty. Hernando de Soto is an honorary co-chair for the World Justice Project.

Among the many prizes he has received are:

The Fisher Prize (1990)
The Freedom Prize (1995)
The Goldwater Award (2002)
The Adam Smith Award (2002)
The CARE Canada Award for Outstanding Development Thinking (2002)
The Democracy Hall of Fame International Award (2003)
The Templeton Freedom Prize (2004)
The Milton Friedman Prize for Advancing Liberty (2004)
The Royal Decoration of the Most Admirable Order of the Direkgunabhorn (2004)
An honorary Doctor of Letters from the University of Buckingham (2005)
The Americas Award (2005)
The Prize of Deutsche Stiftung Eigentum (2005)
The IPAE Award (2005)
The Academy of Achievement's Golden Plate Award (2005)
The BearingPoint, Forbes magazine's seventh Compass Award for Strategic Direction (2005)
The Bradley Prize (2006)
The Innovation Award (Social and Economic Innovation) from The Economist magazine (2006)
The Poder BCG Business Awards (2007)
The Humanitarian Award (2007)
The inaugural Hernando de Soto Award for Democracy (2009)
The Hayek Medal (2010)
The Medal of the Presidency of the Italian Republic (2010)
The 2016 Brigham–Kanner Property Rights Prize
The Global Award for Entrepreneurship Research (2017)

Publications

De Soto has published two well-known books about economic development. These are The Other Path: The Invisible Revolution in the Third World (first published in Spanish in 1986, with a new edition in 2002 called The Other Path, The Economic Answer to Terrorism) and The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else (2000). Both books have been international bestsellers and translated into about 30 languages.

The Spanish title of The Other Path is El Otro Sendero. This title referred to de Soto's different ideas for development in Peru. It offered a way for Peru's poor to improve their lives, compared to the violent group called "Shining Path." Because of his ideas, he faced threats from this violent group. In July 1992, his organization's office in Lima was attacked.

He also co-wrote Swiss Human Rights Book Volume 1: Realizing Property Rights in 2006. This book is a collection of papers about why property rights are so important for small business owners, women, and other vulnerable groups in poorer countries. It includes a paper by Hernando de Soto about the ILD's work in Tanzania.

De Soto, Hernando. The Other Path: The Invisible Revolution in the Third World. Harpercollins, 1989. ISBN: 0-06-016020-9
De Soto, Hernando. The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere Else. Basic Books, 2000. ISBN: 0-465-01614-6
De Soto, Hernando. The Other Path: The Economic Answer to Terrorism. Basic Books, 2002. ISBN: 0-465-01610-3
De Soto, Hernando and Francis Cheneval. Swiss Human Rights Book Volume 1: Realizing Property Rights, 2006. ISBN: 978-3-907625-25-5
Smith, Barry et al. (eds.). The Mystery of Capital and the Construction of Social Reality, Chicago: Open Court, 2008. ISBN: 0-8126-9615-8