From Dollars to Alpaca, Informal Markets Thriving

Is dollarization or improved printing technology leading to more counterfeiting throughout Latin America?  Or perhaps it is more intrinsic in the structure of their institutions and culture in these countries.

Here’s an interview on Peruvian women in the informal economy who are joining trade unions.  I wonder how much they think about the economics of unemployment in their negotiations?  Government concern for the Alpaca trade has led to a questionable program to put microchips in the Alpacas ears in hopes to keep good wool local, even though it is valued much higher abroad.

In other places, some are trying to change incentives on the informal market.  India has implemented a VAT that includes hopes of stunting the informal market for mobile phones.  This opinion discusses some features of the value added tax, including how it cuts into informal markets.

High Price. Lots of Incentive

The drug war appears not to be having much of an effect on cocaine sales in the US.  Although Colombian cocaine traffic has been reduced by 22%, Bolivian production has increased by 17%.  The price remains steady or lower than historical levels.  Read here or here.

McKinsey agrees with DeSoto

McKinsey and Co. states that high corporate taxes and obstacles to entry and exit are pushing businesses into the informal marketplace and undermining "enterprise-level productivity."  This article focuses on business practices in Asia but clearly is model is applicable to the stagnation of Latin American development as well.