Born in Arequipa, Peru in 1941, de Soto studied in Switzerland and worked in international finance and trade before returning to Peru in the 1980s. His background in Swiss international institutions — GATT, the Swiss Bank Corporation — gave him a practical orientation toward institutional design that distinguished his work from academic development economics. He brought the mindset of a trade negotiator to questions typically addressed through macroeconomic modeling.
The Institute for Liberty and Democracy, which he founded in 1980, became the primary vehicle for his empirical research. The Institute's methodology was distinctive: researchers conducted their own fieldwork, often under difficult political conditions, to count informal settlements, measure untitled assets, and document the institutional friction that kept the informal sector informal. The 289-day business registration experiment remains the Institute's most famous empirical demonstration.
De Soto's career was shaped by Peru's violent political context during the 1980s and 1990s. The Shining Path guerrilla movement targeted him repeatedly, and the Institute's offices were bombed. His work was positioned as an alternative to both revolutionary violence and Washington Consensus orthodoxy — an "other path" that took the informal economy seriously as a productive force rather than treating it as a problem to be eliminated.
In recent years, de Soto has extended his framework to incorporate digital infrastructure, including blockchain-based property registries. His 2024 LABITCONF appearance in Buenos Aires articulated a vision in which blockchain, AI, and digital infrastructure converge to create institutional foundations for economic inclusion that physical property registries alone cannot provide. This extension makes his framework directly applicable to the AI economy's representational gap.
De Soto's intellectual formation combined Peruvian practical experience with Swiss institutional training — a combination that produced a distinctive methodological stance. His early work at the Universal Engineering Corporation in Switzerland and later in international trade negotiations exposed him to the operational details of how formal institutional systems actually function, knowledge he would later apply to understanding why those systems failed to extend to the developing world.
The founding of the Institute for Liberty and Democracy in 1980 represented a deliberate choice: rather than pursuing an academic career, de Soto built an institution dedicated to empirical research and policy reform. The Institute's work has influenced property rights reform in more than thirty countries, including major initiatives in Peru, Egypt, Mexico, and the Philippines.
The poor are not the problem; the system is. De Soto's central methodological commitment, which inverts standard development diagnoses.
Empirical fieldwork precedes theory. Count the assets, measure the friction, document the exclusion — theoretical generalization must rest on quantitative foundation.
Institutional infrastructure is constructed, not natural. The West built its property systems over centuries; the developing world can build analogous systems on compressed timescales if the institutional design is sound.
Formalization builds on informality. Successful property reform incorporates existing informal arrangements rather than imposing alien templates.
Digital infrastructure extends the framework. Blockchain and AI-enabled registries offer technological pathways that physical registries alone cannot match.