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Everything you need to know about buying and selling real estate in Mexico, Puerto Vallarta, and the Banderas Bay region

The Rule of Law

Understanding Private Property Ownership

Private Property Rights

If you look at the laws of nations, there are: family law, international public law, international private law, criminal law, and property law. If you’re poor, however; all you basically have is a piece of land or a place where you work, whether you’re street vending or milking a cow. There is nothing more precious to you than your property.

To preserve it without the law, you must satisfy tribal chiefs, crooked cops, corrupt politicians, bad judges, your difficult neighbors, or even terrorists. If the law comes in, however, and says your property rights are recognized, not only by your neighbors but by the police and the whole nation, now you can trade them nationally and even internationally—and the law will protect you.

You become interested in the Rule of Law. This means something, and you begin to understand.

Begin with Property Rights

Economist and specialist in developing countries, Hernando de Soto believes that the genesis of the Rule of Law will allow a modern nation to grow and achieve peace, stability and prosperity from the right to own property. Property rights through the Rule of Law will generate prosperity.

Adam Smith, the eighteenth century Scottish economist and philosopher, wrote that new productivity was due to the division of labor, and this was bringing prosperity to Europe. Smith’s example is very simple. He said he had seen a couple of people, working outside the walls of Glasgow, making pins. In eighteen steps, two were able to make twenty pins each a day.

In another place, he saw ten people dividing those eighteen functions among themselves, and producing 48,000 pins a day. These ten broke the work down so that one person bought the wire, another covered it with tin, a third drew the wire, two others cut it, someone put points to the wire, somebody headed it, and together, they were able to produce 48,000 pins a day—an increase in productivity of 240 times.

Developing countries really have no small businesses, because there is no legal framework to support them. What they have are family enterprises—and families have trouble finding ten people to work; perhaps they can find four, and of those four, two are the lazy brother and the alcoholic brother-in-law—guys who weren’t meant to make pins.

Entrepreneurs know how to combine resources, and whomever you employ is important. If you have no property rights, you cannot get credit or use collateral to create a business within which you can divide labor, or efficiently organize inputs and outputs. You can’t separate the assets of shareholders from those of creditors or of workers. You’ll never be able to compete in the global marketplace.

The Time Has Come

De Soto´s objective, as he goes around the world, if to prove that value is not only raw manpower but also the power of man to divide labor. Value doesn’t just come from simple labor. It comes from intelligent political and economic solutions that can raise productivity enormously.

To build modern nations, we have to learn how the poor work and then structure law that fits their needs. In the end, Peruvians, Chinese, and North Americans want essentially the same things: life, liberty, and property. De Soto and his foundation believe the only way to achieve this for all is to build on a market economy based on the Rule of Law.

Our real enemies are the people who do not believe in the potential of human beings liberated by this simple premise.

In Mexico, we know about about problems in certain states which are known for tourism, agriculture, and violence.

Do these states have property rights for the average citizen? Could the federal government change the economy of Oaxaca,Guerrero, Michoacan, Chiapas, and Tabasco with private property rights?

 


This article is based upon Flex MLS reporting, legal opinions, current practices and my personal experiences in the Puerto Vallarta-Bahia de Banderas areas. I recommend that each potential buyer or seller of Mexican real estate conduct his own due diligence and review. If you have any other questions, contact me through my website.

Harriet Murray

harriet@casasandvillas.com

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