Hernando de Soto, the Lone Prospector and the Formalization of Artisanal and Small-Scale Mining: A Case Study from La Rinconada, Peru

Artisanal and small-scale mining (ASM) has experienced explosive growth as a result of rising international gold prices. Globally, forty million people are directly engaged in this sector. ASM is squarely in the informal economy, operating according to extralegal social or customary norms, rather than recognized legal and policy frameworks. The ASM literature suggests that formalization of ASM sector will unlock its full potential to provide employment and alleviate rural poverty. Yet, top-down State formalization efforts are failing everywhere. The influential economist Hernando de Soto argues that that the California Gold Rush provides a more legitimate and representative example of how to successfully integrate the extralegal into the legal sector. During the California Gold Rush, thousands of miners devised their own informal mining codes to distribute rights to the gold deposits and avoid chaos. These codes were eventually recognized by the U.S. Congress, which show how secure property rights can emerge from the bottom-up. Using La Rinconada Gold Rush episode in the Peruvian Andes as a case study, this Article challenges the bottom-up formalization program lionized by de Soto. The argument is twofold. First, it questions the extrapolation of the California Gold Rush episode—often glorified as a ‘frontier democracy’ characterized by equal access to property rights and social mobility—to contemporary ASM. Second, it exposes the conceptual assumptions and practical implications behind de Soto’s strategy to tackle ASM through conventional property rights, arguing that his ideas would not create more wealth nor improve the environmental and labor conditions of the sector