Assessment of the Instituto Libertad y Democracia

ILD has made a significant contribution to the intellectual and political debate on Peru"s informal sector. It has demonstrated the value of market-oriented regulatory analysis and energized discussions on the legal framework necessary for economic and social development. ILD has also helped to promulgate new laws aimed at alleviating some of the problems facing the informal sector, a necessary first step toward changing the policy and regulatory environment. Local professionals are unanimous in praising the main thrust and effectiveness of ILD research, and ILD"s best known publication, the book El Otro Sendero, has been influential both in Peru and in other Latin American countries. The book"s findings about the Peruvian informal sector appear applicable, with modifications, to other LDC"s. Less positively, however, ILD has not succeeded in publicizing its economic analysis methodology. And although it has built useful links to various other Peruvian organizations in the public and formal private sectors, some of these have been allowed to falter. Some institutional problems exist as well. ILD needs to strengthen its internal management. Its Board of Directors and founding members" organization do not seem to oversee ILD activities or advise on strategy, which means that no independent check on senior management exists. Since ILD does not conduct cash flow and sensitivity analyses, management now makes important decisions such as increasing salaries, hiring new staff, and using consultants instead of staff without being fully aware of their financial implications. ILD"s problems stem from its inability to develop financial management systems to keep pace with its quick growth. ILD"s ambitious planned 5-year program to triple its budget and increase its staff correspondingly would strain the management and research capacity of the institution beyond reasonable limits. Also, although ILD employs a few experienced lawyers and economists who serve as project leaders, most of the staff are junior. These individuals cannot represent the ILD in public debates on ILD"s economic research. ILD has diversified its funding sources away from its original sole dependence on A.I.D.; it is now seeking funds from multilateral funding institutions and the Peruvian formal private sector. Recommendations are included.