People have been living and working in informal settlements for decades because the property registry and titling laws kept people out of, rather than bringing them into, the system, says Elena Panaritis, a public sector management specialist with the PREM network. The judiciary and law enforcement are alien to them, she notes. Were talking about two different countries existing in one.

A loss of faith in government, exorbitant costs, and the bureaucratic hoops prevent people from completing the steps to formalize ownership of their propertya service viewed as reserved for the wealthy.

Sitting in her seventh floor office in the Banks I building, Panaritis, a Greek national trained in economics and political economy, explains how the Peru Urban Property Rights project she manages is tackling this problem. The project provides technical assistance to Peru on policy and legislative reforms to resolve the centuries-old problem.

Peru began to initiate the legal reforms for property rights in the late 1980s and early 1990s. The project helped implement the reforms in select urban areas in 1992 through a $500,000 pilot project financed by a Japanese Technical Assistance Facility and managed by the Bank. It continues today under a $37 million Bank loan approved in 1997. To date, it has helped bring over four million people into the formal economy and has created close to $6 billion in assets by getting property registered, titled, and valued.

With support from the government and the World Bank, Perus Institute of Liberty and Democracy, which had been studying the issue closely in the early 1990s, held a series of public hearings attended by local residents to discuss their ideas and proposals for a solution.

The hearings were key to the subsequent creation of two major laws: One law created the Registro Predial Urbano (RPU), the property registry, which eliminated most transaction costs; the other consolidated the functions of 14 agencies into one titling agency, the Commisiz0ara la formalizaciz$e la propriedad informal (COFOPRI). The costs for registering property came down from $2000 to $50, and the time involved from 15 years to under six weeks.

The owner is sitting on a piece of property that now has a recognized value, and he has a piece of paper to prove it, says Panaritis. We are paperizing and modernizing the state, and we are promoting equal rights by putting the poor on an equal footing with the rich, not only in the eyes of the state, but also of the markets.