NCPA - National Center for Policy Analysis

Telecom Big in Guatemala Due to New Spectrum Laws

December 31, 2002

Until further studies are done, it's impossible to know how to assign the credit for Guatemala's impressive growth in telephone penetration and the drop in prices. A host of telecom reforms surely helped. But economists may also find that a new spectrum policy had a lot to do with it.

Guatemala's reform of spectrum law merits attention because it recognizes the importance of property rights in radio spectrum assignments. Consequently, Guatemala has tapped into one of the most important resources in the information age - property rights.

If we consider how the recognition of property rights in land resulted in economic development in the West, we can see the importance of property rights applied to spectrum rights.

  • In the past, an economy's most significant resource was often land, and for the West at least, every parcel was represented in a property title, says author and property rights advocate Hernando de Soto.
  • The single most important source of funds for new businesses in the United States is a mortgage on the entrepreneur's house .
  • These assets can also provide a foundation for the creation of securities (like mortgage-backed bonds) that can then be rediscounted and sold in secondary markets.
  • By this process the West injects life into assets and makes them generate capital.

According to De Soto and his team of analysts, the extra-legal possession of real estate in the hands of the poor of the Third World and former communist nations is valued at $9.3 trillion (1997). Yet this capital is dead because the land owned by the poor cannot be "used to produce, secure, or guarantee greater value in the expanded market."

Source: Giancarlo Ibarguen, "What Guatemala Can Teach the FCC," The Wall Street Journal, December 27, 2002.

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