Provisional outline: Modern trade requires institutions which are able to enforce contracts. In the informal economy, one could suspect that limited access to tribunals and courts limits the development of a modern market economy. However, counterexamples abound in developing economies of intricate contracts which emerge and are enforced in shadow economies by unofficial institutions. Using the example of Aymara merchants in Bolivia, I illustrate the emergence of complex trade in such informal settings.

ILO estimates that more than 80% of the labour force in Bolivia belongs to the informal economy. The informal sector is surprisingly heterogeneous: from street peddlers to importers of high-end technology, commerce and entrepreneurship expand outside of the overseeing reach of the State. In this context, the recent emergence of a prosperous indigenous elite casts doubt on broad generalizations of poverty and low productivity within the informal sector. Because such an environment is unregulated, contractability and the enforcement of agreements relies on social norms and networks of reputation. In this lecture, we examine the cultural and social conditions that permit the emergence of prosperous informal entrepreneurs in the Andes. Such a study contributes to the policy debate toward the creation of wealth in developing economies and the formalization of the economy.