Latin America's crony capitalism.

• Author: Sanchez, Julian
• Position: Alvaro Vargas Llosa - Interview

In the 1990s, as countries across Latin America announced their embrace of market reforms, economists expected them to boom. Most stagnated instead. Independent Institute Senior Fellow Alvaro Vargas Llosa looks for the roots of the continent's problems--and a way to escape them-in Liberty for Latin America: How to Undo Five Hundred Years of State Oppression. Assistant Editor Julian Sanchez spoke with Vargas Llosa in August.

Q: What are the origins of Latin America's development problems?

A. We came under the control of Spain and Portugal at a time when those two countries were heavily corporatist, heavily mercantilistic. Spain passed about a million different laws in those 300 years, and you can imagine what that did. If you pass a million laws in any country, in any cultural environment, you're going to stifle any initiative or entrepreneurship. And that's what happened, so people became very cynical about the law. Evading the law became an objective in life. There are almost 30,000 laws today in Argentina. Only 4,000 of them are enforceable or applicable.

Q. How does state economic power insulate itself from reform?

A: Mexico's press through most of the 20th century was controlled not directly through throwing the owners or the editors of media outlets in jail but through economic means. Either the government owned the land or the building in which the paper was based, or it controlled advertising. Sometimes it was even more Machiavellian than that: At a time of crisis...