The ILD works with developing countries to implement property and business rights reforms that provide the legal tools and institutions required for citizens to participate in the formal economy.

[1][6] De Soto then believed he was spending too much of his time grappling with red tape and climbing over regulatory barriers, seeing this as nationwide problem resulting from excessive government regulation and concluding that the share of the Peruvian economy was an informal one.

[1] De Soto met with Friedrich Hayek, a free market proponent who helped create the Mont Pelerin Society, shortly after his return in 1979.

[1] With the help of Fisher and the Atlas Network, de Soto created the Institute for Liberty and Democracy (ILD) in 1981, one of the first liberal organizations in Latin America.

[1] In 1984, de Soto received further assistance from the United States president Ronald Reagan's administration, with the National Endowment for Democracy's Center for International Private Enterprise (CIPE) providing it first-ever grant to ILD, including funding and education for advertising campaigns.

[citation needed] When the Shining Path began to gain power during the 1980s, the ILD started a campaign to raise awareness about "the informal sector."

[8] In 1986, de Soto, Enrique Ghersi Silva of the Mont Pelerin Society and author Mario Ghibellini published the IDL's first book, The Other Path: The Economic Answer to Terrorism, calling for legal reforms.

The ILD proceeded to design a unique mechanism called "The Administrative Simplification Tribunal" to gather and evaluate proposals from citizens for deregulation and to check up on how various bureaucracies were responding to the dictates of the law.

To facilitate public participation, bright yellow boxes were placed in the ILD headquarters, in several government offices as well as at all the radio, television, and newspaper outlets to make it as convenient as possible for people to deposit their grievances.

Simultaneously, the ILD was conducting a national campaign to create public awareness of the issue and the advantages of integrating such a huge amount of extralegal property into the legal system, which reached its pitch when Peruvian pollsters confirmed that 80 to 90 percent of the population supported "formalization" of the poor's real estate assets.

[1] To assure that extralegal property was titled and recorded, the ILD helped to create a new organization, Registro Predial, and then proceeded to run it on behalf of the Government from 1990 until 1996.

[1][better source needed] Once the law was enacted, the government assumed direct control of the land title program and hired existing and former ILD personnel to manage it.

In September 1990, one month after Fujimori's inauguration, the ILD presented the new president with a draft law aimed at reducing radically the time required to obtain a license to operate a business legally.

In February 1992, the ILD proposed to the Peruvian public and government a draft of a new law that would allow all parties in conflict the option of an arbitration procedure that would solve their problems in a quick, inexpensive, fair and predictable way.