The Importance of Expensing Stock Options in Corporations

“Brokers may seem like clever fnancial experts, but they are frst and foremost salespeople” (Levitt, 17). The cold true about corporate america was revealed, but a question remanins.


Every time we look at the economic and fnance pages of a newspaper our eyes focus on the diversity of charts trying to visualize the fuctuations in the stock diversity. Those lines that move up and down became our guideline for evaluation of the possible trends a stock price may take. Unfortunately, no everyone thinking about investing in stock has the necessary knowledge to be successful. Investing on stock involve more than just looking at those lines in a newspaper because those lines does not reveal what is going to happen in the future value of stock prices. Instead, those lines are a storytelling of what has happened with a determined stock during the past. Due to this reason, it requires knowledge and expertise in fnance and economics to run a successful and proftable stock investment. As an alternative, investors rely heavily on the expertise economic advisors, brokers, and all sorts of stock gurus can provide them to make the balance.
A corporation seeking fnancial aid relies heavily on the expectation investors have on its future value, because they expect to have a proftable return by buying stock. Investors are the most valuable aid companies have, because investors provide the money capital for present and future economic development of companies. So, there is a strong relation tied between investors and economical advisors.
Investors need economic advice from stock savvies and economic advisors rely on the money capital from investors to make proft in their businesses. However, the lack of knowledge and blind trust investors had given to stock brokers and other gurus is being understood as a disadvantage. How can lack of knowledge be a disadvantage, if investors are paying advisors and brokers to manage their investments? The reason is far deeper than just a confict of interest. Arthur Levitt explains far in detail, “Wall Street frms viewed analysts as marketing tools” (Levitt, 69) and “Brokers may seem like clever fnancial experts, but they are frst and foremost salespeople” (Levitt, 17). Thus, there is a third knot in the rope, this knot is the relation brokers and economic advisors have with corporations.
Since disequilibrium governs in the future return investors should have, government agencies strive constantly for the creation of a fair market and better rules applying to the ways stock should be managed. In recent years, a trend of unmoral accounting practices and corporate behavior has melted several corporations. As Levitt points in one particular corporation,
Enron used accounting tricks to remove debt from the books, hide troublesome assets, and pump up earnings. Instead of revealing the true nature of the risk it had taken on, Enron’s financial statements were absurdly opaque. Auditors went along with the fction, blessing the off-the-books entities that brought the company down. Most analysts also played along, recommending Enron’s stock even though they couldn’t decipher the numbers. Analysts were foils for their frms’ investment banking divisions, which had been seduced by the huge fees Enron was paying them to sell its debt and equity offerings.” (Levitt, 14)
We realize investors are naked on a frozen street were rules are made to bring warm only to those who have a deep understanding of the stock rules and interests. Then, what about investors, aren’t they part of the game too? A closer look to the chess table point investors as pawns.
In an effort to avoid further manipulation of stock prices, the Financial Accounting Standards Board (FASB) failed to accomplish stock options to be accounted as an expense in the Income Statement of corporations. Levitt explains the reason, “The rule would have crimpled earnings and hurt the share price of many companies, but it also would have revealed the true cost of stock options to unsuspecting investors.” “Fearful of an overwhelming override of the proposal, I advised the FASB to back down.” (Levitt, 10-11) another reason for expensing stock options is the misuse of stock for tax avoidance. Companies have learned that it is possible to cut wages taxation by paying part of employee’s salaries in stock. The FASB explains in detail this mechanism, The conceptual roots of the drive to expense employee stock options can be found in the view that, by issuing stock options, companies are able to avoid the cash expense associated with other methods of employee compensation. Thus, a company that might have to pay $500,000 in salary to attract an executive might be able to acquire his or her services for half that amount with an offer of stock options. From the employee’s point of view the trade might be worth the difference in cash compensation because she believes that the company has good prospects for substantial share growth. The employee may also believe that she can enhance the likelihood or extent of that growth. In this example, the company has saved a hypothetical $250,000 by issuing stock options that do not appear--as would cash salary--as an expense on its income statement. The income statement, it is argued, thus understates the company’s costs in producing its income and overstates the company’s real earnings. (Hassett, 3)
If a corporation must expense stock options, how would they assign value to the expenses in curred in issuing stock? The answer would be the difference between the stock price initially issued minus the market price--fnal price at which an investor acquires stock--If this dif a value, then to account this expense in the balance sheet an account called “common stock option outstanding” (Cooke, 154) will be required. A numerical illustration is necessary to visualize the effect in the Balance Sheet of the Financial Statements of corporations. In the book Finance for Non-Financial Managers, Robert A. Cooke, exemplifed,

Common stock options outstanding $200,000
Less: Deferred compensation on stock options $160,000
Net common stock options outstanding $ 40,000

Or, you might see a fnancial statement with one line in the equity section of the balance sheet that reads, “Stock option transactions, net” followed by the net fgure (as the $40,000 above) There would also be some addition to compensate expense. (Cooke, 154)
If stock options being calculated as an expense seems to beneft investors and corporations in the long-run, why not enforcing it? It seems the debate about this proposal will continue on, due to the millions of dollars involved in daily transactions benefting everybody but investors—at least fairly—like it should be. Even though the US Securities and Exchange Commission (SEC) are being extra careful and the FASB keep pushing for newer reforms, it is important to accomplish this goal of expensing stock options for the creation of a fairer and better stock market(s) that we hope further generations will enjoy and pursuit for economic happiness.

Works Cited

Hassett, Kevin. “The FASB Stock Options Proposal. Its Effect on the U.S. Economy and Jobs.” 21 April 2004

Levitt, Arthur and Paula Dwyer. Take on the Street: what Wall Street and corporate America don’t want you to know; what you can do to fght back. New York: Pantheon Books, 2002.

Cooke, A. Robert. Finance for Non-Financial Managers. 2nd ed. New York: McGraw-Hill, 2004.

Quebradizo

Compuesto para un amigo mio que queria decirle adios a su amada,

Quebradizo

Un sombrío recuerdo me ha embriagado,

De aquel amor fortuito que aun estremece mi alma,

Tan siniestro el vacío que dejo os amor baldío,

Cuan profunda la herida que dejo tu indiferencia,

¿Cómo no podéis entender que os ame al desnudo?

~~~ ◊ ~~~

Si no existiese la memoria no hubiese fenecido mi confianza,

Ya que no puedo susurrar mas a vuestro oído,

He de escribir con tinta roja mi propia soberbia,

Despedirme de usted, a quien en mis plegarias os deseo buenaventura,

Si no existiesen juramentos no hubiese faltado al suyo,

Aquel conjuro que me dio con cada beso fue roto por vuestra tribulación a la cordura,

No es menester mas recordar vuestra dulzura,

No es menester mas recordar agrios momentos,

Os entrego lo ultimo que mi copa derramo,

Mi ultimo trago; al decirle adiós,

~~~ ◊ ~~~

¿Donde quedaron vuestras prosas que como trinos me conquistaron?

¿Donde quedaron aquellos deseos que os expresasteis?

La última mujer en mi vida tuvo sus ojos,

A los cuales no podría ver ni de sus labios escuchar palabra,

Seria como morder una copa sin esperar destrozar mis labios,

Seria como un atardecer sin ocaso con el martirio de vuestra reminiscencia,

~~~ ◊ ~~~

¿Dónde van aquellos amores fallidos?

¿Dónde queda tanto desconsuelo?

¿Dónde acaban los deseos truncados y las palabras dichas?

Solo DIO ha de guardar la inmaculada promesa que os di en el altar,

Solo DIO ha de guardar lo que os profese,

No os podré negar que sois parte de mi vida, y lo seréis,

En cada mañana taciturna,

En cada atardecer languidecido por tanta tristeza,

Vos estaréis allí presente,

En mis futuros desafíos no encontrare mejores refugios que en los bellos momentos que disfrutamos juntos,

Sin mas que desearos tenga una vida prospera, he de despedirme,

Yo, el zangolotino, aquel que una vez fue su servidor y amante,

Con mi pasión extinta hacia vos y sin reproche alguno, A mi cucciola,

AutoZone VS O’Reilly: A closer look to the auto-parts top retailers

AutoZone is a retailer store which is focused on the sale of auto-parts with more than 3,600 stores nationwide. AutoZone opened its first store in 1,979 in Forrest city, AR and since then it has expanded to become the leader in auto-parts in the U.S. However, how profitable is Auto-Zone within the industry? In order to answer that question a brief analysis of the financial statements of other auto-part retailers was necessary. Thus, here the numbers:

AutoZone total assets for the years 2003-2006

2006	2005	2004	2003
$ 4,526,306	$ 4,245,257	$ 3,912,565	$ 3,766,826

AutoZone total liabilities for the years 2003-2006

2006	2005	2004	2003
$ 4,056,778	$ 3,854,250	$ 3,741,172	$ 3,393,068

O’Reilly total assets for the years 2003-2006

2006	2005	2004	2003
$ 1,977,496	$ 1,713,899	$ 1,432,357	$ 1,157,033

O’Reilly total liabilities for the years 2003-2006

2006	2005	2004	2003
$ 613,400	$ 568,130	$ 484,540	$ 372,748

Debt/Asset ratios between AutoZone and O’Reilly

	Autozone	O'Reilly
2006	0.896	0.310
2005	0.908	0.331
2004	0.955	0.338
2003	0.900	0.322

The data was pulled from the following websites:

www.autozone.com

www.oreillyauto.com

The ratio of both companies is less than 1 which indicates that both company assets are financed through equity. Definitely AutoZone is in a better position than O’Reilly, because not only AutoZone has more assets but its assets are not based solely on debt. Another look at the financial statements reveals a more expansion and a good income derived from operations for the same years.

AutoZone has developed a close relationship with its suppliers which allow the company to provide information in real time to customers about availability of auto-parts, warranty information and other issues. AutoZone’s Znet computer system was developed with a synergistic perspective because it ties suppliers and inventory of each store altogether into a huge database. Thus, customers can get parts on hold on other stores and special order parts directly from the suppliers. This information sharing of its supply chain to the stores inventory seems not an advantage over AutoZone’s competitors, but a necessity tool to survive into its highly competitive environment. O’Reilly seems to have a similar computer system and Napa on the other side which has more rare parts than other auto-part retailers.

The auto-parts retail business is very competitive. Small auto-part stores have to compete with the giants AutoZone, O’Reilly, Napa, and recently the auto-part retailers online. The fact that these companies have been around since a long time emphasizes their close relationship with its supply chain, and a huge customer list. The bargaining power of buyers is high, so many auto-parts retail stores offer match-pricing, several discounts, promotions, and extra-services. In an effort to keep enjoying higher profits AutoZone carries several types of brands. Some of these brands are exclusive and the other brands, like Valuecraft, at very competitive prices—sometimes 2:1 on the price ratio.

On the other hand suppliers are not being squeezed because the retail business relays heavily on the quality of the parts delivered to the customers. AutoZone remarks this issue by providing lifetime warranty on its brand Duralast. The rivalry among existing firms is moderate. So, it is frequent to watch Autozoners pretending to be customers on the phone calling O’Reilly for prices—it happens vice verse. About auto-parts, there is not really a good substitute; unless everybody decided parts from a wreck yard are a better choice. But once again, an increase in the demand will pull prices up from our friends the salvage auto-parts.

It would have been impossible for AutoZone managers to achieve such success if they were in a constant fight with its suppliers for cheaper prices. Thus, it seems everybody has benefited from a successful symbiotic relationship of AutoZone towards stakeholders.

This work is copyrighted and belongs to the author. Its use is granted for academic use. If you desire to add part of the content of this essay to a website or give its content any other particular use besides the specified contact me at davalos@mayopi.com

Can a monetary policy based on price stability be a worldwide solution to unemployment and inflation?

Can a monetary policy based on price stability be a worldwide solution to unemployment and inflation?

Economics over the years has evolved into a complex mechanism where people look at to solve most of its problems. Just a hundred years ago, different countries debated their ideals about which economic model would bring economic prosperity not only for their citizenry, but how their ideals could serve as a model for the rest of the world. Today, we see a different world, a world that observed the failure of different economic models and now strives to foster stability by using economic instruments like the manipulation of interest rates, targeting inflation and fostering price stability as a recipe for boosting their economies.

In a effort to answer the question about if a monetary policy based on price stability could be a worldwide solution to unemployment and inflation, I have taken data from the central banks from different countries and compare them to see what is changing in those economies. Bellow are some charts comparing some Industrialized countries and their respective monetary policies.

Countries	GDP(PPP) $millions	Inflation Rate		Share of world GDP	Monetary Policies
European Union	$ 13,881,051	1.9	%	14.6%	Price stability targeting unemployment and inflation at a rate below 2%
UK	$ 2,121,766	3.54	%	Not considered independently because the UK is part of the EU	Monetary stability to promote stable prices and confidence in the currency. Inflation target of 2%
Japan	$ 4,170,533	0.3	%	6.3%	Solely focused on price stabilty
U.S.	$ 13,020,861	2.76	%	19.7%	Price stability by the use of the Feds three economic tools: (1)Open market operations, (2)Discount rate, (3)Reserve requirements

As we can see, these three countries have similar monetary policies; thus, their GDP are substantial as well as their Inflation rate are relatively low. Some countries like the E.U. have a lower inflation rate since their target inflation in a more efficient manner. In the charts we can see the US and EU has the largest GDP but the EU and Japan the lowest inflation rate. However in the case of Japan the lowest inflation rate was caused by a deflation effect that the country is going through.

In addition to it, there is no doubt that the two major economies are the US and the EU with a share of 19.7% and 14.6% respectively of the world’s GDP. Bellow there is a graphic chart where we can have a visual idea of the numerical interpretation significance.

It seems overall these industrialized countries are doing pretty good with their monetary policies in place. But, what can we say about unemployment behavior rates in those countries? The data was taken from Earthtrends (1)

Japan

Income Distribution (years vary)

Gini coefficient (0=perfect equality;

100=perfect inequality) 25%

Percent of total income earned by the richest

20% of the population: 35.7%

Percent of total income earned by the poorest

20% of the population: 10.6%

National Poverty Rate: X

Poverty Rate, Urban Population: X

Percent of population living on less than $1 a day X

Percent of population living on less than $2 a day X

US

Poverty rate 12.3%

UK

Income Distribution (years vary)

Gini coefficient (0=perfect equality;

100=perfect inequality) 37%

Percent of total income earned by the richest

20% of the population: 43.2%

Percent of total income earned by the poorest

20% of the population: 6.1%

National Poverty Rate: X

Poverty Rate, Urban Population: X

Percent of population living on less than $1 a day X

Percent of population living on less than $2 a day X

US

Income Distribution (years vary)

Gini coefficient (0=perfect equality;

100=perfect inequality) 41%

Percent of total income earned by the richest

20% of the population: 46.4%

Percent of total income earned by the poorest

20% of the population: 5.2%

National Poverty Rate: X

Poverty Rate, Urban Population: X

Percent of population living on less than $1 a day X

Percent of population living on less than $2 a day X

Europe (2)

Table 1 UNDP Human Poverty Index 2

	HPI-2 (%)	Poverty (%)	Short life (%)	Illiteracy (%)	Long-term unemployment (%)
Sweden	7.6	8.7	8.5	7.5	2.7
Netherlands	8.2	6.2	9.2	10.5	1.9
Finland	8.6	3.9	11.1	10.4	3.1
Denmark	9.3	6.9	12.7	9.6	1.5
Germany	10.4	5.9	10.5	14.4	4.9
Luxembourg	10.5	4.1	10.4	n.a.	0.9
France	11.1	8.4	11.1	n.a.	5.2
Spain	11.6	9.1	9.9	n.a.	10.2
Italy	11.9	12.8	8.9.	n.a.	8.1
Belgium	12.4	5.5	9.9	18.4	5.5
UK	14.6	10.6	9.6	21.8	2.1
Ireland	15.0	9.4	9.8	22.6	4.4

In this graph we can observe a EU with significant poverty rates with the UK and Italy leading with 106% and 12.8% respectively.

Income Distribution (years vary)			UK	US	Japan
Gini coefficient (0=perfect equality;
100=perfect inequality)			37%	41%	25%
Percent of total income earned by the richest
20% of the population:			43.20%	46.4%	35.7%
Percent of total income earned by the poorest
20% of the population:			6.10%	5.2%	10.6%
National Poverty Rate:			X	X	X
Poverty Rate, Urban Population:			X	X	X
Percent of population living on less than $1 a day			X	X	X
Percent of population living on less than $2 a day			X	X	X

In the comparison chart we can see that even though the US, UK, and Japan have a good GDP, they still have to deal with significant poverty lines and a huge gap in income distribution.

From the data above we can observe that a monetary policy focused on price stability and targeting inflation at a rate approximate to 2% can significantly reduce inflation, or keep it within desired ranges like a beast in a cage. However, unemployment rates and income distribution gaps are resistant to reduction because such rates are affected by different variables. In a different analysis I will take into consideration variables such GDP(PPP), Unemployment rates, and Inflation in order to see if there is a relationship between the type of monetary policy and the overall improvement of these variables.

Countries using Price Stability and Inflation as a target as their monetary policies	GDP(PPP) $millions	Inflation Rates	Unemployment Rates	Price Stability (1) Focus more on Inflationary targets (0)
European Union	$ 13,881,051	1.90%	7.90%	0
Japan	$ 4,170,533	0.30%	4.10%	0
U.S.	$ 13,020,861	2.76%	4.60%	1
Mexico	$ 1,149,000	3.40%	3.20%	0
Dominican Republic	$ 77,090	8.20%	16.00%	0
Panama	$ 27,551	2.60%	8.80%	0
Peru	$ 170,089	3.10%	7.20%	0
Chile	$ 209,852	2.60%	7.40%	0
Argentina	$ 671,508	9.80%	8.70%	0
Venezuela	$ 176,400	15.80%	8.90%	0
Australia	$ 718,400	3.80%	4.30%	0
Cameroon	$ 43,196	2.40%	30.00%	0
Madagascar	$ 17,270	12.00%	5.90%	0

From the data shown above we can say the following about GDP (PPP) and monetary policy:

Linearity: The residual plot indicates a violation of equal variation.

Normality: The values are normally distributed since the assumption about normality at the 0.2000 level of significance confirms non-normal distribution values. Also, there are some points outside the band on the expected normal plot.

Standard error of estimate (S y/x): if the estimated line is used; there is a typical error of $3,984,370 when predicting the GDP (PPP) in this sample.

R-Squared: 40.06% of the sample variability of the GDP (PPP) that can be associated with variations in the type of monetary policy applied.

-11,244,866 ± [(2.262)*(4147063.1847)]

-11,244,866 ± 9,380,657

We can say with 95% confidence that a change in the type of monetary policy is associated with a decrease of $11,244,866 in the average value of the GDP (PPP) with margin of error of ± 9,380,657.

Ho: b₁ = 0

H1: b₁ > 0

Reject Ho if t>2.262; t-stat= 2.712

We can say with 95% confidence that a change in monetary policy is associated with changes in the average GDP (PPP).

These results make sense, since the way a monetary policy is design will have a direct effect in the way the economy will behave.

From the data shown above we can say the following about inflation rates and monetary policy:

Linearity: The residual plot indicates a violation of equal variation.

Normality: The values appear to be normal.

Standard error of estimate (S y/x): if the estimated line is used; there is a typical error of 4.80 when predicting the inflation rates in this sample.

R-Squared: 2.64% of the sample variability of the inflation rates that can be associated with variations in the type of monetary policy applied.

0.0549 ± [(2.262)*(0.05)]

0.0549 ± 0.1131

We can say with 95% confidence that a change in the type of monetary policy is associated with a decrease of 0.0549 in the average value of the inflation rates with margin of error of ± 0.1131

Ho: b₁ = 0

H1: b_{1 ≠} 0

Reject Ho if -2.262>t>2.262; t-stat= -0.547

We do not have sufficient evidence to conclude that changes in monetary policy are associated with changes in the average inflation rates.

These results make sense, since the analysis is just a scratch in the surface. In order to see if there is or not a relationship we must examine other variables as government spending, trade influence, and other variables according to each country.

From the data shown above we can say the following about unemployment rates and monetary policy:

Linearity: The residual plot indicates a violation of equal variation.

Normality: The values are normally distributed since the assumption about normality at the 0.2000 level of significance confirms non-normal distribution values. Also, there are some points outside the band on the expected normal plot.

Standard error of estimate (S y/x): if the estimated line is used; there is a typical error of 0.07 when predicting the inflation rates in this sample.

R-Squared: 3.46% of the sample variability of the inflation rates that can be associated with variations in the type of monetary policy applied.

0.0937 ± [(-0.0477)*(0.0759)]

0.0937 ± -0.004

We can say with 95% confidence that a change in the type of monetary policy is associated with a decrease of 0.0937 in the average value of the inflation rates with margin of error of ± -0.004

Ho: b₁ = 0

H1: b_{1 ≠} 0

Reject Ho if -2.262>t>2.262; t-stat= -0.628

We do not have sufficient evidence to conclude that changes in monetary policy are associated with changes in the average unemployment rates.

These results make sense, since the analysis is just a scratch in the surface. In order to see if there is or not a relationship we must examine other variables as government spending, interest rate fluctuation, inflation, foreign investment, political stability, and other variables according to each country.

The analysis performed with these three variables: GDP (PPP), Unemployment, and inflation rates, reveals that a monetary policy is not more than an ingredient to the economic success of a country. However by the results of the data, it seems it is an important ingredient. The real success it is like an exquisite entrée, we can see and taste such a delicacy which in fact we give our critique. Oh! So exquisite –we say— or maybe we dislike it. However, only the chef is worried about the right combination of ingredients, amount of water, etc. I think the same is for economics. We look at the overall economy hungry for prosperity, but only in the kitchen is where the meal is cooking. There is no such a thing as an economic vaccine for hyperinflation and poverty. It is a combination of things that must come from the realities of the countries where the economic models are applied. Some of the countries like the US enjoy a model that fit it so well, because its economic model reflects the lives, preferences and others variables from its citizenry. The real problem lays in emerging economies. Such economies are new, and are changing from a different economical scenario and perhaps what is good for one its no good for everyone. Such is the case where countries applied different monetary policies as targeting inflation due to previous experiences with hyperinflation and it seems to be working better for them. In the following cartoon, I wanted to illustrate how wrong would be a politician to believe that applying a model from another country will fit perfectly that country without considering its own variables.

Author: DANILO AVALOS

On the other hand, third world countries seem to have a slow growth regardless of its monetary policy in place. This problem is based on the political turmoil of many South American countries, and the preferences of it leaders for leftward shift.

In the Economic Letter, published by the Federal Reserve Bank of Dallas, Mr. Wiliam C. Gruben and Richard Alm delighted its reader with an analysis of the political environment South America is living and its economical repercussion for those countries. In the article the authors explain, “Latin America can’t escape the fact that left-learning policies have historically been a drag on growth. Market reforms offer the region a chance to better itself, particularly in an era of globalization.” (3)

There are no doubt such variables as careless government spending in social programs, imposing price controls, price controls, and the creation of a hostile environment for private investments can sink any emergent economy. Such is the case of Venezuela for example, doesn’t matter Venezuela is one of the biggest oil exporters because its inflation rate is high and its economic growth is slow. Other countries like Peru are enjoying the fruits of a more free market environment with a low inflation, a substantial growth, and what it appears a bright future in the international trade arena. However, one of the biggest concerns for third world countries will be in enforcing property rights and to incorporate the poor into the formal market. In an interview made to Hernando de Soto by the Center for International Private Enterprise, Hernando de Soto explained the problem in the video titled, The future of Democracy and Market Economy in Latin America,

I think that we have always in Latin America had a pendular movement between those who would go for the market and those who will be against it –At least nominally so—and the reason for that, of course, it’s that whenever market reforms take place they don’t take into consideration the last two reforms of the Washington consensus. Which has 10 reforms, and the last two are for macroeconomic stability, stable currency, good property rights accessible for everybody, and entrepreneurial form of organization accessible for everybody. What we have seen in a recent study that we carried it out with the Interamerican Developing Bank is that literally about some 90% of Latin America businesses don’t have all the instruments to be ready for the market. Instruments such as limited liability. Instruments such as the possibility to issuing shares to be able to raise investment. Bonds, to be able to get finance. Good property rights to be able to get credit. Limited liability and asset shielding, to be able to demarcate how much risk you are going to take. In the case of Mexico the amount of companies that fit to complete the paperwork to export to the US through the free treaty agreements is 7%. In Peru is less than 2%.

…The state employs only a small part of the population, and the reforms do not get to the poor. So they tend to vote for some groups or support groups who are left oriented. It is not that people doesn’t like the market. If you walk to the street you will see people making deals. It is just very hard to implement legal reforms… The future for Latin America is the market. We are getting there, very slowly unfortunately. (4)

I don’t think it is necessary to add more to the explanation since the problem was exposed clearly by De Soto. However, even though there is a tough panorama in Latin America, there is hope to see a more market oriented economy as soon as the deep problems of such countries get solved. Most of the countries seem to have improved in the days required to start a business and closing business recovery rate as observed in the Economic Letter charts, and the market orientation indicators seems increasing. Definitely as De Soto said the market is the future for Latin American, and the poor its solution.

Words Cited

1: <http://earthtrends.wri.org>

2: Micklewright, John and Stewart, Kitty. Poverty and Social Exclusion in Europe. UNDP (2000) Human Development Report 2000 UNDP, New York

3: Gruben, William and Alm. Richard. Economic Letter. Insights from the Federal Rserve Bank of Dallas.Vol.2, No.7. July 2007

4: