Trust and development in Latin America

These days I was reading an analysis by lawyer Jaime M. Senior on the trust, which I believe accurately reflected what it is and what it is used for as a development engine. It held that a trust “is a figure of law that implies the creation of a legal vehicle that will be the holder (owner) of certain assets and rights that are provided to them. Although the holder is released from the ownership, he does not lose the right to receive the benefits, nor to establish the guidelines for its management.

M. Senior then added that the trustee is the manager, but not the owner of the assets, always adhering to the guidelines of a contract. It concludes that the decision is made to use a trust to “allow others who have the capacity and experience to manage them”, in direct relation to the regional trend of “seeking specialization in the management of certain assets and businesses to ensure and ensure that they obtain the best possible performance.

This regional trend has nearly 100 years of history, linked and motivated fundamentally to the Anglo-Saxon and North American “trust”. It all started in Panama, in 1925, the first country in the region with legislation on trusts; followed by Mexico in 1926, with the Trust Bank Law. Later it would be El Salvador, in 1937, with the Trust Law, and in Guatemala, in 1945, when this figure was introduced in the Constitution. Venezuela would follow (1956); Colombia (1971), Peru (1993) and Argentina (1995).

In the Dominican Republic, the first real effort lies in Law 189-11. There we find the trust in the real estate field, which has led to its development, especially in terms of low-cost housing, the creation of companies in the field and the mobilization of billions of pesos, benefiting thousands of families.

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Of course, everything is perfectible. Hence President Abinader will announce that on February 27 he will submit a bill to strengthen existing regulations on public trusts.

Two things are clear: the trust is a useful and effective vehicle for development, and it will grow in the coming years. This is confirmed if we take a look at the region, where we find that 49% of GDP in Colombia is housed in assets managed by trusts, while in Ecuador 17.5% of GDP is in Assets Managed by trusts. In the case of Panama, the second country with the highest economic growth in the entire region, it has 65.1% of GDP in assets managed by trusts.

The Dominican Republic has enormous growth potential thanks to reliable legal figures. It is no coincidence that Colombia or Panama, one of the largest and fastest growing economies, have half or more of their GDP in assets held in trust. Its reliability and profitability are proven, another thing is to confuse it with privatization or not support its application to certain goods or assets.



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