Maquetación 1

Local Strategies for
Accessing Mobile
Telephony.
Functions and
Structures of the Informal
Market in a Low-Income
Area
Jaris Mujica
This study was carried out with the help of funds provided to the IEP
by the International Development Research Centre, Ottawa, Canada.
DIRSI – Diálogo Regional sobre Sociedad de la Información
LOCAL STRATEGIES FOR ACCESSING MOBILE TELEPHONY. FUNCTIONS AND
STRUCTURES OF THE INFORMAL MARKET IN A LOW-INCOME AREA
2007
MUJICA, JARIS
Local Strategies for Accessing Mobile Telephony. Functions and Structures of the Informal
Market in a Low-Income Area. Lima, DIRSI, 2007 - (Young researchers competition series, 2).
78 p.
MOBILE TELEPHONY; INFORMAL SECTOR; HUMAN SETTLEMENTS;
TELECOMMUNICATIONS; LIMA; PERU
This document is under a Creative Commons Attribution-Noncommercial-No Derivative
Works 3.0 Unported License. To see a copy of this license clic here
http://creativecommons.org/licenses/by-nc-nd/3.0/legalcode
Local Strategies for Accessing Mobile Telephony
Functions and Structures of the Informal Market
in a Low-Income Area
Jaris Mujica
Abstract
Cost limits access to mobile telephony in low-income areas: people living in poverty face the
problem of affordability. However, these individuals do not remain passive before this
difficulty; instead, they develop strategies to access telephony through other means. In this
respect, the informal market is essential because it is where many go to buy a mobile
telephone. This research focuses on the means and strategies for accessing mobile telephony
and its functions in Hatary Llacta, a poor neighbourhood in the City of Lima, and examines
the informal market structure and the functions of its actors: thieves, collectors of stolen
goods, resellers. The results of this study provide insight into the relationship between
demand of low-income sectors for stolen telephones, the informal market and telephone
companies.
Jaris Mujica (Lima, 1981).
Is an anthropologist with a master’s degree in political science from Universidad Católica
del Perú (PUCP). He has won more than a dozen prizes and research fellowships, including
the National Congressional Prize of the Republic, the Sur Prize, the School of Social Sciences
Award, the DAI-PUCP Research Prize, the GRADE-Ford Foundation Research Grant, the
National CONCYTEC Postgraduate Grant and an honorary mention in the CLAD Latin
American Prize competition, among others. He is the author of Economía política del cuerpo. La
reestructuración de los grupos conservadores y el biopoder (2007), and editor of Después de Michel
Foucault. El poder, el saber, el cuerpo (2006). He has also published numerous research articles
in Peru and abroad. His research focus is on political anthropology, power, crime, corruption
and transgression. Mujica has been a visiting lecturer at Universidad Nacional Mayor de San
Marcos and Universidad Jesuita Antonio Ruiz de Montoya. He currently works as a
researcher and teaching assistant at the PUCP. He is a member of Sur-Casa de Estudios del
Socialismo and of the Círculo de Estudios e Investigación Política (CEIP).
“There is a cultural paradox, which is also an economic truth:
only fraudulent imitation can still satisfy this thirst for
authenticity.”
Jean Baudrillard
The System of Objects
Acknowledgments
This research was made possible thanks to the generous support of The International Development
Research Centre (IDRC) and the Latin American Grant for Young Researchers that the Diálogo
Regional sobre Sociedad de La Información (DIRSI) awarded me in 2007. The support of DIRSI was
essential for the development of this study. For its part, the Instituto de Estudios Peruanos (Institute
of Peruvian Studies--IEP) managed this grant and disinterestedly supported the research project.
This study would not have been possible without the collaboration of the field team: Mauricio Cerna,
who provided excellent support in much of the data collection in the field, initially with the help of
Analía Luque and Rocío Limo, who also transcribed the interviews and organized part of the data.
The careful oversight by Dr. Roxana Barrantes was indispensable for organizing and exploring the
study ideas. Dr. Eduardo Villanueva helped revise the initial research framework and the current
state of affairs, especially with respect to information technologies. Likewise, the support of doctors
Cecilia Rivera and Nelson Manrique at the beginning of the study was vital. Thanks to all of you.
CONTENTS
Introduction ...........................................................................................................................................
9
1. The telephony phenomenon: regulatory framework, technology and informality in Peru ..... 12
1.1 The regulatory framework for telecommunications in Peru ...................................... 12
1.2 Telecommunications and telephony technology in the market economy ................ 16
1.3 Beyond the law: the informal market and the black market ...................................... 19
1.4 The phenomenon of telephony from a social science perspective ............................ 23
2. Hatary Llacta: and functions of telephony in a low-income area .............................................. 26
2.1 The hillside community of Hatary Llacta ..................................................................... 26
2.2 Fixed telephony: access, uses and functions ................................................................. 29
2.3 Complementary nature of telephony services in Hatary Llacta ................................ 33
2.4 Availability, accessibility and affordability in low-income areas ................................. 36
3. Informal markets and mobile telephony in Hatary Llacta ......................................................... 38
3.1 Informal markets as part of the formal system ............................................................ 38
3.2 Usury telephone services in Hatary Llacta ................................................................... 39
3.3 The incorporation of mobile telephony in social processes of actors ....................... 43
3.4 Access to mobile telephony through the informal market ......................................... 46
4. Thieves, technicians and resellers. The informal market and the black market ...................... 50
4.1 The structure of the informal market and the black market in Hatary Llacta ......... 50
4.2 The functions of informal “technicians” and networks of thieves ............................ 55
4.3 “La Bulla” and other groups of thieves. The crack of the black market ................... 58
4.4 The life of objects .............................................................................................................. 61
5. On the fringes of the mobile telephony market ........................................................................... 63
5.1 Las Malvinas, Paruro and Leticia ................................................................................... 63
5.2 Formal authorities and actors of the informal system ................................................ 65
5.3 The informal market at the service of mobile telephone companies ........................ 67
5.4 The “democratization” of access? ......................................................................................70
Final Thoughts ...................................................................................................................................... 72
Bibliography .......................................................................................................................................... 74
Introduction
Recent years have been ones of change. Changes in government policy, in the economy, in the ways
people behave, in the means of communication. Just as technology and globalization seem to have
taken root in the daily lives of new social actors, these people also have developed their own ways
of approaching and adapting the different processes of globalization and technology in their own
contexts.
Our countries have not been excluded from these changes and ways of approaching and
appropriating technology. On the contrary, in this part of the world, ways of working with technology
and market rules have been efficiently developed, but often outside the law. This is apparent in the
growth of the informal market, the establishment of a black market and the increased trafficking of
technology.
Mobile telephony is a key part of this process, a basic good of informal markets and black retail
markets of local technology and telecommunications. This is the focus of our study since we want to
identify the mechanisms that people use in daily life to access telecommunications technologies in
low-income areas, the methods of use, the functions and complementary nature of the different
telecommunications tools. To this end, we will study the ways individuals access a mobile
telecommunications tool, which means resorting to the black or informal markets in most cases.
To achieve our aim, we must explore the phenomenon of telephony in our country and how it has
been approached in research studies. Likewise, it is necessary to develop a comprehensive framework
and a methodology that enables us to study this phenomenon. We have divided this paper into five
chapters. The first chapter, entitled “The telephony phenomenon: regulations, technology and
informality in Peru,” briefly analyzes key legislation on telephony in Peru, as well as the use of
telecommunications technologies in the current economic context. In addition, the chapter discusses
how this regulatory framework is insufficient for understanding the phenomenon of access to
telephony from a social standpoint; thus the importance of complementing these studies with a social
science perspective.
The second chapter, entitled “Hatary Llacta: uses and functions of telephony in a low-income area,”
examines the community where the information was collected. Hatary Llacta is a low-income
settlement in the Lima district of El Agustino. It is located on a hillside of the same name. We review
the history of the community, its location, inhabitants and access to basic services. We then discuss
access to fixed telephony in the area, which is a key part of the strategies to access mobile telephony.
Subsequently, we examine the way in which individuals use multiple telecommunications media in
a complementary manner in an effort to reduce costs, and demonstrate that telephony service access
continues to be difficult due to the high cost of the service rather than to a lack of supply.
The third chapter, “Informal markets and mobile telephony in Hatary Llacta,” takes us to the heart
of the issue: the function of the informal mobile telephony system in this area in relation to telephone
usage patterns, fixed line rental, etc. This helps us understand the importance of acquiring a mobile
telephone in Hatary Llacta and the value of this telecommunications tool for inhabitants of this lowincome community. Here we identify a major obstacle: the formal supply is too expensive for the
precarious economies of local residents. In other words, with respect to mobile telephony, there is a
serious problem of affordability, or the capacity to pay for telephone service. But social actors are not
passive before this obstacle; they design strategies to get around it. The means of access is the informal
market.
The fourthChapter, “Thieves, technicians and resellers. The informal market and the black market,”
examines the structure of the informal and black markets in Hatary Llacta, as well as its key actors:
thieves, technicians, resellers, collectors of stolen telephones, etc. Moreover, it analyzes the function
of this informal system and the possibilities for telephony access it offers. The chapter also reviews
the trail of objects in this chain of social relations and informal trade.
Finally, the fifth and final chapter, entitled “On the fringes of the mobile telephony market,” comes
full circle. Here we discuss how the informal and black markets of mobile telephony in Hatary Llacta
are linked to the city’s large informal markets. We explore the basic structure of these markets and
their relationship with types of local power and authority. Finally, we study the link between the
formal market, that is, telephone companies, and informal trade of stolen objects in local black
markets, which will demonstrate that these markets are not incompatible, but actually mutually
beneficial for generating revenue.
Thus, the first two chapters are dedicated to building a social science framework for studying the
phenomenon of access to mobile telephony. These chapters examine the current state of affairs, and
propose a basic research question and an interpretation of the issue. Likewise they offer us a glimpse
of the situation in and characteristics of the local context. This section is tied to the third section,
which is devoted to building a link between the description of ways of accessing the technology, the
informal market and the black market: how these spaces permit access to technologies that are
frequently out of reach. The final chapters discuss the dynamics of these informal markets in the
field. They analyze their structure, actors, operational systems, transactions and relationship with
the formal market.
This research draws on data collected in the field over a 12-week period in May and June 2007. The
study design integrated direct collection of data on social practices through non-intrusive direct
participant observation with information gathered during interviews. Participant observation was
carried out by team members, who lived in a rented room in a private home in Hatary Llacta for
several weeks. This enabled them to directly observe the uses and functions of telephony and to
participate in the activities of local actors and the operation of informal channels. In addition, it
provided an opportunity to gain insight into the structure of groups of thieves, collectors and
redistributors of stolen objects, with whom team members established contact, through the purchase
of equipment and informal interviews. Team members were robbed on two occasions, which
permitted them coincidental access to information on networks of thieves and to later establish direct
contact with them, which proved invaluable for developing this research.
Other tools also were used: in-depth interviews (20 interviews were carried out) and focus groups (six
focus groups were organized), enabling team members to establish contact with different local actors.
In addition, several informal interviews were conducted, giving team members the opportunity to
collect information from actors who would not agree to recorded interviews: thieves, technicians,
etc. Subsequently, basic data were collected through in-depth and informal interviews with former
employees of telephone companies, traders and technicians in the markets of Las Malvinas, Paruro
and Leticia. In addition, the team interviewed several employees and managers of telephone
companies. Many of these meetings were recorded, with permission from the interviewees, but
without the explicit authorization of the companies, for which reason we were asked not to name the
companies or the employees.
Our aim is to recover a place for a research topic that has received little attention. The idea is to think
from outside the system, to reflect on what appears to be a simple residual effect of the regulatory
framework, but which is actually often an essential part of it, and vice versa, because this framework
is also an integral part of the informal system.
Lima, October 2007
1. The telephony phenomenon: regulatory framework,
technology and informality in Peru
In light of the need to regulate, control, generate revenue and optimize telephone service,
telecommunications research, legislation, engineering and economics are closely related. Generally
speaking, the goal is to generate goods, develop technologies, economic policies and effective,
efficient laws in a free market economy. Anthropological and sociological research is still limited in
this field, as are studies that examine the practical relationship of social actors with
telecommunications systems in their daily lives.
The research gap in this field is quite large since in Peru, economic studies have not been
complemented by sociological research to provide insight into the practical, effective ways in which
individuals relate to mobile telephony. Thus, it is important to examine the ways in which social
actors use telephony, the functions they assign it and the means of access to it they develop. Here we
concentrate on the function of the informal and black markets, which are driven by daily
consumption. This research focuses on the ways in which individuals access those markets, their
reasons and ties with daily life. To this end, we explore how the regulatory framework is organized,
how the technologies have developed and how the telephony market has changed in our country.
1.1 The regulatory framework for telecommunications in Peru
The growth of the telecommunications market in Peru has advanced along with some open market
policies that followed the Washington Consensus. This process was made possible thanks to a legal
system which, among other things, enabled the privatization of state companies. The privatization of
the Empresa Nacional de Telecomunicaciones (National Telecommunications Company-Entel-Perú)
and the Compañía Peruana de Teléfonos (Peruvian Telephone Company-CPT) gave Telefónica del
Perú a five-year period of limited monopoly for the fixed telephony sector and a four-year period for
the mobile telephony sector.
Although the fixed telephony infrastructure was expanded and modernized, the beneficiary
population was concentrated in certain urban sectors, whereas in rural areas, expansion of telephone
service remained limited, as it did in poor and low-income urban areas. Economic research on access
to telephony service has demonstrated that despite a range of tariffs, the high costs of the service,
combined with a factor of economic uncertainty, influenced users’ decision on whether or not to
access this service. Despite this difficulty, studies also indicated that mobile telephony, which exceeds
the number of fixed lines, has become a means of access of the poor to the telephony system, with the
prepaid system being the one with the most users (often through the black market or the informal
market).
It is argued that the development of information technologies is closely associated with the goal of
achieving universal access to these technologies. A strong economic component drives this
development because the information society has an economic aspect that guides technological
development and the regulation of telephony service.
Mobile telephony legislation forms part of the telecommunications regulatory framework. This
framework occurs in a legal context that dictates the relations between civil society, the private sector
and the government (Codesi 2005). In these relations, the government is responsible for developing
a regulatory framework that satisfies society’s need to access information and establishes an
environment conducive to the development of activities of private firms. The law strives to promote
“social, personal, economic and cultural development in a context of equity” (ibid: 3) in such a way
that innovations in communication technologies are no longer viewed as a purely economic concern
(Mestre Delgado 2003). Notwithstanding this attempt to take a holistic approach to the
telecommunications industry, the laws regulating it are based on a liberal economic premise: equity,
integration of marginalized groups and the expansion of possibilities of information access should
occur through the liberalization of the communications technology market.1
In Peru, the telecommunications industry was regulated from 1971 to 1991 by Law Decree No 19020,
enacted by President Velasco Alvarado. This law promoted the nationalization that led to the
withdrawal of private firms operating in the country since the communications media were
expropriated in the 1970s (Cauvi and Martínez 1999: 875). When the private companies withdrew,
their responsibilities were transferred to companies managed by the Peruvian government. Thus,
CPT enjoyed a monopoly in telephone service in Lima and Entel-Perú became the national and
international long distance telephone carrier (Perla Anaya 2001: 15-16).
In the telecommunications field, the government policy of the Velasco Alvarado administration
focused on creating labour communities and a regulatory framework designed to regulate legal
relations between national telecommunications firms and citizens. Thus, it fostered the continuation
of telecommunications legislation dating back to 1916, which was implemented by the Dirección de
Correos y Telecomunicaciones (Postal and Telecommunications Office) (Sandoval Courriolles 1975:
13). These legal provisions were not substantially different to those of the General
Telecommunications Law enacted during the Velasco government, since the main duties (with respect
to government control) were to direct, promote, conduct and control everything associated with the use
of information technologies. According to that law, telephone service was to be administered by “an
authorized entity or firm” charged with satisfying the demand for local and long distance telephone
service (Ibidem: 547-548). Likewise, it differentiated between local, urban and rural telephony service
to enable the government to build a telephone network that integrated these spaces based on
sociocultural, economic and geographic distinctions that would permit establishing tariffs for
telephone service.2
1 This interpretation is based on Law No 28900 (2006), “Law that recognizes the Telecommunications Investment Fund-FITEL as a body corporate
of public and private law, assigned to the transport and telecommunications sector” and Supreme Decree No 049-2003-MTC.
2 Articles 44 and 45 of the General Telecommunications Law, Modifying, Expanding and Associated Provisions, 1974.
When the military government ended, the communications media were returned to their owners.
Nevertheless, during the 1980s, telecommunications networks did not expand and remained in
government hands. These networks began to deteriorate during the country’s armed conflict. With
legal modifications during the government of Alberto Fujimori, telecommunications legislation took
a new turn, together with all government policy,3 in line with the Washington Consensus (Franke and
Mendoza 2001). These changes enabled private telephone companies to compete for a five-year
exclusive operating license. In this way, the new legislation sought to accommodate market laws
through the creation of a monopoly which was in the hands of Telefónica del Perú from 1994 to 1999
(Osiptel 2002; 2004b; Perla Anaya 2001). Therefore, the legal context promoted a restructuring of
telecommunications based on:
[…] the modernization of the sector in a context of free and fair competition that has the main objectives of promoting private investment and achieving economic efficiency in service provision” (Cauvi and Martínez 1999:
877).
The legislation established that Telefónica del Perú would have a limited monopoly period of five
years for fixed telephony as well as national and international long distance service. By contrast,
mobile, internet, cable television and local telephone service continued to be protected under free
competition legislation (Osiptel 2004a). This is essential for understanding the logic of the mobile
telephony market and its exponential growth (both formal and informal).
The new legislation and the privatization of telephone companies had an impact on the number of
individuals who had access to telephony services. From 1994 to 2005, the number of fixed telephone
lines tripled and the number of mobile telephones increased by 59 times (Codesi 2005: 4).
The Multisectorial Commission for the Monitoring and Evaluation of the Development Plan for the
Information Society in Peru (Codesi) indicates that the number of fixed telephone lines increased
from 760,000 to 1,990,000 from 1994 to 2005. Mobile and public telephony also increased during that
period. The number of mobile lines rose from 52,000 to 3,769,000, surpassing the number of fixed-line
telephones beginning in 2001; and the number of public telephones rose by 28% (Ibidem: 30). This
increase has been gradual and indicates that in 2006, the number of fixed landlines installed was
2,811, 441, and there were more than 2,400,512 active lines.
In addition, the number of mobile telephones increased.4 Currently there are 8,762,479 mobile lines
and 158,000 public telephones (Osiptel 2006).5 Although telephony services were developing in the
cities, rural areas lagged behind (Franke and Mendoza 2001). It is not clear how telephony is used in
urban areas and how many “pirata”6 fixed and mobile lines and receiver devices exist. According to
3 Legislative Decree No 757 of the Framework Law on Private Investment states that “[…] the Peruvian government guarantees free private
initiative, that the economy is based on free competition and the free access to economy activity, that free competition implies that prices
result from supply and demand and that with respect to basic public service delivery, the government will promote the participation of the
private sector in an effort to improve the quality of these services, and these being the only ones that will establish tariffs.” (Cauvi and
Martínez 1999: 877).
4 “Compendio estadístico 2006.” In: www.osiptel.gob.pe
5 “Compendio de estadísticas de los mercados de servicios públicos de telecomunicaciones al 2006.” In: http://www.osiptel.gob.pe/index.asp?
t=t&idbase=2635&p=%2fosipteldocs%2fgpr%2fel%5fsector%2finformacion+estadistica%2fcompendioestadisticas2006v04abril%2epdf
6 In this text, the colloquial term “pirata” is synonymous with bootlegged.
the Organismo Supervisor de Inversión Privada en Telecomunicaciones (Regulatory Agency for Private
Investment in Telecommunications (Osiptel), in 2006 alone, 1,163,347 mobile telephones were stolen or
lost.7 Nevertheless, it should be noted that growth of mobile lines and sale of handsets has been
explosive. This growth, together with liberalization, has occurred along with the rise of the black and
informal markets of mobile telephony and of new mechanisms of access to these devices, an area that
has avoided regulation.
From the 1916 General Postal, Telegraph and Telephone Regulations of Peru to the latest modification of
the Regulations of the Telecommunications Law, the services that make telecommunications possible have
been classified according to their characteristic uses (public, private, long distance or local, etc.).
Subsequently, classifications became more complex. Thus we moved from distinguishing telegraph and
telephone services to carrier services, teleservices or final services, mobile service, public teleservices, private
teleservices, dissemination services, public-interest private radio broadcasting services and value-added
services (Sandoval Courriolles 1975; Osiptel 2004a).
Currently, telecommunications are regulated by the “general regulatory framework of that sector;
the General Telecommunications Law and its Regulations; the Policy Guidelines for Opening of the
Telecommunications Market, the Interconnection Regulations, Tariff Regulations and the Regulations
on Violations and Sanctions; as well as the Concession Contracts and specific legislation for each
service” (Osiptel 2004b: 9). In that context, fixed and mobile telephony in Peru are categorized as
“teleservices or end services.” In addition, they are classified as a public teleservice. Telephone service
provision takes into consideration the existence of some subscribers and of an infrastructure (mobile
terminals, fixed terminals, public calling centres and coin-operated telephones) 8 that can be provided
by “independent operators, including firms or individuals that are authorized by the Ministry to
provide these services” (Ibidem: 31).
According to telephony legislation, any individual or company that is authorized by the Ministry of
Transport and Communications may be considered an independent operator, for which reason they
may request a mobile or fixed telephony concession, and one or several telephone lines that may be
used as public telephone booths or public call centres. Those who trade or market a
telecommunications service are qualified as follows: simple merchants (those who, after registering
with the Commercial Registry, can offer their services without having a telecommunications
concession) or concessionaries (those who have a concession to provide telecommunications services
after registering with the Commercial Registry) (Osiptel 2004c: 13).
One aspect of telephony legislation that deserves attention is the interconnection mandate.9 This
mandate stipulates that operators must guarantee the interconnection of users affiliated with the
different operators that form part of the telecommunications market. Therefore, telephone service
7 La República daily, February 28, 2007. In: www.larepublica.com.pe/content/view/145216/34/
8 Coin-operated telephones, also known as teléfonos bodegueros, are telephones that are installed in small grocers and in small shops in general
for rental of calls in exchange for a payment each subscriber freely establishes. This subscriber must then pay the telephone company.
9 “Interconnection is of public and social interest and is therefore mandatory […]” (Osiptel 2005: 125).
networks are expected to work as a single network (Osiptel 2001: 27-28; Dussan, undated: 20). In
addition, the General Tariff Regulations establishes two tariff structures: regulated and supervised.
In the regulated structure, the maximum tariffs of service operators are established by Osiptel,
whereas in the supervisory structure, the operator freely sets its rates (Osiptel 2004a: 18).
All of this, set forth in the laws and regulations, generates an immediate doubling in the mechanisms
of action of individuals. Thus, in practice, we find many more actors than those stipulated by law,
actors who trade telephone devices and lines, concessionaries who are part of these networks, etc.,
as well as ways of using these norms to benefit them or simply evading these regulations. Therefore,
in order to understand the practical function of regulations, we must understand what takes place beyond them.
1.2 Telecommunications and telephony technologies in the market
economy
The regulation of telephony functions together with the technological development of
telecommunications and the rules of the market economy. Here, we will explore how the formal rules
of the game, which have permitted the opening of the market, have changed substantially, but have
not necessarily permitted access of the low-income population to these services.
Although some argue that the information society is the result of three processes – information
exchange, creation of a legally-based institutional framework and technological advances
(Bustamante Belaúnde 2003: 19), the situation is actually more complex. In principle, policies have
been designed to regulate each of the three processes. These policies attempt to make information
exchange equitable, permit human development and provide services in a legal framework; to
regulate the most appropriate forms for safeguarding the well-being of producers, distributors and
providers of telecommunications services, devises and users; and to foster the development of
technology to respond to criteria of quality and need for some specialized uses by social actors in
the information society (Freeman 1990; Codesi 2005; Clemente Medina 2007). Of course, in theory,
all of this is established by law. However, as we have seen, the information society is a more complex
category in which other factors and actors must be taken into account, including those of the
informal sector.
Thus, while some underscore the need to “democratize access” to equipment and services, the
development of telecommunications engineering is and has been seen as a political strategy of
investment to achieve private and public economic growth. We could argue that despite efforts to
safeguard the rights of citizens, there is a strong bias toward business interests (Paredes 2002; Torres
2002; Osiptel 2001, 2004; Castillo, undated). The interests of that sector rather than the demands of
citizens may determine the possibilities for improving and expanding access to telecommunications
technology. Generally speaking, telecommunications technology is the means through which signals
are transmitted and received between two or more points located at a distance. These transmissions
are made possible thanks to the existence of optical media, radio frequencies and cables (Castillo
undated; Huidrobro 1999b; Rivadeneyra 1998).
Fixed and mobile telephony networks require a structure to activate the exchange and transport
systems. This structure is composed of exchange stations, transmission media and user telephone
devises. Moreover, it should establish differentiated segments to satisfy telephone service needs of
users throughout the country. For this reason, the existence of urban, interurban and international
networks is necessary for the efficient administration of the telephone signal.10
The advantages of mobile telephony are the mobile nature of the telephone device, characterized by
its broad coverage and efficient use on the electromagnetic spectrum,11 without the need for a system
interconnected with cables (Osiptel 2001: 97). The functions of the mobile handset surpass those of
traditional telephony, which does not permit the exchange of images or the written word and which
requires that the telephone number be changed if the devise is transferred to a physical space different
to that of its original installation.
As in other countries, “traditional” telephony coexists with incipient Internet Protocol (IP) telephony
in Peru. The latter was made possible when Telefónica del Perú switched from the analogue network
to an integrated service digital network (Ibidem). However, this system change affected the network
without modifying subscriber status. Consequently, there is a digital technology telephone network
and a large number of subscribers that continue to have analogue service.12
Although telephone system access has increased since 1994 and the number of mobile telephones
had already surpassed those of fixed telephone services by 2001, Peru continues to have a low
teledensity compared with other Latin American countries.13 This situation has had an impact on
high mobile telephony costs and the absence of new telephone network operators (Álvarez 2005: 41;
Guerra 2006: 1; Dussán, undated: 15). At the same time, it has fostered the growth of active informal
and black markets (although this is not the only explanation for this phenomenon). Nevertheless,
the rise in the number of mobile telephones suggests that users prefer that system to the fixed
telephony system (Barrantes, undated: 9).
In Peru, the Telecommunications Law (1991) favoured the opening of the telecommunications
market. This is how the Telefónica consortium entered the Peruvian market. It could be argued that
this process of market opening responded to what Dussán (undated) calls the search to resolve gaps
in efficiency and access. Dussán says that regulation should resolve the problem of inefficiency in
the management of policies to administer public goods or services through the privatization of
public operators, the introduction of competition and the creation of a stable legal framework;
whereas gaps in access should be addressed through policies to develop infrastructure in the poorest
regions.14
During the period of limited monopoly of Telefónica, telephony networks expanded, technological
conditions improved and tariffs were established to prepare the telecommunications market for the
development of free competition. This process had an impact on the increased number of operators
10
11
12
13
14
José Manuel Huidobro Moya and Rafael Conesa Pastor (1999: 15).
Ibid: 79; Ranu Castañeda and Eduardo Álvarez (2005).
Oral communication provided by Alex Chávez, Osiptel engineer and professor at the Catholic University of Peru (PUCP).
See: www.osiptel.gob.pe/index.asp?t=t&idbase =2752&p=%2fosipteldocs%2fgcc%2fnoticias_publicaciones%2fpublicaciones%2ffa-00.htm
Despite the increase in telephone lines, Dussán points out that this process has not been equitable. Growth was greater in urban areas than
in rural ones. According to the UIT, in Peru, only 8.74% of rural communities had telephone service in 2005.
and fixed and mobile telephone lines. Between 1994 and 1999,15 Peru “managed to align service tariffs
with production costs and therefore eliminate cross subsidies among services” (Osiptel 2001; 2004b:
29).
The opening of the Peruvian telecommunications market that occurred during the 1990s resulted in
the continual growth in the number of operators. This led to an increase in the number of telephone
tariff and line offers, in line with tariff regulations and the modernization and expansion of telephony
infrastructure. According to Martinelli and Miravite, in Peru, as in other countries, subscribers can
choose from several tariff plans. Telefónica del Perú offers two types of local telephony plans: open
and flat-rate.
[…] some of these plans are open and roughly correspond to what in the literature on non-linear pricing are
known as three-part tariffs. A three-part tariff consists of a fixed monthly fee, a number of available minutes without additional change and a per-minute rate for calls beyond the minutes included […] Other plans are “flatrate” and are differentiated from the former in that in order to make calls in excess of the included minutes, the
consumer must use a prepaid card. These plans also correspond roughly to the three-part tariffs, with two major
differences: (1) the cost per additional minute incorporates the possibly idiosyncratic inconvenience to the consumer of using a card; and (2) the use of the card enables the consumer to better control his demand throughout
the month, which can have an idiosyncratic value for the consumer (Martinelli and Miravite 2005: 4).
Of the 26 tariff plans that Telefónica offers, 17 are “open” consumption plans whereas the remainder
are “flat-rate.” These options offer users a range of possibilities that lead to a “rational decision”: the
subscriber will choose the telephone plan according to the telephone usage he wants (Ibidem).
Nevertheless, the model developed by Martinelli and Miravite does not consider an aspect that López
(undated) proposes for understanding access to the telephony system in contexts of economic
uncertainty, when household income is very low and expenses considered necessary need to be
covered to maintain the household, the best choice is not to spend on telephone service. In that case,
the “economic rationale” indicates that expenses need to be prioritized. Telephony may or may not
be an expense to be included in the consumption basket of a household with unstable income. Many
low-income individuals choose informal alternatives that permit access to telephony services at a
minimal cost. Frequently, they do so by purchasing devices and lines in the black or informal markets.
This raises a key issue. Participation in the telephony system, or the lack thereof, involves the issue
of telephony access. According to Milne, cited by Barrantes, all definitions of access to telephony
service imply the consideration of three components: availability, accessibility and affordability
(Barrantes, undated: 11). Whereas the first two components refer to the non-discriminatory supply
that operators may offer, affordability refers to the capacity to pay for telephone service. In this regard,
Barrantes says that affordability indicates the existence of a barrier effect (cannot access) and an
inhibitor effect (a call is not made).
15 Although the monopoly period ended in June 1999, the market opening was moved ahead of schedule, to August 1998.
The literature on accessibility of poor sectors to mobile and fixed telephony postulates that despite
the variety of tariff plans offered, there is limited access to the traditional telephony system in Peru.
Globally, there is a tendency toward growth in the number of mobile telephone users. In developing
countries, the use of this telephony system also demonstrates the preference of the poor for mobile
telephony because it offers more tariff possibilities. In this regard, rather than showing a relationship
between high earnings and use of mobile devices, this system offers a possibility of social access for
low-income social actors (Barrantes, undated; López 2005; Dussán, undated; Mariscal, undated).
With respect to accessibility, Franke and Mendoza (2001) indicate that while the quality of the
telephony system has improved and the network has expanded, telephone service is still expensive.
Oscátegui (2001) believes that this is the reason telephone costs in Peru are among the highest in the
region, despite the variety of tariff plans.16
The Peruvian population in general, and low-income sectors in particular, have no or only limited access to the
service. As a result, they can only buy limited calls […]. (Franke and Mendoza 2001: 35).
We have a problem, then. The development of and considerable advances in telecommunications
technology, the market opening and the expansion of telephony supply do not necessarily enable
low-income individuals to access this service. At the same time, the construction of a growing, broad
formal market is accompanied by the development of an informal market (which is also growing
and wide), and with practices that evade, exceed or violate telephony regulations.
1.3 Beyond the law: the informal market and the black market
Thus, just as the law never functions alone, but rather has “double” systems that violate it (that is, the
law is never complete by itself), technology is not a simple aseptic development that becomes
integrated in social relations in accordance with the mandate of the market. Technology is also resignified, reconstructed, reused in daily life, sometimes following market rules and at others, working
against them. However, both ways are frequently integrated and the informal becomes a basic
component of the formal.
The celebration of a contract between a subscriber and a telephone service provider implies a series of
obligations and rights that concern both parties (and which they do not always fulfill). This
relationship is guided by a legal framework that also provides a regulatory framework to ensure
continuity and business development for those who “exploit” telephony service. It also guarantees
fulfillment of technical procedures that these companies must complete to satisfy the demands of
the population. These considerations are condensed in the “conditions of use.”17 These stipulate
that the subscriber has a right to receive information with respect to telephone tariffs, periodic
billing, addresses of payment offices and penalties and their consequences. The subscriber or user
16 According to GDLN-PERU-PUCP (2005: 3), “The bottom of the pyramid of consumers in global markets is no longer a barrier to business
development; rather, it is an opportunity. This requires that businesses develop radical innovations in technological and development models
[…] this is where rural telecommunications are found.”
17 In:http://www.osiptel.gob.pe/Index.ASP?T=T&IDBase=3381&P=/OsiptelDocs/GCC/SOBRE_Osiptel/preguntas_frecuentes_DCR.htm#P1Q1
of a telephone line enjoys these rights because he fulfills several obligations with the service provider.
The user must agree to duly use the service (as per the subscriber contract), comply with contract
conditions, opportunely pay for the services received, and to obtain authorization if he wants to
provide public telecommunications services.18
With respect to regulations on the use of telephony devices and networks, in the local, national or
international area, when the subscriber carries out the following actions, he is considered to have
committed undue uses (serious violations).19 First, to use telephony services to “make telephone
calls in the country, for the purpose of obtaining a return call with a dial tone with an invitation to
dial, from a basic telecommunications network located outside the national territory”
(Telecommunications Regulations; Perla Anaya 2001: 157). Second, when the subscriber makes a
“contract with national or foreign entities to channel his telephone communications through other
countries, without the intervention of operators of local fixed or mobile telephony service (Ibidem).
Third, when he acquires “a telecommunications service from an individual or corporation not
authorized to provide it” (Ibidem). Fourth, when he acquires devices that do not have a certificate of
authenticity since these goods can generate interference in the telecommunications network or cause
damage to the networks and may not guarantee the safety of the user.20 In addition, the regulations
stipulate that “operators cannot condition service provision on the acquisition of its equipment, goods
or services” (Ibidem).
This regulatory framework permits an understanding of the general boundaries that formality
establishes with respect to telephone usage. At the same time, it raises a key issue and underscores
one of the limitations of the research on this topic since actors constantly evade the law and find
ways to use the services, lines, signals and devices in accordance with their own interests, to “take
advantage” of them. These are not passive users who face unknown technologies, but rather people
who seek ways to use them to their own advantage and to give them a practical function in daily
life, making access less expensive and facilitating telecommunications.
To gain a better understanding of this issue, we must modify the common perception of the informal
market, which is the broad term we will use to define that which evades regulation or legality, within
which several forms of the informal are constructed: for example, black markets, underground
markets and contraband systems or bootlegging. All of these are informal systems with special
characteristics. Nevertheless, these terms have often been used interchangeably.
Many authors have stated that there are “black markets” of telephony, currency, vital organs, drugs,
etc. Nevertheless, few have tried to define the term black market. Generally speaking, this reflects
the fact that journalists and economists appeal to common sense when using the term rather than
define it.
18 In: http://www.telefonica.com.pe/noticias/pdf/cinformativa.pdf
19 Violations have penal or civil responsibility.
20 Interpretation based on the Standardization Law.
Bourdieu says that this “common sense” indicates that black markets are spaces where goods and
services are traded that are characterized by their informality, illegality and therefore, harmful to the
entities that trade those goods and services because they do not receive revenue. Since these markets
evade taxes, governments do not receive tax revenue. Nevertheless, consensus exists that black
markets fulfill a useful function since, as Nowak says, they mitigate “the negative repercussions of
quantitative restrictions on the allocation of resources” (Bejler 1977; Tanzi 1983; Nowak 1985;
Goldberg and Karimov 1992):
[…] the underground economy can be defined either as the total income not declared to tax authorities, or as the
total income not included in national accounts (Tanzi 1983: 10).
In an article published in the journal Desarrollo y Finanzas,21 Vito Tanzi examines the causes and
consequences of the “underground economy.” Tanzi maintains that the “underground economy”
can be qualified as black, informal, parallel and unofficial because it goes against the rules, violates
prohibitions established by law and promotes (or perpetuates) bureaucratic corruption. Although
society as a whole is harmed (Nowak 1983), the underground economy:
[…] is a relatively legal practice compared with fully criminal activities that sometimes escape official attention
and it can distort government statistics and lead to erroneous policies (Ibidem: 10).
In countries with difficulties in the balance of payments and with insufficient reserve levels or debt capacity to
maintain the official exchange rate, black market activities will be well developed and organized, even being
permitted despite being deemed “illegal” (Febres 1990: 72).
Consensus exists that these types of considerations (“relatively informal”) respond to all types of
restrictions, increased economic regulation and increased taxation. In summary, the “black market”
is the result of economic policies where the market does not function properly. This has an impact in
that:
[…] in several countries, black market transactions are officially tolerated, although strictly speaking,
they are illegal (Nowak 1985: 21).
The literature on the existence of black markets indicates that “fluctuating goods” determine the
existence of different types of black markets. Thus, it is possible to distinguish between trafficking of
currency, goods, individuals, vital organs, drugs, etc. (Bejler 1977; Tanzi 1983; Nowak 1985; Febres
1990; Goldberg and Karimov 1992; Schweimler, undated).
Despite the great variety of “fluctuating goods,” the literature on the black market has concentrated
on three topics: currency trafficking; labour informality; and violations of intellectual property and
property rights (bootlegging). It has not focused on the parallel trade of objects, such as mobile
telephones. In Peru, social science literature on this topic is non-existent.
21 Desarrollo y Finanzas is a quarterly publication of the IMF. The article cited appears in the December 1983 issue.
Qualifying the black market as informal has also been studied from the perspective of labour
practices. Part of this research seeks to understand the implications of incorporating informal
activities in market activity and, in this way, promoting the development of capitalism with a view
to greater social development (De Soto 1987; Yamada 1994 and 2004; Mosqueira 1999; Franke 2001;
Tripa 2001; Trebilcock 2005). Others view informality as a social inclusion strategy that is practiced
by emerging social sectors (emigrants) but they do not advocate the incorporation of those sectors in
a capitalist market (Matos Mar 2004; Golte 1990; Adams and Valdivia 1991). Despite this difference,
both research trends recognize that the informal economy responds to some social, economic and
political factors that impede the social insertion of the poorest citizens in the formal labour market,
for which reason so-called informal or own-account employment (Yamada 1994) also can be included
in the category of jobs that do not meet the criteria for “decent or appropriate work,”22 in other words,
that do not provide minimal social security protection to workers.
The International Labour Organization (ILO) has used the concept of informality to refer to economic
activities in a market of low productivity resulting from the lack of or limited use of appropriate
technology, the use of unskilled manual labour and low earnings. In that context, activities of families
or microenterprises are classified as small economic units not registered with government regulatory
systems. This definition concentrates on the concept of informality with respect to production and
labour conditions without qualifying the term “black markets.”23 Nevertheless, this concept does
not avoid the economic and legal definitions that suggest that “black,” “ underground” and
“informal” refer to the same phenomenon: the evasion of tax laws in ways that can violate formality
through corruption and, generally speaking, non-compliance with regulations. In addition,
informality is a general concept, which makes understanding the phenomenon difficult in a context
where heterogeneous economic units exist (Aliaga 2002: 11).
Here we will use “black market” to mean the space where goods are accumulated and speculation
occurs through the parallel sale of a stock, in a situation of scarcity (or the construction of scarcity).
In other words, these markets can determine prices of certain goods, offering them parallel to the
formal-legal market and being the supplier of these goods. This can be seen in regulations to prevent
currency substitution, for example. Some governments establish regulations to prevent currency
substitution. To this end, they restrict capital movements mainly by employing quantitative exchange
controls. When these policies restrict the availability of foreign currency in official channels, they
inevitably generate black markets of foreign currencies. This drives up exchange costs and risks
“producing a differential between the black and official market on transactions” (Febres 1990: 71). It
is the accumulation of goods (stock) in the black market and policies to combat it that can lead to the
overvaluing or undervaluing of the traded service or object.
On the other hand, the informal market includes different practices that bypass the legal or regulatory
system: illegal activities, parallel trade, underground markets, bootlegging, as well as black markets.
Black markets are part of the logic of informal systems in a context. In Lima, this is quite clear despite
the lack of research on the topic. There is a large informal market, within which a black market and
speculation of some products also exist. The objective here is to demonstrate that a black market
exists within the large informal market.
22 In its 2002 session, the International Labour Conference (ILC) established that all work that could be called “decent” had to comply with four
standards. Anne Trebicock (2005) summarizes these as follows: “opportunities for employment and income, respect for rights at work, social
protection and stronger social dialogue.”
23 In:http://www.oit.org.pe/spanish/260ameri/oitreg/activid/proyectos/actrav/proyectos/pdf/doc_179/glosario.pdf
Bootlegging of books, videos, musical recordings, etc. is an activity that also can be considered
informal. Bootlegging concentrates a group of workers who do not necessarily develop “decent work”
and consumers of the goods and services offered. Bootlegging is the result of the violation of property
rights. This implies that the creator, the official provider of the good or service and the government
do not charge taxes (Reyes 2006). The formal sector views bootlegging as a problem that should be
eliminated because it forces it to compete not only with the informal sale of videos, but also with the
trade of stolen goods, such as electric power and fixed telephone cables and mobile handsets.
Stolen mobile telephones account for a large share of the goods offered in informal markets.
According to Osiptel, in 2006, well over a million mobile phones were reported stolen or lost,
representing 13.26% of all mobile handsets in service. It is assumed that these devices end up in
informal or black markets. There, the electronic serial number is altered and the original chip is
changed so that they can be resold, without the Peruvian government receiving sales tax revenue
and without operators receiving proceeds. This occurs despite the existence of Law 28774, which
sanctions individuals who modify mobile phone serial numbers or lines with prison sentences
ranging from two to five years.24
The interesting thing about this phenomenon with respect to mobile telephony is that companies
may benefit from this practice since it generates more incoming calls and therefore more telephone
calls and traffic (we will discuss this further in the next chapters), especially among individuals who
could not access mobile telephony if it were not for their access to an inexpensive handset (obtained
in the informal market).
Clearly, in Lima, black and informal markets refer to more than the simple trafficking of goods.
They are spaces to buy and sell stolen articles, where mobile handsets are one of the most plentiful
objects available. At the same time, they are spaces of appropriation and use of technology for
specific purposes, which reduce costs and provide users with an illegal, but functional, service and
which largely do not negatively affect the interests of the major mobile network operators. This
is this subject that concerns us here. The goal is to gain insight, on the one hand, into how lowincome individuals access mobile telephony and on the other, how they use mobile devices. The
informal market plays a key role in this issue.
1.4 The phenomenon of telephony from a social science perspective
The literature produced by sociologists and anthropologists on the subject of telephony contrasts
with that of attorneys, engineers and economists in that it is the Internet, radio and television that
have become the main subjects of social science research, to the detriment of studies on telephony,
which are limited in Latin America. Generally speaking, the Internet, television and radio are
studied as social spaces where ethnic, gender and class identities are configured and (re)configured
(Pearson 1993; Díaz 2002) and where local spaces are defined and (re)defined in relation to global
contexts (Appadurai 1996). On the other hand, in the context of the information society,
information and communication technologies (ICT) have been viewed as tools that can be used to
empower the population and to develop new forms of education (Gómez 2002; Blanco Joo 2004;
24 See El Comercio, March 13, 2007. In: www.elcomercioperu.com.pe/EdicionImpresa/Html/2007-03-13/ImEcTemaDia0687924.htm
Casablanca undated). This last approach, together with the recognition of ICTs as tools that enable
knowledge generation, led to the proposed sociological reformulation of the concept of these
technologies to ICKT, for information, communication and knowledge technologies
Access to information and the acquisition of telecommunications devices are associated with a
consumption process. Both access to information and acquisition of goods imply that these are
conceived as an internal reality each individual can appropriate. This leads us to the issue of
consumption, conceived as both the purchase of objects and the appropriation of meanings.
With respect to access and the use of mobile and fixed telephony that go beyond economic analysis
and that can be studied based on research carried out by Casablanca, social actor’s interpretations of
technological devices (undated) also should be considered. Although this author focuses on
sociocultural factors that influence the decision of low-income sectors not to participate in Chilean
“e-government”, his study constitutes a type of research that goes beyond the economic models and
the government policies that address access and use of ICT because it looks at the problem from the
perspective of social actors:
[…] most efforts and resources [in Chile] to incorporate the Internet in policy are designed to improve government
management to enhance service quality and access, as well as to reduce its cost […] This has ignored sociocultural
factors that influence the citizen/government relationship. These factors include everything from the individual’s
initial perceptions of public services (usefulness, proximity, confidence) to the capacity to use information available online. Each citizen has a personal history with the government administration that has an impact on how
he will demand more or less information, more or fewer services, answers, etc. (Casablanca, undated: 9).
Whereas access is influenced by certain economic and sociocultural conditions, usability is another
aspect that should be considered when analyzing the use of mobile and fixed telephony (Ibidem: 25).
This concept distinguishes the functionality of the device according to the different uses of the user.
Generally speaking, usability refers to the system of uses designed to achieve the objectives of the
owner or the user of the technological device.
Nevertheless, beyond these contributions, the subject is a new field for the social sciences, for which
reason legal and economic approaches dominate this area. Thus, we will explore the ways in which
social actors actively appropriate these telecommunications media. In other words, we will look at
how they build the mechanisms of access to the market and the services that it offers.
To this end, we will attempt to analyze the micropolitical strategies of use and access to mobile
telephony in a low-income neighbourhood of Lima: Hatary Llacta in El Agustino District. The goal
is to understand how individuals develop practical ways to access telecommunications services,
although prices may not be affordable. This will give us a better understanding of how this ties in
with the above discussion. On the one hand, legislation on telephony shows us a boundary which,
far from being respected in formal law, is evaded and bypassed by local strategies. On the other, new
technologies and market behaviour provide certain mechanisms that permit and restrict access and
affordability of individuals, especially the poorest. Nevertheless, social actors use informal means to
access this system.
Inhabitants of low-income areas design their own mechanisms to access the market supply. Far from
displaying a passive attitude of waiting for prices to decrease, these individuals develop active
mechanisms for penetrating the system. This study is based on 12 weeks of field work, where three
research methods were used: participant observation, in-depth interviews and focus groups. To
complement these methods, the team carried out informal interviews and interviews with
telecommunications experts, as well as literature reviews. These methods permitted us to fulfill the
objectives of the study: on the one hand, to understand the mechanisms of access to mobile telephony
in a low-income area; and on the other, to describe the networks constructed to permit access and
establish ties with informal markets. To this end, we will study the barriers individuals face in
accessing telephone services, the way they use these services, their functions, the local adaptation of
these services and specific ways in which they are accessed. In addition, we will examine the key
actors involved in this process—usuries, traders of stolen goods, thieves—and their ties with the
market and with mobile telephony service in Lima.
2. Hatary Llacta: uses and functions of telephony in a
low-income area
Telecommunications technology has quickly become a part of Peruvians’ daily lives. Nevertheless,
technology is not simply an aseptic supply of goods and services; rather, it is used by individuals who
assign new meanings to its functions, which give it meaning in life. In that process, individuals do
not passively receive market mandates, but rather reinterpret the possibilities, offers and ways of
accessing technology. Low-income areas are important in this issue because, besides encompassing
a very wide area (due to the large number of people living in poverty in our country and on the
continent), it is an area that is not foreign to technology or services available on the market.
We will now explore how inhabitants of Hatary Llacta, a low-income settlement in the Lima District
of El Agustino, develop ways to access telephony. To this end, we will briefly review the history of
Hatary Llacta, its establishment and how it has obtained basic services. We will then discuss access
to fixed telephony, its uses and functions, which will give us insight into what is in this
neighbourhood a range of telecommunications possibilities used in a complementary manner, and
where the mobile telephone is of major importance.
This presents a complex scenario because low-income users face a key barrier to access to
telecommunications technology, and specifically to mobile telephony: it is not a lack of supply or
availability, but rather of affordability, that is, of the high costs involved in access. Faced with this
major obstacle, individuals do not remain passive; they develop strategies to access telephony
services, most of which are outside the formal and legal context.
2.1 The hillside community of Hatary Llacta
In 1684, a wall was built to protect the Lima population. Among the places outside the wall was the
present-day District of El Agustino. Although the wall, which symbolically separated what then were
considered “unsafe” or “marginal” areas from those “appropriate for the development of citizen
life,” was destroyed during the government of José Balta (1868-1872), many Lima residents continue
to equate El Agustino with “marginalization” and the “periphery.” Whereas in colonial times the
district was considered “extramural,” today, as a result of migration and the expropriation of country
estates, it is considered a poor and dangerous neighbourhood.
El Agustino was founded in 1965 as part of a land settlement policy promoted by the 1940 Yanaconaje
Law. The area was gradually settled by migrants, mainly from the central and southern highlands.
Later, municipal authorities began to relocate the population to resolve the problem of overcrowding.
The government encouraged the settlement of other parts of El Agustino, which were located further
from downtown Lima or which were less desirable for settlement due to the soil quality or the
steepness of the slopes. It is in this context that Hatary Llacta was established on one of the hills
bordering the district:
I lived in the first zone of El Agustino […] near Pino Hill, but the municipality wanted me to relocate […] they
wanted me to move to another district but I refused […] so they sent me to what is now Hatary Llacta.
(Juan, 65-year-old resident of Hatary Llacta)
We paid a certain amount for each lot because it was government land. All of it was for the municipality and we
had to work for ourselves, for our lots, we had to put in our days […] we broke up rocks with blow torches, pickaxes and so forth […].
(Víctor, 59- year-old resident of Hatary Llacta)
Hatary Llacta was founded in March 1986 at the base of the hill located between block 18 of Riva
Agüero Avenue and blocks 11 and 12 of Cesar Vallejo Avenue. The settlement was composed of four
sectors (or “stages”) located at different altitudes on the hillside. The first sector is located at the
lowest point and the fourth at the highest point. Occupation by sector follows two criteria: length of
residence and work hours and effort provided during land preparation:
The municipality granted the land […] the heads of the family, that is, the men, prepared the land [the hill]. The
municipality said that the people who worked the most would receive more facilities
(Dominga, 58-year-old resident of Hatary Llacta).
The oldest inhabitants of Hatary Llacta remember that before moving to the hillside, they had to
carry out communal works (minga), building roads and clearing the land where the houses would be
built. During the process, municipal officials recorded the work hours and the number of workers
each family contributed. This enabled them to grant land titles in accordance with the level of
participation of each family. The lowest areas were occupied first. Families of those who had
participated in preparing the hillside moved there with their relatives, building some multifamily
dwellings that survive today.
Residents recall the story of the founding of Hatary Llacta, as do some migrants who were looking
for a place to live and who needed to transform a “virgin hillside” into a habitable area. This story is
reflected in the name of the settlement: Hatary (“get up” or “arise”) and Llacta (“village”).
When we came here, this was a virgin hillside because no one had settled here yet, there was no place to settle,
it was very difficult, rocky, rough. People who came and left said who could live on that hillside? My husband
began to work, to work for weeks, he came home looking like a crazy man, all covered in dust and grime, his
hands torn up and everything. That’s what the place was like.
(Roberta, 56-year-old resident of Hatary Lllacta)
Many of the people who currently reside in Hatary Llacta once believed they would never live there
because of the difficulties they encountered during the communal work organized to prepare the
hillside. Over time, cement dwellings began to replace the straw mat huts; sometimes the new houses
were built next to the huts. Today, dwellings of sturdy materials may stand next to straw mat or
wooden huts. The pattern is more or less the same: cement and brick houses are frequently found on
the lower part of the hillside whereas wooden, straw-mat and even cardboard constructions are found
at higher altitudes. The higher up the hill, the newer the buildings or settled areas.
The four sectors of the settlement, divided by horizontal cuts according to their distance from the
avenues, have five staircases to access the hillside. These are placed symmetrically: two on Riva
Agüero Avenue, two on César Vallejo Avenue and one at the intersection of the two streets. The
staircases date from 2002; previously, climbing the hillside was much more difficult. Water service for
the highest sectors of the hillside also dates to around that time.
Residents recall that Hatary Llacta lacked basic services such as electricity, water and telephone. In
response, they developed several strategies to access basic utilities: communal works, formal requests
for the service required or informal access to it (the latter is increasingly common). Some residents
were able to request private electricity and water services. They rented electric service to neighbours,
requesting that they install electric lines into their homes. They also began to sell water. Many
residents preferred to buy water in this way than to go down the hillside to fetch it since no roads or
staircases existed at the time:
The straw mat houses did not have well developed access; the dirt paths were very slippery […], it was really hard
to walk. There was no water, wastewater, electric, much less telephone, service, it was impossible.
(Norma, 51-year-old resident of Hatary Llacta)
[She] charged me for light […] I used a cable for electricity but she charged me a lot […] S/.15 or S/. 20 […].
(Francisca, 40-year-old resident of Hatary Llacta)
Telephone service, and to a lesser extent, the Internet, were the last services to reach Hatary Llacta.
Residents report that they received telephone service about 10 years ago. Nevertheless, some people
still do not have fixed or mobile telephony; others have a fixed line dating from just two or three
months ago (after a campaign by Telefónica del Perú), and many have only mobile service. Several
Hatary Llacta residents who do not have telephone service or have only recently acquired it
mentioned its high cost, despite the fact that Telefónica frequently offers tariff plans in the area:
They come here all the time to offer it […] Telefónica […] has a slogan. They come to make their sales here […]
but people don’t get it […] because of the cost, mainly because of the cost.
(Focus group participant)
Currently, Hatary Llacta has 160 property owners or representatives of a nuclear or extended family.
Most but not all have water and electric service. Residents are represented by an executive board, a
Glass of Milk committee and another committee responsible for administering the community
kitchen. In all of these entities, women participate substantially more than men, who usually work
outside the community.
Thieves comprise another important group in Hatary Llacta. Their technique is known as the
“cogoteo”, which consists of one thief grabbing the victim by the neck to immobilize him while others
remove his belongings. This group identifies itself as “La Bulla”. Although, it is not a formal group,
La Bulla is recognized around Lima as a band or network of small-time thieves. Their leader, Taca
Taca, is known by other bands of thieves and by the police and municipal officials since he has been
incarcerated on numerous occasions. As one Hatary Llacta residents who “works” as a thief informed
us—his centre of operations is at the corner of Puno and Abancay streets—, La Bulla is a major
criminal network of Lima that provides electronic devices and especially mobile telephones, mp3
players, CD players, etc. to small-scale merchandisers of stolen goods, who resell these items to larger
merchandisers.
Each of these entities—the executive board, the committees and the crime network—plays a key role
in Hatary Llacta. The executive board represents the community before other institutions, such as the
municipality. As such, it works to resolve problems in the neighbourhood. The Glass of Milk
committee and the mothers responsible for the community kitchen provide food to those who request
it. For their part, La Bulla members supply stolen goods and offer protection to residents.
Some Hatary Llacta residents managed to save money and opened small shops in the neighbourhood.
On the lower part of the hill, in the first sector, facing Riva Agüero or Cesar Vallejo avenues, they
established grocers and hamburger, salchipapa (a hotdog and fried potato dish) and juice stands. In
the second sector, there are two small grocers that sell basic goods: sugar, milk, eggs, rice, oil, tinned
foods, coffee, crackers and candy. The third sector only has a small shop and the fourth sector has
none. Some families sell homemade marcianos (a frozen treat) or other desserts, such as gelatine and
mazamorra (corn pudding). Moreover, some families rent their telephones to residents to make or
receive calls whereas others have installed coin-operated telephones.
In addition, many Hatary Llacta residents work for public cleaning companies, local bakeries or
messenger services. Some female residents are employed as domestic workers whereas others work
in the market. Among the youth population, a minority attend vocational schools, local institutes or
public universities; the remainder work in different jobs, most without labour stability. Others are
involved in criminal activity.
Despite being a separate community, Hatary Llacta is not isolated from the city. To the contrary, its
inhabitants have regular contact with other zones for purposes of employment, study or family
relations. It is mainly the men and young people who leave the district to study or work. Adult
women (mothers) usually work in the home and do not leave the hillside area.
Several services are located close to the lower part of the hill: restaurants (especially chicken
restaurants), hardware stores, pharmacies, small grocers, etc. Telecommunications services are also
found: coin-operated telephones, Internet cabins, mobile telephone rental stands, etc. Those
businesses survive despite the rampant violence in the area.
Hatary Llacta is a complex place, with multiple sources of stress. The only constants are poverty,
difficulties in obtaining or maintaining a job and low, unstable monthly earnings. The local
population gained access to basic services only after many years of demanding and waiting. In sum,
it is a poor settlement on a poor hillside in one of Lima’s poorest districts.
2.2 Fixed telephony: access, uses and functions
In this context, having a fixed telephone line was a luxury in Hatary Llacta. A small minority of
residents acquired this service during the second half of the 1990s. At that time, the telephone was
not considered a basic need like water and electricity were (in that order).
Fixed telephone service is no longer viewed as inaccessible, however. Low-income segments of the
city have begun to access it. Increasingly, telecommunications devices have become a part of daily life
and are no longer in short supply. They have become common, “necessary” tools. Fixed telephones
have quickly become widely available, mobile telephones have grown exponentially and the Internet
has become a part of daily life.
Nevertheless, fixed telephony continues to be a problem for low-income sectors. This is because it
continues to be an expensive service despite the increased supply and greater possibilities of access.
Therefore, the population seeks alternatives. During the period of limited monopoly of Telefónica del
Perú, the company expanded telephony networks, purportedly improved technological conditions
and tariffs and aligned costs to prepare the telecommunications market to launch “free and fair
competition.” In this way, it sought to expand the number of subscribers, which it achieved: from
1994 to 2006, the number of people who had fixed telephones rose from 770,000 to 2,400,512, as
mentioned earlier (Codesi 2005; Osiptel 2006). But in areas such as Hatary Llacta, residents had to
carefully consider whether to obtain fixed service and sometimes had to cancel their lines after using
them for a time.
Let’s take a closer look at how people access and use fixed telephony. Although the expansion of
telephone lines began in the country in 1993, this process took place more recently in Hatary Llacta.
According to residents, fixed telephones date back 10 or 12 years, although some believe they became
available only about five years ago. Only a very few families had telephone service initially, and they
lived in the first sector. This indicates that access to fixed telephony was not made available to
everyone simultaneously.
We can say with certainty that initially, Hatary Llacta subscribers represented a minority of residents
and the pace of growth in the local population’s access continues to be slow, even in recent years.
Although residents report that some people have a fixed telephone line, many families do not have
this service and others have accessed it only recently:
Q: Do you recall how long you’ve had a telephone?
A: For about 11 or 12 years now.
(Dora, 45 years old. Resident of Hatary Llacta)
Q: And you, how long have you had a telephone?
A: In my home? […]Approximately six months.
(Víctor, 56 years old. Resident of Hatary Llacta)
Q: Since when you got a fixed telephone?
A1: Not long ago, two or three years.
A2: I’ve had mine for a month.
A3: Three or four years.
Q: Do all of you have a fixed telephone?
A2: Some do, some don’t.
(Focus group participants)
Thus, access is uneven, available at different times and under different circumstances. In addition,
demand may not be permanent: individuals may not maintain the service indefinitely. Many families
that obtained a fixed telephone service in Hatary Llacta paid for it for several years and later decided
to cancel the service due to its high cost. Others decided not to access this service and instead used
other telephony or telecommunications services since the procedures for obtaining fixed lines are
burdensome and tariffs are very high. In other words, accessing service or accepting the fixed-line
supply does not imply maintaining service permanently. Residents always look for ways to minimize
costs and to make use of other telecommunications methods.
To access fixed-line service, an individual determines if he is willing to pay a specific amount of
money for a certain number of minutes per month, in accordance with the options offered by the
company and which enable it to generate profits. As we have said, in some cases, Hatary Llacta
families find it difficult to continue assuming this economic responsibility. These families are often
dissatisfied because when they accepted the offer, they believed they would pay a certain rate and
ended up paying another. Some of have filed complaints to maintain their lines whereas others have
stopped paying for the service.
They must think we’re stupid here in Peru, you know, because all the companies that come here, whether it’s
Telefónica, or Edelnor, all private companies […] cheat us. Even with the water, the water metre cheated us just
recently […] When you complain […], I don’t know if when President Alan García kept his promise…first he said
he would reduce the prices charged by Telefónica, the basic fee, which isn’t really that. But a lot of people come
to offer this service to us and those poor young people who come to sell Telefónica service […] repeat the slogan.
They come to make sales here [Why not get it?] Because of the cost, mainly because of the cost […].
(Jorge, 42 years old. Focus group in Hatary Llacta).
The bill arrives and it’s for S/.38. S/.38, S./39 at first, before it was S/.49 but what with the government ordered, it
went down to S/.38. That was it. With maintenance costs it comes out to S/. 43 or S/.42, but when we didn’t pay
for two weeks, the bill was double, S/. 63 […] my son said: ‘Mom, we should cancel it, it’s too much, we were supposed to have a flat rate.’ So when the bill came again, not that month but another, it was S/.106 for three months.
So I took it and went to pay the S/.106 and I said: ‘Miss, is this all I owe?,’ and she said ‘yes, that’s all,’. Then
another bill comes for S/.63, I again pay the S./63 and they told me everything was going to go back to normal. I
paid again, the last time was S/. 51, so I cancelled it, changed it. Now I have the flat rate service of S/. 30. since
[...] four or five days.
(Francisca, 40 years old. Resident of Hatary Llacta)
[In response to the question of whether he previously had fixed telephone service at home]: Yes, previously, but
they cut it off because sometimes no one was home and the bill ran up.
(Juan Carlos, 38 years old. Resident of Hatary Llacta)
The belief that fixed telephony operators, and private companies in general, “cheat people,” is
widespread. Residents believe that “Telefónica cheats people,” “charges them more than they say,”
and that “the tariffs are unfair,” and this influences their decision to refuse the service or to stop
paying for it. Residents also express these ideas to justify access to informal, illegal or “bootlegged”
telecommunications systems since, as residents reported, “if Telefónica is going to cheat us, I’m going
to cheat them.”
Thus, despite the expansion of telephony during the 1990s, formal access to this service continues to
be a problem in low-income areas, including Hatary Llacta. It is mainly a problem of affordability.
[…] as I’ve said, [fixed telephone] service is too expensive, we can’t pay for it. First water, then light, with the telephone it is too much […].
(Focus group participants)
Now let’s look at why some people do opt for fixed telephone service. Accessing a telephone line
implies previous knowledge of the supply from companies and the willingness to assume
responsibility for a monthly payment. Some community members with telephone service visited the
offices of Telefónica del Perú to request installation. Others obtained it through salespeople who
periodically visited to promote tariff plans.
Although telephone service is considered expensive, some Hatary Llacta residents do pay for a fixed
line. Of this group, a minority have the classic (or open) line whereas the majority have flat-rate plans.
Beyond these differences, local residents usually pay between S/.35 and S/.70 monthly. The people we
talked to made this effort because a fixed telephone at home is useful “in an emergency,” “to receive
messages on jobs,” or to “maintain contact with family members who do not live in the area”:
Q: Why did you decide to get a fixed telephone?
A: Well, I think that […] in the case of an emergency […] if something happens to my father or my mother’s or
father’s family […] and they can call immediately to let us know, right? […] The telephone is for emergencies […]
Mostly for emergencies.
(Juan Carlos, 38 years old. Resident of Hatary Llacta)
Q: Why do you think the telephone is important?
A: To keep in touch […] especially when someone’s sick […] I had to get a phone because my mother is 81 and
lives in Yauyos province so when she’s ill or when she plans to come to Lima, she calls me from the agency in Luna
Pizarro and says: ‘Marta, I’m at the agency,’ and I say ‘okay, then.’ That’s what I mainly have it for; I don’t use it
much for business.
(Cecilia, 40 years old. Resident of Hatary Llacta)
Those who do not have a fixed line also believe the service is important for getting a job or staying
in contact with family members. For this reason, they pay to receive or to make calls on coin-operated
telephones, private telephones or at public phone centres. The telephone is synonymous with peace
of mind, comfort and increased possibilities for communication.
The fixed phone is used to not have to worry about family members who live far away, to communicate with them
about anything that comes up. It’s good to keep in contact with family members, don’t you think? […].
(Focus group participant)
[…] telephones are for contacting a family member or […] for business, and communicating with co-workers.
(Focus group participant)
For both those with and without service, it is important to save as much money as possible to
maintain the household economy, for which reason they use fixed telephony only in special situations:
for emergencies, to seek employment or receive job calls. The cost of the service has made the classic
(or open) line increasingly rare because residents opt for flat-rate plans, which function as receivers
for incoming calls. In addition, the telephony supply is constantly on the rise.
2.3 Complementary nature of telephony services in Hatary Llacta
Local residents, then, reinvent the functions of telecommunications systems. They select some
functions—the most efficient and the lowest-cost ones—and complement them with other systems.
The use of fixed telephony can only be understood together with and in relation to the other
telecommunications systems available in the community.
As we have indicated, the responses of Hatary Llacta residents and their search for different ways to
access the telephone system indicate that they consider it an important service. For what purposes is
local telephony used in Hatary Llacta? We can identify three types of uses or functions: to transmit
or receive employment information; to maintain contact with relatives, friends and acquaintances
who live in another area; and to generate income through line rental, charging third parties for
incoming or outgoing calls. These are the reasons fixed telephony is important.
What types of calls are made from fixed telephones? To answer this question, it is easier to identify
the types of calls that are not made or that are avoided due to their high cost. On the one hand, they
do not make calls to mobile telephones and do not make international calls. They call relatives with
certain frequency (every three days, once a week, etc.), and most of the time using a phone card to
control the cost of the call. Thus, they avoid “pleasure,” calls, those “just to talk,” and those that “do
not have a clear, concrete objective.”
Fixed telephones do serve as a permanent receiver for incoming calls and enable users to maintain
contact with people living abroad. Several residents have relatives living outside the country who call
them occasionally. The fixed telephone is also an object of prestige: it represents the economic
potential of those who own one. Residents who have the service are “those with money,” and
therefore, those who are symbolically better connected and with more networks. This type of
telephone service permits individuals to be located for odd jobs (cachuelos) or to be considered for
accessing other services. As some respondents reported, mentioning that they have a fixed telephone
during job interviews gives them an advantage over job candidates who do not have this service.
The problem of not having a fixed telephone can be overcome, however, by obtaining a mobile
telephone, although many companies still refuse to call mobile numbers because of the cost.
Those who do not have a telephone in their home look for ways to overcome this disadvantage. To
this end, they seek out locations where they can make or receive calls. As in the case of subscribers,
saving money is a priority. Public telephones, coin-operated telephones, Internet cabins, public phone
centres, mobile telephone rental stands and mobile telephones are some of the multiple possibilities
for accessing telephony and telecommunications systems for different uses. Users can lower their
costs by using these systems in a complementary manner.
The different services have both advantages and disadvantages and their functions have been
changing in recent years. Before there were subscribers in Hatary Llacta, all residents had to climb
down the hill to locate a public pay telephone, which was the only way to call relatives, friends and
places of employment. Some saw a potential for earnings in this situation, for which reason they
ordered coin-operated telephones from Telefónica del Perú. However, public call centres were later
established and people began to have access to telephones in their homes. In the mid-1990s, the first
public call centres appeared and since the beginning of the new century, their numbers have increased
while their costs have decreased. This has led to a decline in the income received from coin-operated
telephones and has even generated economic problems for those who own them:
About two years ago, I earned between S/.800 and S/.1,000 […]. Now I get about S/.400 in total […] from which
I have to pay Telefónica. Sometimes there’s not much money and a big bill comes and I have to complain. I don’t
know why they sometimes charge more or less on the bill. I don’t understand it. Sometimes I take in S/.400, for
example, and they charge me S/.430 and I have to complain.
(Owner of a coin-operated telephone in the first sector of Hatary Llacta)
Besides the competition, using a coin-operated telephone may mean economic losses because “it eats
coins.” In addition, those who rent mobile telephones on the lower part of the hill often break the
coin-operated telephones, as well as the public pay phones. In addition, coin-operated telephones
are expensive: a local call to a fixed telephone costs S./0.50 per minute; a call to a local mobile or
national long-distance number, S/.1; and to a mobile phone in the provinces, S/.2. Calling from a
public call centre is more than 50% less expensive.
People who have a home telephone may use public call centres because their tariff plans only permit
them to call fixed telephones, because they have consumed all their minutes or because they believe
their home telephone should only be used to receive calls and in emergencies.
This raises a key issue. Coin-operated and public pay telephones have largely been replaced by phone
centres, whose costs are much lower. Having a telephone at home does not keep people from using
public pay telephones, coin-operated telephones and public call centres to make calls. Coin-operated
telephones in the hillside community are used only occasionally since they are more expensive than
public pay telephones or call centres. They are used only in emergencies, when it is difficult to go
down the hill or when people are too lazy to do so, according to the residents interviewed. Coinoperated telephones are becoming increasingly rare in the community.
With respect to public pay phones, residents use them to make quick calls, mainly local calls that
cost S/.0.50. These telephones are located on the lower part of the hillside and the surrounding area.
Calls to the provinces, international calls or lengthy calls are made at public call centres. Public pay
telephones are often out of order or “eat coins,” for which reason people prefer to go to the call
centres. As occurs with coin-operated telephones, public pay telephones are sometimes broken by
local merchants, owners of public call centres or those who operate mobile telephone rental stands
to reduce competition. In other cases, they are vandalized.
Internet cabins are also used as telecommunications spaces, both via e-mail and real-time virtual
communication (text messaging, for example). Both forms of communication are used by Hatary
Llacta residents to communicate with relatives, friends and acquaintances. These cabins give young
people access to low-cost telecommunications services. Young people may use these cabins for long
periods. In addition, many Internet cabins offer local, national and international long-distance service
at very low prices. In many cases, Internet cabins also function as public call centres.
Moreover, during the past year, a new service has prospered in several areas of Lima and Peru in
general. These are itinerant stands or shops that rent out mobile telephones from different companies
at very low rates. Individuals use this service to make calls to mobile telephones because it is less
expensive than making these calls on public pay telephones, coin-operated telephones or at public
call centres. Normally, those who provide this service carry half a dozen mobile telephones, which
they attach to themselves with long chains. This permits callers to move a few metres away when
making calls but does not give them the opportunity to steal the handset. Tariffs for this service vary
and have decreased in recent months due to strong competition: prices range from S/.0.50 per minute
to S/.0.50 for three minutes to local mobile numbers.
Evidently, then, different telecommunications media and a wide range of costs are available in the
community. Social actors frequently have a range of possibilities and try to access the least expensive
method. But one device does not fulfill all costs-functions that social actors need. Therefore, Hatary
Llacta residents may use several methods as needed, since the supply is growing and has become
physically closer.
In general, Hatary Llacta residents use the following telecommunications services to make the
following types of calls: fixed telephony, which only some people can access or maintain, to make
emergency calls and generally to make local calls to other fixed telephones or to receive calls; coinoperated telephones, which are used for local calls to fixed lines when there is no access to a fixed
telephone or when the individual opts not to go down the hillside to locate a cheaper alternative;
public pay telephones, which are used to make short local calls; public call centres or Internet cabins,
where international calls are usually made since local and national long distance service is
increasingly available and less expensive; and public call centres, public pay telephones, and
increasingly, mobile telephone rental stands, to call mobile telephones.
But this range of possibilities functions at the same time there is a growing demand and supply of
mobile telephony. In other words, the difficulty of access to many of these services, particularly fixed
service, and the growing importance of intercommunication and rapid, effective contact has placed
mobile telephony at the centre of this phenomenon. In this regard, having a celular (mobile telephone)
enables individuals to overcome the obstacle of not having a fixed telephone to receive calls, which
is the main problem facing many people who need to be located quickly for the odd jobs that generate
income, or to maintain contact with their places of employment and relatives.
Among these telecommunications tools and systems, mobile telephony is in increasing demand
among Hatary Llacta residents. However, mobile telephony does not fulfill all the functions it does
in other locations: it is used mainly to receive calls and to permit continual connection. This is
important since the Hatary Llacta residents we interviewed said they had mobile telephones with
prepaid service, and that they bought prepaid cards only when necessary to avoid having the line cut
off or in cases of emergency. Mobile telephones are used to receive rather than to make calls; therefore,
it replaces the fixed telephone in the community.
Thus, having a mobile telephone has become essential, particularly for the adult and youth
population. However, they are very expensive, even though the prepaid system was allegedly created
as a way to control telephone service costs. Prices are high for calls made to mobile telephones of the
same company and even higher for calls to mobile telephones of other companies. For this reason, as
we have said, the prepaid system is used to receive rather than to make calls. Even so, the handset is
expensive (more so in the prepaid system than in other tariff plans) and having enough money to buy
one often poses a problem.
Thus, Hatary Llacta residents have a varied telecommunications supply with different functions,
which are adapted to the local context to minimize costs.
2.4 Availability, accessibility and affordability in low-income areas
The telephony supply has changed substantially in recent years. In the late 1980s and early 1990s,
telecommunications possibilities were limited, and not only in low-income areas. In addition,
although some people had no access to a fixed telephone line, “not everyone needed to have one.”
Jobs and personnel hiring practices operated under different systems. Moreover, it was common
knowledge that many people did not have a telephone because of deficient service, the slow pace of
installation and the high costs involved. Telecommunications were not considered to be a “real need.”
[Having a telephone] wasn’t necessary before; we managed to find each other, we had work. Now, though, it’s a necessity because they can’t find you, they don’t call you, you don’t know where they are. It’s important, it’s necessary.
(Óscar, 38 years old. Resident of Hatary Llacta)
Since the 1990s, this “need” has been advancing rapidly. The new employment systems, often
associated with neoliberal economic policy, where much of the population (particularly those living
in poverty) does not have stable employment, requires individuals to be permanently connected with
the labour market. Not receiving a call on time could mean losing a job. Therefore,
telecommunications have become essential. As many Hatary Llacta residents report, “it is a need
rather than a luxury.”
In this changing environment, telecommunications supply (especially through telephony) has had to
evolve and expand. The growing demand for mobile telephony and its gradual (although relative)
reduction in cost has forced many large companies to expand their supply and apparently reduce
costs, although these continue to be quite high compared with those of other countries of the region.
This expanding supply is the result of the opening of the market, the decrease in production costs and
the improvements in and lower costs of technology. However, it is also due to the growing use of and
great demand for telephone devices, which went from being considered “exclusive” goods to
essential products used daily and that have an increasing number of functions.
In response to growing user demand and needs, companies have increased supply. Telephony
products are on the rise, especially in mobile telephony, which has grown rapidly in recent years in
Peru (as we saw in the first chapter). Fixed telephony companies have also increased supply. There
are now several tariff plans, flat-rate plans, open lines, combined services, etc. In addition,
international call service offers are plentiful and new companies are entering the market.
In this environment, the market economy would seem to increase possibilities of access to telephony.
Telephony products and services are no longer restricted to the wealthy or to higher-income sectors
since service is no longer limited or difficult to access. Supply, demand, access and availability of
telephony have expanded at an equal pace in recent years.
Nevertheless, and here lies the main problem, the possibility of accessing telephony does not
necessarily mean that services are affordable for low-income citizens, as Barrantes has stated (undated:
11). The costs of these services are not always commensurate with the earnings of those who live in
Hatary Llacta or with their priorities. Companies offer telecommunications products and services
according to market standards, but they cannot be purchased by low-income individuals..
Therefore, although it is a “need” for many people, formal access to telephony (fixed or mobile) is still
very difficult, not because of a lack of supply or services (as was the case in the early 1990s) but rather
due to the lack of service affordability. Many Hatary Llacta residents report that despite the many
offers and the fact that they know where and how to access these services, they find them very
expensive. There is a large supply, the market is open, demand remains strong and access is dictated
by the market, but not everyone can afford these services.
This poses a major barrier for Hatary Llacta residents since they believe that telephony has become
a “need,” a means for connecting them not only with family and friends but also with the labour
market, enabling them to earn a living. At the same time, these “necessary” services are not accessible
through formal channels due to their high costs. There is a need for affordable access to these services.
Residents generally prefer mobile telephony because, as we have seen, it permits them to be
permanently connected with the job market, relatives and friends. Mobile telephony is preferred
because it acts as a call receiver—the main function assigned to fixed telephones—but with the
possibility of being in different locations. In addition, it is less expensive if it is used for incoming calls
since the prepaid system requires only the initial purchase of the handset and line and the occasional
purchase of the least expensive phone card to maintain service. To make calls, residents make use of
the many telecommunications options we have examined here.
In this context, prices continue to decrease. Mobile handsets costing S/.80 or S/. 120 are promoted as
“inexpensive handsets” of the prepaid system. Nevertheless, for most Hatary Llacta residents, these
prices are still too high, sometimes equivalent to a week’s pay.
But there is another option, which interests us here. Individuals do not passively wait for the market
or the large telephone companies to reduce mobile telephony costs, Social actors develop their own
ways of accessing this service at a lower cost. There is a widely available, affordable supply of mobile
telephony (both for handsets and lines) originating from the city’s informal and black markets. In
this case, the low cost is not the result of market supply but rather the “reinvention” of supply in
informal markets, which are always less expensive than their formal counterparts.
There is, then, a problem of affordability with respect to mobile telephony. We will focus here not on
how these services are offered in the capitalist market system, or whether the supply is adequate, but
on how social actors access this technology, creating their own ways of penetrating the market or
reinventing it in the local context through informal systems.
3. Informal markets and mobile telephony in Hatary Llacta
Mobile telephony is a telecommunications system that has become increasingly important in daily
life. Nevertheless, costs for this service are quite high for people living in poverty. In Hatary Llacta,
as in many poor areas of Lima, the problem of access and affordability is “overcome” in a variety of
ways. Access is mainly through the informal mobile telephony market, whose supply is considerably
less expensive than that of the formal market. To gain a better understanding of this phenomenon,
we will briefly look at the most important informal systems for accessing telephony in this
community.
It should be noted that obtaining a mobile telephone is part of a decision process in which prices,
benefits and functions are considered. Thus, the decision to purchase a mobile telephone is associated
with the lifestyle of individuals as well as the possibilities of the formal and informal market, which
tend to favour the latter. Although the informal market appears to be outside the system, it is actually
a special way to penetrate it.
3.1 Informal markets as part of the formal system
In Hatary Llacta, as in several poor areas of Lima, the problems of accessibility and affordability
initially exclude certain population segments from accessing telephony service. Nevertheless, they
find ways to access the market through the informal system. A chain of individuals, activities and
services comprises this system, which has quickly expanded in the country.
In Latin America, the market economy and neoliberal economic policies have led to the privatization
of several companies, in a process dictated by the law of supply and demand. These have created
formal markets regulated by free competition; however, they have also generated (or at least have
contributed to) the development of informal markets, black markets and contraband. Low-income
individuals access many of the services and goods offered in the formal market through the informal
market, thereby strengthening trade activity that would seem to be outside the law and market rules.
However, these individuals and informal spaces are not outside the system; rather they are used as
a mechanism to penetrate it.
Individuals do not use informal systems to access telecommunications technology, and more
specifically, mobile telephony, to destroy the system, to overthrow capitalist countries or to debilitate
the market, but rather to penetrate it in the easiest, most affordable way possible. Likewise, most
individuals do not use informal markets to carry out illegal activities with mobile telephones
(although there are plenty of thieves that purchase these devices in those locations or contribute to
their supply) or to take a stand against democratic ideals. Rather, they do so to obtain employment,
to be able to find work in an unstable, itinerant job market, to talk to relatives or friends, to be a part
of “modern society,” of the latest “trend,” or to use tools common to “globalized citizens.”
In other words, informal systems constitute a means of penetrating the formal system rather than
leaving it. Informal markets of goods (stolen, bootlegged or contraband) are one of the few ways
low-income individuals can penetrate the formal market and modern society when the supply is too
expensive. At the same time, the informal market is closely tied to the formal market and the modern
capitalist economy.
The rules of supply and demand apply in these informal markets, which are associated with the
formal system in informal ways. Here, sellers offer goods that are advertised and distributed by
formal companies, using their symbolic values, re-appropriating them and generating revenue
through their sale. These markets involve a network of different actors that are “within the formal
system” and others who carry out illegal activities. It is a large network whose participants are not
always aware of their complementary functions.
The informal in the context of this study does not circumvent the formal system but rather is a part
of it. It responds to market forces and operates within the market structure. It is not a parallel system,
which functions with its own rules of the game, isolated from the economy, policy or the social
context. Rather, it is part of this cluster of actions, practices and structures and operates under many
of its rules and offers, reinventing them or using them to its advantage. But this is not a one-way issue
since formal economies and legally established companies use the practices and structures of the
informal and black markets to design their sales strategy, increase revenue or as a variable to consider
when they design an investment strategy. At least this is what has begun to occur in recent years.
In Peru, informal markets have grown together with the neoliberal market economy and offer an
impressive supply of goods of varying qualities. Demand of citizens of different social classes is very
strong. But informality is not only the black market, as we have seen in the previous chapter.
Likewise, the informal is not limited to a physically established market (like the informal market of
Las Malvinas or that of Paruro); it also includes multiple systems of usury, local trade, retail sale of
stolen objects, contraband, etc. In Hatary Llacta, there are a variety of informal mechanisms for
accessing telephony. These include usury telephone services.
3.2 Usury telephone services in Hatary Llacta
Hatary Llacta residents need to do more than simply make calls. The variety of telecommunications
systems and the complementary-use strategy helps save them money on calls and maximize the
functions of these systems, as we have seen, but it does not necessarily resolve the need to receive
calls. People “need” to be connected to receive calls, to be contacted by relatives, friends and
employers, and in emergencies. When these individuals do not have a mobile telephone or fixed line
at home, they must find ways to receive calls and be connected.
Given that access to telephony is the relationship between the economic possibilities of the user or
potential user and the offers provided by telephone carriers (Barrantes, undated), in Hatary Llacta,
we can identify three forms of access to fixed telephony service to receive calls: formal access
(requesting a telephone line from an operator); public call centres; and access through a usury
telephony network (renting a telephone from a subscriber).
Each of these forms of access involves the use of the telephone handset in two interrelated locations:
within or outside the home. The need to access this service implies that users establish a relationship
between the two locations in order to communicate with relatives, friends or places of employment.
Clearly, access to fixed telephony is difficult in Hatary Llacta because of the high costs it entails. Thus,
the first alternative is dependent on economic conditions that most community members do not have.
The other alternative for accessing a service that permits the user to make calls or at least to take
messages is the public call centre. For example, an individual can arrange to receive a long distance
call at a call centre; he requests that the individual who is calling from abroad or somewhere in Peru
call him at a specific call centre at a prearranged time. This requires individuals who decide to use
this system to carefully plan the call with the caller.
The problem with this system is precisely the careful planning it requires since individuals do not
necessarily have time to wait for a call in a location that is not their home or place of employment. It
is difficult to coordinate with callers. In addition, this system is not useful for receiving calls or
messages at odd hours and is not useful for obtaining odd jobs.
Therefore, a person with limited funds or an unstable income who cannot pay for a fixed telephone
or immediately access a mobile telephone with prepaid service must find an alternative to receive
calls and to be able to be contacted in some way. Hatary Llacta residents who find themselves in this
situation resort to a third form of fixed telephone access: that is, they rent a fixed telephone from an
individual who lives nearby. This is a usury telephony system, an informal way of obtaining
incoming-call service.
In this system, individuals who have fixed telephones—that is, those with the least economic
difficulties—rent out their telephones. It is a usury system that targets the poorest among the poor
population because these individuals have no telecommunications tool.
In principle, making use of a private telephone assumes a relationship of trust. Nevertheless, during
our field work, we were able to use telephones of people we did not know; we only had to request
it.
A subscriber’s card is used to make a telephone call from one of these fixed telephones costs. The
cost is S/.0.50 or S/.1 per minute. In most of these cases, a 147 card is rented to make calls. This is
because most of the telephone lines in the hillside community are on the flat-rate plan, with a limited
number of minutes, which are reserved for emergencies. Thus, for some people, the fixed telephone
fulfills two functions: it is a means for being located and being able to respond to emergency
situations and, at the same time, it is a way to generate income.
The rental cost of a telephone is substantially higher than that of the other telecommunications
systems. For example, it is almost three times more expensive than a call from a public call centre. For
this reason, the poorest residents of Hatary Llacta use this system only in emergencies. But this usury
system also has another function: receiving calls that will later be communicated to the interested
parties.
If the interested party is a tenant (someone who rents a room in the home where the telephone is
located) or a neighbour whose home is located nearby, the person who answers the call quickly
locates the person. However, if the interested party does not live nearby, the person takes a message,
noting the name of the caller and the time in order to later inform the individual who has paid for
the message service.
It should be noted that some subscribers do not rent their telephones for outgoing calls but do use
them to receive and communicate messages. They charge S/.0.50 per message, which is quite
expensive. These messages are usually from a relative or acquaintance or are work-related. If
individuals using this service think they will receive more than 10 messages per month, they will
usually opt for a flat rate of S/.5.00 for unlimited messages.
At my house, if my relatives had to make a call […] they had to go to the avenue to buy their telephone token.
Later, those phones came out where you had to insert a S/.0.10 coin, then those disappeared, now they only
receive S/.0.50. But no one had a telephone.
(Focus group participant)
[…] if you lived on a block where someone had a home telephone, you could ask to use it or could also pay for
the service […].
(Focus group participant)
[…] in my case, the man receives my [messages] and comes running to call me if there’s an emergency […].
(Focus group participant)
[How much do they charge you per message?] S/.0.50 per message. [Have you ever rented a phone from someone
in Hatary Llacta?] Yes, they charge S/.1.00.
(Focus group participant)
[…] we rented to two neighbours who got calls. We live close to the two neighbours. I would go to their house
to tell them about the message and they would come to answer because the caller would call back in five or 10
minutes.
(Dora, 45 years old. Resident of Hatary Llacta)
Nevertheless, even when users pay a flat rate of S/.5.00 to receive messages, the cost is high because
they then have to return calls, which in the best of cases will cost an additional S/.0.50 for three minutes
to a fixed telephone from a public call centre, or S./0.50 per minute to a mobile telephone from one of
the mobile telephone rental stands found on the lower part of the hill. This means they will pay at
least an estimated S/.5.00 in calls monthly. In addition, if it is a job-related message, it will almost
always require a rapid response, for which reason the cost of returning the call will be even higher.
The message and call service is common although individuals do not use it on a permanent basis. An
individual who cannot access fixed or mobile telephony (formal or informal) will use this system
until he saves enough money to buy a mobile telephone in the informal market. When he buys a
mobile telephone, he will stop using this service but will continue to use complementary services to
make calls.
Having a mobile telephone enables the user to receive calls and avoid the cost of the incoming-call
and message service, which is very expensive, and at the same time save money on returning calls
since he can immediately answer any calls he receives. He does not have to call back.
During our field work in Hatary Llacta, whenever we requested a private telephone, the first point
of reference was the telephone at Juana’s house. She also has a coin-operated telephone. Later we
were told that we could also call from other homes. Thus, residents are familiar with this system in
the area where the first fixed telephones were installed in the community.
Over time, we noted that private telephones are used for the following reasons: because the coinoperated telephone “eats” the coins, because users are “too lazy to go down the hill,” because they
do not have a mobile telephone, because they have consumed all the minutes of their tariff plan or
because they do not have a phone card.
Q: What do you do when you’ve used up your minutes?
A: A card, we get a card, but not often because we usually go down the hill to make calls. We use it mostly to receive calls […].
Q: But isn’t it a hassle to walk down?
A: What can you do […] but get moving? […] there is no public call centre and it’s very expensive […].
Q: Do people call from the public telephone [in Hatary Llacta]?
A: No, it eats your coin, it always eats the coins […].
(Jorge, 42 years old. Resident of Hatary Llacta)
One characteristic of the usury telephony service is its situational nature. In some cases, an individual
may want to rent his telephone while in others he may prefer simply to lend it. We believe this reflects
the following conditions: whether or not the owner has a telephone card to rent it; whether or not the
owner wants to earn money occasionally; whether callers are relatives or friends; and to meet
demand.
Just as some telephone owners in Hatary Llacta charge for messages or outgoing calls, others opt not
to offer the service because, according to residents, they do not know how to keep track of the time
and the type of call (national, local or fixed). This has been the experience of some individuals. As
some residents indicate, they initially charged the person making the call for each call; however,
because the classic (open) line was the only one available several years ago, they had to pay very
high rates, which caused them to stop renting their telephone.
I used to rent my telephone, but the bill was really high, so I installed a coin-operated telephone […] [now] I take
messages from callers for people who live close by because I don’t want to climb too much.
(Cecilia, 40 years old. Resident of Hatary Llacta)
The fact that some people no longer rent their telephones because they are afraid they will pay more
than they earn has led some residents to develop a more sophisticated alternative: to sell minutes of
a 147 card previously purchased for that purpose. In this way, they avoid the risk of paying more than
they earn and of not knowing the effective cost of calls. At the same time, it enables them to earn
income from their fixed line. These individuals have become true usuries of fixed telephony services.
They are able to earn continual revenue from this business.
Through the usury system, Hatary Llacta residents can receive calls and messages. However, people
are not satisfied with this service because it is expensive and does not permit an immediate,
permanent connection. Therefore, usury telephone service is useful only for a limited time. Many
residents reported having used this service at one time, before obtaining a mobile telephone with
prepaid service. Others say they use this service only if their mobile phone has been lost or stolen.
During the time they are using this service, they seek out other ways to access a device that enables
them to receive calls at any time, without having to pay a third party. Because fixed telephony service
is expensive, residents, particularly the youngest ones, prefer mobile telephones.
3.3 The incorporation of mobile telephony in social processes of actors
Like the fixed telephone, the mobile telephone is viewed as a device that affords comfort and peace
of mind to users. Having access to mobile telephony means being able to maintain permanent contact.
Moreover, it is an alternative to fixed telephony since it does not involve a monthly expense, or at any
rate, it may be less expensive.
In Hatary Llacta, the mobile telephone is frequently used to receive calls. In other words, it serves as
a call receiver that replaces the fixed telephone. It is much less expensive than a fixed phone since
individuals can acquire a stolen one in the black or informal markets.
Although it has become a “need” for many people, access to telephony is occurring gradually and is
dependent on the context. For example, although the use of mobile telephones has become
increasingly widespread among children, clearly not all families believe their children need one until
they are older. The same thing occurs in low-income areas: telephony is not a need for all
stakeholders.
The elderly do not usually access telecommunications. They do not have mobile telephones and do
not use public telephones or public call centres. They have fixed telephones in their homes only if they
live with a relative; they do not have a permanently connected social network. Homemakers, who
comprise a large percentage of the women in the community, have fixed telephones with flat-rate
plans in some cases, and in others have mobile phones with prepaid service. Most young and adult
men and young women have mobile phones, which they use to receive calls and to be connected.
These individuals view accessing mobile phones as a goal that permits them to access the labour
market, the market and modern society, but also desire them for purposes of entertainment and
pleasure and as a status symbol.
Young people always have their mobile phones. Just recently, for example, there was a special offer for youth on mobile phones […] that had games and Internet […] young people are more into that, into the games. They also take
photos. They’ve been advertising that phone. They’re selling it now […].
(Focus group participants)
It’s hard for me to get a job without a mobile phone, there’s no way to contact me, to call me. It’s a necessity nowadays.
(Miguel, 28 years old. Resident of Hatary Llacta)
Q: Which mobile phone would you like to have?
A: One like my friend has, the flat model that Claro offers, it has everything.
Q: But isn’t it expensive?
A: Yeah, very expensive, I don’t know if I’m going to buy it. Maybe I’ll buy that model for less in Las Malvinas.
(Ricardo, 24 years old. Resident of Hatary Llacta)
The issue is a complex one. Mobile phones help achieve the goal of accessing telecommunications,
but unlike other communications devices (such as fixed telephones), they offer many more functions:
text messaging, colour screen, mp3 player, camera, etc. Hatary Llacta residents initially seemed
uninterested in these extra features of mobile telephones. Nevertheless, they now want telephones
with these features because they are considered status symbols. Mobile phones are objects of
important symbolic value that have connotations of “youth” as well as access to “modern society” and
“globalized urban life.”
The demand for those features, which are apparently not a priority, occurs gradually. It is a slow,
complex process of access to mobile phones and the increasingly expensive and “complete” supply.
Demand is gradual rather than immediate.
When do Hatary Llacta residents begin to demand this telecommunications tool? Mainly when they
begin to seek employment or enter the labour market, although they also want mobile phones to
keep track of family members or when they run a business. Thus, obtaining a mobile telephone is part
of the life process of individuals, who often use other means of telecommunications initially.
Once individuals obtain a mobile phone, they seek out increasingly sophisticated models. In other
words, many people first purchase the simplest, least expensive handsets on the market and later
seek out more sophisticated models. While this process is influenced by their interests and the amount
of money they have, it is more closely associated with the supply offered in the black or informal
markets. Frequently, resellers of stolen objects, or the thieves themselves, offer high-quality handsets
at extremely low prices because they urgently need the money or because they have to sell the stolen
merchandise quickly. Therefore, many people are able to obtain modern handsets at considerably
reduced prices. It is an “occasional” or “coincidental” yet relatively common occurrence in the
community. The result is that in Hatary Llacta, individuals who live in precarious dwellings can be
seen with high-quality mobile phones.
In Hatary Llacta, prepaid cards for mobile telephones are purchased only a few times per year. Most
users reported that although they sometimes purchase a S/.10 prepaid phone card monthly, they
almost always use the card for two months, which means that they go for an entire month without
being able to make calls since this card expires after 30 days. In other words, most residents purchase
a prepaid card only six times per year, that is, they spend S/.60 annually on the mobile phone. This
clearly demonstrates that the phone is used to receive calls. Because users would have to pay S/.5
monthly for a usury service to receive telephone messages, usury and mobile phone services cost the
same: S/. 60. Nevertheless, the usury service is less complete and more restricted.
Q: How often do you buy a prepaid card?
A: I buy a card for S/.10 per month, but I use it for two months.
Q: So you buy S/.10 per month?
A: No, I buy it for two months, but the call minutes only last for one month.
Q: And the next month you don’t make calls on the mobile phone?
A: No, I don’t have any credit. When I call, I use the public pay phone or the call centre, that way I can better
control costs.
(Henry, 26 years old. Resident of Hatary Llacta)
Q: Approximately how often do you buy a prepaid card?
A: Once a month or every two months. I think the cards expire after a month.
Q: What prepaid card do you usually buy?
A: The one that costs S/.10.
Q: How long does that last you?
A: Just a month, the card expires in a month.
(Óscar, 29 years old. Resident of Hatary Llacta)
Interestingly, when individuals have prepaid minutes to make calls, they try to minimize expenses
by making calls as short as possible. This has generated codes of speaking on a mobile phone and
other strategies to avoid “using up the minutes.” For example, there is the practice of “ringing a
mobile” to indicate that a person has arrived to his destination or to inform the other party to call him.
In other words, one person calls another, lets the phone ring two or three times and then hangs up.
The mobile phone of the called party records the lost call and the number or name of the caller, if it
has been entered on the contact list. This informs the party that the caller wants to communicate or
has arrived at his destination.
For example, that’s what we do with my sister. We know when she is arriving to the bus stop because she rings
for us to meet her because it’s dangerous at the hour she arrives.
(Paola, 30 years old. Resident of Hatary Llacta)
Sometimes I let it ring so that they’ll call me. That way, I don’t use up my minutes.
(David, 25 years old. Resident of Hatary Llacta)
In addition, residents try to save telephone credit by avoiding calls to mobile phones that do not
belong to the same company as the one they own, since the tariff is higher. To make calls to mobile
phones of other companies, individuals use the mobile phone rental service, which offers handsets
of different companies, for which reason the price of the call is lower. Moreover, members of a family
or a group of friends will try to acquire mobile telephones of the same company to reduce
communication costs.25 Another way to save on the telephone credit purchased is to communicate
through text messaging, which is inexpensive.
Thus, the mobile telephone gradually becomes a part of life for Hatary Llacta residents. It is a service
people access when they need to be in contact, especially when looking for employment. Young men
and women and adult men are the main users of this service. Initially, the mobile telephone replaces
the local usury message service, for which reason users seek an inexpensive handset that functions
only as a call receiver; later they seek a better handset. The more sophisticated handsets are obtained
at reduced prices through occasional offers from thieves, sellers of stolen objects or resellers in the
black market. In general, users try to minimize costs and the length of calls since they buy prepaid
phone cards only infrequently (usually once every two months). They also employ communications
strategies that do not imply costs, such as calling and hanging up before anyone answers.
25 This is in the interest of the telephone company because if a client can be persuaded to buy a mobile telephone from the company, the rest
of his family may also buy handsets from the same company.
3.4 Access to mobile telephony through the informal market
A growing phenomenon in mobile telephony is the “itinerant call centre” where call minutes on
mobile phones are sold to passer-by who want to save on calls. Thus, access to mobile telephony
serves not only to communicate with others but also to create self-employment or to employ
unemployed persons.
In Hatary Llacta, several people (men and women) can be seen selling minutes of their mobile phone
plan. They usually operate in crowded areas or near public call centres and public pay telephones.
Sellers offer this service in one of two ways. The first is to stand on the sidewalk wearing a
phosphorescent vest bearing the logos of Claro and Movistar mobile telephone companies; the second
is to sit in a chair hung with paper or plastic signs listing the price of calls.
In both cases, the costs are S/.0.20 or S/.0.30 per minute to a local fixed telephone; S/.0.50 or S/.0.60 to
a national long-distance fixed telephone; S/.0.50 to a local mobile phone, and; S/.0.80 to a mobile
phone in the provinces. Sellers usually have three or more handsets that they divide into two groups:
one to call fixed telephones and the other to phone mobile numbers. They designate handsets to call
mobile telephones of the Claro, Movistar and Nextel companies exclusively.
Those who carry out this activity are considered informal workers by municipal officials of El
Agustino. Because mobile phone service sellers occupy public areas to work and do not pay taxes,
municipal collectors charge them S/.1.00 for a work pass. These passes are granted even though the
handsets are of “questionable origin.” Individuals who perform this activity may own the telephones
or may work for someone else. It is common for friends and family members to work together in this
business. The telephones used are on the postpaid plan. Sellers obtained this service because they
were able to demonstrate their solvency to telephone companies. However, evidence indicates that
tramitadores26 often manipulate information to ensure that their clients obtain a telephone line.
This form of access to mobile telephony came about as an alternative to public call centres and coinoperated telephones. Residents also may use this service when they have used up their call minutes
on their own phones or simply because they prefer not to use their telephone credit. Like fixed
telephones, mobile phones are viewed as devices that should only be used in emergencies:
[It is important to have a mobile telephone] to communicate, right? Maybe one of our relatives has had an accident; he can call us so we can go to visit him, you know?
(Roberto, 26 years old. Resident of Hatary Llacta)
Users of “itinerant call centres” have no qualms about using this service even though they know it
is an informal business:
Do you think it is a legal business? Some deception is probably going on there, because S/.0.50 to a mobile phone
is still […] yeah, there must be some scam, don’t you think?
(Óscar, 28 years old. Resident of Hatary Llacta)
26 A tramitador is an individual responsible for helping an interested party obtain several postpaid lines. The Claro Company has identified
tramitadores that have cheated individuals seeking this service.
A guy with a fixed phone in his home rents it to you, right? You go with your coin and call and a percentage goes
to the house. It’s the same thing with mobile phones. It’s a clever way to make money.
(Focus group participant)
What is important for the purposes of this study is not where the mobile phones are located (the
street) but how they are acquired. As occurs with fixed telephony, there are different ways to access
mobile phones. Individuals can buy them at authorized centres if they can afford them, which is
infrequent. Most opt for the alternatives of the informal and black markets. It should be noted that
in some cases, users have purchased mobile telephones through formal channels without being aware
that their handsets originated from the black market. Often, sellers of mobile phones deliver
contraband handsets with new chips to earn extra money.
With respect to mobile telephony, the formal and informal markets co-exist. Each develops thanks to
actors who interact in response to a demand and an organizational structure designed to meet users’
expectations. In Hatary Llacta, both markets are part of telecommunications strategies.
To access the formal mobile telephony system, users must identify the locations where a handset can
be purchased and be familiar with the supply. As mentioned, in Hatary Llacta, the prepaid system is
preferred (all individuals interviewed preferred it). Choosing the formal system offers more
guarantees. The only disadvantage mentioned for acquiring a mobile phone in the informal or black
market is the lack of guarantees. The individuals with whom we spoke said that those who acquire
stolen or “bootlegged” handsets and lines may be cheated and that purchasing stolen objects means
there are no guarantees, for which reason they prefer to purchase them at authorized centres.
Although buying a mobile phone in a formal establishment implies the desire to obtain a technical
guarantee and gives owners a sense of security, the research team learned that second-hand mobile
telephones are sold as new at authorized distribution centres27 of Telefónica and Claro companies.
To corroborate this information, which was provided by a thief,28 we visited a store on Riva Agüero
Avenue bearing a sign stating that it is an authorized Claro centre. There we asked about the prices
of the mobile telephones in the display case. We then mentioned that we were planning to buy a
telephone in the informal market on Leticia Street to save money and that, anticipating the possibility
of being sold a “blocked” phone, we wanted to know if the technician of the establishment could
“unblock it.” He told us that it was possible to “free up the equipment” and that the cost would
“depend on the handset model.” Nevertheless, he gave us an estimate: With a camera, between S/.20
and S/.30; without one, between S/.10 and S/.15.” He also informed us that if the technician could not
“free up” the handset, we would have to send it to Las Malvinas, which would cost an additional
S/.10. As we were leaving, the salesman said that he could sell us a second-hand mobile handset at a
good price. When we asked to see the model, he opened the display case. The sign beneath the
handset indicated a price of S/.199, but he claimed he could sell it to us for S/.90 because it was his.
It was a Samsung folding model with a camera and appeared to be new.
27 Authorized sales centres are located along Riva Agüero Avenue.
28 In an interview, he told us that several authorized centres sold stolen telephones that had been repaired.
Later, a thief in the area told us that several authorized shops sold stolen mobile telephones. These
models all had a camera or mp3 player and were refurbished to make them “like new” so they could
be resold. He added that these handsets are usually sold with the same special offers as new
telephones. When we asked him how this could occur, he responded: “Everything is rotten” and
claimed that many employees of formal businesses sell bootlegged lines. He said that some telephone
company employees have ties with technicians and thieves who operate in the mobile phone black
market. In other words, in the formal market (authorized distributors of Claro and Telefónica) stolen,
second-hand and bootlegged goods are sold without customers’ knowledge.
Thus, there are informal and black markets for both mobile telephony lines (signals) and handsets.
Informal markets on Paruro and Leticia streets or Las Malvinas offer bootlegged or cloned lines.
These lines often function for a time but may be cut unexpectedly when the companies become aware
of the theft or cloning. These markets also sell huge numbers of mobile handsets without a signal or
line. Most originate from small-scale crimes carried out by cogoteros around the city, and to a lesser
extent from contraband sources. Users are concerned that the signal will be cut or that they will waste
their money if they buy bootlegged or cloned lines:
Q: If this phone were lost or stolen, would you buy a new one or a stolen one?
A: A new one. I’ve heard that […] a stolen one is worthless […] it won’t last. I’ve already had two stolen mobile
phones [and lines] and they don’t last, I prefer a new one.
(Vanesa, 29 years old. Resident of Hatary Llacta)
They cheated him…when he left to get the money […] he was happy when he got home: ‘Look, I bought a mobile
phone,’ he said. ‘Let’s see it,’ I said. When he opened it, it was full of soap […] They tell you ‘look how it works,’
then you get distracted and they switch it.
(Focus group participants)
It could be the line because you can get a good deal on the bootlegged ones sometimes, but with no guarantees.
They cut the line. But there’s no problem with the handset model, they’re all the same, they’ll sell you any model.
(Franklin, 24 years old. Resident of Hatary Llacta)
Although Hatary Llacta residents prefer not to purchase bootlegged lines due to bad personal
experiences or the stories they have heard, they do favour buying handsets in the informal market.
In other words, when users manage to save enough money to purchase a mobile phone, they buy the
chip that gives the signal and the telephone number in the formal market–at an average cost of S/.30—
and acquire the handset in the informal or black market—also at a minimum cost of S/.30. They also
can purchase the handset from resellers of stolen objects or directly from the thieves living in the
community. In that case, prices may be even lower.
Users then have a legally purchased chip installed in an illegal handset. This practice does not appear
to be of concern to the mobile telephone companies; to the contrary, they appear to benefit since they
are more interested in selling call minutes (traffic) than handsets. We will discuss this further in
Chapter 5.
These strategies considerably reduce telephone costs. Full mobile telephone service (signal and stolen
handset) can cost approximately S/.60. By contrast, the least expensive handset with a prepaid line
purchased from an authorized Claro or Movistar distributor is S/.69. In other words, handsets cost
at least S/.20 more in the formal market, and that is for the most basic model.
In the formal market, purchasing a phone with prepaid service often includes other offers: for
example, companies may offer the amount paid for the handset in free minutes to make calls for one
month. Nevertheless, these offers do not attract low-income consumers for two reasons. First, the
minutes can be used only for one month, or three months, in the best of cases. Thus, it is better to
purchase a chipeado mobile phone (with a stolen or cloned line), use it until it the line is cut (this may
not occur for a year or more) and then purchase an original chip. The second reason is that lowincome individuals mainly use mobile phones to receive calls rather than to make them, as discussed
earlier. Therefore, having a late-model handset is more important than having extra call minutes.
4. Thieves, technicians and resellers.
The informal market and the black market
The informal telephony market is quite complex. It is a system with different actors, functions,
objectives and strategies. All actors act according to their own interests and in a manner that can
generate earnings from the sale and repair of the mobile handsets they receive. Most of these handsets
originate from street crimes committed by thieves in the area or in other districts of Lima. This
informal market, which makes mobile telephony affordable to Hatary Llacta residents, has its own
dynamics, which we will examine in this chapter.
To this end, we will study the informal and black markets operating in Hatary Llacta, which have ties
to the largest informal markets in the city. This will provide insight into the activities of their main
actors: thieves, technicians, resellers, collectors, etc. We will explore the chain of actions and functions
taking place in these markets and the structure of a leading band of thieves, La Bulla. This will
demonstrate how objects–mobile telephones—are transformed in their trajectory through different
locations and owners, but which nonetheless form part of an informal market that plays by the rules
of the formal market.
4.1 The structure of the informal market and the black market in Hatary
Llacta
The informal market of Lima is characterized by stolen goods, trafficking of information technology
and lower prices than the formal market. Like the formal market, this type of underground economy
entails the existence of a complex network of actors, functions and activities. Just as formal operators
require manufacturers of mobile handsets, distributors, technicians and sales people, the black and
informal markets also require individuals who perform these functions. In addition, users need a
motivation for buying mobile phones in informal markets: clearly, the main reason for doing so is
price as the service is basically the same in both formal and informal markets:
What are the advantages of stolen mobile phones? […] They sell them cheaper.
(Jorge, 42 years old. Resident of Hatary Llacta)
[…] what are the advantages of the mobile phone black market? The cost is lower […] it’s cheaper.
(Focus group participants)
Identifying the individuals who form part of the organizations that support the informal and black
markets in Hatary Llacta involves distinguishing between customers and the people who form part
of the internal structure of these markets. This difference can be exemplified through the following
description of the productive cycle of the underground economy of mobile telephony.
The stolen mobile phone a potential customer observes is the result of a series of actions. In the most
direct scenario, he will be looking at a telephone that was stolen, then offered for sale on the streets
of Hatary Llacta. In this case, the buyer will pay a sum of money that the thief-seller considers fair,
depending on the handset model, its condition and the need to sell it rapidly (as mentioned, the price
may be much lower if the thief must get rid of the merchandise quickly).
In other words, if the thief-seller needs to sell the stolen handset quickly, he may quemarlo, which
literally means “to burn it,” in other words to reduce the price for quick sale. Otherwise, he will seek
a buyer who can pay more, negotiating a price closest to that of the informal market (which may
range from 25% to 75% of the cost of a mobile phone in the formal market). In Hatary Llacta, this type
of sale only takes place among acquaintances::
For example, you can buy a mobile phone that sells for S/.200 in Claro from Richi [a well-known local thief] for
S/.50. Sometimes he’ll sell it to you at S/.50 or S/.40, or sometimes for whatever you have.
(Henry, 26 years old. Resident of Hatary Llacta)
Q: What kind of mobile phone have they offered you?
R: All kinds, with a camera or normal ones. If they need the money to smoke and drink, approximately S/.60 or
S/.70 with a camera. It depends on whether they know you [laughs].
(Paola, 30 years old. Resident of Hatary Llacta)
A potential buyer of a stolen telephone may also actively look for it. In this case, the client may go to
the mobile phone repair shops on Leticia Street, or in La Parada or Las Malvinas markets. In that
case, the history of the mobile phone to be purchased is more complex since there are no direct
thieves-sellers but rather “technicians” who repair handsets or sellers who purchase stolen handsets
for resale. Here the prices are higher than those of the thief-seller: ranging from 50% to 75% of the cost
in a formal establishment.
Whereas thieves are the main suppliers of the informal mobile telephony sales centres, employees of
mobile network operators may also distribute them.29 In those cases, the handsets are delivered in
sealed boxes that contain the charger and operating instructions. This raises the question: Which
employees steal handsets and sell them in the informal market: those of the telephone companies,
those of authorized distributors or those of mobile telephone manufacturing plants? The answer
takes us in several different directions.
Unlike purchasing a mobile phone from a thief, buying one in the establishments of technicians or
authorized sales centres where stolen telephones are sold as new involves a more complex process.
The steps are as follows: the thief can sell the stolen mobile phone to a collector of stolen merchandise
in the neighbourhood, to a technician or to someone working at a sales centre. If he does not have
many contacts or prefers not to be seen, he can give the mobile phone to another thief. This thief then
becomes a recursero, that is, someone who has contacts that ensure the quick sale of the handset. For
this operation, he will change a percentage of the sales price, a commission agreed upon between
the thief who supplied the device to be sold and the recursero. The percentage is very low; thieves
obtain only between 10% and 20% of the final sales price in the informal market.
29 Information obtained during informal interviews and conversations with thieves and former employees of telephone companies.
For example, if a stolen telephone is resold in the informal market at S/.100, the effective earnings of
the final salesperson will range from 25% to 50% of the sales price. In other words, that final
salesperson purchased the telephone from a collector of stolen goods at a price ranging from S/.50 to
S/.75. The collector purchased the telephone from the thief at a prices ranging from approximately
S/.10 to S/.20. The amount varies according to the market price of the handset.
Technicians will repair a stolen phone that has a camera and mp3 player if it is not in good condition.
If necessary, they will change the keypad and frame. Then, according to the people interviewed in the
community, they will contact employees of the telephone companies to ensure that these devices can
be sold as part of the offer of new mobile phones, together with a quantity of telephone credit similar
to the cost of the handset.
If the handset is a “modern” one and has been blocked, the IMEI30 must be changed to unblock it
before it can be resold. In some cases, this process is not done, in which case the user must locate a
technician to unblock the device.
These operations imply an alliance among technicians, thieves and security forces: in informal
markets, all of these individuals interact. This alliance is made possible because several security
guards in these markets are former inmates, who were contacted through their ties with the network
of thieves. Thus security agents, besides guarding the markets, are often in contact with thievessellers of mobile telephones. These individuals may guard a block, but when they finish their shift
they often commit crimes in neighbouring areas.
A user can hire a technician of the telephone company where he has a contract to repair his phone
after the one-year guarantee on the handset expires. However, the cost is high compared with that
of informal technicians, for which reason technicians specializing in mobile phone repair are in high
demand.
Even though the street sale of stolen mobile telephones is less complex than that in informal stands
and unauthorized shops, the buyer is particularly vulnerable to being cheated with this method. One
of the best known scams is the so-called “soap.” With this technique, the customer is shown a mobile
phone in good condition. Once he agrees to purchase it, the thief-seller switches the device and hands
over another with the same characteristics (size, weight, physical condition) but which in reality is
only the frame filled with a bar of soap carved into the shape of the telephone:
[…] La Cachina on Aviación? [location where stolen telephones are sold]. Sure, you buy there and at the next corner they steal it from you. You return. They did that to my husband in La Parada market. He went to buy one,
and since it had a camera, which was expensive then, he went to buy it and was happy to pay S/.50 […] they tricked him, when he left to get the money […] he was happy when he got home: ‘Look, I bought a mobile phone,’
he said. ‘Let’s see it,’ I said. When he opened it, it was full of soap […]
(Focus group participants)
30 “IMEI [International Mobile Equipment Identity] is a universal code giving a unique gsm/dcs/pc in the network. In theory, this code in the
telephone cannot be changed. It is used by operators to identify telephones in their network or in others. See:
www.claro.com.pe/opencms/export/sites/default/ClaroSite/documentos/atencionCliente/glosario_tim.pdf: p. 8.
They do that to you in Las Malvinas. They trick you. There’s a problem of security […] They say “Look how it
works,” they do everything, then you get distracted and they switch it. You can’t lose sight of it. You have to pay
attention. Sometimes you turn around and you’re screwed. And you can’t complain there. No. They immediately
[…] change clothes.
(Focus group participants)
We have said that the sale of a stolen mobile phone on the street is less complex because it involves
direct contact between the thief, the victim of the theft and the buyer. With this method, there are
fewer actors and therefore, the trajectory of the handset is simpler. Nevertheless, the ipso facto sale
of the stolen device implies another level of complexity involving a social drama that can be
summarized in the idea of the immediate economy of a small-time thief who tries to survive on those
precarious proceeds.
Informal trade has taken place since Hatary Llacta was established. Initially, water was trafficked to
new residents; later it was electricity, food, etc. Today, the neighbourhood is a complex space with
several businesses offering a wide array of products and a network of diverse actors who, far from
being isolated from the city, are part of a larger informal market network. Three aspects interest us
here: first, the players and their functions in a network that is a type of division of informal labour;
second, the structure of this network, the flow of activities and the pattern that defines this system;
and finally, the function that this informal system fulfills in the context of the activities and social
relations of Hatary Llacta.
The merchandise-trafficking networks in the informal market have three main actors: suppliers,
resellers-redistributors and final sellers. There are different types of suppliers. They may work in
contraband activities or may be employees of a company that has a stock of telephones. In most cases,
they are common thieves. These thieves each provide a few devices per week. Together, however, the
amount of stolen merchandise reaches staggering proportions: as mentioned earlier, more than one
million handsets were lost or stolen in 2006.
In addition to suppliers, there are resellers-redistributors of merchandise that was stolen or obtained
through small-scale contraband operations. These individuals buy and collect these devices locally
(in Hatary Llacta or other city neighbourhoods), resell them at higher prices than the thieves or
accumulate their stock to later sell it at Las Malvinas market or on Leticia Street.
Here there is evidence of speculation and the generation of a black market based on the scarcity of
certain goods. For example, if these resellers-redistributors obtain a large quantity of mobile phones
with cameras and mp3 players, they will not sell these devices quickly or directly in the informal
market. Rather, they will wait until these models become scarce and then raise the selling price to
more than that of the informal market, but lower than that of the formal market. There are many
resellers-redistributors. In Hatary Llacta, the best known one goes by the name of La Gringa. She has
a house in the third sector of the community.
In her home, La Gringa has a stock of different devices, but especially mobile telephones of different
brands, qualities, prices and conditions. She also has Discmans, m3 players, DVD and CD players,
speakers, detachable front panels of car stereos, etc. Her home is a collection point in the community,
where thieves frequently go to sell the articles they have stolen.
Like many resellers-redistributors of stolen objects, La Gringa does not just buy any item. As
mentioned, what is generated here is a small black market within the informal system of resale of
stolen goods. La Gringa engages in speculation on prices and demand for certain goods, especially
mobile telephones. She buys only those devices she believes will increase in value or will soon be in
short supply and that will therefore be in demand. Moreover, when thieves go to her home to sell
their stolen goods, they consult her on which products she wants. She indicates the telephone brands
and models. In other words, as several thieves stated, they “take pick pocket orders on request.” La
Gringa has several recent catalogues from department stores and mobile telephone companies as
well as advertisements. She also has informants in Las Malvinas (two relatives) who inform her on
the most requested handsets that other sellers do not have.
Often, resellers-redistributors reject the thieves’ offers. In that case, thieves are forced to sell what
they have stolen to passer-by or neighbours, or they will have to go to Las Malvinas, Paruro or Leticia
to offer it directly to final sellers. Nevertheless, this may be more costly for thieves since informal
merchants at those locations pay very low prices because they know that the thieves are trying to
“burn the merchandise.” Thieves also incur additional costs in terms of transportation and time.
Thus, the thieves who do not manage to sell what they have stolen to La Gringa or another collector
will have to sell their merchandise at a reduced price on the street or to a neighbour. This is how
many people obtain mobile handsets at very low prices, even lower than those of the resellers.
Therefore, there is a type of division of labour. The work of selling at Las Malvinas or Paruro is
supported by the work of thieves. There is also a chain of middlemen who collect the merchandise
in different areas of the city. Although these individuals do not coordinate their activities, the network
is quite functional.
This leads us to the second aspect: the structure of the informal network. This network does not
function as an integrated, coherent and deliberate whole. To the contrary, actors do not coordinate
with each other and there are no predetermined codes; it is not a case of organized trafficking. This
network operates in response to needs, demands and supplies associated with the formal market.
This network operates as a system with different segments. In other words, it has neither a leader nor
a hierarchical structure. There is no standard or code of honour. To the contrary, a system of related
and interconnected interests has arisen in this space. The system functions by linking knowledge and
“talents” with the requirements of its components. It does this in the same way as the formal latecapitalist market. It is a place of speculation, but also of “free competition,” investment, usury,
advertising, and of supply and demand. What are the rules and objectives of the informal market?
They appear to be those of the formal market, except that the informal market avoids regulation and
taxes. Although this topic goes beyond the scope of our research, it merits further study.
The informal system functions as a complex network that requires all components to be able to
survive. If one of the elements fails, the whole system will destabilize. The different functions do not
have a “proper name,” in other words they are not assigned to unique and irreplaceable individuals,
but rather to practically anyone who enters the network at any given time. Thus, the stability of the
system does not depend so much on an individual specializing in a function and remaining there but
rather on the function being carried out by someone.
This system fulfills a double purpose in the local community. On the one hand, it provides individuals
with a source of income when they are unemployed because they can work as thieves, distributors,
collectors, etc. On the other, it enables Hatary Llacta residents to access mobile telephones and other
devices and services: it generates affordability. However, we should not confuse this practical function
with the aims of the system. The function of affordability is not an objective of the structure (or of the
actors that comprise it) but rather a consequence of it.
It should be underscored that a small black market operates within a large informal market of goods
that are stolen, contraband, bootlegged, counterfeit or adulterated, etc. Black market operators
stockpile goods and engage in price speculation. They have begun to employ these methods with
more precision and sophistication, although this market is still in its incipient stages.
In this basic structure, there are different key actors who participate in the informal market. The
actions of thieves are also complex and play a key role in the structure of the informal and black
markets of mobile telephony within and outside of Hatary Llacta.
4.2 The functions of informal “technicians” and networks of thieves
There are two main groups in the informal and black markets of mobile telephony that are often not
obvious when studying this phenomenon. One is of thieves, which we have analyzed briefly. Another
group is of “technicians” responsible for “cloning, installing chips, repairing, clearing and
unblocking” mobile handsets and lines. The former is composed in some cases of networks or bands
of thieves and in others, of individuals who approach resellers-redistributors after having stolen
something. The second group is mainly a cluster of individuals who work for merchants of stolen
merchandise in major centres such as Las Malvinas or Paruro.
Stolen mobile phones are not the only goods sold in the informal market. These markets also offer
services such as unblocking of stolen telephones and cloning of phone numbers.
Unblocking stolen mobile phones requires modification of the IMEI of the handset reported stolen,
even though in theory, the IMEI cannot be changed. This operation is only carried out if the mobile
line and device were blocked by the user who reported the theft. In the case of the Claro Company,
the blocking of the chip or the telephone line is a priority. Afterwards, the company will disconnect
the handset so that it cannot be used by another person. To do this, the user must give his IMEI code
because the handset cannot be blocked without it.
The IMEI is printed on the box containing the handset or on the sales receipt. According to the
conditions of use, the subscriber should learn this number. Nevertheless, none of the Hatary Llacta
residents we talked to knew their IMEI number. In addition, they confused ‘IMEI’ with ‘e-mail,’ as we
did the two times we were pick pocketed in the neighbourhood and tried to block the line and the
handset.
This situation confirms a hypothesis: most people block the line but not the handset, for which reason
these devices can be sold easily on the black and informal markets. This is the result of the way
instructions on handset operation and the blocking process are communicated.31
Moreover, some people whose mobile phones are lost or stolen never block the line or report the
incident. Some Hatary Llacta residents say that they do not do so because it would mean paying for
a call and they “will never get it back” anyway, for which reason it seems senseless to do so. Others
indicate that they do not do so because they bought their handset in the informal market and assume
that reporting and blocking it would be useless. Therefore, mobile telephone companies do not block
the lines of these devices that were lost or stolen and thereby permit or at least facilitate the cloning
of lines.
Cloning of mobile numbers consists of registering a phone number that can be used by two people.
On several occasions, when people do not complain at the company, or do not request that the line
be blocked after theft or loss, the process is easier since the line is used only by the “bootlegging” user
and the person who formally owns the line never finds out since he usually acquires another
telephone and changes his number.
Cloning costs between S/.15 and S/.20 on Paruro and Leticia streets and Las Malvinas market.
Frequently, this service is requested in order to access the telephone credit of another subscriber.
According to several merchants and “technicians” who provide this service, the process involves
going to the website of the mobile telephone operator to access the data of the subscriber to whom
the number belongs. According to them, “the technician enters the number of the subscriber to obtain
personal data on the user of the number that will be cloned.” Since it is necessary to enter the system
of the telephone company, there are two possibilities: that the security system is vulnerable or that
some individuals with access to it are associated with the informal technicians.
Both possibilities are feasible. On the one hand, according to a Claro employee, workers have been
identified that unblock mobile phones at the request of certain technicians working in Las Malvinas.
On the other, as people at several stands in Las Malvinas and Leticia told us, as well as some
informants of the telephone companies and “technicians” on Wilson Avenue, there are many
specialized hackers who access security systems. We were unable to contact any of these hackers.
This topic requires further study.
Technicians’ function is to “repair” the devices that originate from resellers and thieves to enable
them to be resold in the large informal markets. Technicians are often individuals who have begun
studies in engineering or electronics in universities or vocational institutes. Some have completed
their studies but could not find a job; others did not finish for a variety of reasons and view the market
as a good place to make money. Some of these technicians are former employees of telephone
companies who were dismissed because of staff reductions, because their contract ended or because
they did not fulfill their duties or stole equipment, information, etc. At any rate, there is a large capital
of individuals with specialized technical knowledge.
31 This hypothesis is based on information provided by a telephone company employee.
I studied electronic engineering and was working at a company, but they fired me. I couldn’t find a job. My cousin
who had a kiosk (which sold stolen telephones in Paruro) asked me to work there.
(Gerardo, 29 years old. Resident of Hatary Llacta and technician in Paruro)
I’ve worked here for a long time […] the business is pretty stable, it makes money.
(Daniel, 30 years old. Resident of Hatary Llacta and technician in Leticia)
In Hatary Llacta, there are also individuals who do this work. Some studied fields associated with
electronics but did not receive any job offers and therefore decided to become technicians. But higher
education is not the only way to acquire this knowledge: Paruro, Leticia and Las Malvinas have
become informal training centres. Thus, the informal markets, besides being centres of distribution
and sale of stolen objects, are also places for learning..
Q: What work do you do or have you done?
R: I’m studying electronics in Paruro.
(José, 25 years old. Resident of Hatary Llacta)
I learn in Paruro, I work there, I help out and they are teaching me how to repair mobile phones and chips. They
teach, I learn.
(Felipe, 26 years old. Resident of Hatary Llacta)
The technicians we spoke with said that they are salaried employees of the owners of stolen mobile
phone stands. Their salaries range from S/. 800 to S/. 1,200 per month. Other technicians work for
relatives who own these stands, or have managed to establish their own businesses, in which case
they earn more.
Technicians have work thanks to the group of actors who supply the telephone handsets. We are not
referring to the middlemen here but rather to individuals who sell the devices, in other words, the
thieves. According to Hatary Llacta residents, their main contact with the informal and black markets
is through the purchase of stolen mobile phones from La Parada or from members of La Bulla.
During the field work for this study, we witnessed many thefts committed by members of La Bulla
and the selling of stolen mobile phones. As mentioned earlier, during our stay in Hatary Llacta, some
of us were robbed. In addition, we were offered stolen phones and we bought some devices from
resellers and thieves. We even managed to recover a tape recorder stolen from us by purchasing it
from La Gringa, who gave us a special discount since the equipment belonged to us.
If a Hatary Llacta resident wants a mobile phone, he only has to locate a member of La Bulla or go to
La Gringa’s house.
Q: Do you know where stolen mobile phones end up?
A: They’ll probably sell them at La Cachina at a good price.
A: Has anyone ever offered you a stolen mobile phone on the street?
A: Yes, I have a neighbour whose family members are thieves.
Q: And does he get you mobile phones?
A: Yeah, he’s offered them to me several times […].
(Ricardo, 26 years old. Resident of Hatary Llacta)
Q: What happens to stolen mobile phones?
A: They resell them; they change the chip and sell them. For example, […] in La Cachina, Las Malvinas on Argentina Ave., they have a collection of mobile phones that they sell for cheap. Most people buy only those nowadays. S/.20, S/.30. Some come with cameras. There are a lot of mobile phones […] They sell them […]. They’re very
popular with young people.
Q: So people here in Hatary Llacta can get stolen mobile phones?
A: Sure, you can get everything.
(Focus group participant)
Thieves can “work” in two ways. They can work by themselves or in a partnership with a friend or
acquaintance. These thieves may not steal on a permanent basis, but only occasionally to obtain
money. In other words, it is not their “profession.” These individuals use specific techniques to steal
in downtown Lima, around Abancay Avenue, Mesa Redonda market or in the streets of El Agustino
District or La Parada. They sell the stolen goods to resellers-redistributors of the community. In those
cases, thieves may have an “honourable,” formal job, and only steal to cover gaps in employment.
Mobile telephones are the preferred goods since they are easy to obtain and can be sold at a good price.
But Hatary Llacta also has other thieves who have more complex levels of organization and action.
These individuals form bands with established leaders and which have a relatively organized
operation. They have a closer relationship with places that resell mobile phones, with usury networks
and with collectors. They employ more sophisticated techniques for stealing telephone handsets and
they target certain models.
Therefore, although they are not a mafia-like established criminal organization (Gellner 1986), the
bands of thieves are part of a segmentary structure (Evans-Pritchard 1977) that have a type of
leadership (unlike the classic segmentary societies studied by ethnographers). As we have seen, these
organizations of thieves are essential for the functioning of the informal and black markets of Hatary
Llacta and the rest of Lima. They permit local residents to access mobile telephony by offering goods
of value at very low prices.
4.3 “La Bulla” and other groups of thieves. The crack of the black market
La Bulla is a band of thieves, most of whose members live in Hatary Llacta. More than 20 thieves
spend much of their time working with the group. Many La Bulla members have been incarcerated
numerous times or are sought by the police for a variety of offences: aggravated robbery, theft, assault,
etc. Their leader, who goes by the name of Taca Taca, is one of the best known and most dangerous
criminals in the area.
The structure of the bands varies. There are few studies on this subject. La Bulla is an organization
with a stable leader—in other words, an individual who orders activities and is responsible for
ensuring that objectives are met—and a central group coordinated by the leader and composed of
friends and acquaintances, individuals who have developed ties of trust and complicity. This
leadership functions as a basic component of the band of thieves, but requires other actors to function.
Common criminals who are not directly associated with the organization may identify with the
group, follow orders of the leaders and recognize the authority of its top leader.
Thus, this group functions as a segmentary system similar to that proposed by Evans-Pritchard (1977),
but following a different logic since there are leaders recognized by the entire structure. It is not an
acephalous system, but neither is it a chaotic, multi-headed one. There is a central leadership and
several segments that come together for “concrete work” and that subsequently physically separate
but continue to identify with the symbolic centre of the organization. However, it should be noted that
the existence of this system of relations, established leadership and a permanent core group does not
imply a bureaucracy. The groups of thieves have a purpose and a level of organization, but they are
not part of an organized crime network. Likewise, these bands do not follow written codes or explicit
regulations, but rather tacit rules and shared criteria of action, although they also have conflicts.
However, the issue of interest here is not the internal organization of these multiple networks but
rather its ties with the local informal and black markets, particularly of telephones, and the link
between these groups of thieves and access to telephony in low-income areas such as Hatary Llacta.
Specifically, we are interested in two main aspects: the functions that La Bulla fulfills in terms of the
residents of the zone and the process of incorporation into the social network; and the construction
of relations with redistributors and collectors of stolen goods to establish theft criteria and techniques
and to define objectives.
What La Bulla gives to its members is not so much economic security—it is not a permanent job with
an established salary—but rather a field in which members must constantly seek their own income,
a way contribute to the group and to obtain enough income to survive. In this regard, the band gives
its members a symbolic sense of security because they become part of a protection and security
network.
This protection network enables members to move throughout the hillside community without fear
of being robbed or assaulted since people know that they belong to La Bulla and fear retaliation from
the group. This also implies protection for members’ families. The security this band provides is
based on the fact that it has a network of contacts through which members can obtain odd jobs,
usually as security guards at an informal market of stolen goods.
It is common knowledge that if an establishment hires a member of La Bulla or another band of
thieves as a security guard, it will have a better chance of responding successfully in the case of a theft
or robbery since the entire network would go to defend the locale. It is a group of segments that join
forces as needed, but which are not permanently together. These guards-thieves are also responsible
for establishing contacts with the locales they guard and for advising members of La Bulla on leads
for selling stolen mobile phones.
In a context of economic uncertainty, not knowing which goods to steal, in this case, which mobile
handsets are in demand in the informal market, can be counterproductive. If thieves “steal just
anything,” they may not be able to sell the stolen items and will be forced to “burn” them. The group
provides information on the mobile phones most in demand (or, more specifically, what La Gringa
requests). The thieves thus have specific instructions and therefore can better target their efforts. This
of course does not mean that they will not take advantage of the chance to steal other models to “burn
them” and thereby increase their earnings for the day.
In this regard, there are two types of dynamics occurring with respect to the theft of mobile phones
by La Bulla. First, thieves try to ensure more income by seeking out a specific handset model that will
be sold directly to the local collector; second, they will steal any model to complement their earnings,
even if it they have to sell it at a very low price. One of the functions of the band is, then, to transmit
information from the collector to target the search and therefore reduce uncertainty with respect to
the resale of the stolen telephones. The band also seeks to establish a standard of security, in some
cases redistributing earnings to help members who have not obtained any income. Therefore, there
is a system in place to reduce uncertainty with respect to daily earnings.
The members of La Bulla steal during most of the day. They work in different areas, mostly in El
Agustino and downtown Lima. Their preferred locations are Abancay Avenue, and Mesa Redonda
and La Parada markets.
They use two main stealing techniques: the arrebato and the cogoteo. In the arrebato, a thief follows the
victim who has a mobile telephone, grabs the victim’s handset or purse and runs away. The cogoteo,
by contrast, involves a group of thieves. Some of the thieves hold the victim by the arms and legs
while others search his clothes, taking his belongings (wallet, coin purse, mobile telephone) and then
fleeing the scene in opposite directions to later meet at a predetermined location, where they
distribute the booty or take an inventory of what was stolen. In most cases, the stolen merchandise
is distributed as follows: the money is divided up between those who participated in the crime; the
documents, wallet and other objects are distributed to be sold in Las Malvinas (where stolen
documents are sold, including identity documents, passports, university IDs, etc.). Another thief may
collect mobile telephones to sell them together at the end of the day and then distribute the earnings.
This method allows thieves to earn more money than they would if they worked alone.
Thus, unlike in the formal market, individually selling devices in the informal market means less
income than selling them in groups. If the thief sells individually, he does not have a support network.
By contrast, if thieves sell together and belong to a band such as La Bulla, they not only have an
economic support network but can also negotiate with several collectors and therefore request a
higher price. Likewise, in the case of a band of thieves, collectors provide a pre-established price for
the goods to be stolen as they have a special interest in certain goods, in accordance with the dictates
of the small black market. Therefore, thieves know beforehand how much they can obtain for stealing
specific items.
This is the end of the chain of action. Thieves follow instructions of collectors (local resellersredistributors). In Hatary Llacta, there is La Gringa and a permanent system for collecting stolen
merchandise, which was discussed in the previous section. Demand depends on La Gringa’s
speculation criteria, which is based on market supply, advertising and trends, and on information
thieves obtain from her contacts and relatives in Las Malvinas.
On the edges of this chain of commercial trade, that is, on the margins of the activity of the black and
informal markets, a crack may appear that enables telephony devices to be sold at very low prices.
What does this mean? As we have seen, Hatary Llacta residents have serious difficulties in accessing
mobile telephones, which have become a necessity for them. In response to the access barrier, that is,
to the problem of affordability, the informal market has become an effective means for accessing a
mobile telephone at a much lower price than the formal market offers. Most residents of Hatary Llacta
buy their mobile phones in the informal markets of Lima. Nevertheless, many want more
sophisticated or trendier devices. It is difficult for these individuals to obtain those models, even in
the informal market, because they are expensive. However, small black markets often develop within
the informal market. In these black markets, the goods that are not in demand from collectors are sold
at prices even lower than those of the informal market. This is where local residents access the latest
equipment. Through that crack, they have access to other supplies, functions and goods.
The informal market enables low-income sectors to access mobile telephony. At the same time, the
local black market generates a second level of access, in a largely tangential manner. Both markets
function together and constitute the main way through which individuals can develop their strategies
of access to technology and telecommunications.
4.4 The life of objects
The market is constantly expanding, moving and generating feedback. Stolen goods are an essential
part of this market. Thieves are the smallest component in this network of access and trafficking of
goods, but a key piece nonetheless. Collectors, resellers and distributors of stolen merchandise are the
second level in this context. We will examine their ties with larger markets, which are no more than
a collection of small, informal cells of crime and trade, but which together form an enormous
conglomerate of trafficking of merchandise. It is not an organized black market but rather a
heterogeneous informal market: the juxtaposition of small local black markets of speculation and
stockpiling following informal market rules.
It is in this micro-political-microeconomic tension between local black markets and the interests of
collectors, with respect to the largest informal markets and the supply from thieves, where there is
an interesting development, a crack in the informal system where Hatary Llacta residents can access
mobile telephony at even lower prices.
In their constant movement, the goods—mobile phones, in this case—are not elements with intrinsic
value, their value is not permanent, constant or immanent. To the contrary, in their journey through
several informal and formal markets and the hands of different owners, the objects’ value, social
functions and uses change. Their lifecycle does not end when they are lost or stolen; rather, they
acquire other values and other prices.
Objects have a life, they are part of a system (Baudrillad 1999), and mobile telephones are no
exception. But what do we mean by this? First, it is a question of recognizing their symbolic character
(Godelier 1998), their importance as producers of symbols. They are not objects devoid of meaning.
They are objects-meanings, which say something, have a value, connote status, etc. But they also
have a life in the sense that they are not permanently in the same space, they may have different
owners and they change during their trajectory. They are part of a social process.
Users renew their mobile phones periodically because they have an old model and a new, better one
is being offered on the market, because they want additional features, or because their phones were
lost or stolen. Objects have a life, a journey that can be tracked, which defines not only their worth
or position in a structure of factual and symbolic values, but also their transformation, their multiple
uses and their consistency in a market which modifies that structure not only through the formal
economy, but also through informal spaces, underground economies, and through the network of
actors who enter the system, modify structures and generate other conditions to enable the market
to function.
Q: Where did you buy it?
A: A co-worker sold it to me.
Q: He sold it to you […] new?
A: No, it was […] stolen.
Q: How long did the telephone last?
A: Less than three months.
Q: And the other, how long did it last? The previous one?
A: […] I also lost it. I lost two. It lasted […] about two or three months.
(Aquiles, 20-year-old resident of Hatary Llacta)
As mentioned, a mobile phone can change hands many times. It moves from a shop or a contraband
operation into a user’s hands, then–stolen, lost or discarded—it may fall into the hands of a thief, a
reseller or a merchant of second-hand goods. Thus it reaches other people who assign a new value
to it, and who later discard it and return it to the transaction chain. It is interesting to contemplate the
functional life of this device in the formal market and how long this life is prolonged in other markets.
The question remains of how this method of access to telephony affects formal markets and in
what way it is associated with the interests of mobile network operators. It should be noted that the
life of objects is essential for telephone companies because they are aware that when mobile phones
leave the hands of the original users, or are no longer traded in the formal market, the receptive
population increases and they can generate revenue through telephone traffic. It becomes a
profitable business. This is an interesting area for studying the link between the formal and informal.
These multiple modifications may take place in the informal market of Las Malvinas and Paruro, a
major centre for the constant modification, movement and transformation of these devices. Far from
destroying the system (the formal mobile telephony market), it appears to oil it, to give it another
type of development.
5. On the fringes of the mobile telephony market
The informal mobile telephony market of Hatary Llacta is not a closed space. To the contrary, it is
directly linked to the informal markets of Lima and its centres of trade of stolen objects. To understand
this relationship, we will briefly discuss the way in which they are linked, as well as their general
structure. This will give us insight into the power structures of those markets and the relationship
with formal officials.
We will also analyze how relations develop between the formal and informal markets in mobile
telephony. Rather than generating losses for the formal telephony market, the informal market
apparently benefits it. Finally, we will examine how the idea of democratizing access to telephony has
been proposed to demonstrate that in low-income areas, at least in the case of Hatary Llacta, it is not
the formal supply that permits this access; rather, it is the cracks in this system that enable the
functioning of an informal market of stolen goods.
5.1 Las Malvinas, Paruro and Leticia
The informal and black markets of Hatary Llacta do not function in a vacuum. In other words, their
functioning does not depend solely on the relations and demands that develop within the
community; rather, they are linked to the city’s informal markets.
We have discussed the chain of actors in this system: thieves, collectors, resellers, redistributors,
technicians, etc. These actors are located in different spaces and form a network of exchange and
informal trade. Clearly, the system cannot function in an isolated manner. Clearly, a black market
cannot develop in Hatary Llacta if it is not tied to the centre of the informal or formal markets. Clearly,
the sales strategies of thieves depends on the contacts that collectors, resellers or redistributors of
stolen merchandise have with the “main” informal market to permit them to operate their businesses,
that is, to be able to buy goods from thieves in the neighbourhood.
Hatary Llacta collectors work with the large informal markets located on Argentina Avenue (Las
Malvinas) and Paruro and Leticia streets.
This is not a pre-established group of organized trafficking--which is how the large-scale black market
operates—or a system of organized mafias that control trade among actors. Although some criminal
organizations do exist, they are not mafias in the traditional sense, in other words, they do not have
codes of conduct or hierarchies established in a formal local structure. Rather, it is a system that
functions thanks to a network of several small cells. It is a cluster of actors that functions with a
natural division of labour, but without a pre-established organization or management from outside
the structure.
This means that the largest informal markets of the city are the result of a linking of segments that
conform a complex network of interactions. However, unlike segmentary societies, they do not have
the capacity to fully connect. They come together as components of a group, but they do not form a
whole because they cannot move or act as a group. This is because each part of the informal market
has its own interests and is in constant competition with the other parts. As mentioned, although
informal, this market adheres to the principles of competition, supply and demand.
The informal market of Las Malvinas offers a wide array of goods, including toiletries, clothing,
shoes, electronic goods, firearms, CDs, DVDs and sporting goods. However, trading of stolen mobile
phones, telephone line cloning services and activation of telephone lines are key activities in this
market. Moreover, technicians offer repair services for different devices, such as television sets and
video games, but especially mobile phones.
The informal markets on Paruro and Leticia streets in the downtown area bordering Barrios Altos
District have a similar structure. These markets do not offer such a wide range of products, however.
They tend to concentrate on the sale, purchase and repair of electronic and mechanical equipment and
light machinery. For example, there are several stands that sell scrap metal and others that sell broken
television sets, DVD and CD players and other items. There are stands that repair radios, electric
parts of automobiles, stereo equipment, etc. “Technicians” repair these items, which are later sold in
the same market or as second-hand goods in other locations around the city, especially in Mesa
Redonda market and downtown Lima. They also repair handsets, which they resell as new. As
mentioned, in Hatary Llacta, several stands sell refurbished second-hand telephones as if they were
new.
In Paruro and Leticia, stands that buy, repair and sell mobile phones are common. These markets are
perhaps the main centres of the mobile phone trade. It is possible to find any brand and model in any
condition. Handsets, and call minutes, are sold at a variety of prices. Some stands offer 50 free hours
of calls for S/.150, others for S/.210. These are cloned and stolen telephone lines, and customers who
purchase them are often cheated. The Leticia and Paruro markets offer all mobile telephones available
in the formal market at a much lower price, as well as older models no longer stocked in shops.
How do these markets function? As we have said, they consist of linked segments that do not
have the capacity to work together because they compete with one another. The objective of those
who integrate them is not to destroy the formal market—they have neither the purpose nor the
organization to do so—but rather to (“simply”) create a means to generate income. How are these
markets linked with the small informal markets of Hatary Llacta? Because the operations of those
markets form the basis for the development of the Hatary Llacta black market. They are linked
because the goods that thieves sell to local collectors are resold to merchants of Las Malvinas,
Leticia or Paruro. In addition, Hatary Llacta residents occasionally shop in those markets.
A variety of interests and tensions develop in those markets. In addition, these markets have built a
variety of relations with formal officials. They also have created other types of authority and local
power structures.
5.2 Formal authorities and actors of the informal system
Informal markets, like the variety of criminal acts that take place in the city, are in violation of the law,
or they at least fail to comply with it. For many, this means operating outside the law and the control
of the formal authority. Violations, delinquent acts and informality are often viewed as an ongoing
affront to formal officials, as something antagonistic to them and as a source of continual tension.
Nevertheless, informal markets and the informal system in general do not necessarily break with the
formal system and formal authority. Rather, they constitute a different way of relating to them. To
understand this, we must examine two key issues: on the one hand, the relationship between
informality and formality in black and informal markets in terms of the development of local power
and social relations; on the other, the relationship between formal market interests and strategies and
the organization and structure of the informal market, and the ways in which the former profits from
the latter.
The first issue encompasses two additional areas of interest: the relations of formal power and
authority that are developed within a system of informality, illegal activity and black markets. Here
we must analyze two chains of actors: those who exercise power in daily life in local informal spaces:
thieves, redistributors, collectors, final sellers, etc; and those who represent formal authority: the
police, municipal officials, the serenazgo security service, etc.
This structure is complex because it is not a case of two antagonistic forces –as common sense would
indicate—but rather of intersecting spaces that are not separated in practice. In other words, although
the police, security agents, serenazgo officers, municipal officials, etc. are responsible for ensuring
order, and thieves, usurers, resellers and collectors continually attempt to break the law, their roles
change in the local context.
As we have seen, thieves often work as private security guards or form groups responsible for
protecting the local community. On the other hand, police offers charge cupos (bribes) to collectors
of stolen merchandise to avoid seizing their goods, or to thieves to avoid arresting them, to release
them after they are captured or simply to not be at their assigned beat to allow them to “work.” Bribes
range from S/.5 to S/.20 and may even consist of a stolen mobile phone.
Hatary Llacta residents are aware of these relations between security forces and criminals, informal
traders and other actors involved. The formal authority is part of the informal system.
Formal officials are part of this system not only because they permit it or ignore activities developing
within it, but also because they themselves are users and clients of those markets. Police officers buy
equipment in informal markets and are often acquaintances, friends or relatives of people who work
there. Just as thieves are hired to work as private security guards, police offers often become
protectors of the informal system, their actors and businesses.
This became evident during our field work. Police offers were regularly seen on Riva Agüero and
Cesar Vallejo avenues, seemingly unperturbed by the informal stands selling mobile telephones.
Some even bought bootlegged goods, whereas others purchased phone cards or made calls from
public telephones, call centres or mobile phone rental stands. Residents know that the police “do
nothing to stop” this activity and when they do launch an operation, collectors are forewarned to
hide their merchandise. The relationship between formal security agents, the police and collectorsredistributors of stolen mobile telephones is quite clear. As some residents literally said, authorities
“know the business, know where everything is and everything that goes on.”
Thieves, traffickers and collectors of stolen mobile phones form temporary alliances with the police
or with certain security agents. They pay regular bribes to avoid arrest. Bribes may consist of stolen
goods. Instead of avoiding or opposing the formal authority, actors establish ties with this authority
because the illegal activity of the informal market demands it.
The formal authority is not rejected by individuals involved in informal activity; rather, the authority
demands its authorization through bribery. Informality leads actors to approach authorities and
associate with them to obtain benefits. For the most part, they achieve their aims.
Sure, if the pick pockets always pay the police, if they always give them something, their spare change to buy a
soda, or maybe even mobile phones, they can come to an agreement.
(Ricardo, 24 years old. Hatary Llacta resident)
They are released after they are caught. They pay off the police […] right away. They give them change, which
they accept. It’s normal. It happens every day […]
(Miguel, 28 years old. Hatary Llacta resident)
Therefore, formal officials operate within rather than outside the system, where they form alliances
and relations of reciprocity and where daily tensions exist. These are not antagonistic forces but rather
multiple mechanisms of negotiation.
The Hatary Llacta actors that are part of the informal market are not marginalized; rather, they are
individuals who enjoy social prestige and power thanks to their economic position (the case of La
Gringa) or their capacity to exercise violence (the case of Taca Taca, the leader of La Bulla). Likewise,
these individuals are known for their relations with the formal authority and for the possibilities that
these ties offer them. Finally, they provide Hatary Llacta residents with access to goods and services,
such as those of mobile telephony.
Certain formal officials are not only tolerated by participants in the informal system; they may in
fact exercise power in these local contexts and even develop power structures. We then have another
source of tension since, unlike what is commonly believed, these formal actors belong to and play a
key role in the informal structure. Therefore, the formal is not in opposition to the informal; rather it
complements and is a part of it.
5.3 The informal market at the service of mobile telephone companies
Although informal and black markets are traditionally believed to be economically harmful to formal
companies and the government (to the latter because they do not pay taxes), these markets also
represent potential access to goods and services and generate employment, regardless of labour
conditions.
In Peru, the informal market of videos and books (especially bootlegged items) has in fact caused
enormous economic losses for companies operating in those sectors. Many of these companies have
failed as a result whereas others have been forced to leave the country (Blockbuster, for example).
Nevertheless, this has not occurred in the area of mobile telephony. If this risk existed, telephone
companies would have proposed norms to regulate the industry; they would have pressured
Congress or regulatory agencies. Although some regulations do exist, telephone companies seem
relatively unconcerned with their compliance.
If the underground economies harm the formal sector and the government, why do mobile network
operators seemed unaffected by them? Or rather: how are these companies affected by the informal
and black markets of mobile telephony? This is a complex issue that reveals sales strategies adapted
to local social contexts and the possibilities of the population. Telephone companies have developed
these strategies to generate profits. However, this is not a case of modifications to permit formal
access of citizens to telephony, but rather an adjustment to the deficiencies these individuals face,
which they use to strengthen their investments.
The answer to this question is that these companies earn more from telephone traffic than from the
sale of mobile phones. Companies purchase mobile handsets from handset manufacturers (Nokia,
Samsung, Sony Ericsson, etc). When the companies sell these devices to the public, they sometimes
offer them at below cost, that is, the offers in the formal market subsidize the cost of the handset to
enable more people to purchase them and thereby contribute to telephone traffic. In other words,
telephone companies do not generate profits selling handsets, or at any rate, this activity does not
produce major returns.
Q: Do you manufacture mobile phones?
A: Nokia, Motorola and others do. They make and distribute handsets. We generate profits from the service, not
from the handsets. Sometimes we invest in certain handsets. We subsidize the price of the devices.
(Telephone company employee)
Q: You earn from call traffic, right? What happens with the handsets purchased in the black market?
A: Well, you could say that the company can earn more profits because it does not have to deal with distributing
and subsidizing the handsets. It focuses on selling service. We even save on the sales people.
Q: So stolen mobile phones reduce costs and generate profits? Isn’t there a law that regulates this?
A: The police are responsible for controlling it, for regulating it. It doesn’t affect us. From a commercial standpoint,
it even benefits us.
(Telephone company employee)
Companies earn their real profits, as indicated, from telephone traffic, which is generated once users
have acquired a handset. For this reason, companies develop strategies to ensure that users purchase
phone cards periodically. Many companies are not interested in promoting postpaid systems. They
prefer to focus on increasing the number of subscribers with prepaid plans. The informal market
increases that possibility:
A: We do not classify users; we used to with [the former company], the high, medium and low segments; for
example, a prepaid was for the high segment, a client who constantly purchased phone cards or received many
calls, who had a high prepaid level. Postpaid […] were usually the high segment. At one time there was a platinum segment, with individual consumption of approximately S/. 1,000 monthly.
Q: So why don’t you use those classifications anymore?
A: Because of the philosophy of the [current company]. [This company] tends toward a concept of mass consumption. [The previous company] was concerned more with the postpaid system, because it created a fixed
monthly expense. [The company] concentrates on prepaid because with prepaid you earn more profits over time
[…] the idea is to attract more clients than the competition. That’s the idea.
(Telephone company employee)
Q: Do you have more prepaid than postpaid subscribers?
A: All companies do, approximately 70% is prepaid.
(Telephone company employee)
If a user of a prepaid service does not purchase call minutes for six months, the company may cancel
his service: the user does not produce traffic and consequently, the company does not generate
revenue. Phone cards have a limited effective period: that of S/.10 has a maximum effective period
of one month, that of S/.20, two months and so forth. In addition, call minutes cannot accumulate after
a card expires; they are simply cancelled.
Considering that stolen mobile telephones are sold without the need for mobile phone companies to
purchase the handsets or oversee their distribution, and that stolen telephone equipment circulating
in the informal and black markets will continue to produce telephone traffic once it is resold (since
even low-income users will purchase a telephone card every two months, as we have seen), it is clear
that black and informal mobile telephone markets serve the formal market, despite the obvious
problems they can cause. This leads us to conclude that the dynamics of these markets are closely
related. They complement and even support one another.
When formal lines are cloned, telephone credit of a prepaid system may be stolen, but once these are
used up, the individual who acquired the cloned line must buy a phone card and thereby generate
telephone traffic, and consequently, revenue for the company. Likewise, if an individual loses his call
minutes on his mobile line due to cloning, he will purchase a new card, also generating earnings for
the company. Finally, if it is a postpaid line, cloning increases the telephone traffic of the handset
owner, who must pay for the service in any case. Companies monitor cloning of mobile telephone
lines closely and usually cut cloned lines after they are identified, which may take anywhere from a
few days to several months.
Therefore, the formal market uses the informal market as a major channel for distributing mobile
handsets and for generating revenue. The black market supplies actors (“citizens-consumers”) with
mobile receivers-handsets, which have little value for the large companies. Thieves steal mobile
handsets from individuals and resell them in the black and informal markets, thereby generating
increased possibilities for the low-income population to access a system that they would be unable
to access through formal channels.
This is important since the method of access of low-income individuals to mobile telephony does not
mean an effective loss for the companies because companies know that those individuals could not
access the system if it were not for the informal network. Thus, eliminating the informal or black
market would not increase profits.
Likewise, individuals whose mobile telephones are lost or stolen, and who have sufficient income to
purchase another telephone through formal channels, will buy a handset in the “regular” telephone
market. In other words, they will buy a second telephone and will generate more telephone traffic.
Their stolen or lost mobile telephones will join the ranks of the telephones in the informal market and
thus will generate traffic, and of course, revenue. The individuals who own mobile telephone stands
do not appear to threaten the formal market; to the contrary, they appear to benefit it.
Q: Have you identified the people who sell calls on mobile phones at S/.0.50 per minute?
A: Yes, but they don’t affect us; to the contrary; they generate more call traffic and therefore revenue.
(Telephone company employee)
This means that mobile network operators are not harmed by the existence of the informal market;
to the contrary, it adds to their profits. This explains why these companies sell mobile phone chips
separately in authorized establishments, in other words, without the handset. This does not occur in
some other countries in the region (Uruguay, for example), where users cannot buy a chip without
buying the complete package of handset plus chip.
Selling the chip separately from the handset enables low-income users to buy a handset in the
informal market, from resellers or thieves, and install an original chip acquired from a formal
establishment. As mentioned in previous chapters, most Hatary Llacta users have legally purchased
telephone lines that operate with mobile handsets obtained illegally.
Q: Chips are sold separately?
A: Yes, for example, if a person has a handset that has no restrictions, he can purchase a chip to obtain a line.
(Telephone company employee)
Normally, one buys the chip in a shopping centre, shop or distribution centre and puts it in a handset […] purchased in Las Malvinas, La Cachina, Paruro, etc.
(Telephone company employee)
I bought my mobile phone there, I got a good price. I put in my sister’s chip, which she bought at Claro for S/.30
the other day.
(Carla, 27 years old. Hatary Llacta resident)
The informal market and the small black market in Hatary Llacta we have studied function in relation
to the formal market. In fact, the evidence indicates that these markets generate profits for the formal
market. The example of Hatary Llacta is not an isolated one; it is a common phenomenon in Lima.
The formal market takes advantage of the activities and organization of the informal and black
markets to greatly increase profits.
Some telephone company employees we interviewed acknowledged that the informal market serves
the formal telephony market, and not the other way around, as is commonly thought.
Actually, those people who work in Las Malvinas, for example, even telephone thieves, are working for us, only
they don’t know it.
(Telephone company employee)
They are employees of [the company], they are only lacking the vest; they work for us for free.
(Telephone company employee)
A: [Referring to an individual who rents mobile telephones in the street] You could say he is an employee, who
doesn’t even know that he works for [the company]. He’s just like any other employee. We provide the service.
Q: But isn’t it wrong that something private is used to turn a profit?
A There’s nothing that penalizes it. It can affect the municipality, but they pay them and that’s it. It’s like when
they used to rent fixed lines, which were not widely available. It is like a public telephone in a way.
(Telephone company employee)
This is an important point because what appears to be outside the system is actually at its very centre,
and not only in symbolic terms, but in a practical sense. At the same time, this generates a paradox
because access to the system is not provided, promoted or facilitated by formal companies, by the
system itself, but rather from the sidelines, that is, from the informal market.
This raises another issue. In this context, the informal, which would seem to be in opposition to the
formal, becomes a key part of it. It does not function through its own effort, through its illegal
operation, as a dissident force of a system that permits only a single possibility, but rather as an
essential part of the economic machinery. Therefore, how should we view the democratization of
access of low-income individuals to mobile telephony? Is informality the solution? From the most
radical side of the issue, we question how individuals can demand formal access to telephony if the
informal system benefits the formal market and companies.
The paradox is that access to telephony by low-income users – the democratization of access—has not
resulted from the promotion or interest of the formal system. Rather, it is a product of a defect in it,
of the cracks that appear when it relates to individuals in their own environment.
The strategies of access of low-income individuals are located in these crannies. It is in these cracks
where tension can be seen: the formal market has a residual effect, its own informality, but it does not
permit this to undermine its structure. It develops mechanisms to generate profits in this process.
Low-income individuals cannot access the formal market yet they require and demand what it offers.
They achieve their aim through the informal market, which permits immediate, direct access. They
are not passive before the supply, they are not passive before the lack of affordability. This is where
these two groups of actors meet, where new interests develop and where, far from being antagonistic,
the actors appear to mutually exploit one another for their own purposes and benefits.
5.4 The democratization of access?
Every day, individuals develop strategies to access services the market offers. Some are basic services,
many of which the government supports by providing facilities to ensure universal access to them,
although we know that this does not always work in practice (in Peru, many people do not have electric
power, water or wastewater services). The market also offers services to higher-income segments,
services which afford comfort, in other words, luxury services. There are also other services that have
recently become needs for individuals, essential elements that permit them to remain active in society.
Mobile telephony is one of those services. For some people, it remains a non-essential good, but for
others, it has become increasingly important and is viewed as the only way to maintain contact with
others. Thus, for many people, the telephone is not a luxury item; to the contrary, not having one is.
Some people have “the luxury” of temporarily disconnecting from the labour market, the economy,
politics and information.
But for those living in Hatary Llacta, not having a mobile telephone is not a luxury but a disadvantage
since for them it is the only means of communication. Once these individuals begin to work, having
a mobile phone becomes a key aim. But obtaining one is not easy because market prices are too high
and the government has shown little interest in facilitating universal access to telecommunications.
The number of mobile telephones in the country has grown substantially in recent years thanks to the
prepaid system. Some people argue that this is a process of democratization of telephony access
because of the increasing number of mobile phone users and the plentiful supply. However, the issue
is more complex because, as we have seen, the low-income population’s access to telephony does not
occur through the formal market but rather through informal and black markets.
The formal market creates a fringe area, an apparent residual effect of its structure known as the
informal and black markets. There, a gap develops where the goods of the formal market, which
low-income individuals could not afford, can be acquired. In this crack in the formal market, made
possible by the market itself, by the companies themselves, a system is built through which
individuals access supply.
Likewise, a second crack of access to telephony opens in the informal market: many mobile phones
of Hatary Llacta residents were not purchased in Las Malvinas, Paruro or Leticia markets but directly
from thieves who could not “place” what they had stolen. This reduces the costs of the goods.
The individuals with whom we had contact in Hatary Llacta are clear examples of this process and
system. They have a need to be in contact with the labour market, their families and with information
and they achieve this by developing their own strategies. The informal market gives these people
access to telephony. There is a paradox here because the apparent “democratization” is made possible
precisely through what is located on the economic and legal sidelines of the system itself.
Final Thoughts
In “El malestar de la democracia formal” (2002) [“Formal Democracy and Its Discontents”], Zizek
argues that liberal democracy is not made “to order for concrete individuals, but rather made to
order for an abstraction.” The democracy of late capitalism, says Zizek, “functions as a Gesellschaft of
atomized individuals, society as a mechanical grouping, without internal ties.” Of course Zizek’s
idea does not refer to democracy per say, but to the neo-liberalization of democracy after the
Washington Consensus. In that context, many of what were viewed as citizens’ rights were
transformed into the market supply, with competition being one of the main criteria for establishing
social relations.
This idea, which appears to be an acontextual reflection, seems increasingly logical. Our study leads
us to a similar conclusion. The “democratization” of access to certain services is not necessarily a
right, but rather part of an economic system of supply and demand and competition, in which citizens
have become mere consumers. Mobile telephony follows this logic: for low-income individuals, it is
not a luxury but a need in order to enter the labour market and to maintain family relationships and
social networks.
Hatary Llacta residents face major obstacles to accessing telephony. Just as they pressured the
government to provide water and electricity services, many residents also demanded fixed telephone
service. Some obtained this service, but few were able to maintain it due to the high cost. Residents
who have fixed telephone service today pay nearly S/.40 for a flat-rate plan. They often rent their
service to individuals who want to receive calls or messages. This is a usury system that permits
those without telephone service to have a call reception service.
However, this system is expensive, for which reason residents prefer to purchase a mobile telephone
that permits them to receive calls or messages directly throughout the day. With a mobile phone,
they do not need to return calls and therefore do not have to incur additional expense making calls.
Low-income individuals use mobile telephones mainly as call receivers. To make calls at a lower cost,
they use different telecommunications channels: public telephones to make local calls to fixed
telephones; public call centres to make longer calls to the provinces; mobile phone rental stands to
call mobile telephones of different companies.
The main point, however, is that the formal supply of mobile telephony continues to be out of reach
for many people. Nevertheless, faced with this obstacle, citizens do not remain passive, waiting for
the government or the market to resolve the problem. Rather, they develop their own strategies of
access. The main strategy is to purchase mobile handsets in informal and black markets. Thus, they
enter a chain of consumption that has different actors, each with a distinct function.
Local thieves supply handsets to the informal market. In Hatary Llacta, there are several bands of
thieves; one of them, La Bulla, provides mobile phones to local collectors. Collectors buy goods they
believe are valuable and that will fetch a good resale price in the informal markets of Las Malvinas,
Paruro or Leticia. There, a crack in the informal market develops, in which a black market of
speculation and stockpiling is generated. Collectors buy only telephones that will have a high resale
value. They reject the rest, forcing thieves to sell these directly to community members on the street.
These devices are sold at lower prices than those of the informal market.
Thus, two cracks appear in the system. The first develops between the structures of the informal and
formal markets. This enables individuals to access telephony, because they buy stolen handsets and
install original chips in them. The second crack develops in the encounter between the informal
market of stolen goods and the black market of speculation by local collectors and resellers. Here a
surplus is created, which is resold to Hatary Llacta residents at very low prices, thereby facilitating
their access to mobile telephony.
These markets are composed of segments that do not have a central organization or an external
leadership. It is a complex system of networks integrated by competing interests that comprise the
formal system and operate under its rules, with the only “exception” being that it evades taxes and
is illegal. And herein lies two paradoxes: on the one hand, the informal mobile telephony market
does not seem to oppose the interests of formal market companies; in fact, it appears to increase the
revenue of the formal market since profits are not dependent on the sale of handsets (which are often
subsidized) but rather on telephone traffic. Informal and black markets increase the volume of
telephone traffic and function as a tax-free distribution channel for mobile handsets. The informal
market appears to be “at the service” of the major companies.
On the other hand, the apparent democratization of telephony that some believe is demonstrated by
the expanding supply and growing number of mobile phone users in Peru is not in fact driven by the
system. There is no effective concern for democratically integrating this service into the lives of the
population, since it is still inaccessible for many. Rather, the service has expanded among the lowincome population through the informal and black markets, which reveals a contradiction in the idea
of “democratization.”
This also demonstrates the complexity of the phenomenon we have analyzed and the importance of
continuing to study not only the multiple forms and strategies of access to telephony, but also the
informal market, the black market and the centres of trade of stolen goods. In Peru, as in many Latin
American countries, these are not an exception to the rule but rather a part of daily life.
This leads us to a clearer understanding of Zizek’s idea with respect to democracy: that it cannot be
viewed as an aseptic structure, as a mere abstraction, but rather in concrete terms of individuals that
reconstruct and reinvent it daily. It is also clear that the formal system, unable to eliminate its double,
has developed ways to use it to its advantage, without destroying or eliminating it, but also without
attempting to improve the conditions in which it operates. What some believed was a residual effect
of the formal, legal structure now appears to be at its very centre.
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