The hidden economy: informal and parallel trade in Northwestern Uganda

Abstract

This study of informal and parallel trade in Uganda's Arua District shows that such trade has a long history back through colonialism. Its roots do not lie in the distortions of post‐colonial state intervention, as the current conventional view would have it, but in the activities of the colonial state in imposing borders and divergent currencies and in implementing trading networks. More recently and as part of adjustment programmes, attempts to shift incomes from traders to farmers, by raising producer prices and taxing traders’ incomes, have resulted in traders shifting to parallel markets over the border in Zaire. One such market in Ariwara is analysed and shown to involve trade in visible manufacturers and foodstuffs and more crucially in gold, US dollars and coffee. Conventional views that parallel trade is limited to export crops, and that such cross‐border smuggling is on barter terms, are shown to be greatly mistaken, given the existence of a multi‐product market lubricated by a sophisticated multi‐currency and gold market. In conditions of shortage, where alternative supply channels exist, policies of ‘structural adjustment’ which fail to take the basis of these parallel markets into account, will not succeed.