Financial Crime on the Rise in Peru: Loan Sharks and Extortion Gangs Thrive Amidst Economic Vulnerability
Peru is facing a growing crisis of financial crime, with cases of extortion soaring 370% between 2021 and 2023. The majority of these crimes are linked to predatory “gota a gota” loans, which have become a major concern for authorities.
Predatory Lending on the Rise
Gota a gota loans, also known as “drop by drop” loans, involve extortionate interest rates and have been driven by financial desperation. These loans have become a major concern for authorities, with all but two of Peru’s 34 fiscal districts recording a rise of at least 150% in extortion reported between 2021 and 2023.
Financial Desperation Drives Crime
Financial desperation is driving the rise in financial crime, particularly among Peru’s most vulnerable populations. Around 500,000 people in Peru owe gota a gota loans, with many seeking these loans to pay off other debts. The country’s 1.2 million Venezuelan migrants are particularly susceptible to exploitation by loan sharks, as they often lack residency status and have limited access to formal financial institutions.
Exacerbating Factors
A cap on interest rates approved by Congress in May 2021 has exacerbated the situation, making it less likely for banks to grant loans and driving individuals into the hands of extortionists. The COVID-19 pandemic has also had a devastating impact on Peru’s economy, with poverty levels rising to their highest level since 2010.
Transnational Gangs Taking Over
Colombians have traditionally controlled gota a gota loans in much of Peru, but recently arrived Venezuelan gangs are posing a growing threat. Some Venezuelan gangs may seek alliances with existing groups before attempting to take control of the market. In one region, the transnational Venezuelan mega-gang “Tren de Aragua” has already taken over the gota a gota market at gunpoint.
The Vulnerable Targeted
The presence of over a million Venezuelans without access to credit plays into the hands of these criminal organizations. “These mafias come and they take advantage of these very Venezuelans who have come here seeking new horizons,” said Dr. Jorge Chávez, National Coordinator of the Attorney General Office’s organized crime division.
Urgent Action Needed
As Peru struggles to combat this growing crisis, it is clear that financial desperation and economic vulnerability are driving the rise in loan sharking and extortion. The country must take immediate action to address these underlying issues and protect its most vulnerable populations from exploitation.
- Implement measures to increase access to formal credit for low-income individuals
- Strengthen regulation of gota a gota loans to prevent extortionate interest rates
- Increase enforcement efforts against loan sharks and extortion gangs
- Provide support to Venezuelan migrants to help them integrate into Peruvian society and access formal financial institutions