Financial Crimes Soar in Peru, Leaving Trail of Desperation and Exploitation
In a nation already grappling with economic struggles, financial vulnerability has given rise to a criminal competition that is driving extortion and loan sharking to unprecedented levels in Peru.
Rise in Extortion Cases
The country’s Attorney General’s Office reports that cases of extortion skyrocketed by 370% between 2021 and 2023, with 22,396 reported incidents last year alone. This surge in financial crime is largely attributed to the proliferation of predatory “gota a gota” loans.
Got a Gota Loans: The Primary Driver
These types of loans, which charge extortionate interest rates, accounted for six times as many complaints made to the Interior Ministry’s platform as all other forms of extortion combined in 2023. The practice of gota a gota lending originated in Colombia and has since spread to Peru.
The Prevalence of Got a Gota Loans
It is estimated that around 500,000 people in Peru owe gota a gota loans, with many seeking out these loans to pay off other debts. The most vulnerable individuals are those who lack access to formal financial institutions, including the country’s 1.2 million Venezuelan migrants.
Financial Vulnerability of Venezuelans
Many Venezuelans living in Peru work in the informal job market and lack residency status, making it difficult for them to secure credit from banks or other financial institutions. A World Bank Group study found that nearly half of all Venezuelans living in Peru were unbanked as of September 2022. Only 5% have been able to receive credit from formal financial institutions.
The Impact on Peruvians
Peruvians are also struggling financially, with the country’s poverty rate predicted to reach its highest level since 2010 due to the COVID-19 pandemic and economic instability. A cap on interest rates for business and consumer loans approved by Congress in May 2021 has further exacerbated the situation, as banks are less likely to grant loans to desperate individuals.
Competition Between Criminal Groups
The rise of gota a gota loans has also led to competition between Colombian and Venezuelan criminal groups. While Colombians have traditionally controlled the practice in much of Peru, Venezuelan gangs are increasingly entering the market. Some may seek out alliances with existing groups in an effort to gain control of the market, while others may choose to take it by force.
A Stark Reminder
In one region of southern Peru, the transnational Venezuelan mega-gang Tren de Aragua has taken over the gota a gota trade at gunpoint. The group’s presence and success in exploiting vulnerable Venezuelians is a stark reminder that financial desperation can lead to exploitation and crime.
Addressing Financial Vulnerability
As Peru struggles to recover from its economic woes, it is clear that addressing the root causes of financial vulnerability will be crucial in combating the growing problem of extortion and loan sharking. Without access to legitimate credit options, many individuals are forced into the arms of criminal groups, perpetuating a cycle of poverty and exploitation.
- The Peruvian government must prioritize providing access to formal financial institutions for vulnerable populations.
- Banking regulations should be revisited to ensure that banks provide loans to desperate individuals without exploiting them with extortionate interest rates.
- A comprehensive strategy is needed to address the root causes of financial vulnerability, including economic instability, poverty, and lack of financial education.