Peru’s Financial Crisis Fuels Surge in Gota-a-Gota Extortion and Loan Sharking
Peru is grappling with a steep rise in financial crimes, especially loan sharking and extortion, as economic vulnerability intensifies competition among criminal groups. According to the Attorney General’s Office, the number of reported extortion cases increased an alarming 370% between 2021 and 2023, totalling over 22,000 cases. This represented a 20% increase in overall crime reports during the same period.
Extortion Cases on the Rise
Every region of Peru, except for two, saw a rise of at least 150% in reported extortion cases between 2021 and 2023. The surge continues into 2024, with predatory ‘gota-a-gota’ or “drop by drop” loans playing a significant role in fueling this trend.
- Extortion Trends
- Reported extortion cases increased by 370% between 2021 and 2023
- At least a 150% rise in reported extortion cases in all but two Peruvian regions
- The surge in extortion cases continues into 2024
Gota-a-Gota Loans on the Rise
Gota-a-gota loans, which involve loan sharks charging exorbitant interest rates, were a primary cause for the increase in complaints. These types of loans accounted for six times as many complaints filed with the Interior Ministry’s complaints platform as all other forms of extortion in 2023.
- Impact of Gota-a-Gota Loans
- Six times as many complaints related to gota-a-gota loans than other forms of extortion in 2023
- The loan sharking phenomenon continues to grow in prevalence
Origins and Spread of Gota-a-Gota Loans
Gota-a-gota, which arrived from Colombia around a decade ago, initially spread from the northern cities of Chiclayo, Piura, and Trujillo before expanding to Lima and reaching 97 cities by late 2017.
Impacts in Lima
The capital city, Lima, was particularly affected, accounting for half of all reported gota-a-gota cases throughout the country between May and December 2023.
High-Profile Arrests
In March 2024, authorities in Lima dismantled a Venezuelan-Colombian gota-a-gota gang with 20 members and seized illegal weapons and explosives.
Financial Desperation and Victimization
Approximately 500,000 individuals in Peru are relying on gota-a-gota loans, making them easy targets for extortion.
Vulnerable Populations
Venezuelan migrants, of whom there are around 1.2 million residing in Peru, are particularly susceptible to exploitation by loan sharks due to their limited access to formal financial institutions.
Access to Financial Services
Nearly 50% of Venezuelans in Peru lacked bank accounts in September 2022, and just 5% had received credit from formal financial institutions. In Lima, only 3% of Venezuelan residents had accessed credit from a bank by November 2023.
Factors Contributing to the Crisis
A combination of factors contributes to the rise in financial crime, including Peru’s economic situation and challenges posed by foreign criminal organizations.
Economic Hardships and Government Regulations
The country took a severe hit from the COVID-19 pandemic and has struggled with its recovery. The poverty rate has reached its highest level since 2010, according to a non-governmental organization. Additionally, a cap on interest rates for business and consumer loans set by Congress in May 2021 has made it less likely for people to obtain formal loans, pushing them towards loan sharks and extortionists.
Foreign Competition
Colombians have historically dominated the Peruvian gota-a-gota market, but they and Peruvian groups face challenges from recently arrived Venezuelan gangs.
Tren de Aragua’s Dominance
Tren de Aragua, a powerful transnational Venezuelan gang, has taken control of the gota-a-gota market in at least one Peruvian region, according to reports. Their presence further exploits the considerable number of Venezuelan migrants without access to formal credit.