Financial Crime World

Peruvian Financial Districts Witness Alarming Surge in Extortion and Loan Sharking Cases

Amidst the broader context of escalating financial vulnerability, Peru has witnessed an unprecedented surge in economic crimes, primarily loan sharking and extortion.

Unprecedented Surge in Extortion Cases

According to recent data from the Attorney General’s Office, extortion cases in Peru saw a staggering 370% increase between 2021 and 2023. Reports jumped from 4,761 to 22,396. Overall crime reports rose by 20% during the same time frame.

  • Extortion cases increased by 370%
  • Crime reports rose by 20%

Extortion Cases by Fiscal District

All but two of Peru’s 34 fiscal districts reported a rise of at least 150% in extortion cases.

Predatory ‘Gota a Gota’ Loans

The phenomenon of predatory “gota a gota,” or informal loans with exorbitant interest rates, fueled the surge in reported instances.

  • Gota a gota loans accounted for six times as many reports to the Interior Ministry’s complaints platform as all other forms of extortion combined in 2023

Origins of Gota a Gota

Gota a gota, which translates to ‘drop by drop,’ is a loan sharking practice that originated in Colombia and made its way to Peru around the early 2010s. It first appeared in Chiclayo, Piura, and Trujillo and later spread to Lima. By late 2017, it reached 97 Peruvian cities, with the capital area accounting for almost half of all reported cases in 2023.

Vulnerability of the Population

Financial instability, exacerbated by the COVID-19 pandemic and restrictive credit policies, has created an environment conducive to exploitation. The approximately 1.2 million Venezuelan migrants living in Peru constitute a significant portion of this population in precarious circumstances.

Access to Formal Financial Institutions

According to the World Bank Group and USAID studies from 2022 and 2023, respectively:

  • Nearly half of Venezuela-born Peruvians were unbanked
  • Only 5% of them had been able to borrow from formal financial institutions
  • In Lima, where the largest concentration of Venezuelans resides, merely 3% had accessed credit from banks

Demand for Quick Cash Loans

Despite having a regulatory cap on interest rates for business and consumer loans set by Congress in May 2021, the demand for quick cash loans remains high.

Foreign Competition and Alliances

Foreign competition has intensified the issue, as Colombian gangs have faced challenges from newly arrived Venezuelan groups. Peruvian and Colombian gangs have attempted to form alliances, with some Venezuelan gangs eyeing potential takeovers.

  • Colombian gangs faced challenges from new Venezuelan groups
  • Alliances between Peruvian, Colombian, and Venezuelan gangs

Exploiting Financial Desperation

Dr. Jorge Chávez, National Coordinator of the Attorney General Office’s organized crime division, stated, “This vulnerability plays directly into the hands of these mafias. When a person is in a situation of desperation, they become easy prey for these extortionists.”

Challenging Road Ahead

Peru’s rapidly changing financial landscape, combined with the deepening levels of financial vulnerability, points to a challenging road ahead for the authorities attempting to combat these illicit activities.

[Image: Passers-by read an advertisement for a loan in Peru. Credit: Interior Ministry of Peru]