Financial Crime World

Peru’s Surging Financial Crime Epidemic: Extortion and Loan Sharking Run Rampant

Peru’s financial vulnerability has given rise to a burgeoning criminal industry, with cases of loan sharking and extortion skyrocketing in recent years.

Extortion Cases Surge in Peru

The Attorney General’s Office reported a startling increase of 370% in extortion cases between 2021 and 2023, from 4,761 to 22,396. This overshadows a 20% rise in overall crime reports during the same period. Every Peruvian fiscal district except two recorded a minimum of 150% hike in extortion reports during this time.

Predatory Gota a Gota Loans

At the forefront of this criminal trend is predatory gota a gota loans, where loan sharks prey on unsuspecting victims to pay exorbitant interest rates.

  • Gota a gota loans accounted for six times more complaints made to the Interior Ministry’s complaints platform than all other forms of extortion combined in 2023.
  • The illegal practice originated in the early 2010s from Colombia and first appeared in Chiclayo, Piura, and Trujillo in northern Peru.
  • Lima is currently the epicenter of this criminal enterprise, with the capital city accounting for half of all reported cases nationwide between May and December 2023.

Financial Instability Driving Victimization

Approximately 500,000 Peruvians owe gota a gota loans, according to the credit organization FEPCMAC. The primary motivation for borrowers seeking these loans is to repay existing debts.

  • Many Venezuelan migrants lack legal residency status and work in the informal sector, with limited access to formal financial institutions.
  • Almost half of the Venezuelans residing in Peru were unbanked in a World Bank Group study in September 2022.
  • Peruvians are also grappling with the financial repercussions of the COVID-19 pandemic. According to the Videnza Instituto, poverty rates rose in 2023 to their highest level since 2010.

A Legislative Cap on Interest Rates

A legislative cap on interest rates for loans given out by financial institutions, which Congress approved in May 2021, has compounded the issue. This restriction makes it less likely for banks to sanction loans, leaving desperate individuals susceptible to the clutches of unscrupulous loan sharks and extortionists.

Foreign Competition Fuels Escalating Situation

Despite Peruvian groups controlling the majority of the gota a gota market, they and Colombian counterparts face mounting competition from recently arrived Venezuelan gangs.

  • Abraham Valle, from the organized crime consulting agency Consultora Nacional de Criminologia, explains that these new gangs may forge alliances with existing organizations and ultimately aim to seize control.
  • Transnational Venezuelan gang Tren de Aragua has accomplished this goal in at least one sector of the country, according to Dr. Jorge Chávez, National Coordinator of the Attorney General Office’s organized crime division.

Exploiting the Venezuelan Diaspora

Given the presence of over a million Venezuelans without access to credit, Tren de Aragua’s power to exploit members of the Venezuelan diaspora is undeniable.

  • “These mafias come and they take advantage of these very Venezuelans who have come here seeking new horizons,” Chávez concluded.