Peru’s Financial Crisis Fuels Surge in Loan Sharking and Extortion

In the bustling streets of Lima, Peru, the competition for financial survival grows increasingly intense.with:right::shock: Widespread economic vulnerability has given rise to an alarming trend: loan sharking and extortion.

skyrocketing Extortion Cases

According to the Attorney General’s Office, reported extortion cases in Peru :

• Increased by 370% between 2021 and 2023, from 4,761 to 22,396
• Significantly outpaced the overall increase in crime reports (20%)
• Were reported in all but two of Peru’s 34 fiscal districts, with growth of at least 150%

gota a gota Loans

At the heart of Peru’s extortion crisis are predatory ‘gota a gota’ or ‘drop by drop’ :

1. Definition: Unscrupulous loans where borrowers are forced to pay exorbitant interest rates to loan sharks. Three times as many reports of gota a gota extortion were made than all other forms combined in 2023.
2. Origin: emerges from:
   • Northern cities of Chiclayo, Piura, and Trujillo (early 2010s)
   • Spread to Lima, then to the rest of the country (97 cities by late 2017)

Example of Venezuelan-Colombian gang dismantlement

In a recent example of the growing criminal market, Peruvian National Police dismantled a Venezuelan-Colombian gota a gota group with 20 members in Lima on March 16, 2024. :

• Seized guns and explosives from the group
• Highlights the involvement of organized crime and violent elements in the extortion economy

Drivers of gota a gota loans

Desperation, not merely poverty, drives many victims to seek these predatory loans:

• 500,000 individuals in Peru owe gota a gota loans
• Common reason for seeking these loans: to pay off other debts
• Over 1.2 million Venezuelan migrants in Peru face greater risks
  • Limited access to formal financial institutions
  • Over 50% unbanked as of September 2022
  • Only 3% have secured formal credit in Lima

Impact of Peru’s Economy

Peru’s economy was hit hard by the COVID-19 pandemic:

• Predicted highest level of poverty since 2010 in 2023
• interest rate caps restrict lending
  • Desperate individuals turn to loan sharks and extortion rackets for relief

Transnational Criminal Elements

Recent shifts in Peruvian organized crime:

• Colombian criminals control much of the gota a gota market
• Venezuelan gangs have begun to pose a significant challenge
• Tren de Aragua, a powerful transnational Venezuelan mega-gang, seized control of the market in Arequipa

Impact of Venezuelan Migrants

Venezuelan gangs exploit the large population of unbanked Venezuelan migrants:

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

• Jorge Chávez

[ Image credit: Interior Ministry of Peru