Peru’s Financial Vulnerability Fuels Criminal Competition: A Surge in Extortion and Loan Sharking

troubling rise in crime

Lima, Peru - In a worrying development, Peru’s financial vulnerability has led to intense competition among criminal groups, resulting in a significant increase in extortion and loan sharking. According to data from the Attorney General’s Office, reports of extortion amplified 370% from 2021 to 2023, escalating from 4,761 to 22,396, compared to an overall crime rate increase of 20% within the same period.

Extortion on the Rise

• Reports of extortion surged 370% between 2021 and 2023, from 4,761 to 22,396.
• The overall crime rate increased by 20% within the same period.

financial despair and predatory loans

Peru’s financial distress has forced residents to find alternative means to secure loans, fueling the growth of predatory “gota a gota” loans. These debts, associated with extortionate interest rates, accounted for six times as many complaints on the Interior Ministry’s platform as all other types of extortion combined in 2023.

Gota a gota Loans

• Predatory loans, nicknamed “gota a gota,” have seen a sharp rise since their arrival in Peru around a decade ago.
• The capital city, Lima, is the epicenter of this growing criminal market.

root causes

The most common reason for individuals seeking gota a gota loans is to pay off pre-existing debts. Peru’s one million Venezuelan migrants, who face significant barriers to accessing formal financial institutions due to a lack of residency status and work in the informal sector, are particularly at risk of falling victim to loan sharks.

Susceptible Populations

• Approximately 47% of Venezuelans living in Peru were unbanked as of September 2022.
• Only 5% of Venezuelan migrants have obtained credit from formal financial institutions.

economic challenges

Peru’s economic struggles due to the COVID-19 pandemic have left many Peruvians in desperate need of loans. The Videnza Instituto forecasts Peru’s poverty rate reached its highest level since 2010 in 2023. These financial woes, combined with a cap on interest rates for loans provided by financial institutions, have driven even more individuals into the arms of loan sharks.

transnational criminal groups

While Colombians have historically controlled the gota a gota market in much of Peru, they and local groups now face stiff competition from newly arrived Venezuelan gangs. Some gangs seek alliances with existing groups, potentially with an eye on taking control.

Criminal Alliances and Powerful Gangs

• The powerful Venezuelan mega-gang, Tren de Aragua, has taken control of the gota a gota market in at least one region of the country.
• Gangs seek alliances with existing groups to potentially seize control.