Financial Crimes Plague Peru’s Economy

Peru is facing a significant crisis due to a surge in financial crimes, particularly extortion and predatory lending. These crimes are driving widespread vulnerability and desperation among its population.

Extortion Soars by 370%

According to the Attorney General’s Office, cases of extortion skyrocketed from 4,761 in 2021 to 22,396 in 2023 - a staggering increase of 370%. The Interior Ministry reported that all but two of Peru’s 34 fiscal districts recorded a rise of at least 150% in extortion reports during this period.

The Rise of Predatory Lending

The growing trend is attributed to the proliferation of predatory “gota a gota” or “drop by drop” loans, which demand borrowers pay exorbitant interest rates. These loans accounted for six times as many reports made to the Interior Ministry’s complaints platform as all other forms of extortion combined in 2023.

Gota A Gota: A Growing Problem

Gota a gota arrived in Peru from Colombia in the early 2010s and has since spread to 97 cities across the country, with Lima accounting for half of all reported cases. The practice has been linked to Colombian and Venezuelan gangs, who target vulnerable individuals, including migrants and those struggling with debt.

Contributing Factors

Peru’s economic woes have exacerbated the situation, with poverty rising in 2023 to its highest level since 2010. A cap on interest rates imposed by Congress in May 2021 has reduced lending from financial institutions, driving desperate individuals into the arms of extortionists.

Vulnerable Communities

• The Venezuelan diaspora is particularly vulnerable to exploitation, with over a million Venezuelans living in Peru lacking access to credit and working in the informal job market.
• Many lack residency status, making it difficult for them to access formal financial institutions.

Foreign Competition Enters the Fray

Foreign competition has also entered the fray, with Venezuelan gangs seeking alliances with existing groups to eventually take control of the lucrative gota a gota market. The Tren de Aragua, a transnational Venezuelan mega-gang, has already taken over the gota a gota trade in parts of Peru, exploiting members of the Venezuelan diaspora.

Consequences for Peru’s Economy and Society

As the situation continues to deteriorate, experts warn that financial crimes will have far-reaching consequences for Peru’s economy and society as a whole.