Financial Vulnerability Fuels Predatory Crime in Peru

Widespread financial vulnerability is driving criminal competition in Peru, leading to skyrocketing cases of loan sharking and extortion.

Cases of extortion in Peru shot up 370% between 2021 and 2023, from 4,761 to 22,396, while overall crime reports rose 20% over the same period, according to the Attorney General’s Office. All but two of Peru’s 34 fiscal districts recorded a rise of at least 150% in extortion reported during that time. This trend is continuing into 2024.

Predatory gota a gota, or “drop by drop” loans, where loan sharks demand borrowers pay extortionate interest rates, are driving the rise. 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. 

SEE ALSO: Latin America’s Criminal Bankers: Explaining Colombians’ Monopoly on Gota-a-Gota

Gota a gota arrived in Peru sometime in the early 2010s from Colombia, and was first seen in Chiclayo, Piura, and Trujillo in the north of the country, before passing to Lima, and later spreading south, according to the police. By late 2017, it had reached 97 cities.

The capital, Lima, accounted for half of all gota a gota cases reported nationwide between May and December 2023. In the most recent example of this growing criminal market, on March 16, police in Lima dismantled a Venezuelan-Colombian gota a gota group with 20 members. They also seized guns and explosives from the group.

Financial Desperation Driving Victimization

Around 500,000 people in Peru owe gota a gota loans, according to credit organization FEPCMAC (La Federación Peruana de Cajas Municipales de Ahorro y Crédit). The most common reason borrowers seek out the loans is to pay other debts, Peru’s Interior Ministry has said.

The 1.2 million Venezuelan migrants living in Peru are particularly vulnerable to being exploited by loan sharks. Many lack residency status in the country and the majority work in the informal job market, meaning their access to formal financial institutions is severely restricted.

Almost half of the Venezuelans living in Peru were unbanked in September 2022, according to a World Bank Group study, while only 5% have been able to receive credit from formal financial institutions. In Lima, only 3% have accessed credit from a bank, a November 2023 USAID study found. 

Peruvians are also in need of loans. The country was hit hard by the COVID-19 pandemic and has struggled to recover. The Videnza Instituto, a non-governmental organization specializing in political policy, predicts poverty rose in 2023 to its highest level since 2010.

A cap on interest rates of business and consumer loans given by financial institutions, approved by Congress in May 2021, has exacerbated the situation. The cap means banks are less likely to grant loans, driving desperate individuals into the hands of extortionists.

Foreign Competition Exacerbating Situation 

Colombians have traditionally controlled gota a gota loans in much of Peru, but both they and Peruvian groups have faced challenges from recently arrived Venezuelan gangs. 

Some Venezuelan gangs may seek out alliances with existing groups with an eye on eventually taking control, Abraham Valle from the organized crime consulting agency Consultora Nacional de Criminologia told InSight Crime.

SEE ALSO: Venezuelan Extortion Gangs Spark Violent Backlash in Peru

“Migrating from Venezuela has caused them to adapt,” he said. “[They think] I’m not going to compete with someone who already has the market or I will clash with this gang. Instead, I can make a deal with them, and maybe at some point, when I have enough members, I can take over that market.”

Tren de Aragua, a transnational Venezuelan mega-gang, has reached that point in at least one part of the country, according to Dr. Jorge Chávez, National Coordinator of the Attorney General Office’s organized crime division.

In Arequipa, a region in southern Peru, the “Tren de Aragua has taken [gota a gota] away at gunpoint,” he told InSight Crime.

Given that Tren de Aragua has thrived in Peru by exploiting members of the Venezuelan diaspora, the presence of over a million Venezuelans without access to credit plays into the group’s hands.

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

Featured image: In Peru, a passer-by reads an advertisement for a loan. Credit: Interior Ministry of Peru