Venezuela Businesses Increasingly Need Dollars. Loansharks Are Taking Advantage.

Latin America

In February 2024, two young men started hanging out in a store in the central Venezuelan state of Lara. The shop owner, Alejandra*, sold them candy and chatted with them. As the trust between them grew, she even told them about her financial difficulties, and the two men offered her a loan of $300 that she needed to stock her shop. Alejandra accepted, unaware that the seemingly friendly gesture would set off a nightmare. 

Alejandra had to pay the lenders $5 a day in interest, as well as weekly installments towards the amount that she had borrowed. Soon, a lack of sales in the store meant she fell behind on her payments, and within days she began to receive threats, Alejandra’s mother and a neighbor told InSight Crime.

“When my daughter started to fall behind on the installments, they would come to collect and the tone started to be defiant and threatening,” Alejandra’s mother told InSight Crime. “We don’t know where they are from, or where they came from. They never gave any details.” 

Alejandra is one of many victims of gota a gota (“drop by drop”) loans in Venezuela. Criminals offer short-term cash credit at high interest rates, and when borrowers are unable to pay, the lenders resort to violence to intimidate them. 

SEE ALSO: The Fraudsters: Venezuela’s Organized Crime Vultures

This modus operandi is growing in the country as the need for credit rises as a result of a lack of bank loans and increasing dollarization. Between May and June, authorities captured close to 20 people involved in these extortion schemes, compared to 2023, when authorities did not report a single victim during the same period. 

Gota a Gota Migrates to Venezuela

Although gota a gota loans were born in Colombia in the late 1990s, they have expanded to other countries such as Mexico, Brazil, Bolivia, Argentina, Ecuador, Honduras, Peru, and Chile. They are run by local gangs and other nationalities, including Venezuelans. 

Business card advertising paga diario (“daily payment”) loans in Venezuela. Credit: InSight Crime.

Both locals and foreigners are active in Venezuela. In the most recent operation, officers from Venezuela’s criminal investigation unit arrested six men who were extorting small and medium-sized businesses in the state of Miranda. Five of them were Colombian nationals. 

In addition to Colombian extortionists, the arrival of gota a gota loans in the country could be connected to the exodus of Venezuelans who learned the system when they emigrated to Colombia.

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

“Those who lend money usually know how the gota a gota system is run in the neighboring country,” said a commissioner from the Venezuelan police. 

Some even try to sound Colombian to generate more fear in people. Alejandra’s mother said one of her daughter’s extortionists had a Colombian accent, but they could not tell if it was fake or real.

Other police officials, journalists, and businessmen in Lara, Falcón, and the Capital District consulted by InSight Crime, said they have identified money lenders who migrated to Colombia and, after returning to Venezuela, began to lend out money and charge high interest rates with threats. 

Dollarization Attracts New Lenders 

After almost a decade of inflation, US dollars started to become the de facto currency in  Venezuela around 2019. The dollar now accounts for 45% of commercial transactions. The use of the dollar has boosted trade, mainly retail, as well as capital flow.

Business card advertising paga diario (“daily payment”) loans in Venezuela. Credit: InSight Crime.

After seeing the profitability of this foreign currency, criminals began to offer loans in dollars with high interest rates, known as paga diario (“daily payment”)

The lenders hand out cards to vendors advertising “instant loans” or “fast money,” operating in popular areas of Caracas and the interior of the country, vendors and journalists told InSight Crime. 

“These gangs are dedicated to offering false loans in foreign currency, and then, through death threats, force the victims to pay high amounts of money,” criminal investigative police director Douglas Rico said on his Instagram account. 

That is what happened to Alejandra. The friendly relationship she maintained for several days with the lenders who promised to help her business turned hostile after she was unable to pay the interest, amounting to threats that made even her neighbors uncomfortable. Faced with the situation and overcome by fear, Alejandra felt she had no choice but to close her business and flee. 

But the lenders did not stop. When they could not contact her, they threatened her father with a gun and the whole family fell into despair, Alejandra’s mother told InSight Crime. 

“With the daily interest payments, we are paying more than she borrowed,” she said. “We know that they are walking around with guns.”

*The victim’s name has been changed to protect her identity

Featured image: A vendor counts Venezuelan Bolivars and US dollar bills to deliver change for a customer at a public market in the Quinta Crespo neighborhood in Caracas, Venezuela, Sunday, Dec. 11, 2022. Credit: AP Photo/Matias Delacroix

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