Q COSTA RICA – “The clock is ticking, all the fake ‘tourists’, members of this extortion and money laundering structure, take advantage and get out of our country quickly. Afterwards, we will not hear lamentations”.
With those two sentences, Salvadoran President Nayib Bukele recently announced that one of the components of his security strategy would be to go after loan “gota a gota” lenders, a commonly used term for illegal lending or loansharking, predominantly armed groups linked to drug trafficking, giving short-term loans with high-interest rates daily.
Costa Rica is no exception, and just taking office last May, the Minister of Security, Mario Zamora, identified these types of loans as a threat.
The detail at the local level is that the regulations on interest, introduced through the so-called “Usury Law” (Ley de Usura in Spanish), excluded thousands of people from the formal financing system, ie banks, finance companies, etc, leaving them vulnerable to other means.
It was one of the warnings made by the most critical since the Usury Law law bill was debated: the excluded users would continue to borrow and the only solution would be to resort to the parallel system, where the conditions are not regulated or clear.
Adding to the equation is now a risk.
There is no risk analysis, there is no income assessment, and many times guarantors are not needed, nor do the borrower have to go through the bank bureaucracy.
The loans can be large but also small. Sometimes they are to purchase a luxury item, like taking a trip, others to start a business or keep one running, and, in the most critical cases, groceries for the week.
The “small installments” has in contrast, extremely high interests, which, in addition, are often accompanied by very peculiar collection methods, ranging from physical harm that can result in serious injury or even death, to the debtor, threatening family members or applying a whole tactic of psychological violence.
Minister Zamora was clear in pointing out that there are new crime schemes, with organizational deployments that affect the population, even out of fear.
“We are in the presence of new phenomena such as the issue of “gota a gota loans”, he said at the Finance Committee of the Legislative Assembly on June 12.
“These new criminal phenomenologies where the groups are spreading not only in their traditional criminal activities, but also exercising these new phenomena that generate patrimonial slavery in a sector of the population; especially those who do not have access to loans represent and entail challenges regarding police action,” he explained.
As an example, he shared the case of a fruit vendor on the San Ramón-Puntarenas route. After requesting a “gota a gota” loan and paying it, they continued to demand payments.
The Minister gave his support to modify the law to expand the persecution of the problem but, for now, the situation continues freely.
Given the announcements from El Salvador, the Ministerio de Seguridad Publica (MSP) – Ministry of Security issued an alert to reinforce border controls and prevent the entry of groups dedicated to “gota a gota” loans to Costa Rica.
The MSP insisted on promoting insecurity generated by these groups, to the point that surveillance was even reinforced at illegal crossings.
Security specialists agree that the “gota a gota” loan is akin to a “disease” that has been present for a long time. Researcher Gerardo Castaing has pointed out that there is an entire business infrastructure with specific strategies involved.
Castaing explained that it can start with the loanshark handing over the cash at the borrower’s home, which allows the organization to then use violent methods for collection purposes.
“It may be that you pay the loan after three months, but the collectors will continue to collect the loan. The lender has already recovered their money with all the interest, but the lenders, as they know where the borrower lives, are going to continue collecting,” said Castaing.
Castaing also emphasizes that the financial conditions for access to loans at banks have become more complicated, “a terribly tangled procedure, they ask for any number of requirements”, leading people to resort to these illegal channels.
The “Usury Law” came into force in mid-2020.
In its first 14 months alone, the regulations left 180,000 people without credit cards, according to the Central Bank.
The General Superintendency of Financial Entities (Sugef) pointed out, for its part, since the beginning of 2022, that the regulations required adjustments to counteract the exclusion generated – in their case they warned of 275,000 fewer transactions between June 2020 and June 2021.
Three years later, experts in the sector continue to criticize the risks that they warned about.
“What the Usury Law caused was the exclusion of hundreds of thousands of borrowers whose financing needs did not disappear. Apart from moving in the illegal world, they are a source of political and social instability because their collection methods are atypical,” said economist Gerardo Corrales.
Corrales recalled that from the legislative debate, entities such as the Central Bank, the Sugef, and the Consejo Nacional de Supervisión del Sistema Financiero (Conassif), exposed the risks that would come; however, the political criteria prevailed for approval.