The Rise of “Gota a Gota,” “Chulco,” and “Broke Bones”: Uncovering South America’s Shadow Lending Networks

Across South America, a dangerous form of informal lending is taking root, known by different names in different countries – “gota a gota” in Uruguay, “chulco” in Ecuador, and “broke bones” in Colombia. These networks offer quick cash loans with minimal requirements, attracting vulnerable populations and small businesses excluded from traditional financial systems. Still, behind the facade of accessibility lies a web of usurious interest rates, intimidation, and violence.

A Growing Problem Across Borders

Authorities in Uruguay have detected this activity in at least 14 departments, with investigations in Tacuarembó, Paysandú, and Cerro Largo leading to prosecutions for usury, criminal association, and, in some cases, private violence. The loans typically range from 5,000 to 50,000 pesos, but the associated interest rates are often exorbitant, trapping borrowers in cycles of debt.

Origins and Expansion

According to Héctor Rodríguez of Ceres, a Uruguayan investigative unit, the first records of this lending modality date back to 2018, with a significant investigation in 2023 bringing the issue to wider attention. The practice reportedly originated in Colombia in the late 1990s, initially linked to drug trafficking as a method for laundering money. From there, it spread to other South American countries, including Uruguay.

Who is Involved?

Investigations indicate that individuals from Colombia, Venezuela, Cuba, and Uruguay are involved in operating these lending networks. Lenders often employ coercive tactics, including intimidation, threats, and psychological pressure, to collect debts. These tactics can escalate to physical violence, carried out either by the lender themselves or by associates within the organization. While traditionally conducted in person, virtual payment methods are increasingly being used.

Raising Awareness and Combating the Issue

Ceres is actively engaged in public awareness campaigns to educate the public about the dangers of these informal lending practices. These campaigns aim to help individuals recognize the warning signs and avoid falling victim to predatory lenders.

Key Takeaways

• “Gota a gota,” “chulco,” and “broke bones” are informal lending practices prevalent in South America.
• These networks target vulnerable populations and small businesses with quick, easily accessible loans.
• Loans come with extremely high-interest rates and often involve coercive collection tactics, including threats and violence.
• The practice originated in Colombia and has spread to other South American countries.
• Authorities are working to raise awareness and combat these illegal lending operations.