Lima: The New Las Vegas

Peruvian President Ollanta Humala. (Photo: Government of Peru)

Peru’s thriving illegal economy is helped more by corruption than violence.

Tenacitas International

LIMA -- Pablo Escobar, the Medellin Cartel’s pioneering boss, had a saying: offer plata (silver) first and then, if refused, use plomo (lead). Peru’s criminal economy may now outstrip Colombia’s, yet there is little violence – which in part is precisely because of rampant corruption.


Peru has overtaken Colombia as the world’s principal producer of cocaine. The drug trade finances the remnants of the Shining Path rebel movement, and has attracted Colombian, Mexican and Russian transnational organized crime syndicates.

However, the drug trade is but one element of Peru’s criminal portfolio, and not its most lucrative. Sonia Medina, Peru’s crusading government prosecutor, estimates Peru earns $1.2 billion a year from the drug trade. The main criminal earner, by far, is illegal mining. This is principally gold mining, but also some silver, grossing anything up to $3 billion per annum.

There is also the illegal lumber trade, generating up to $500 million a year, which sees not only Peru’s virgin forests stripped, but from Bolivia too. Another significant criminal earner is human trafficking, principally within the country. This is linked to both the illegal mining and lumber industries, which need not only cheap labor but also prostitutes to service their workers.

According to the US Secret Service, Peru is also one of the world’s biggest producers of counterfeit US dollars, with Venezuela the principal market. Two other growing criminal enterprises are extortion and local illegal drug distribution. Ms Medina estimates that a total of over $7 billion in illegal funds is washing through the Peruvian economy every year.

This money laundering is a major criminal enterprise in itself. The taxi ride from Lima’s Jorge Chávez international airport to any of Miraflores’ many luxury hotels can bring to mind Las Vegas. Casinos abound, as well as a construction boom, with luxury high-rises increasingly dominating the skyline of the Peruvian capital. There has been an explosive growth in hotels, many of which boast levels of occupancy that are suspiciously high and probably inflated to launder inflows of dirty money. These are just the most obvious ways of laundering Peru’s illegal earnings.

According to international law enforcement sources, corruption at all levels, from police to senior judges, makes the successful prosecution of organized crime figures next to impossible. First, an honest policeman is needed, then a trustworthy prosecutor, and finally a judge impervious to corruption. All links in the judicial chain are open to corruption and political interference.

One of the few organized crime cases actually to exit the starting gate – against members of the notorious Sanchez Paredes family, who have known ties to illegal mining and drug trafficking – collapsed ignominiously in March, even after assets had been frozen in the United States. Instead, the prisons are overflowing with street-level criminals, most of whom have still to be tried. The legal situation is further complicated as Peru moves to an accusatorial justice system, which is proving effective in processing common criminals, but making convictions for complex organized crime cases even more difficult. Previously, specialized judges handled these cases. Now, they are tried before juries, which demands a higher burden of proof and causes prosecutors to have to work harder to build their cases. Few prosecutors are currently capable of this.

The army, relied on heavily by President Humala, a former army officer, is now embroiled in its own corruption scandals. Operational effectiveness in the battle against the Shining Path in the Apurimac, Ene and Manturo river valleys has been undermined as elements within the military sell their fuel supply to the black market. Just this month a special forces general was arrested for pocketing funds destined for 620 soldiers who did not exist – they were a phantom unit he had created for siphoning the money.

Also in September, Peruvian authorities announced investigations into 19 politicians with alleged ties to drug traffickers: five congressmen, three governors and 11 mayors. But there are indications that the corruption may reach the presidency itself. Former two-time president, Alan Garcia, is under investigation for the presidential pardons he granted to 400 convicted drug traffickers during his 2006-2011 presidential term. There have been allegations the pardons were sold for $100,000 each. President Humala has also pardoned up to 100 people convicted of drug trafficking.

There is little pressure to change the status quo. While in July there were popular protests against corruption, this social agitation has so far been fragmented and largely ignored by the political establishment. The United States, which once was able to exert significant pressure in the war on drugs, is increasingly disengaging. This is not solely because under President Barack Obama the US has toned down the drug war, but because less than eight percent of all cocaine seizures in the US can be traced to Peru. Peruvian drug production is now feeding the domestic markets of Brazil and Argentina, with the rest heading onwards to Europe. The European Union does provide some counter narcotics aid to Peru, but is not able to exercise the kind of influence necessary to fight systematic corruption.

Peru is a relatively safe country, with a murder rate of around 11 per 100,000 of the population, well below the regional average. But this is part of the problem. While Colombian and Mexican enforcement has in good measure fuelled those countries’ violence, Peru’s passive acquiescence has allowed organized crime to grow and its tentacles of corruption to tighten their grip on the organs of the state. Further, the lack of violence has caused corruption to command only limited public attention. With a booming economic backdrop, there seems little prospect of this changing – and every likelihood plata will continue to render plomo unnecessary.

Republished with permission from Tenacitas International.


Related News: