Failing to prosecute illegal lenders in Guatemala

QUETZALTENANGO, Guatemala — Aníbal Siliezar drives a cab at night in Guatemala’s second-largest city, Quetzaltenango. He has four children, and last year he took out a 20,000-quetzal ($2,607) loan against a piece of land in order to pay a people smuggler, or coyote — to take him to the U.S.

Siliezar was one of a group of five, each paying the same amount. For many who attempt the journey, the cost is much higher, and fees exceeding the equivalent of $6,000 are common.

Generally, the agreement for these trips is that one gets three chances to cross the border. Intercepted in Reynosa, Mexico, near the border with the U.S., Siliezar and his companions were returned to Guatemala. A few days before the group was going to make a second attempt, Siliezar was hit by a car. Hospitalized, he was unable to rejoin his comrades.

Since then, he said, the coyote has stopped answering his calls, leaving him with a debt that he struggles to pay each month.

“I pay the lender 1,200 quetzales a month for the debt,” Siliezar said. “But I earn 3,200 to 4,000 a month, and from that I have to pay 500 each week to rent the taxi.” On top of this, he pays 800 quetzales in child support. “Things are really tight.” He has two years to pay off the debt, he said.

He is caught in a trap with which Guatemala’s authorities are struggling: how to punish those who abuse and steal from people seeking to make the long journey to the United States. It is a growing problem for Guatemalan law enforcement, judiciary and government officials, as they battle distrust, corruption and the fundamental difficulties of policing something that is inherently illegal.

Siliezar could report the fraud to the local Public Ministry, a government agency charged with investigating and prosecuting criminal cases in the public interest, but so far, he has not.

This, said Francisco Cottón, who coordinates the Public Ministry’s investigative unit in Quetzaltenango, is one obstacle to his agency’s work. “There’s no culture of filing complaints,” he said. “We had 28 cases last year. That’s just a few. It’s just a few with respect to what the phenomenon must really be.”

Without a formal complaint, he said, the agency can’t investigate. A spokeswoman for the national office said that an individual complaint will sometimes reveal a much larger problem. She cited one case of fraud that led to catching an operation’s ringleaders, who had scammed over 100 people with the promise of Canadian work visas. But the limited ability to launch inquiries is a significant hurdle for the ministry’s watchdog efforts.

Complicating matters further for Siliezar, in the department of Quetzaltenango, judges have been denying fraud cases focused on payments to coyotes. Asked what possibilities exist to prosecute lenders like the one Siliezar used, Cottón said, “The only tool the state has is the crime of usury — that is, [charging] interest rates higher than the rates approved by the national banking authorities.” Prosecuting such cases can be tough. “Notaries make changes when they draft these documents so that this usury, these high interest rates are disguised as the capital. That is, they’re lending 25,000, but they write it up as 50,000, and that base of [50,000] is what the interest is calculated on.” He said there hasn’t been a single case based on usury in Quetzaltenango in the past three years.

While few people are filing formal complaints, the issue of high-interest migrant debt is widespread. As part of a study for Oxfam, 450 people in eight departments and four cities were interviewed about their migration experience. The study found that many hopeful migrants go into debt to pay for their journeys, potentially exposing them to fraud and worse.

Alvaro Caballeros, a researcher at the University of San Carlos, reported that 76 percent of the migrants surveyed paid coyotes to take them to the United States. Nearly a quarter paid more than $6,000. Some 78 percent took out loans in order to pay the smugglers, and nearly 40 percent obtained those loans from informal lenders.

For Alejandra Gordillo, the executive secretary of Conamigua, the Guatemalan government agency focused on migrants, the reason so many turn to the informal sector is that they don’t meet financial institutions’ lending criteria. “There’s no access to credit for people of a certain profile in Guatemala. Basically, you have to prove that you don’t need the money in order to get it,” she said.

Caballeros said that most who attempt to reach the U.S. but fail will try again, often several times. These efforts can put families into even greater debt and consume what assets they owned before the debt-migration cycle began.

“Basically, this is an issue of organized crime where there there’s a coyote, moneylender and a recruiter. It’s happening all over the country,” Gordillo said. She pointed out that the loan contracts are often written as purchase agreements, putting borrowers at additional risk, since they have legally sold their land or home.

Monthly interest on these informal loans ranges from 5 to 20 percent, researchers say, and local reporting found 10 percent to be most common rate. Official financial institutions often offer alarmingly high rates as well, at least partially because of a lack of regulatory oversight.

The informal lenders such as the one Siliezar used are just one aspect of the regulation black hole. There are even more questionable practices. A recent article in ContraPoder magazine reported that one rapid loan service, Chepe Te Presta, charges interest equivalent to four times the amount it lends, along with terms that can involve the right to seize collateral without a warrant.

The problem, according to academics, is a lack of legal oversight. Sandra Chuc Norato, a researcher with the Latin American Department on Social Sciences, studied credit in Totonicápan, a city northeast of Quetzaltenango. “I tried to identify, to find a law, some government body that regulates [interest rates], but I never found one. If it exists, I am unaware of what it is.”

She found credit unions charging annual rates of 18 to 30 percent and nongovernmental organizations acting as lenders. In some cases, she said, small credit unions issue loans knowing that if the borrowers make it to the U.S. and find work, they are a good investment. “They don’t say it clearly, but they know. They’re aware that the person is going to use the money to migrate.”