HomeNewsBriefEcuador Tackles Loan Sharking that Funds Human Smuggling
BRIEF

Ecuador Tackles Loan Sharking that Funds Human Smuggling

ECUADOR / 28 OCT 2013 BY MIRIAM WELLS EN

Ecuador has increased the legal penalties for loan sharks in an attempt to crack down on the exploitation that is a key part of the human smuggling and trafficking chain.

Unscrupulous lenders who charge more than the legal amount of interest will now face jail sentences of five to seven years and fines of up to 200 times the minimum wage ($318 a month), compared to the current punishments of six months to two years in jail and fines between $16 and $311 dollars, reported El Comercio. Those who lend money to five or more people will face even stiffer penalties -- between seven and ten years in jail and fines of up to 500 times the minimum wage.

In one illustrative case, the newspaper spoke to a 67-year-old woman who had borrowed $16,000 from a loan shark to pay for her daughter's passage to the United States in 2008, money that was paid directly to a "coyote" -- criminals who coordinate the transport of illegal immigrants traveling across Latin America towards and over the US border. The woman, who was illiterate, signed documents offering her house as collateral. Despite paying back $1,000 a month the debt -- for which the interest increased by 3 percent each month -- rose to more than $40,000 and her house is now set to be repossessed on December 20.

Between January 2012 and July 2013, 396 cases of usury (lending money with excessive interest rates) were reported across Ecuador, according to figures from the Prosecutor General.

The increased penalties are part of Ecuador's new Penal Code, the majority of which was approved earlier this month.

InSight Crime Analysis

Exorbitant, unethical debt is the bedrock of human smuggling and human trafficking, the key to what makes it such a hugely profitable criminal enterprise. At the beginning of the chain desperate people borrow money to pay excessive transport fees for themselves or relatives. Along the way migrants are often held captive until further amounts are paid, with deadly consequences for those unable to scrape together the cash. Once in the United States, many migrants are then sold into forms of debt bondage such as forced labor or prostitution.

SEE ALSO: Target: Migrants

Effectively cracking down on loan sharks could alleviate some of the distress caused to the families left behind, but given the law will still allow for the borrowing, just at fairer interest rates, it is unlikely to make an impact on the wider net of ruthless exploitation behind human trafficking and smuggling. 

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