From ENN DAILY INTELLIGENCE REPORT- ERRI Risk Assessment Services-Wednesday, April 30, 1997 Vol. 3 - 120

KIDNAPPING: A LATIN AMERICAN GROWTH INDUSTRY ...

By Steve Macko, ERRI Crime Analyst

Thanks to increased opportunity, weak law enforcement and the continued disparity between the poor and the wealthy, the abduction of business executives is a growth industry in Latin America. According to estimates by the highly-respected New York-based Kroll Associates security firm, there were at least 6,000 kidnappings in Latin America in 1995. Kroll is highly informed in the matters of kidnapping. They offer kidnapping and ransom advice to insurance companies and victims. Their statistics show that business executives are increasingly becoming the targets of kidnappers.

Statistics show that Latin America is ranked, by far, the most dangerous area in the world in terms of kidnapping. The region is well ahead of the Middle East and Asia. Six years of economic growth in Latin America has brought more local and foreign business people on the scene. With that are increased opportunities for criminals.

While the economy has been growing, there are still traditional patterns of weak, inefficient and corrupt law enforcement and there is still a large gap between the poor and the wealthy. This does motivate a large number of kidnappings in the region.

Kidnapping, unfortunately, is largely a safe crime to commit. Security consultants say that unlike the United States where 95 percent of kidnappers are brought to justice, the opposite is true in Latin America. The ability of police to deal with kidnapping is virtually non-existent. Few suspects ever get caught.

Part of the reason is that victims often refuse to cooperate with local police. They often fear, and with good reason, that law enforcement officials may be working with the kidnappers or that rescue attempts will result in the death of the victim. Kroll Associates Deputy Chairman Brian Jenkins says "Seventy-nine percent of all hostages are killed during rescue attempts in Latin America."

Jenkins says that he uses a pyramid model to classify kidnapping victims. The majority of the victims are small businessmen and ranchers. Jenkins said, "Their presence and movements are easily monitored, they're not likely to have security and not likely to contact authorities."

Moving up in the pyramid are nationally prominent businessmen and managers of foreign firms. At the very top, and numbering just a small number of cases per year, are expatriates.

Kenneth Stephens, the kidnapping and ransom product manager of Chubb & Son, said, "Kidnapping's definitely a major concern for multinationals. Everyone is at risk."

Jenkins says the foreign executives in the oil and energy sectors are especially at risk to kidnapping. The abductors, themselves, range from being just mere street thugs who will just randomly snatch someone from a local supermarket and demand as little as

$100 in ransom to well-organized criminal gangs that could comprise of leftist guerrillas, corrupt policemen or drug traffickers.

COLOMBIA

Colombia is considered to be the undisputed world champion in kidnapping. According to estimates by Kroll, there were at least 4,000 abductions in Colombia in 1995. Experts say that kidnapping is well-organized in Colombia. It is estimated that about 50 percent of the abductions are carried out by either the Revolutionary Armed Forces of Colombia (FARC) or by the National Liberation Army (ELN) guerrilla groups. But some experts say that the guerrilla groups are often blamed unjustly. Even though many of the abductions are attributed to them, many are committed by common criminals who claim to belong to a guerrilla group in order to provoke fear among the families of victims.

According to a recent government study, the private sector in Colombia lost more than $800 million in kidnappings, extortions and theft between 1990 and 1994.

Chubb CEO Dean O'Hare wrote in article about kidnapping and ransom: "Colombia is expected to remain one of the most dangerous areas in the Western Hemisphere for foreigners working for multinational companies, as well as local wealthy citizens."

Brian Jenkins believes that a new specialized anti-kidnapping unit that was established in 1995 should help the situation.

BRAZIL

According to estimates by Kroll, Brazil averages about 800 kidnappings a year. The majority occur in Rio de Janeiro, but the number in the Sao Paulo area have been increasing. Experts say that Rio de Janeiro has more kidnappings, but lower ransom demands. Sao Paulo may have less abductions, but the ransom demands, for whatever reason, seem to be higher. Experts estimate that a little more than 100 kidnappings were reported in Rio de Janeiro in 1995. The main culprits appear to be drug traffickers and corrupt policemen.

MEXICO

Brian Jenkins echoes the words of many security experts when he says "the situation has gotten worse" in Mexico. The number of kidnappings is increasing every year. According to the Mexican attorney general's office, there were 1,400 kidnappings in 1994. That's up from an average of 500 per year between the years 1989 and 1992.

Kidnapping has become a cottage industry in Mexico. Why? Some security experts can trace it back to the March 1994 kidnapping of Alfredo Harp Helu -- the 50-year-old, at the time, chairman of Mexico's largest financial group. He was also a close friend of then-president Carlos Salinas. He was released after a $30 million ransom was paid.

Jenkins said, "Clearly, the announcement by Harp's family on TV that they had paid $30 million had an inspirational effect on other kidnappers."

Other criminals in Mexico saw how much money could be made and said, "Hmmmm." Shortly after the Harp kidnapping, another prominent businessman, Angel Losada Moreno, the vice chairman of a Mexican supermarket chain, was abducted. He was kidnapped while driving to Mexico in April of 1994. Losada was released after a reported $50 million ransom was paid.

After the kidnapping of Harp, not only did the number of abductions in Mexico go up, but so did the ransom demands. It was like major league sports. If one guy is worth $2 million -- then this other guy must be worth at least $3 million.

Jenkins said that while Kroll Associates was working a case when the Harp case was unfolding, the ransom went up accordingly. It's Kroll's belief that they were dealing with the same kidnappers. Experts say that the fact that the Harp and Losada kidnappers got away with the crimes motivated other would-be abductors.

In regards to the Harp kidnappers, Jenkins said, "That gang was extremely sophisticated. It was a well-planned operation."

Many security experts believe that kidnapping gang included current or ex-police officers. Even though many abductions are blamed on corrupt police, many of the abductions are said to be perpetrated by drug traffickers. Jenkins explained, "Some gangs will carry out kidnappings to finance their entry into the drug trade, using ransom money as venture capital or, in the case of existing drug gangs, enter kidnapping as a side business, in an effort to diversify."

GUATEMALA

Kroll estimates that about 100 people a year are kidnapped in Guatemala. What makes the situation different is that the victims tend to be children of wealthy local or foreign businessmen.

PANAMA

Panama had only 11 kidnappings in 1995. In Decmember of 1995, Panamanian police arrested six Colombians who kidnapped a wealthy Panamanian woman. Also arrested were two members of the national police.

ECUADOR

Ecuador has about 200 kidnappings per year and is second only to Colombia in the number of abductions per capita in Latin America.

VENEZUELA

Kroll estimates that about 200 abductions per year take place in Venezuela. The area near the border with Colombia has seen the largest increase.

PERU

Kroll says that fewer than 100 kidnappings took place in Peru in 1995. Before the hostage crisis at the residence of the Japanese ambassador, the trend for kidnappings had been declining in Peru.

Summary and Costs

Brian Jenkins estimates that nearly all top-level foreign executives in Latin America are now covered by kidnapping and ransom insurance. Among small local businessmen and ranchers, coverage is said to be rare. Experts say that the number of kidnap victims killed by their abductors is four times higher among uninsured than insured. Part of the reason is how the abduction is handled. Insured victims receive the benefit of professional crisis management, while uninsured relatives of victims tend to make fatal mistakes.

According to insurance industry estimates, about 50 percent of the world's kidnap and ransom insurance specifically covers Latin America. Depending on the risk, premiums can vary. An annual premium for a family of five ranges between $18,000 to $30,000 a year for a $1 million policy. For a $5 million policy, the premiums would be about $70,000.

The premiums vary according to the country that the coverage will cover. For example, in Brazil, a family of five would pay about $9,000 or $10,000 for a $1 million policy coverage. The figure would be higher for Colombia.

The insurance covers the ransom, the cost of hiring a security firm to handle negotiations and even payment to the family of a sum that is equivalent to the salary of the hostage being held.

The top two U.S. insurers in this field are the New Jersey-based Chubb and New York-based AIG. But half of the kidnapping insurance market in Latin America is controlled by two Lloyd's syndicates, Cassidy Davis Hiscox Consortium and Roger Dwyer Consortium.

The insurance companies hire security experts to assist in the kidnapping cases. AIG uses Kroll Associates. Chubb uses the Miami-based Ackerman Group. Cassidy Davis Hiscox Consortium uses the London-based Control Risks Group.

Kroll Associates says that it deals with about one kidnapping every two weeks worldwide. While this article dealt mainly with Latin America -- the reader should be aware that a high number of kidnappings also occur in the Philippines. Jenkins says that the vast bulk of Kroll's business in the area of kidnappings is in Latin America.

Security experts say that abductions will continue to increase as Latin America's economy expands and there is increased foreign investment. Law enforcement in the region is seen to remain inefficient, at best.

(c) Copyright, EmergencyNet NEWS Service, 1997. All Rights Reserved. Redistribution without permission is prohibited by law.

The ENN DAILY INTELLIGENCE REPORT is a subscription publication of the EmergencyNet NEWS Service, which is a part of the Chicago-based Emergency Response and Research Institute. This publication specializes in Security/Terrorism/Intelligence/ Military and National Security issues.

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