Jorge Tejada was examining the charred remains of a bus in the parking lot near his recycling business in Lima. It had been set on fire overnight in what residents said was retaliation from a gang shaking down local bus companies.

Mr. Tejada, 50, has lost count of how many attacks like this have struck his neighborhood in the past year. Explosives set off at bodegas. Restaurants riddled with bullets. His own recycling yard was set ablaze and damaged after he ignored a gang’s demand to pay it $530 per month.

It could have been worse. A pharmacist was shot dead behind the counter of his store and several shop owners have gone into hiding, he said.

“This used to be a tranquil area,” Mr. Tejada said, describing how the former shantytown developed into an official district of the capital through decades of hard work and community organizing. “Now we all live in fear here.”

A growing number of Peruvians feel the same way. The South American nation is grappling with an extraordinary crime wave, fueled by a surge in extortion schemes as gangs exert increasing control over urban areas.

Reports of extortion across the country have ballooned since 2017, from a few hundred per year to more than 2,000 per month this year, according to the national police. And the number of killings by hired hit men has also jumped significantly in recent years, statistics show.