Venezuelan Crisis Colombian Economy

Venezuelan immigration – what it means for the Colombian economy?

The exodus of Venezuelan citizens into neighbouring countries in Latin America has been called one of the worst immigration crises in Latin America, with others groups and associations stating that it is reaching the same scale as that of Syrian. Approximately 7% of the Venezuelan population has already fled their country, with Colombia taking in the majority of the immigrants. This article examines how this large number of refugees affects the Colombian economy.

Quick history of the Venezuelan crisis

The Venezuelan political crisis and the economy have been in free-fall since the election of socialist Nicolás Maduro in April 2013, despite the country’s large oil reserves. Corruption, an inflation rate that reached 1.7 million late 2018 (expected to increase to a staggering 10 million by the end of 2019), shortages of food and medicine, and general economic mismanagement have led to more than two million Venezuelans fleeing the country, accounting for approximately 7% of the country’s population. Most humanitarian aid and assistance from the International Monetary Fund have been rejected as receiving help would be tantamount to surrendering to the US in the eyes of Maduro, leaving Venezuelan citizens in line for hours to receive small amounts of food. The shortage of supplies is also fueling grand protests across the country. Maduro’s government posits that Venezuelan’s current state of desperation is due to an “economic war” led by the United States, unwilling to take responsibility for his own incapability to lead.

Recent elections

The Venezuelan president was re-elected for a second-term May 2018 but this is, however, seen by many as illegitimate as Maduro either barred or exiled members of the opposition. The situation escalated even further when Juan Guaidó declared himself as acting president on the 23rd of January, while being recognized as interim-president by countries such as the United States, Canada, and several European Countries.

What does this mean for Colombia?

Venezuelan Immigration Crisis and its Effect on the Colombian Economy
Only 40% of Venezuelan immigrants’ children are enrolled in school

Colombia has to deal with an ever-growing influx of 4,500 Venezuelan immigrants a day. Approximately 1.2 million Venezuelans are currently living in Colombia, most of them entering Colombia through Cúcuta, which has been struggling to cope with this growing number of refugees. Many refugees are malnourished and in need of healthcare. Diseases that were thought to be eradicated like the measles have returned, and many women crossing the border are pregnant, accounting for 62% of the woman giving birth at Cúcuta’s public hospital.

The Venezuelan immigration crisis is much like that of the Syrian refugees, but with a difference in that the receiving countries in Latin America cannot capitalize on a modern well-fare system, schools, or modern hospitals like most European countries receiving Syrian refugees can. To illustrate, the six main countries taking in Venezuelan immigrants at the border have an average per-capita income of just $17,000 whereas the rate in European countries is well over $46,000. Recently, Cúcuta’s public hospital spiralled into debt while taking care of Venezuelan immigrants. But this is not all. Only 40% of the refugees’ children are enrolled in school and the immigration population is twice as likely to be unemployed than the local population.

How does this affect Colombia’s economic stability?

After reading the above information, one might feel scared for the stability of Colombian’s economy. Luckily, a report from the World Bank, in cooperation with the Colombian government, the United Nations Agency for Refugees, and the International Organization for Migration titled ‘Migration from Venezuela to Colombia: short and medium-term impact and response strategy’ provided a positive perspective on the Venezuelan immigration crisis for Colombia’s economic growth.

Short-term pressures

The immigration influx poses significant pressure in the short-term, as the levels of unemployment are rising and due to tension between locals and Venezuelans. Most of the refugees passing through or staying in Cúcuta participate in the informal sector, creating resentment with Colombians operating in the same industry.

Long-term economic growth

The same influx of Venezuelan refugees can lead to economic growth in the long-term if the challenges that immigration poses are managed effectively by the Colombian government. That is – the low participation of immigrant’s children in the school system and the high vulnerability unemployment. For every half million people of working age, the economic growth of Colombia could accelerate by 0.2 percentage points.

What has the Colombian government done so far?

Border region

Venezuelan Immigration Crisis and its Effect on the Colombian Economy
In an effort to cooperate, take care and protect the Venezuelans, 11 countries joined hands and signed “The Declaration of Quito on Human Mobility of Venezuelan citizens”

Duque’s government is proactively taking measures to ensure that refugees have access to basic healthcare and education services. These efforts will ultimately increase the participation of these refugees and their children in the workforce. Furthermore, Venezuelan immigrants are being moved across the nation in order to lift some of the greatest pressures near the border regions.

In an effort to cooperate, take care and protect the Venezuelans, 11 countries joined hands and signed “The Declaration of Quito on Human Mobility of Venezuelan citizens,” agreeing on 18 points of common agreement. 

International support

With many nations around the world refusing to acknowledge Maduro as the legitimate president of Venezuela, support is growing for both Venezuela and neighbouring countries that are actively taking in refugees. For example, Spanish Prime Minister Pedro Sanchez recently announced that the European Union will give Latin America 35 million Euros for support. Many NGO’s are providing humanitarian aid in Cúcuta, with doctors donating their time and assistance to provide medical care to the most vulnerable refugees. 

What is the cost?

The costs of the additional public services lie between 0.23% and 0.41% of Colombia’s GDP. The Inter-American Development Bank (IDB) stated that Colombia needs COP$1.6 billion a year to respond to the ever-growing influx of immigrants. Even though this might seem like a big pressure on Colombia’s budget, a report carried out by the OECD in November 2018 posits that Colombia’s economy is expected to grow due to Duque’s governments’ expenditures on infrastructure, a reduction of corporate taxes (33% to 30%) and higher oil and coal prices. The expanding middle-class and improved confidence will lead to a growth in consumption. Colombia’s economy is expected to grow with 3.59% in 2019, 3.7% in 2020, and 3.65% in 2021.

What is next?

The exodus is far from over. With the United States increasing their economic sanctions and threatening possible military intervention, Maduro strengthening his belief in an imperialist world war on Venezuela by refusing humanitarian aid, and nations across the world refusing to acknowledge Maduro’s presidency, things are expected to escalate even further. However, international support also strengthens the region’s capabilities to take care of and protect the Venezuelan immigrants. 

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The information provided here within should not be construed as formal guidance or advice. Please consult a professional for your specific situation. Information provided is for informative purposes only and may not capture all pertinent laws, standards, and best practices. The regulatory landscape is continually evolving; information mentioned may be outdated and/or could undergo changes. The interpretations presented are not official. Some sections are based on the interpretations or views of relevant authorities, but we cannot ensure that these perspectives will be supported in all professional settings.
Legal Team Colombia

Legal Team Colombia

Legal Team Colombia is the Biz Latin Hub leading experts on doing business in Colombia The Team writes on the news, doing business, law, and changing regulations. The team are experts in corporate law, Administrative law, Employment law, Immigration law and legal advisory services. Read more about them here. You can contact Legal Team Colombia via our "contact us page".

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