Over the past few years, the political and economic crisis in Venezuela has forced nearly 1.8 million Venezuelans to flee to Colombia. The Colombian government has responded warmly, taking steps to integrate Venezuelans into its society and economy. But legal and practical barriers still prevent many Venezuelans from achieving true economic inclusion, the attainment of decent work and income commensurate with their skills.
COVID-19 has exacerbated these barriers, wreaking havoc on Colombia’s economy and health system. As of October 20, the country had the second highest number of cumulative cases in Latin America and the fifth highest in the world. According to the International Monetary Fund (IMF), Colombia's GDP will shrink by 7.8 percent in 2020.
To combat these impacts, Colombia should facilitate greater economic inclusion for Venezuelans. This would diversify the sectors Venezuelans work in, helping them earn more and contribute to the COVID-19 response. It would also stimulate economic growth, increasing incomes and employment for Colombians, and helping the country recover from COVID-19.
Greater economic inclusion would help Venezuelans and Colombians
Forty percent (about 764,000) of the Venezuelans in Colombia have regularized their status and, in most cases, obtained the right to work. The remainder do not have legal access to the labor market. For both populations, a variety of barriers—including difficultly verifying credentials and discrimination, as well as a lack of financial access, job opportunities, and information among employers about whether and how they can hire Venezuelans—further limit economic inclusion.
According to our newly published analysis with Refugees International (which is based on pre-COVID-19 data from August-October 2019), if all such barriers were removed:
- Venezuelans’ average monthly income would increase from US$131 to US$186. This would translate into a contribution of at least US$996 million to Colombia’s annual GDP, increasing incomes and living standards for Colombians as well.
- The total number of formal Venezuelan workers would increase from 293,060 to 454,107. This would reduce job competition in the informal sector and open up opportunities for Colombians, creating a positive impact on government revenues and the social security system.
We find that the gap between current and predicted monthly incomes is largest for more highly educated Venezuelans (see figure 1). This suggests that lowering barriers for this group—especially the difficult process of verifying credentials—could have an outsized positive impact.
Figure 1. Average Predicted and Observed Monthly Incomes for Venezuelans, by Education
Furthermore, we find that Venezuelan women face a double disadvantage due to their gender and nationality. Reducing barriers to economic inclusion would lead to a 67 percent increase in incomes for Venezuelan women. Addressing gender-based barriers would lead to an additional 74 percent increase in their incomes.
During COVID-19, these potential benefits are more important than ever, for both Colombians and Venezuelans. On the former, with small businesses struggling, the potential boost in productivity offered by Venezuelans is much needed. Facing large fiscal deficits, the government will need greater tax revenues. Increased spending by Venezuelans could help stimulate the economy. And considering the high rates of unemployment, it will be important not to restrict Venezuelans only to the informal sector, which could lead to increased job competition.
On the latter, our recent research with Refugees International found that 64 percent of Venezuelans were working in sectors which have been highly impacted by the pandemic, compared to 47 percent of Colombians. Moreover, 78 percent of Venezuelan women work in highly impacted sectors, compared with 57 percent of Venezuelan men and 59 percent of Colombian women.
Since COVID-19 has disproportionately affected Venezuelans in the labor market, the gaps between Venezuelans and Colombians’ incomes has probably grown even larger. This suggests the benefits from economic inclusion are even greater than our research suggests.
Finally, greater economic inclusion does not only produce economic benefits—it may also help Colombia fight the pandemic. For example, many Venezuelans in Colombia have experience in the health sector; they could help address shortages of medical staff. However, in March, an announcement by the Colombian president that the government would support these moves was met with backlash by the medical community, which led to a withdrawal of the policy.
Recommendations for Improving Venezuelan Economic Inclusion
We recommend that the government of Colombia, donors, international organizations, NGOs, and the private sector take the following actions to facilitate greater economic inclusion (discussed in more detail in our case study and policy paper).
The government of Colombia should:
1. Maintain an ongoing registration process for Venezuelans that allows all new entrants to gain regular status and work rights upon arrival.
2. Work with the International Labour Organization (ILO) to facilitate credential and skill verification for Venezuelans by convening discussions through the ILO’s tripartite mechanism.
3. Combat xenophobia. Fostering positive public perceptions of Venezuelans is key to achieving economic inclusion. However, discrimination is a serious challenge for Venezuelans that has likely been exacerbated by the recession.
Donors and the international community should:
4. Increase funding to the Venezuelan response. In 2019, only 53 percent of the international Refugee and Migrant Response Plan (RMRP) was funded. These funds are sorely needed for a wide range of programming efforts.
5. Begin prioritizing economic inclusion programming for Venezuelans. During the COVID-19 outbreak, a humanitarian-focused approach to supporting Venezuelans has rightly dominated thus far. Moving forward, humanitarian funding should be maintained, but there must also be a shift towards economic inclusion.
6. Prioritize women’s economic inclusion. Venezuelan women faced the largest income gaps prior to the pandemic and have likely been disproportionately affected by COVID-19.
7. Rigorously evaluate livelihood programs. Livelihood programs, which are designed to help individuals achieve decent work and increase their income, can have remarkable impacts. However, they are highly inconsistent. To ensure they are having their intended impact, experimental evaluations should be conducted regularly.
The private sector should:
8. Engage Venezuelans and host communities through core business and advocate for continued policy progress. Businesses can improve economic inclusion by directly hiring Venezuelans, investing in businesses owned by or employing Venezuelans, and/or supplying from businesses owned by or employing Venezuelans. They can also have a powerful voice advocating for policy changes—particularly those that make it easier to hire Venezuelans.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.
Image credit for social media/web: World Bank Photo Collection/Twitter