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Impact of Venezuelan migrant flows on Colombia

17 April 2019 Arthur Dhont

On Friday (12 April), the World Bank announced that it has approved a USD31.5-million grant from its Global Concessional Financing Facility to help Colombia provide support for Venezuelan migrants entering the country.

Despite the World Bank's contribution, Colombia still faces a significant shortfall in resources to provide support for Venezuelan migrants, encouraging it to plan widespread privatizations and improved fiscal capture. On 29 March, Colombia's Minister of Finance Alberto Carrasquilla said that attending to the welfare needs of the 1.2 million Venezuelan migrants who are already in Colombia would require USD1.58 billion per year for the rest of the current administration's term, or close to 0.5% of GDP. Carrasquilla has said that the government will consider relaxing its fiscal stability rule to allow for the funding of welfare programs for Venezuelan migrants. The rule currently mandates a deficit reduction to 2.4% of GDP in 2019 and to 1% by 2027. A revision of the rule is likely to be assessed negatively by credit rating agencies. In order to address such fiscal pressures, Colombia is evaluating the possible privatization of over 100 state-owned companies. According to Deputy Minister of Finance Luis Alberto Rodriguez, the government has already identified firms worth 2% of GDP as candidates for sale and he forecasts state receipts of 0.6% of GDP from privatizations in 2019. The government also plans a review of tax collection arrangements, including strengthening its tax collection agency and developing new technology to improve fiscal capture and boost tax consistency.

The inflow of Venezuelan migrants is likely to continue. Colombia is the largest recipient of the approximately 3.7 million migrants that have left Venezuela as a result of its severe economic crisis. Roughly one-third of this total are in Colombia and the government estimates that there could be 3-4 million Venezuelan migrants by 2021. The Colombian government has ruled out closing the border to stop the inflow of migrants, advocating instead for the removal of Venezuelan President Nicolás Maduro as the prerequisite for improved economic and political stability in Venezuela and to stem the growing migrant flows. The United Nations High Commissioner for Refugees estimates that 23.1% of Venezuelan migrants in Colombia are based in Bogotá, 14.7% in Norte de Santander, 12% in La Guajira, 10.2% in Atlántico, and 6.9% in Antioquia, with smaller concentrations in other departments across the country.

Hostility towards Venezuelan migrants in Colombia remains relatively muted compared with other countries with large Venezuelan migrant flows, including Ecuador and Brazil. In October, President Iván Duque, who heads a coalition of right-wing parties, asked Colombians "not to give in to xenophobia" when outlining the government's ongoing commitment to supporting Venezuelan migrants. A poll in April indicated 63% support for the government's policy towards Venezuela. Colombia's recent history, in which more than 5 million were displaced internally by violence, is also likely to contribute towards relatively low levels of hostility towards Venezuelan migrants.

Nevertheless, as migrant flows continue to increase, with a steadily greater adverse economic impact, the risk of migrant-related violence is likely to worsen. On 25 January, police evicted 400 Venezuelan migrants who had occupied an area near the city's central bus station in Cali, with some confrontations occurring between migrants and the authorities. A similar incident occurred on 5 February on Circunvalar Avenue (ring road) next to the Metropolitan Stadium in Barranquilla when authorities evicted 300 Venezuelan migrants from a makeshift campsite. In November 2018, authorities announced the deportation of 15 Venezuelan nationals after a riot at a shelter, where protesting migrants allegedly vandalized property while demanding better living conditions. Such incidents are likely to become increasingly frequent as the Colombian government struggles to provide adequate support.

Indicators of changing risk environment

Indicators of increasing Venezuelan-migrant-related protests

  • Withdrawal of Colombia's Special Permanence Permit (Permiso Especial de Permanencia) program, which represents the main route for Venezuelan migrants to formalize their status in Colombia, would be likely to increase protests by migrants unable to formalize their residence in Colombia or access welfare and employment opportunities.
  • A series of high-profile crimes such as murder or rape by Venezuelan migrants against vulnerable sectors of Colombian society would increase the risk of anti-migrant protests by Colombians.
  • An end to the Nicolás Maduro administration in Venezuela could trigger a call for Venezuelans based in Colombia to return to their country of origin.

Indicators of decreasing Venezuelan-migrant-related protests

  • Multilateral donations that reduce the financial burden of supporting Venezuelan migrants, thus decreasing the risk of protests by Venezuelans about their living conditions and of Colombian protests against the transfer of resources towards migrants.
  • Successful completion of significant privatizations that will reduce fiscal pressures.
  • A continued decline in Colombia's bond spread, which already discounts fiscal improvements, having declined from 231 basis points over the United States' treasuries at the start of 2019 to 179 basis points as of 15 April. Such improvements would lower the country's potential borrowing costs and facilitate the funding of increased welfare outlays.

Posted 17 April 2019 by Arthur Dhont, Senior Analyst – Americas, Country Risk, IHS Markit


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