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INTERNATIONAL MONETARY FUND
WESTERN HEMISPHERE DEPARTMENT
DEPARTMENTAL PAPER
Regional Spillovers from the Venezuelan Crisis
Migration Flows and Their Impact on Latin America and the Caribbean
Prepared by Jorge Alvarez, Marco Arena, Alain Brousseau, Hamid Faruqee, Emilio Fernandez-Corugedo, Jaime Guajardo, Gerardo Peraza, and Juan Yépez Albornoz
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Copyright ©2022 International Monetary Fund
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Names: Alvarez, Jorge A., author. | Arena, Marco, author. | Brousseau, Alain, author. | Faruqee, Hamid, author. | Fernandez-Corugedo, Emilio, author. | Guajardo, Jaime, author. | Peraza, Gerardo, author. | Yepez, Juan, author. | International Monetary Fund, publisher.
Title: Regional spillovers from the Venezuelan crisis : migration flows and their impact on Latin America and the Caribbean / prepared by Jorge Alvarez, Marco Arena, Alain Brousseau, Hamid Faruqee, Emilio Fernandez-Corugedo, Jaime Guajardo, Gerardo Peraza, and Juan Yépez Albornoz.
Other titles: Migration flows and their impact on Latin America and the Caribbean. | International Monetary Fund. Western Hemisphere Department (Series)
Description: Washington, DC : International Monetary Fund, 2022. | DP/2022/019 | December 2022. | Includes bibliographical references.
Identifiers: ISBN: 9798400224478 (paper)
9798400225109 (ePub)
9798400225314 (web PDF)
Subjects: LCSH: Emigration and immigration—Economic aspects. | Latin America—Economic conditions. Classification: LCC JV6217.A48 2022
The Departmental Paper Series presents research by IMF staff on issues of broad regional or cross-country interest. The views expressed in this paper are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
The authors are grateful to Ilan Goldfajn, Julie Kozack, and Patricia Alonso-Gamo for their guidance throughout the project. The paper also benefitted from various inputs and discussions with IMF, Western Hemisphere Department (WHD)country teams and WHD seminar participants. Thanks also to colleagues from COM, ICD, RES, SPR, and STA for useful comments and staff from UNHCR Americas for helpful discussions.
The authors would also like to thank Kristine Laluces for production assistance and Lorraine Coffey (COM) for leading the editorial and production process.
Publication orders may be placed online or through the mail:
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P.O. Box 92780, Washington, DC 20090, U.S.A.
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Contents
Executive Summary
Acronyms and Abbreviations
1. The Venezuelan Exodus: An Unprecedented Economic and Humanitarian Crisis
Unprecedented Economic and Humanitarian Crisis
Ensuing Exodus in Venezuela
Future Migration Flows
2. Labor Market Outcomes from Migration in Recipient Economies
Migration Flows and Labor Market Implications
Migrant Flows across Regions and Local Market Impacts
Migrant Outcomes Relative to Local Workers and Misallocation
Impact on Local Workers
Evidence from Other Countries
3. The Macroeconomic Effects of Migration in Recipient Economies
Spillover Channels from Venezuela’s Crisis
Trade and Financial Spillovers
Migration Spillovers: Impact on Economic Activity
Growth Spillovers: A Partial Equilibrium Approach
Fiscal Implications and Spillovers
General Equilibrium Approach
Conclusion
4. Policy Responses and Recommendations
Taking Stock of Migration-Related Policies
Policies for Past Migrants and Future Waves
Annex 1. Mechanisms for Registration and Regularization of Venezuelan Migrants
Annex 2. Provision of Social Assistance to Venezuelan Migrants
References
BOXES
Box 1. Colombia: Implementation of the Temporary Protection Status
FIGURES
Figure 1. Largest Real GDP Declines
Figure 2. Venezuela Oil Production
Figure 3. Hyperinflation Episodes
Figure 4. International Comparison of Migration Episodes
Figure 5. Number of Venezuelans in Select Economies
Figure 6. Migration Patterns and Labor Market Characteristics
Figure 7. Migrant Characteristics and Labor Market Outcomes
Figure 8. Migration and Labor Market Outcomes
Figure 9. Migration Regression Results
Figure 10. Migration Flows and Average Wages
Figure 11. LAC: Exports to Venezuela
Figure 12. Growth Accounting Results
Figure 13. Growth Accounting: Sensitivity Analysis
Figure 14. Estimated Fiscal Costs
Figure 15. Macroeconomic Impact of Venezuelan Migration on Largest Recipient Economies
Figure 16. Macroeconomic Impact of Venezuelan Migration on Other Recipient Economies
Figure 17. Macroeconomic Impact of Venezuelan Migration: Sensitivity Analysis
Figure 18. Number of Countries with Visa Requirements
TABLES
Table 1. Fiscal Cost of Venezuelan Migration
Table 2. Visa Requirements for Venezuelans
Table 3. Mechanisms for Registration for Venezuelan Migrants
Table 4. Provision of Social Assistance to Venezuelan Migrants
Executive Summary
In the wake of a historic humanitarian crisis and economic collapse, Venezuela experienced a large exodus of people who migrated to other countries in Latin America and the Caribbean (LAC). This departmental paper documents the crisis in Venezuela and the ensuing migration flows to LAC, shedding light on the local and macroeconomic impact of these migration flows on recipient economies and discussing the country-specific responses and policy options going forward. The analysis presents important lessons that could inform policy solutions to other large migration episodes elsewhere in the world. The first chapter studies the forces behind this exodus, for which the unprecedented collapse in economic and living conditions in Venezuela were central (push) factors that led to one of the largest migration episodes in history—with nearly 7 million people having left Venezuela by August 2022. It also shows that most of them relocated to other countries in LAC and looks at the socioeconomic characteristics of migrants and how these characteristics make the Venezuelan crisis different from other migration episodes that have typically affected advanced economies. While the pandemic temporarily limited the migration flows, more than a million people have left Venezuela since end-2020 as travel and borders restrictions eased, a trend that could continue in the coming years.
For recipient economies, the main spillovers from the Venezuela crisis have been through migration rather than through trade or financial channels. Thus, a key socioeconomic issue for partner countries revolves around the potential effects on local labor markets and employment. The second chapter in this volume shows how the influx of Venezuelan migrants encountered a diverse set of labor market conditions in recipient countries in LAC—with common language and culture as advantages but legal and non-legal barriers as challenges. As a result, many migrants attached to the informal sector, leading to some mismatch of skills given their levels of education. The analysis finds no significant evidence of displacement of local workers from migration, given the informal markets’ ability to absorb the inflows of new workers. With productivity losses due to labor misallocation in the near term, the analysis also highlights how LAC economies would benefit from a deeper integration of migrants into domestic labor markets to raise productivity and potential growth.
At the macroeconomic level, recipient countries have benefited from the boost in internal demand and the labor force due to the inflow of Venezuelan migrants. Accounting for various frictions, the analysis in the third chapter indicates that migration flows may have raised annual GDP growth in the largest recipient economies in LAC between 0.10 and 0.25 percentage point on average since 2017. If migration flows continue over the next years as expected, output gains should further accumulate in the region—including through higher investment and productivity. Migration inflows have also exerted pressures on fiscal and external balances in recipient countries. On the fiscal side, higher migrant-related spending (for example, health care, education, other services) amounts to between 0.1 and 0.5 percent of GDP depending on the country. However, the increase in fiscal deficits should narrow over time as the tax base expands in line with economic benefits of migration.
Finally, the last chapter of this paper takes stock of migration-related policy actions taken in recipient countries in LAC to support and integrate Venezuelan migrants. The chapter provides a framework and tracks the evolution of policies related to immigration, humanitarian assistance, provision of public services, and domestic labor market policies. A central theme for policies is how to best manage the costs of adjustment while taking advantage of the prospective benefits of migration. Drawing on the experience from the LAC region, as well as from other migration episodes, this section concludes with various policy initiatives and offers strategic priorities for regional partners to manage the transition and reap the benefits of migration spillovers.
Acronyms and Abbreviations
| CAMI | Irregular Migrant Assistance Centers |
| CCSS | Costa Rican Social Security Fund |
| CdT | Carteira de Trabalho |
| CPP | Temporary Stay Permit Card |
| DANE | Colombia’s National Administrative Department of Statistics |
| ENCOVI | Encuesta Nacional de Condiciones de Vida |
| ETPV | Temporary Protection Statute |
| GDP | Gross Domestic Product |
| LAC | Latin America and the Caribbean |
| MBPD | Million Barrels per Day |
| OPEC | Organization of Oil Exporting Countries |
| PDVSA | Petróleos de Venezuela S.A. |
| PEPs | Special Permanence Permits |
| PAHO | Pan-American Health Organization |
| PPT | Temporary Protection Status |
| PTP | Temporary Stay Permit |
| R4V | The Interagency Coordination Platform for Refugees and Migrants. |
| RUMV | Unique Registry of Venezuelan Migrants. |
| SENA | National Learning Service Agency. |
| TUV | Uniform Vaccination Card. |
| UNHCR | United Nations Refugee Agency |