From Displacement to Development – How Colombia Can Transform Venezuelan Displacement into Shared Growth

Jimmy Graham, Martha Guerrero, Daphne Panayotatos, and Izza Leghtas

Center for Global Development (CGD) and Refugees International (RI), April 2020

This paper can be made available upon request. Interested readers can contact Helen Dempster: [email protected]


Colombia hosts approximately 1.8 million Venezuelan refugees and forced migrants (as of December 2019) displaced by the humanitarian, political, and economic crisis in Venezuela. This paper examines labor market access and economic inclusion for displaced Venezuelans in Colombia, drawing on research conducted by a joint CGD-RI team and a mission to Colombia in November 2019.

Key points:

  • The Government of Colombia has mobilized a robust humanitarian response and taken steps to integrate Venezuelans into its society and economy. Nearly 700,000 Venezuelans have been able to regularize their status in Colombia through temporary stay permits, Permiso Especial de Permanencia (PEP), which gives them access to basic rights and services, including the right to work. New policies introduced in January 2020 will create additional pathways to regularization.
  • However, a range of legal, administrative, structural, and social barriers prevent many Venezuelans from being able to fully meet their needs or realize their rights in practice. Many Venezuelans are struggling to make progress towards economic inclusion, and have poorer labor market outcomes in terms of their labor income and formal work rates. Employed Colombians earn 43 percent more on average than employed Venezuelans, despite the fact that Venezuelans are highly educated. High rates of informal work also create a range of difficulties and protection concerns.
  • Many Colombians, including Colombian returnees and IDPs, also struggle to achieve economic inclusion and the continued arrival of Venezuelans to Colombia is straining the government’s capacity to respond to both populations’ needs.
  • The arrival of Venezuelans and the government’s response have already yielded a number of benefits, including an increase in economic growth, fewer labor shortages (particularly in agribusiness), and a positive impact on the employment rate for Colombians (by increasing firm productivity). Although the effects on wages for informal and low-skilled workers are negative and statistically significant.
  • The large-scale arrival of Venezuelans in a relatively short timeframe has also created significant challenges and costs. The inflow has strained Colombia’s already overburdened health, education, social protection, and water and sanitation systems. The net fiscal effect was estimated at -0.3 percent of GDP for 2019, and as a result public debt is expected to go up. Additionally, it is likely that the arrival of Venezuelans in some communities has pushed up housing prices. These issues have led to growing negative attitudes towards Venezuelans.
  • Improving the economic inclusion of Venezuelans—and of host communities—would benefit refugees, migrants, and Colombian society overall. It would lead to shared economic growth, a smaller informal sector, benefits for the private sector, reduced social tensions and xenophobia, and mitigated protection concerns. The authors estimate that if all Venezuelan-specific barriers to economic inclusion were lowered: (a) Venezuelans’ average monthly income would increase from $131 to $186, translating into an increase of at least $996 million in Colombia’s annual GDP, and creating a positive ripple effect for Colombian host communities; (b) the number of formal Venezuelan workers would increase from 293,060 to 454,107, which would reduce job competition in the informal sector and create a positive impact on the social security system; (c) Venezuelans’ self-reliance would increase, leading to reduced protection concerns and higher standards of living; and (d) Venezuelans would boost Colombian firms’ productivity by filling labor shortages, complementing Colombian workers with their unique sets of skills and experiences, and developing business connections abroad.
  • Greater economic inclusion for Colombian returnees would lead to similar benefits, increasing their average income by 13 percent. It is likely that the inclusion of other disadvantaged groups of Colombians, such as IDPs, would also create such benefits.
  • Venezuelan women face a double disadvantage due to their gender and nationality. Addressing both gender- and Venezuelan-specific barriers would lead to a 191 percent increase in Venezuelan women’s incomes. Given that Venezuelan women account for 52 percent of the total Venezuelan working-age population, huge gains could be made by lowering barriers for Venezuelan women.
  • The potential gains from economic inclusion are greatest for highly educated Venezuelans. Lowering key barriers for this group—especially the lack of work permits and difficulties verifying credentials—could have an outsize positive impact.
  • While the average level of education for Venezuelans entering the country has declined over time, large numbers of highly educated Venezuelans continue to enter the country. Providing them with the right to work quickly and often will be key to ensuring their economic inclusion.

The report concludes with several recommendations for government and its partners as follows:

  • Government should maintain the PEP process for Venezuelans that is not limited by entry date and provides a simplified path towards regularization and guarantees of protection.
  • Donors should increase funding for the response to Venezuelan displacement in Colombia—especially for efforts that improve economic inclusion and involve host communities. They should also consider a compact-like approach (e.g. offering other non-aid incentives) to better support the government and encourage the expansion of regularization and the right to work.
  • Government, international donors and NGOs should: (a) prioritize support for women’s economic inclusion by lowering women-specific barriers such as access to child care; (b) facilitate the process of credential and skill verification; (c) diversify approaches to combating xenophobia, e.g. through interventions to increase interpersonal contact; (d) facilitate voluntary relocations of displaced individuals currently residing in areas with few job opportunities, which would also reduce the risk of negative labor market effects on host communities and ease the strain on service systems in areas that currently have large displaced populations.
  • The private sector should engage Venezuelans and host communities through core business (e.g. directly hiring Venezuelans, investing in businesses owned by or employing Venezuelans, and/or supplying from businesses owned by or employing Venezuelans), and advocate for continued policy progress (e.g. to make it easier to hire Venezuelans).

The authors conclude that the influx of Venezuelan migrants into Colombia presents many challenges, but also a development opportunity. The arrival of Venezuelans and the constructive response of the government and its partners has already created positive, widely shared benefits. Strengthening an already robust response to improve Venezuelans’ economic inclusion in Colombia could multiply these benefits.