Regional Spillovers from the Venezuelan Crisis: Migration Flows and Their Impact on Latin America and the Caribbean

Jorge A Alvarez, Marco Arena, Alain Brousseau, Hamid Faruqee, Emilio William Fernandez Corugedo, Jaime Guajardo, Gerardo Peraza, and Juan Yepez


This paper evaluates the economic impacts of Venezuelan migrants on host countries and the implications for future policy responses. Since August 2022, nearly 7 million Venezuelans (23 percent of the population) have fled their country due to economic collapse (a contraction of over 75 percent of real GDP), deteriorating basic services, and insecurity.  

Colombia hosts the largest number of Venezuelan migrants, totaling 2.5 million or about 5 percent of the Colombian population. Chile, Ecuador, and Peru collectively host 2 million migrants, accounting for more than 3 percent of the local population on average.  

Venezuelan migrants have encountered a variety of labor market conditions in host countries. Some countries (e.g., Chile) have large formal sectors and relatively high wage flexibility, while other countries (e.g., Colombia, Ecuador, and Peru) have smaller formal sectors and more rigid wages. Language and cultural assimilation barriers are relatively low in Spanish-speaking countries, but Venezuelan migrants face legal and non-legal barriers to economic integration. 

The demographic profile of Venezuelan migrants resembles that of local populations—almost two-thirds of Venezuelan migrants are working age and almost half are female. Venezuelans tend to be more educated than the average citizen of host countries. 

Main results: 

  • The number of Venezuelan migrants is projected to reach 8.4 million by 2025, about 1.4 million higher than the current number. 
  • Working age migrants have faced higher unemployment, are more likely to initially work in the informal sector, and earn less than local workers. The wage gap, which rises with educational attainment, indicates misallocation of migrants’ human capital.  
  • There is no evidence of displacement of local workers, given the informal markets’ ability to absorb inflows of new workers. Venezuelan migration tends to increase labor informality in recipient countries. Labor force participation, employment, and informality of local workers are all broadly unchanged, though there is some downward pressure on wages particularly in the informal sector. 
  • Venezuelan migration has had a positive impact on economic activity in recipient countries. Venezuelan migration has led to an increase in GDP growth in the largest recipient economies of between 0.10 and 0.25 percentage points on average since 2017, largely driven by the boost to the labor force and domestic demand. The increase in labor, including both the number of migrants and their human capital, accounts for about 70 percent of the increase in GDP growth on average. If migration flows continue as projected, economic gains should further accumulate in the region, including through higher investment and productivity. 
  • Migration inflows place downward pressure initially on fiscal and external balances in recipient countries. Higher migrant-related expenditures (including health care, education, other services) ranges between 0.1 and 0.5 percent of GDP depending on the country. However, these pressures on fiscal balances are expected to dissipate over time as the tax base expands in line with the expansion in economic activity. 
  • Employment policies have helped migrants to regularize their status and find jobs, but only a few countries have adopted active labor market policies to deepen integration. Country responses to Venezuelan migration has varied over time. Initially, Latin American countries welcomed Venezuelan migrants, implemented flexible immigration policies, and provided humanitarian assistance and access to social services such as healthcare, childcare, and education. However, as migration flows surged in 2018-19, some countries modified their policies and imposed barriers. 

The authors conclude that Venezuelan migration has had a positive impact on host countries’ economic activity, although there are some short-term adjustment costs. Given productivity losses due to labor misallocation in the short term, host countries can increase GDP growth by supporting deeper integration of migrants into the formal economy. Policy priorities should include formalizing migrant workers, promoting job search, and facilitating labor market adjustment, while managing attendant fiscal costs and strengthening international cooperation.