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From Displacement to Development: How Peru Can Transform Venezuelan Displacement into Shared Growth

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Peru
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EXECUTIVE SUMMARY

Latin America is witnessing its largest displacement crisis in recent history. Over the past few years, millions of Venezuelans have been forced to flee their home country due to political unrest, economic and institutional collapse, violence, and human rights abuses. With over one million Venezuelans, Peru hosts the second-largest number of displaced Venezuelans, and has received more asylum applications from Venezuelans than has any other country. Despite the support that has been mobilized, Venezuelans living in Peru have difficulty accessing basic rights and services, and they face many practical and legal barriers to their economic inclusion.

Initially, the Peruvian government welcomed Venezuelans, creating the temporary stay permit (PTP, for its Spanish acronym) in January 2017, which allowed Venezuelans to stay for up to two years, authorized them to work, and opened a pathway to longer-term residency. However, as more Venezuelans arrived, the government faced increasing socioeconomic, political, and social pressures. In October 2018, the government implemented the last round of PTPs, and eight months later, it introduced a humanitarian visa, which is still in place. To obtain the visa, Venezuelans need to apply in specific Peruvian consulates abroad and provide documentation that is difficult to obtain, such as passports. The humanitarian visa effectively increased restrictions on Venezuelans entering Peru; since its implementation, only a handful of Venezuelans have been able to enter Peru regularly.

The shift from the PTP to the humanitarian visa led to a sharp increase in the number of asylum claims made by Venezuelans in Peru. Yet since June 2019, Venezuelan asylum seekers entering through the Ecuadorian-Peruvian border have had to wait at border facilities while their claims are being processed, which takes up to 70 days. Furthermore, as asylum applications increase, the Peruvian asylum system is failing to respond to the increased demand, and applicants must wait up to two years for a decision on their claims. Consequently, most asylum seekers are still awaiting a resolution of their status; less than 1 percent of asylum applications from Venezuelans were approved in 2019, as most were not even processed.

Ultimately, with few means to enter Peru regularly, an increasing number of Venezuelans are resorting to entering and staying irregularly. In October 2020, the government of Peru issued a special type of PTP—called the temporary stay permit license (CPP for its Spanish acronym)—that will open the opportunity for Venezuelans inside Peru to regularize their status. Once implemented, the CPP will grant one year of regular status and work authorization to all foreigners—including Venezuelans—who entered Peru irregularly or whose permits have expired. While the new measure is a step in the right direction, it has some drawbacks that could prevent many Venezuelans from obtaining it. For instance, applicants must present a valid internationally recognized ID (such as a passport) and pay high fees if they have overstayed their visas. While some of the specifications to obtain the CPP are still being developed, without adjusting its requisites, many Venezuelans will likely continue without the possibility to regularize their status.

In irregularity, Venezuelans face a heightened state of vulnerability, live in in fear of the authorities, and are unable to access public services such as healthcare or education. Furthermore, their irregular status affects their economic inclusion, pushing them to work in informal, low-paying jobs, where they are subject to exploitation and abuse. Yet, while regularization is a necessary condition for Venezuelans to obtain formal jobs and reduce their vulnerability, it is not sufficient, as even those with regular status face challenges to finding formal work.

Data show that Venezuelans in Peru are falling far short of economic inclusion. Prior to the pandemic, 93.5 percent of working-age Venezuelans in Peru had jobs, but most of them were informal salaried workers or self-employed (64.8 and 19.2 percent, respectively). At the end of 2018, the average monthly income for employed Venezuelans was $333, compared with $509 for employed Peruvians. That is, Venezuelans earned 35 percent less than Peruvians on average. In addition, Venezuelans often work in jobs that do not match their skills and are subject to exploitation. The risks are especially high for Venezuelan women, who may also face sexual harassment and/or gender-based violence. Venezuelan women also face significant economic disadvantages: they earn 23 percent less than Peruvian women and 49 percent less than Peruvian men. The outbreak of COVID-19 has exacerbated these economic difficulties. Because Venezuelans mainly work in the hardest-hit sectors, many have lost their jobs.

Despite the obstacles, Venezuelans are active economic participants in and contributors to the Peruvian economy. In fact, the overall economic and fiscal contributions of Venezuelans exceed the costs of hosting them. According to the World Bank, in 2019, Venezuelans had a net positive fiscal impact of $365.11 million. And according to the Central Bank of Peru, in 2018, 0.3 percentage points of annual GDP growth could be attributed to the migrant population in Lima and Callao. Notwithstanding the evidence on the economic benefits of hosting Venezuelans, the gains and costs are not distributed evenly across populations, geographies, and time horizons. For instance, the central bank indicates that falling wages for young, less-educated Peruvians in the service and commerce sectors may be associated with the arrival of Venezuelans.

Expanding economic inclusion for Venezuelans can help reduce any negative effects in specific segments of the labor market, while also potentially yielding significant social and economic benefits. Greater inclusion would lead to higher incomes and rates of formal work among Venezuelans, which would increase their self-reliance, reduce protection concerns, and improve their standard of living. With higher incomes, Venezuelans would spend more in the economy, thus benefiting Peruvian businesses and promoting economic growth. According to a pre-COVID-19 analysis by the International Monetary Fund, increased Venezuelan labor market integration could potentially raise Peruvian GDP growth by 0.4 percentage points in 2021. Higher incomes and rates of formal work would also yield greater fiscal revenues and, since Venezuelans in the country are younger on average than Peruvians, support for Peru’s pension system. Finally, with more Venezuelans formalizing, job competition in the informal sector would be reduced.

As COVID-19 wreaks havoc on the Peruvian economy, it is more important than ever to realize these benefits. However, doing so will require overcoming significant barriers, including these:

  1. Limited opportunities for regularization. Many Venezuelans cannot regularize their status, which pushes them to work informally and increases their economic precarity.

  2. Practical restrictions on asylum seekers working. The long asylum process leaves asylum seekers with temporary documentation that employers do not accept.

  3. Difficulties recognizing qualifications.High costs and rejection from professional associations prevent many Venezuelans from having their foreign diplomas recognized.

  4. Quotas on hiring foreigners. Foreigners cannot account for more than 20 percent of a business’s workforce, and their salaries cannot exceed 30 percent of the total salaries.

  5. Higher tax rates. Formal workers who have been in the country for less than 183 days are taxed 30 percent of their income in addition to a 13 percent standard income tax.

  6. Discrimination and exploitation. Xenophobia and discrimination prevent Venezuelans from accessing key services and contribute to their exploitation in the workplace.

  7. Increased challenges for women. Venezuelan women are at an increased risk of harassment and exploitation. They often do not have access to social networks and key services such as childcare, limiting their ability to participate in the labor market.

  8. Limits on entrepreneurship. A lack of knowledge of regulations for starting a business and discrimination from government officials undermine Venezuelan businesses.

Past experience shows that, when policymakers make the right choices, economic inclusion for migrants and refugees is possible.25 To achieve it in the Peruvian context, the government and its partners should build on their existing plans and approaches by implementing the following recommendations.

The government of Peru and donors should

  • Increase and improve access to regularization for Venezuelans;

  • Strengthen the Peruvian asylum system and implement measures to ensure the economic integration of asylum seekers;

  • Introduce exceptions for Venezuelans to the quotas on hiring foreigners and the collection of additional taxes; and

  • Allow Venezuelans to access Ministry of Labor services, such as programs that match job seekers with employment opportunities.

The government of Peru, together with international organizations and NGOs, should

  • Create a governmental interagency strategy that accounts for humanitarian and development objectives in responding to the Venezuelan presence in Peru;

  • Disseminate information on Venezuelans’ rights;

  • Facilitate the process of credential and skills verification;

  • Expand, diversify, and evaluate approaches to address discriminatory perceptions toward Venezuelans; and

  • Rigorously evaluate livelihood programs.

International banks and donors should

  • Increase funding for the humanitarian and development response in Peru—to expand economic inclusion efforts while also covering humanitarian needs, and

  • Incentivize private-sector participation by raising awareness among businesspeople on the benefits of hiring Venezuelans, spreading information on how to hire them, and using blended finance mechanisms to offset the risk of investing in Venezuelan-owned businesses.

The private sector should

  • Engage Venezuelans and host communities through core business and value chains, and

  • Advocate for policy progress that facilitates economic inclusion and benefits businesses.

The arrival of Venezuelans in Peru presents many challenges, but also an opportunity to boost the country’s economic development and mitigate the economic downturn caused by COVID-19. By working with development partners to pursue policies and programs that facilitate economic inclusion, the Peruvian government can enable Venezuelans to realize their full potential, improve their own lives, and contribute even more to society, while reducing any negative economic impacts and maximizing Venezuelans’ positive impact on Peruvian society.