Peru is currently experiencing an economic, health, and political crisis. Not only is the country experiencing the devastating effects of the COVID-19 pandemic, but it is also undergoing major political instability.
As Peru enters a political crisis, the economic effects of the pandemic are being intensified. And while the Peruvian government had implemented major programs to support its population during COVID-19, they are leaving behind some 1 million displaced Venezuelans currently in Peru.
New research by Refugees International and the Center for Global Development (CGD) finds that Venezuelans in Peru face major barriers that prevent them from integrating into the Peruvian economy. As a result, many are pushed into informal, low-paying jobs that do not match their qualifications. Some are subjected to exploitation and abuse. And because of these factors, Venezuelans are more vulnerable to economic shocks, such as COVID-19.
Barriers to Venezuelan Economic Inclusion in Peru
Venezuelans in Peru face several legal and practical barriers that prevent their economic inclusion, including limited opportunities for regularization, difficulty recognizing qualifications, quotas on hiring foreigners, among others. While some barriers—such as the predominance of the informal economy—apply to both Venezuelans and Peruvians, there are many others that are specific to, or more severe for, Venezuelans.
These barriers push Venezuelans into informality, underemployment, and exploitative working conditions, and many have been exacerbated by COVID-19. Prior to the pandemic, Venezuelans were earning 35 percent less than Peruvians on average. The income gaps were starkest for highly educated individuals, with Venezuelans with at least some university education earning 71 percent less than Peruvians.
Venezuelan women are disproportionately affected by these barriers. At the time of the survey, Venezuelan women were earning 23 percent less than Peruvian women and 49 percent less than Peruvian men (figure 2).
The outbreak of COVID-19 has exacerbated these economic difficulties. According to our recent policy note, prior to the COVID-19 outbreak, about 71 percent of Venezuelans were working in sectors of the economy that have been most impacted by COVID-19, such as accommodation and retail, compared with 56 percent of Peruvians. As a result, hundreds of thousands of Venezuelans are facing food insecurity and many are at risk of eviction.
Benefits of Venezuelan Economic Inclusion
Despite these barriers, Venezuelans are active participants in the Peruvian economy. In 2018 alone, they contributed 0.3 percentage points of annual GDP growth. According to the World Bank, they had a positive fiscal impact of $365.11 million. This is because Venezuelans consume goods and services, pay taxes, start and invest in businesses, provide skills that complement those of Peruvians, contribute to the productivity of Peruvian businesses, and more.
Increased economic inclusion would allow Venezuelans to obtain jobs that match their qualifications, increase their levels of formalization, earn higher incomes, and therefore improve their self-reliance. In turn, they would plug skills gaps in the Peruvian economy, reduce their concentration (and thus job competition) in the informal labor market, contribute to the pension system, provide greater fiscal revenue for Peru, increase productivity of businesses, and boost the economy overall.
According to a pre-COVID analysis by the IMF, increased Venezuelan labor market integration could potentially raise Peruvian GDP growth by 0.4 percentage points in 2021. As Peru’s GDP growth is expected to be -13.9 percent in 2020, the potential benefits to economic growth from greater economic inclusion are certainly needed.
Additionally, increased economic inclusion among Venezuelans would support the fight against COVID-19. Many Venezuelans are essential workers, providing vital services necessary during the pandemic. Increasing measures that promote their economic inclusion—such as the decree that allowed Venezuelan doctors exercise their professions—are paramount to harness this much-needed support. Additionally, greater economic inclusion would allow Venezuelans to diversify the sectors they work in, minimizing the impact of the pandemic on such a vulnerable population.
Facilitating Greater Economic Inclusion
The current health, economic and political crisis may tempt Peruvian policymakers to ignore their Venezuelan population. Yet doing so would increase suffering among Venezuelans while also depriving Peruvians from the much-needed benefits of inclusion. Our new research provides a series of recommendations that should be implemented in the coming months to facilitate greater economic inclusion. Some include:
- The government of Peru and donors should include Venezuelans in their COVID-19 response strategies, expanding access to health services regardless of migratory status.
- The government of Peru, together with international organizations and NGOs, should address the remaining barriers to Venezuelans’ economic inclusion; create a governmental interagency strategy that brings together humanitarian and development objectives; and facilitate economic inclusion by scaling up livelihood and anti-discrimination programs, rigorously evaluating these programs, and working with the government to facilitate credential recognition.
- International banks and donors should increase funding to Peru by extending humanitarian and development grants, making them conditional on the inclusion of Venezuelans, while incentivizing 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.