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

By Martha Guerrero Ble , Izza Leghtas , Jimmy Graham | December 16, 2020

Preface

In most low- and middle-income countries, refugees and forced migrants face a range of legal, administrative, and practical barriers that prevent their economic inclusion. Removing these barriers would enable displaced people to become more self-reliant and more fully contribute to their host communities.

Such efforts are even more important as the world looks to recover economically from COVID-19. While the pandemic has created unprecedented challenges for low- and middle-income countries around the world, it has also highlighted the importance of expanding economic inclusion. Refugees and forced migrants can, and do, play a crucial role within labor markets. Given the opportunity, they can help their host countries recover from this crisis.

This policy paper is part of the “Let Them Work” initiative, a three-year program of work led by the Center for Global Development (CGD) and Refugees International, and funded by the IKEA Foundation and the Western Union Foundation. The initiative aims to expand labor market access for refugees and forced migrants, by identifying their barriers to economic inclusion and providing recommendations to host governments, donors, and the private sector for how to overcome them. The primary focus is on refugees and forced migrants in Colombia, Peru, Kenya, and Ethiopia, with other work taking place at the global level.

To learn more about the initiative, please visit cgdev.org/page/labor-market-access and get in touch.

Helen Dempster
Project Manager for the “Let Them Work” initiative and Assistant Director, Migration, Displacement, and Humanitarian Policy
Center for Global Development

Foreword: Project Overview and the Impact of COVID-19

Economic inclusion—and with it access to decent work—is an important right for refugees and forced migrants that governments must recognize.[1] When displaced individuals are included in their host countries’ economies, they can become self-reliant and live better, more dignified lives. In addition, they can more fully contribute their skills and knowledge to strengthen their host countries’ economies, creating widely shared benefits. However, in many countries, refugees and forced migrants face a range of legal, administrative, and practical barriers that prevent them from being included in local economies, reaching their potential, and maximizing their contributions to host communities.

This case study is part of a series of publications by Refugees International and the Center for Global Development focusing on labor market access and economic inclusion for refugees and forced migrants. The series provides insights into and analysis of questions related to economic inclusion in countries around the world. It includes case studies of four countries: Colombia, Ethiopia, Kenya, and Peru. The publications aim to (1) identify the barriers to labor market access and economic inclusion that refugees and forced migrants face in host countries, (2) analyze the impacts and benefits of improving economic inclusion, (3) make policy recommendations to help maximize the positive outcomes of economic inclusion, and (4) open a policy dialogue around these findings.

This case study focuses on highlighting both de jure and de facto barriers to labor market access for Venezuelans in Peru. It analyzes the impacts and benefits of Venezuelan migration and recommends policy changes to lower barriers and maximize Venezuelans’ positive contributions to the Peruvian economy.

Most of this paper was completed prior to the outbreak of COVID-19. Since then, the situation of refugees and forced migrants around the world has become even more dire. As countries closed their borders, shut down nonessential businesses, and implemented strict quarantine measures to contain the spread of the virus, it became clear that the humanitarian and economic toll of COVID-19 would have deep, long-lasting effects beyond the immediate public health crisis. In this context, refugees and forced migrants are among the most vulnerable. They often work in sectors of the economy most highly impacted by the pandemic, have few savings, and are excluded from social programs—including health systems and social safety nets—that could offer recourse.

Displaced Venezuelans in Peru are no exception. 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, 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.

Peru is facing one of the greatest economic contractions in the region due to the effects of the pandemic. Indeed, the International Monetary Fund predicts that Peru’s GDP growth will fall by 13.9 percent in 2020. Furthermore, research shows that attitudes toward migrants tend to worsen during recessions, which might lead to policies that further limit Venezuelan economic inclusion. Nevertheless, such policies would be counterproductive. Increasing economic inclusion for Venezuelans would help not only with the economic recovery but also with the COVID-19 response. For instance, if Venezuelans earn more money in the economy, they will likely spend more and thus help create a much-needed boost in consumer demand. Furthermore, by allowing Venezuelan health professionals to apply their skills in the workforce, governments can work with their refugee populations to fight the virus.

The Peruvian government has taken some positive steps to realize these benefits. For instance, it issued a decree to allow Venezuelan health professionals to register and work in their professions to help fight the virus. Most notably, on October 22, the government issued a special permit to grant one-year regular status to Venezuelans inside Peru. Once implemented, the regularization measure—called the carnet de permiso temporal de permanencia (temporary stay permit license, or CPP)—will benefit Venezuelans with irregular status or whose permits have expired. While the CPP is a good step in the right direction, the measure has major drawbacks that could keep many Venezuelans from becoming regularized.

In many other ways, the Peruvian government has neglected Venezuelans in its COVID-19 response. For example, most Venezuelans still lack access to the public health system, and none were eligible for government grants to vulnerable families and businesses. As a result, they are more vulnerable to the effects of the virus and less able to recover from the economic shock it has created. In addition, many Venezuelans are still unable to work formally or exercise their professions. To more fully leverage the skills of Venezuelans toward economic recovery, the government should facilitate their economic inclusion.

Therefore, although most of this report was completed prior to the COVID-19 outbreak and does not fully address the additional challenges that the outbreak has created, the analysis of barriers to economic inclusion and recommendations for greater inclusion are as relevant as ever.[2] Addressing the barriers and facilitating inclusion would allow for a faster recovery for Venezuelans and Peruvians alike.

Acknowledgments

We are thankful to Cécile Blouin, Analí Briceño, Helen Dempster, Xavier Devictor, Cindy Huang, Hardin Lang, Sarah Miller, Daphne Panayotatos, Martha Denisse Pierola, Galo Quizanga, Rachel Schmidtke, and Eric Schwartz for their invaluable feedback and comments on this paper. We are also thankful to the Peruvian, US, and European government officials; UN agency representatives; staff of nongovernmental and civil society organizations; and Venezuelan individuals who took the time to share their insights with the research team for this paper. Any errors are our own.

The Center for Global Development and Refugees International are grateful for contributions from the IKEA Foundation and Western Union Foundation in support of this work.

About the Center for Global Development

The Center for Global Development works to reduce global poverty and improve lives through innovative economic research that drives better policy and practice by the world’s top decision makers.

About Refugees International

Refugees International advocates for lifesaving assistance and protection for displaced people and promotes solutions to displacement crises around the world. We do not accept any government or UN funding, ensuring the independence and credibility of our work.

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.[3]

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.[4] 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 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.[5] That is, Venezuelans earned 35 percent less than Peruvians on average.[6] 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.[7]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.[8] 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:

Limited opportunities for regularization. Many Venezuelans cannot regularize their status, which pushes them to work informally and increases their economic precarity.
Practical restrictions on asylum seekers working. The long asylum process leaves asylum seekers with temporary documentation that employers do not accept.
Difficulties recognizing qualifications. High costs and rejection from professional associations prevent many Venezuelans from having their foreign diplomas recognized.
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.
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.
Discrimination and exploitation. Xenophobia and discrimination prevent Venezuelans from accessing key services and contribute to their exploitation in the workplace.
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.
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. 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.

Endnotes

[1] We define forced migrants as individuals who have been forced to flee their countries of origin due to economic, political, or security challenges and have, for whatever reason, not been granted official refugee status.

[2] For more information regarding the impact of the COVID-19 pandemic on Venezuelans’ economic inclusion in Peru, see https://www.refugeesinternational.org/reports/2020/12/7/the-effect-of-covid-19-on-the-economic-inclusion-of-venezuelans-in-peru.

[3] Interviews with organizations in Peru, November 12–19, 2019.

[4] Ibid.

[5] Based on data from the ENPOVE survey (Encuesta Nacional sobre la Población Venezolana, or National Survey to the Venezuelan Population) for Venezuelans living in Peru and the EPE (Encuesta Permanente de Empleo, or Permanent Employment Survey) for Peruvians, both from the Peruvian statistical agency (Instituto Nacional de Estadística e Informática, or INEI). The ENPOVE data are from December 2018 and the EPE data are from October through December 2018. ENPOVE is representative of the Venezuelan population in six cities that host 85 percent of the total Venezuelan population. EPE is representative of Lima and Callao. We use a conversion rate of 0.3 US dollars to 1 Peruvian sol. Even though these data are over a year old, given that policies for economic inclusion have largely worsened since the time of the surveys (particularly in terms of the right to work), the data are likely still illustrative of current trends and gaps in labor market outcomes. Instituto Nacional de Estadisticas e Informacion (INEI), “Microdatos,” accessed February 8, 2020, http://iinei.inei.gob.pe/microdatos/.

[6] Based on authors’ calculations, using an ordinary least squares regression of logged income, controlling for age, age squared, education, and sex. Results are statistically significant at the p < 0.01 level.

[7] INEI, “ENPOVE: Condiciones de Vida de la Población Venezolana que Reside en Perú,” 2018, p. 98, https://www.inei.gob.pe/media/MenuRecursivo/publicaciones_digitales/Est/Lib1666/; Centro de Investigación Universidad del Pacifico, “Frente a un Triple Peligro: Migrantes Venezolanos y Su Integración Laboral,” December 2019, http://sisisemail.up.edu.pe/sisisemail/_data/2019/26035/CIUP-PPP-No3.pdf.

[8] World Bank, Una Oportunidad para Todos: Los Migrantes y Refugiados Venezolanos y el Desarrollo del Perú, Vol. 2, Washington, DC: World Bank, 2019, http://documents.worldbank.org/curated/en/107621574372585665/Una-Oportunidad-para-Todos-Los-Migrantes-y-Refugiados-Venezolanos-y-el-Desarrollo-del-Per%C3%BA; Vanessa Belapatiño, Francisco Grippa, Ismael Mendoza, Hugo Perea, and Hugo Vega, “Inmigración Venezolana a Peru: Características e Impactos Macroeconómicos,” BBVA Research, October 2019, https://www.bbvaresearch.com/publicaciones/inmigracion-venezolana-a-peru-caracteristicas-e-impactos-macroeconomicos/.

Cover Photo: UNHCR/Sebastian Castañeda