Page 8 - Preliminary Report on the Venezuelan Migrant and Refugee Crisis in the Region

Determinants of the migrant and refugee crisis

The economic collapse in Venezuela

The deep economic recession coupled with rampant hyperinflation are part of a crisis that

includes serious shortages of food, medicines, and basic inputs, as well as a highly

unpredictable supply of electricity and water services. According to numerous testimonies, the

humanitarian conditions that Venezuelans have to endure are one of the causes of the mass

migration from the country.

To a large extent the humanitarian crisis is the result of a procyclical economic policy as well as

an enormous amount of control and regulation of the economy and the private sector. Under
the administration of Hugo Chávez, a massive increase in imports was accompanied by an

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unsustainable accumulation of external debt. In the short-term the strategy proved effective
for a time at improving the country’s economic and social indicators, including the poverty and

inequality rates. However, the effect was only temporary.

In 2014, with the fall in world oil prices, Venezuela was faced with a foreign exchange revenue

deficit that led to a massive 70 percent cut in imports and, in the absence of other sources of

external financing, a vast expansion in monetary supply by which the regime hoped to cover its
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high fiscal spending bill. Already strangled by unending regulations and controls on prices and
access to foreign exchange, the private sector was powerless to fill the void created by the cuts

in imports. Indeed, Venezuela’s gross domestic product (GDP) has shrunk by nearly 50 percent
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since 2013. That explains the huge shortage of food, medicines, and basic goods, which have

stopped being imported. In parallel, monetary expansion led to hyperinflation, which has

13 Especiales Prodavinci. “Venezuela: la deuda externa en cifras,” Prodavinci, 2017,
http://especiales.prodavinci.com/deudaexterna/.
14 Barrios, Douglas, Ricardo Hausmann y Miguel Ángel Santos. “Cómo salvar a Venezuela.” The New York
Times, July 9, 2018, https://www.nytimes.com/es/2018/07/09/opinion-salvar-venezuela-crisis-economica/.
15 Long, Gideon. “Hollowed-out Venezuela Counts the Cost of Crisis.” Financial Times, September 4, 2018,
https://www.ft.com/content/55bd21a8-b02e-11e8-8d14-6f049d06439c.

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