Update Country Report Curaçao 18 Apr 2018

Event

In early April the Netherlands announced that it is donating EUR100,000 (around US$124,000) to Curaçao to support the processing of refugees from nearby Venezuela. This follows an agreement to reopen Curaçao's borders with Venezuela, which could lead to a further influx of migrants.

Analysis

The Netherlands will provide financial support in order to expand accommodation at the detention centres currently being used to house Venezuelan refugees while they are being processed. In addition, the Dutch Immigration and Naturalisation Service will send officials to help Curaçao's institutions to assess the refugees and determine those classed as economic migrants and those who are political refugees.

Extra support from the Netherlands acts as recognition of the economic and institutional pressure being placed on Curaçao as a spillover effect of the political and economic crisis in Venezuela. Given Curaçao's relative proximity, 2017 saw a surge in Venezuelans fleeing their country to take refuge in Curaçao. According to the UNHCR, approximately 5,000 refugees leave Venezuela each day. Although many flee to neighbouring Colombia and Brazil, a proportion goes to Curaçao, whose population of 160,000 is struggling to manage the inflow.

The situation may worsen shortly, following an agreement with Venezuela to restore trade and transport links, after Caracas suspended these in early 2018. Although this will provide some small benefit to Venezuela's beleaguered economy, the boost in trade and tourism to Curaçao could be offset by rising numbers of refugees, especially ahead of Venezuela's elections on May 20th. Curaçao does not have sufficient capacity to block illegal trafficking routes through its maritime territory and is also hard-pressed to track and deport Venezuelans who have arrived legally but overstayed.

It is unclear how Curaçao and the Netherlands will address the issue of Venezuelan migrants once they have been assessed. The Dutch minister of foreign affairs, Stef Blok, noted that most are likely to be economic migrants rather than political refugees, but did not clarify whether Curaçao would then seek to deport illegal migrants back to Venezuela. The economic cost of receiving, sheltering and processing illegal Venezuelan migrants will continue to place downward pressure on Curaçao's GDP growth prospects, despite the extra funds from the Netherlands.

Impact on the forecast

We continue to expect real GDP growth of only 0.3% in 2018, followed by a pick-up to 0.9% in 2019. The political fallout from the refugee crisis, however, has the potential to cause social tension and impair governability.