Update Country Report Curaçao 12 Sep 2018

Although recent focus from the regional and international community has been on the mass exodus of Venezuelans to other South American countries, the Caribbean is not escaping unaffected from Venezuela's ongoing economic and political crisis. In addition to rising Venezuelan migration into the region, the Caribbean is feeling the hit of reduced investment and oil flows via the PetroCaribe oil scheme, as well as the effects of falling tourism and increased crime and smuggling.

The decline of PetroCaribe is the most significant regional consequence of Venezuela's economic meltdown. The preferential oil initiative was set up by Venezuela in 2005 as a means of providing cheap oil to Caribbean member countries, and also as a way of spreading Venezuelan influence through the region. PetroCaribe currently has 17 members, 14 of them either from the Caribbean or a member of the Caribbean Community (Caricom), although the level of commitment and participation varies between members. Officially, members include Antigua and Barbuda, the Bahamas, Belize, Cuba, Dominica, the Dominican Republic, Grenada, Guyana, Haiti, Jamaica, St Lucia, St Kitts and Nevis, St Vincent and the Grenadines, and Suriname.

Venezuela's ability to provide oil at cheap rates has declined in line with its falling oil production and deteriorating economy, which makes selling oil at below market rates an increasingly unwelcome commitment. As a result, oil sales and investment through the PetroCaribe funds are declining, increasing oil import costs for Caribbean member states. With oil prices rising towards US$70/barrel over 2018, this puts heavy pressure on the budgets of the most oil-dependent Caribbean states, especially those that experienced damage in the hurricanes of September 2017 and are already struggling to finance their reconstruction programmes.

PetroCaribe financing under threat

Haiti is one of the most vulnerable members of PetroCaribe. The country has received considerable investment from Venezuela, both directly and through PetroCaribe. Venezuela and PetroCaribe were major donors following the devastating earthquake in Haiti in February 2010 and successive Haitian administrations came to rely on this funding, especially because it came without any oversight or preconditions, unlikely the majority of international aid. As such, the decline in PetroCaribe funding has had an immediate impact, especially as it has coincided with a Haitian senatorial commission finding evidence of widespread irregularities in the handling of PetroCaribe funds, with an investigation into corruption and embezzlement now ongoing. The absence of PetroCaribe funding has undermined the ambitious infrastructure investment plans of the Haitian president, Jovenel Moïse, some of which were contingent on Venezuelan funding. In addition, popular frustration about the emerging extent of corruption linked to PetroCaribe is contributing to Haiti's already-fraught political landscape.

Alongside Haiti, Cuba is one of the islands experiencing the greatest negative fallout from the decline in Venezuelan funding. A long-standing ideological ally, Venezuela had provided major funding to Cuba through PetroCaribe and bilaterally, to some extent filling the gap left by the slump in funding from the former Soviet Union in the 1990s. The decline in Venezuelan funding is in some ways having an analogous impact, and the lack of alternative funding is driving the Cuban authorities to implement a series of reforms designed to bolster economic activity and prevent a major economic slowdown.

Venezuelan migration also affecting the region

Although not at the same levels as migration to neighbouring Colombia and Brazil, the wave of Venezuelans fleeing their country is also affecting those islands closest to the Venezuelan coast. Trinidad, only 15km away from Venezuela, is experiencing particularly high migration. According to the UN Refugee Agency (UNHCR), 4,847 Venezuelans had sought asylum in Trinidad and Tobago as at July 2018, making it the leading Caribbean destination for Venezuelan migrants. However, flows are likely much larger in reality, as many migrants arrive clandestinely or use Trinidad as a base to move onward to other destinations. Although Trinidad is one of the largest Caribbean islands, its ability to absorb large numbers of migrants, even temporarily, is limited. For example, providing social care for Venezuelans will put pressure on public services, while some Trinidadians may fear that higher levels of migration will increase competition for jobs. In addition, locals may resent the creation of temporary accommodation for migrants, especially if that leads to a rise in crime rates.

Curaçao, the second-most popular Caribbean destination, had received 679 migrants by the end of December 2017, although local reports indicate that this figure is set to have doubled in 2018. However, Curaçao is an example of how even relatively small numbers of migrants can put pressure on fragile island economies. Indeed, Amnesty International, a non-governmental organisation, recently accused authorities in Curaçao of abusing Venezuelan migrants. In addition, islands such as Curaçao and Aruba are suffering from a decline in Venezuelan tourism at the same time that Venezuelan migration is increasing. Tourism from nearby Venezuela had been a driver for both islands' economies, and a 38% decline in arrivals to Curaçao helped to push the island's economy into decline in 2017, with a further slowdown expected in 2018.

Negative trends set to continue

With no political or economic recovery for Venezuela currently in sight, these negative trends are set to continue affecting the Caribbean region into 2019. Some Caribbean countries are already seeking to replace Venezuela as a major source of funding, with China in particular stepping up its investment in the region. The current push to increase renewable energy capacity across the region may also be linked to the rise in oil import costs following PetroCaribe's decline.

However, migration is unlikely to slow in the medium term, maintaining pressure on those islands closest to Venezuela. Moreover, increased lawlessness within Venezuela will expand beyond its coastline to affect other countries in the Caribbean: transnational drug-trafficking originating in Venezuela has led to increased violence in Trinidad and Tobago, for example. In addition, reports of pirate attacks in the Caribbean rose by 163% in 2017, with the majority being reported close to Venezuela. Rising incidences of piracy and drug-trafficking are likely to be combined with rising reports of people-smuggling as criminal gangs take advantage of the exodus from Venezuela to offer escape routes into the Caribbean, as well as Latin America. Venezuela's political and economic crisis is likely to continue to negatively affect its neighbours in coming years.