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Venezuelan refugees on Curaçao have entered the Kingdom of the Netherlands! by Peter Heintze, Dorothea Hilhorst and Dennis Dijkzeul

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“Reception of refugees in the region” is a central concept in the foreign policy of the Dutch government. It means that the Netherlands wants to financially support countries that accept refugees fleeing from a conflict in a neighboring region rather than enabling refugees to migrate onwards to Europe. Usually, the regions where refugees need to be sheltered are far away from the borders of our Kingdom. Suddenly, however, the Netherlands Kingdom has become the region itself.

Refugees from Venezuela are arriving in small but growing numbers on the Caribbean island of Curaçao. Curaçao is a remnant of colonial history, in that it is an independent country that continues to be part of the Kingdom of the Netherlands. The response to the fleeing Venezuelans now arriving on the island is highly inadequate and it is recognized that human rights are being violated on a large scale.

A recent report of Refugee International states that: “In displacement crises, the quality of services and assistance typically varies from one host country to another, but the fate of Venezuelans seeking refuge on the small island of Curaçao, only 40 miles from the coast of Venezuela, could very well be the worst in the Americas”. It is high time that the Netherlands, as the main country of the Kingdom, starts to make a serious effort to ensure that refugees are properly accommodated in their own region.

Distraught

Curaçao, an island state with 160,000 inhabitants, is struggling with major problems. The exploitation of the Curaçao oil refinery by the Venezuelan oil company brought jobs and foreign currency. And so did wealthy Americans and Venezuelans who came to spend their money in the paradise-like tropical tourist resorts.

Now everything has changed. Due to American sanctions against Venezuela, the refinery has almost come to a standstill, hotels have closed their doors, and the Insel Air airline was declared bankrupt in February. Twenty-six percent of the population is unemployed. The crisis in Venezuela is deeply affecting the economy of Curaçao, and its public finances are running out. Meanwhile, in Venezuela, less than eighty kilometers away from Curaçao, a political, social and economic tragedy is taking place. The international community is preparing for the large-scale provision of humanitarian aid. Distraught Venezuelans are leaving the country.

And that’s how the problems arise on Curaçao. Under pressure from a complaining population, a faltering economy and declining government revenues, the government in Willemstad is trying to prevent the arrival of undocumented Venezuelan migrants. Instead of recognizing their desperate situation, the Venezuelan migrants are being portrayed as criminals.

Boats

For generations, people have travelled back and forth between the South American mainland and the Caribbean Islands off the coast. Boats brought fish, fruits and seasonal workers. This has always gone on openly, outside of official rules and without international supervision. Besides fish and fruit, the boats also bring drugs and weapons and facilitate human trafficking. Nowadays they also bring more and more refugees from Venezuela.

The Venezuelans, who could be entitled to international protection under international law, are suffering the consequences. They do not receive shelter or protection. Instead, they are treated as criminals who need to be expelled as soon as possible. The Curaçao government does not acknowledge that this entails grave human rights violations. The government is resorting to fear mongering and repeatedly states it needs to act against illegal migration in order to avoid a potential pull effect, which might cause the country to attract even more migrants.

The role of the Netherlands

Curaçao is an independent state within the Kingdom of the Netherlands and is responsible for its own asylum policy and migration issues. However, the Statute of the Kingdom stipulates that the states have a duty of care for each other, especially in times of emergency. Moreover, foreign and defence policy is formally a responsibility of the Kingdom as a whole. If there are human rights violations within the Kingdom, the Kingdom is responsible. However, the Netherlands is currently failing to extend support to the forced migrants who are entitled to protection. Observers in Curaçao are advocating a more hands-on attitude on the part of the Netherlands: less distant and more in cognizance of the spirit of the Kingdom.

As early as July 2018, the Advisory Council for International Issues (Adviesraad voor Internationale Vraagstukken / IAV) warned of legal inequality within the Kingdom of the Netherlands, and pointed out the importance of respect for human rights. The potential impact of the Venezuela crisis on Curaçao forces the Kingdom to take a pro-active stance to protect Venezuelan refugees. Everyone understands that in the current situation, Curaçao can neither handle the influx with its own resources nor uphold refugee law. It is time for civil servants from Curaçao and the Netherlands to jointly set up a functioning asylum procedure for Curaçao and make it work!

Protecting Venezuelan refugees is in the first place a responsibility of the state of Curaçao. Nonetheless, the Netherlands should step in and support the country to provide a decent level of care to the despair migrants from Venezuela. The Netherlands has always favoured reception of refugees in the region; it is time to walk the talk.

Image Credit: Cookie Nguyen. The image was cropped.

About the authors:

Peter Heintze 2016 01 19_048Peter Heintze is an independent researcher, as well as coordinator of the KUNO – platform for humanitarian knowledge exchange in the Netherlands.

 

TheaDorothea Hilhorst is Professor of Humanitarian Aid and Reconstruction at the International Institute of Social Studies of Erasmus University Rotterdam. She is a regular author for Bliss. Read all her posts here. 

 

dennis finalDennis Dijkzeul is a Professor in Conflict and Organization Research at the Ruhr-Universität Bochum, Germany.

 

How oil rent contributes to Venezuela’s economic crisis by Blas Regnault

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The ‘Paradox of Plenty’, the ‘Dutch Disease’ or the ‘Resource Curse’ are often cited as reasons for Venezuela’s economic crisis. However, economic processes in such oil-exporting economies deserve deeper theoretical investigation to overcome the misunderstanding of oil rent as their main source of income. In Venezuela, declining oil rent alone may not explain the economic crisis of this oil-exporting economy—the mismanagement of oil rent due to the ambiguous conception of oil rents into the GDP strongly contributes.

 

The Venezuelan economy is experiencing a very complex crisis. Misguided economic policies have created profound distortions throughout the whole economy. Exchange rate parity has led to drastic reductions in foreign currency and a deterioration of the productive sectors, with damaging effects on the ability to import. This has resulted in crises in production and distribution of goods. The common sense view is to focus on the so-called resource curse and conclude that the high oil prices “feast” is over. But declining oil rent alone may not explain the economic crisis of this oil-exporting economy. As I will argue, oil rents are neither a blessing nor a curse. Oil rent is just a peculiar income stream that deserves a specific status in the GDP of oil-exporting economies[1].

What are oil rents?

The extraordinary profit observed in the global oil sector is due to the presence of very significant rents in the international oil market. These rents reflect fundamental differences in geological endowment of each oil producer, showing significant and systematic divergence from the average cost of production between countries. Table 1 shows that in 2016 the productivity of 463,305 wells located in the USA was 18.9 barrels per day. This was significantly less than the productivity in Saudi Arabia of 2,876.3 barrels per day.

Screen Shot 2018-04-18 at 14.37.22In addition, the price of oil is not determined by the average of production costs between all wells in the world. On the contrary, the price of a barrel is determined in 80% of cases by the production cost of the least productive region. This means wells located in the US determine world prices. Enormous differences between regional productivities allow the most productive regions to take advantage of their low production costs in the form of rents. This is what economic theory has called Differential or Ricardian rents. However, since 2014 the emergence of “shale oil” in US is also playing a key role in the oil price determination, transforming its productivity pattern.

Thus, oil rent is widely accepted as an inevitable and specific remuneration from any oil business. In historical terms, national oil companies, major oil companies, national states and private owners have struggled for control of oil rents. Whether in Texas, Alaska, Saudi Arabia, Kuwait, Norway, UK, Nigeria or Venezuela, the property rights regime represents the main legal tool used to keep part of the rent.

What is the problem with oil rent in the Venezuelan economy?

Ever since 1912, when Venezuela started to export crude, oil rents have historically provided recurrent income for Venezuela. However, oil rents remain absent in accounting for the national GDP. This invisibility is perhaps one of the main reasons for historic mismanagement of oil rents in the past. Indeed, the absence of the specific account for this income makes impossible the control by citizens and policy-makers of the way in which this rent is being spent. The problem becomes bigger when the entire economy bases its plans and policies (both in the oil and non-oil sectors) on oil rents as if these resources were a stable and more or less inexhaustible part of national income.

Why do falling oil rents create a crisis for the Venezuelan economy?

Crisis occurs in an oil rent-dependent economy when oil prices fall below the commitments made in the national budget. If the government and private sectors did not set funds aside in the form of savings as protection against episodes of decreases in oil prices, and if the economic system is not prepared for such fluctuations in oil rents, the crisis will always have the size of the commitment acquired.

However, the current Venezuelan crisis has three additional characteristics:

  • The national oil industry has suffered a significant deterioration in its productive capacity[2];
  • The non-oil sector, also dependent on oil rents, has suffered very serious damage to its productive capacity; and
  • The inefficiency in internal fiscal accounts and unsustainable exchange rate parity create profound distortions throughout the economy (non-official estimates indicate that inflation was near 2,616 per cent in 2017).

Non-productive solutions for the massive economic crisis.

The national government is still far from initiating a plan of national economic recovery that could boost production. On the contrary, the fall in oil rents has led the government to look for other sources of rents, exacerbating the extractive condition of the economy. At present, the government is trying to recover revenues through further indebtedness using a cryptocurrency called Petro. This only commits further, future barrels of oil into private hands and reverses rights obtained in 2001 with the Hydrocarbons Law. In addition, the government has created the Orinoco Mining Arc as a new source of rent for the exploitation of gold and other minerals, placing more than half of the southern province of Guayana at the disposal of large transnational mining corporations.

How to prevent mismanagement of oil rents? Build oil rents accountability.

In Venezuela, the public discussion about the uses of oil rents in national development started in 1934 and is still ongoing. However, the ambiguous conception of oil rents into the GDP has prevented a consensus on the uses of oil rents, leading to indebtedness and mismanagement of this income. Given the fact that the Venezuelan economy has to deal with oil rents as recurrent and fluctuating income, it is important to prevent further mismanagement and to build an institutional framework based on solid political interest to given this issue public visibility. This public visibility will allow for greater accountability for uses of oil rents, and will certainly prevent the historical mismanagement that this country has witnessed.

[1]Baptista (2008), Mommer (1989) and Regnault (2013) have developed an alternative GDP methodology for the oil exporting economies.
[2] According to the OPEC, the Venezuelan Oil production losses 604,000 barrels per day since 2016 (2.373 MBD 2016/ 1.769 MBD Jan 2018).

References
  1. Baptista, Asdrúbal. (2008). Bases Cuantitativas de la Economía Venezolana: 1830-2008, Fundación Polar, 2008.
  2. Mommer, Bernard (1989). ¿Es posible una política petrolera no rentista? In Revista BCV: Caracas, Volumen 4 – No. 3 – 1989; pp. 56-107.
  3. Murshed, S. Mansoob (2018) Revisiting the Resource Curse. Book Manuscript.
  4. OPEC (2018) Monthly Oil Market Report, 12th February 2018. Available in http://www.opec.org/opec_web/en/
  5. Regnault, Blas (2013). Neither a blessing nor a curse: National Accounts for oil-exporting economies (The Venezuelan case). International Institute of Social Studies, Erasmus University of Rotterdam http://iippe.org/wp/wp-content/uploads/2013/06/Blas-Regnault-Neither-a-Blessing-nor-a-curse-IIPPE.pdf

Photo credit: durdaneta

downloadAbout the author:

Blas Regnault is a Venezuelan sociologist and PhD researcher at the ISS, devoted to the study of global oil price cycles and its impact on the sustainable development in oil exporting economies.