As the western hemisphere’s worst refugee crisis unfolds with 3m Venezuelans pouring into the country’s Andean neighbours and relief agencies projecting that number could double amid a continued stand-off between rival presidential claimants Nicolás Maduro and Juan Guiadó, the international community is again scrambling for emergency funding.
The appeal comes as the budget for the main United Nations relief arm, the High Commissioner for Refugees, has been running 40 per cent below the $25bn requested in 2017.
Development lenders like the World Bank and Inter-American Development Bank are in the early stages of modest commitments, and private financial market participants are just beginning to consider their involvement, potentially in the shape of innovative products such as refugee bonds. Meanwhile, three-quarters of displaced populations are hosted in developing countries.
The Global Compact for Refugees finalised last year after two years of negotiations, and endorsed by all UN members except the US and Hungary, calls for new public-private arrangements and investments to support governments and companies on the front lines, but offers no specific delivery models as global needs continue to increase with refugee numbers at almost 70m as of mid-2018, according to the UNHCR.
The pact is voluntary and depends on improvised field relationships, and in Latin America’s case and elsewhere a joint official-commercial funding unit could generate resource and policy breakthroughs.
Humanitarian groups have tried for years to change the UNHCR’s budget formula, which relies on non-enforceable pledges and draws from a shrinking donor base, with 10 countries contributing nearly 80 per cent of the total.
They argue for mandatory assessments as with peacekeeping missions, or separate public goods levies such as on airline tickets that could be earmarked for refugees.
As populist anti-immigrant leaders have assumed power in some advanced and developing economies these proposals have stalled, as an initial lack of political will shifted to fierce resistance.
UN officials moved from acknowledging the difficulties to considering internal changes a dead end, and instead urge that additional revenue comes from wider system partners such as the World Trade Organization in the form of host country export preferences.
With Jordan, the European Union embraced this track and offered duty-free entry for garments using Syrian refugee labour as part of a broader agreement with bilateral and multilateral donors including the International Monetary Fund.
It charted a standard adjustment programme for fiscal austerity amid the influx. Subsidy cuts sparked street unrest, forcing King Abdullah to replace his prime minister and cabinet, and the fund has since come under pressure to rework facilities for protracted refugee emergencies.
The World Bank in 2016 joined with the Islamic Development Bank and European Bank for Reconstruction and Development to create a concessional lending platform, the Global Concessional Financing Facility, paving the way for $1bn in infrastructure projects for Jordan and Lebanon as middle-income economies.
The bank also recently opened a $2bn window in its low-income International Development Association arm for borrowers like Bangladesh and Ethiopia.
It just announced that Colombia, where almost a million Venezuelans have crossed the border, will be the third middle-income country eligible for discount rates, and Luis Moreno, president of the Inter-American Development Bank and himself a Colombian, intends to raise a regional $1bn fund for refugee social protection and job creation.
Bogotá has granted work permits and temporary residence, but host community public services have been overwhelmed as local officials plead for education, health, housing and employment assistance.
A national inter-agency plan was drafted in November, but has yet to be fully aligned with World Bank priorities and procedures to access the low-cost funding. The GCFF is backed by bilateral pledges from 10 countries as the World Bank issues traditional bonds and lends the proceeds, but has no authority to deal directly with private sector banks and fund managers, despite requests as they organise for large-scale trial refugee transactions.
Colombia’s government, an investment-grade borrower, has expressed interest in placing project and sovereign bonds, collateralised by utility revenue streams from serving refugee and internally displaced populations.
They could feature tax incentives, and be natural portfolio allocations for local banks and private pension funds as well as dedicated overseas asset managers.
For equities, a Colombian company investment fund may add to the instrument range where listings on the domestic and regional Latin America Integrated Market (MILA) exchanges can get capital for hiring refugees and product and technology launches.
This innovative private market-based approach was a core recommendation of the final January report, A Call to Action, of the World Refugee Council, a two-year Canadian-led effort to craft new refugee crisis policy and practical solutions.
In the Andean and other critical regions, commercial emerging market specialists can formally team up with humanitarian agencies and official lenders to mobilise tens of billions of additional dollars, as well as investor insights and discipline that reinforce a shared purpose.
