As the Western Hemisphere’s worst refugee crisis unfolds with 3 million Venezuelans pouring into Andean neighbors, and relief agencies projecting that number could soon double with continued standoff between the Maduro and Guiado government claims to legitimacy, the international community is again scrambling for emergency funding. The appeal comes as the budget for the main United Nations arm, the High Commissioner for Refugees, has been running 40% behind the $25 billion 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 markets are just beginning to consider pilot debt and equity issuance from standard emerging economy designs, with three-quarters of displaced populations hosted in developing countries. The Global Compact for Refugees finalized 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 the refugee number at almost 70 million at mid-2018. 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 UNHCR’s budget formula, which relies on non-enforceable pledges and draws from a shrinking donor base, with 10 countries contributing nearly 80% 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 assumed power throughout advanced and developing economies these proposals have stalled, as 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 come from wider system partners like 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 labor, as part of a broader agreement with bilateral and multilateral donors including the International Monetary Fund. It charted a standard adjustment program 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 GCFF, enabling $1 billion in infrastructure projects for Jordan and Lebanon as middle-income economies. The Bank also recently opened a $2 billion 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 Inter-American Development Bank President Luis Moreno, himself a Colombian, intends to raise a regional $1 billion fund for refugee social protection and job creation. Bogota 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 interagency 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 ten countries as the World Bank issues traditional bonds and on-lends the proceeds, but has no authority to deal directly with private sector banks and fund managers, despite requests as they organize for trial large scale refugee transactions.
Colombia’s government, an investment-grade frequent emerging market borrower has expressed interest in placing project and sovereign bonds, collateralized by utility revenue streams 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 MILA exchanges can get capital for refugee hiring and product and technology launch. This private market-based innovative 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 pressing regions, commercial emerging market specialists can formally team with humanitarian agencies and official lenders to mobilize additional tens of billions of dollars, and investor insight and discipline that reinforce shared purpose.