Severe economic mismanagement has caused chaos in Venezuela. Now President Nicolás Maduro is using Colombian migrants as a scapegoat.

In 1993 Hugo Chávez became president of Venezuela with a clear mandate to do something about the country’s persistently high levels of inequality – a feature evident across the Latin American region, as a whole. Chávez reckoned that reform was in order, however, unlike most other leaders he decided to reverse a trend of liberalization and privatization, which had given positive results around East Asia, as well as Chile, Colombia, Mexico and Peru, closer to home.

Instead, Chávez embraced what has come to be known as Socialism of the 21st Century. This new type of socialism encompasses a series of old-fashioned policies such as restrictions on imports that protect local industries; price ceilings on agricultural goods to lower the cost of living for the poor; large subsidies for fuel; and raiding government coffers to create jobs, schools and infrastructure.

These policies are not sustainable. Import restrictions lower the supply and variety of goods available domestically, leading to very high prices for a limited range of products which hurts the poor. Price ceilings on agricultural goods only resulted in significant production restrictions. Media reports show that Venezuelans must cue for hours to buy simple necessities. It is not unheard for citizens of Caracas, the capital, to take a day off work to go grocery shopping. The high level of government expenditure is unsustainable because, to put it simply, revenue raising cannot keep up with spending. While Venezuela was able to keep up expenditure when the price of oil was high throughout the 2000s, in more recent months the international price of a barrel of oil has fallen from US$110 to below US$50.

Importantly, this budgetary pressure resulted in the Venezuelan government deciding to pay its bills by printing more money. This process, called Seigniorage, erodes the value of currency held by the public and transfers it to the government. Not surprisingly, this policy is associated with high levels of inflation, which punishes the poor more than any other group – some estimates suggest that inflation is currently near 800 percent per annum.

In sum, economic mismanagement resulted in very high levels of inflation, shortages of basic foods, and, not surprisingly, rising violence. January 2014 saw a series of protests, political demonstrations, and civil insurrections that have continued throughout the country.

Faced with this difficulty, President Nicolás Maduro, Chávez’s successor, decided to look for a viable scape goat.

Due to left and right wing guerrilla insurgencies as well as infamous drug trafficking cartels, Colombian migrants have flooded to its neighbours looking for refuge and stability for over four decades. Some estimates suggest that there are over 5 million Colombian migrants in Venezuela alone.

As in most countries with a large diaspora, Colombian migrants’ reputations are not what many would hope. Nicolás Maduro is taking advantage of existing stereotypes by suggesting that closing the border with Colombia and deporting Colombians from Venezuela would lower crime, kidnappings and drug trafficking. Maduro also argues that Colombian migrants are behind a major smuggling operation, where certain subsidised products are being illegally exported to Colombia in an effort to destabilise the Venezuelan economy.

In recent weeks, Maduro has partially closed Venezuela’s border with Colombia and recalled its ambassador (as has Colombia). According to media reports, Maduro has deported more than 1,000 Colombian migrants while another 5,000 have left voluntarily. Television reports in Latin America have shown Colombian migrants carrying their belongings on their backs and heads across a muddy river that separates the two nations.

All this adds to existing tensions between the two nations, which date back to 2010. The then president of Colombia, Álvaro Uribe, showed evidence that the Venezuelan government was permitting Colombian leftist guerrilla movements, such as FARC and ELN, to seek safe haven and operate within in its territory.

With Venezuela officials currently marking the houses of Colombian migrants with the letter “D” and the UNHCR and other international organisations urging Venezuela to respect all human rights, it is foreseeable that this conflict between these two neighbours will escalate.

While a violent conflict is unlikely, Nicolás Maduro remains incredibly unpredictable. An armed conflict with Colombia may even prove beneficial given the popular notion that support for a government increases during times of external conflict.

If fighting begins, the Latin American community must come together to find a peaceful solution to this problem. The Organisation of American States is likely to be an important mediator. However, this could be an opportunity for Cuba to play a more pivotal role in the region. Cuba is well placed to host meetings between the two governments given that it has already served as a mediator between far-left rebels and the Colombian government in multiple occasions in recent years. Alternatively, this could also serve as an opportunity for the recently formed Bolivarian Alliance for the Peoples of Our America (ALBA), to show that it can seriously bridge ideological gaps between its neo-socialist member countries and other nations in the region. This could serve to propagate ALBA as a serious international organization working toward prosperity and regional stability.

Alberto Posso is a Senior Lecturer in the School of Economics, Finance and Marketing at the Royal Melbourne Institute of Technology (RMIT). This article can be republished with attribution under a Creative Commons Licence.