Refugees from Economic Collapse Are Deeply in Debt

Finances. This is the real scourge of our time. Make poor financial decisions, and they will haunt you for a long time.

By now, most of us preppers understand that financial literacy is a valuable asset for anybody. Concepts like profits, investment capital, passives, and all the terminology involved should already be a second language for us even before graduating from college. It should be a necessity for high schoolers, too, I think.

Resource optimization is important for all of us.

Getting the most value of what little we may have is the way to go. Waste nothing, as you may not know when scarcity will present in your life.

Why did I decide to write about this?

I learned that the lack of financial education is one of the main problems faced by Venezuelans immigrating to the United States and Europe. This situation leads them to make poor financial decisions that lead to deep, serious debt issues.

I need to clarify this. A very large portion of Venezuelan immigrants have professional degrees. One of the main traits of the migration wave is that it is the one with the most educated migrants (formal, University education) around the world, thanks to our free college, funded by oil revenues back in the day. It´s not like 90% barely ended primary school, as Hollywood insists in describing it. Comparing the educational and literacy levels of Central American migrants with our population you will see.

Even though, the financial struggles of Venezuelan migrants are not exactly because of the scarce education in other areas, rather than the financial and economic areas. These specific areas are the ones that have generated the most problems.

In Venezuela, as in many other countries, financial education has never been a priority in the educational system. Students do not receive the training they need to understand the basics of finance, such as savings, credit, and investment. This leaves them at a disadvantage when they arrive in the United States or even Europe, where the financial system is very different from the one in our home country. Composite interest works wonders in our favor, but if we don’t read the small print it can become a nightmare.

Venezuelans migrating to the United States or Europe often face several financial challenges. First, they must adapt to a new economic system with different rules and regulations, including severe penalties for debtors. Second, finding employment and establishing in a new country, and sending money to Venezuela if children and wife were left behind. Sounds easy? Trust me: it´s not. Third, they must assume new expenses, such as rent, food, and transportation.

Debt can destroy your new life.

In this context, the debt trap is there to catch the imprudent. I have heard of Venezuelans acquiring credit cards or even loans to cover their basic expenses.

Without a financial plan, they end up paying high-interest rates and accumulating debt, generating the contrary effect to what they were looking for.

Many Venezuelans rushed to buy cars and rent apartments with salaries so meager that, after some time, they realized they couldn´t afford the lifestyle: expensive cell phones, clothes, a car, phone bill, landline bill, Internet bill, water bill, power bill, food bill, fuel bill, insurance bill, and everything in between. They racked up the expenses only to find themselves like a deer in front of a car with high beams on.

Debt problems can make it difficult to find employment, financial stability, and build a future in any country.

To avoid debt problems, improving a financial education is necessary. Courses, workshops, counseling programs, self-teaching, every step is a good one in the right direction. It is also important to learn about the financial system in the country you are in and develop a financial plan to manage the expenses.

What many people don´t know is that hyperinflation ate away our debt, just like our salaries, savings, and, in many instances, our patrimony of a lifetime of work.

Debt can be used to your advantage in a stable economy.

However, I used debt to my advantage back in the day: I bought a brand-new car and took out a bank loan to buy a house. Within two years, the car was almost paid off, and seven years later, the house was completely paid off. I was even able to buy three plots of land, two on Isla Margarita and one in the mountains, next to my family´s cabin.

In a stable economy, debt can be used wisely if you know how to do it.

Debt can also destroy your life.

On the other hand, debt, like an insidious shadow, can cast a long, dark pall over the aspirations of many unsuspected Venezuelan immigrants. It can hinder employment opportunities, impede the desired financial stability, and obstruct the path to that brighter future they pursue.

It doesn´t happen only in the US or Europe. It´s happening in Chile as well.

It’s not even exclusive of the atypical process in Venezuela:

Debt and the Migration Experience: Insights from South-East Asia 

Among Venezuelans with longer residency time, the confidence in accessing the financial system is stronger. They see accessing a type of economic support in their daily management as an “opportunity,” especially if it is a bank rather than personal networks. However, this opportunity is valued only if they have an excess to cover future payments. It is a problem not having money in the long term and only increasing debt, which is the definite opposite of what we must do.

Some people get into debt to migrate.

Debt is seen usually as a possibility to access certain products that generate “stability” in this new context. Most of us already know this is not so true. But, for a young man or woman who craved a new cellphone for years and see the possibility of getting a new one with all the bells and whistles after living day-to-day in a country with one of the least advanced communications networks in the world, it can be heaven.

Debt is very appealing to those who want a new start.

The general thinking is that to be able to “advance” (measured in things you consume and not in your ability to be financially independent), you always have to be able to count on loans or bank support. Regardless of what for, to buy a car, to buy a house… because only with “saving a portion of your salary you are not going to buy it” in the words of a guy I met. Getting some debt to be able to continue, to advance, under that criteria, means you always need a loan to acquire something or to be able to go supplying and to have a better quality of life.

But for Venezuelans with less residency time, debt is almost essential to cover monthly expenses in some countries. Go figure. In addition, they find it safer to borrow from banks than from retail, as although these stores quickly offer them credits, the interest rate is usually much higher. I, personally, never got into debt, even having full-time employment.

For some Venezuelans, it is important to show themselves as “good payers,” not only to be able to access bank loans but also to not intensify the stereotypes that exist about migrant people.

There is an important psychological effect that can influence this, regardless of the country of choice for migrants.

One of the effects of arriving abroad for the Venezuelan population is “social declassing.” This is the acceptance of the loss of social position compared to what they enjoyed in our country.

Migrants emphasize that they cannot achieve the same position mainly because they cannot work in their professions. This is due to the administrative difficulties in most countries where the process of homologating titles is slow, and the economic cost is high. Some interviewees express their regret for the differences in social positions between their home society and the current one due to the change in lifestyles.

The negative social valuation of the migrant population in some countries is definitely a strong effect because they feel that they have lost economic status.

And we did lose it, indeed, as I have expressed in previous articles. I had my own home and ended up in Lima in a quite small and expensive bedroom with a shared bathroom. Yes, YIKES. But Mrs. Rosita, the landlord, was an angel, and I give thanks to her every day and send blessings for her and her family.

Nevertheless, declassing was one of my motivations to reorganize myself, put my stuff together, and come back to see where to go next.

I was lucky, though, as I have my family support.

Most of the migrants are not so fortunate.

There is a strong contrast between the level of education – many have university degrees – and the type of work and salaries migrants can access depending on the country they choose. This produces a feeling of loss of symbolic value. This manifests in social position, even though the economic situation of the country was not stable, there is always a general acknowledgment of such status. Politicians and .gov fat cats are usually despised and frowned upon as we all know where all their “status” and “wealth” comes from. This leads migrants to a constant effort to improve or to demonstrate to their families and friends back in the country the maintenance of that status, even though they do not possess it at all in this new context. Hence, getting into debt has been misused as a possibility to maintain that social expectation. Yes, many migrants show off on social media how “great” is their life now they can “get out of that God-forsaken land.”

This is not a wise choice but people are just trying to survive.

As things are going in the world, I don’t know if that was a very wise step, but to each their own. I’d rather prefer living here and developing my own businesses, political uncertainty and all, and working abroad for some time in partial contracts than to see myself trapped in some huge city in a foreign country in the middle of a disaster.

Like I was already in 2020, if you have read my story…

Thanks for your support!

Stay safe, and keep tuned!

What are your thoughts?

Do you foresee debt levels continuing to increase? Do you think it’s a bad way to fund a new start? Do you think this will negatively affect the countries hosting the migrants?

Share your thoughts in the comments section.

About Jose

Jose is an upper middle class professional. He is a former worker of the oil state company with a Bachelor’s degree from one of the best national Universities. He has an old but in good shape SUV, a good 150 square meters house in a nice neighborhood, in a small but (formerly) prosperous city with two middle size malls. Jose is a prepper and shares his eyewitness accounts and survival stories from the collapse of his beloved Venezuela. Jose and his younger kid are currently back in Venezuela, after the intention of setting up a new life in another country didn’t  go well. The SARSCOV2 re-shaped the labor market and South American economy so he decided to give it a try to homestead in the mountains, and make a living as best as possible. But this time in his own land, and surrounded by family, friends and acquaintances, with all the gear and equipment collected, as the initial plan was.

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