The Colombia-Venezuela Standoff

This week as Venezuela shut down its border with Colombia, cargo trucks bringing perishable food sat in park on the highway. It was a perfect image to capture the state of affairs between Venezuela and Colombia: a standstill, with potential for spoiling.

For the last several years, Colombia's Alvaro Uribe has maintained a tricky alliance with both the U.S. and Venezuela, maintaining strong economic and diplomatic ties with both countries. While the U.S. continues funneling military aid to Colombia through Plan Colombia, Colombia has maintained a huge export business with a longtime adversary of the U.S. government, Venezuela. Chavez and Uribe’s friendship has paid off over the years, particularly when Chavez helped broker the release of dozens of FARC hostages back in 2003.

Yet the recent agreement by Colombia to allow seven of its military bases to be used by the U.S. for counternarcotics and antiterrorism operations has soured relations. As of this week, Venezuela has closed its borders for some Colombian exports, and Chavez has pulled his ambassador out of Bogota. Chavez has stated that he will "freeze" relations with Colombia, and that Venezuela is not dependent on the country for imports. In the wake of the report, the Colombian peso fell in value for the first time in a month, after having been the world’s best performing currency for four months.
However, even as Chavez says that Venezuela can survive without Colombia’s imports, the standoff seems like it would hurt his country much more than Colombia. Venezuela has been the main market for Colombia’s non-traditional exports in plastics, poultry, textiles, and other exports. In the first five months of ’09, Venezuela absorbed 33 percent of Colombia’s exports, followed by the U.S. taking in 19.6 percent. Analysts quoted by Bloomberg News stated that Venezuela would suffer in worsening food shortages, which would increase the country’s already high inflation and put more pressure on their deficit. Then there’s the effect on Venezuela’s petroleum industry. Venezuela looks to Colombia for imports of 300 million cubic feet of natural gas a day, and that gas is required for the country’s oil reservoirs to increase pressure and boost production, and as raw material for the petrochemical industry.

The question now becomes whether either country will flinch. Uribe has garnered sympathy for the new bases from Uruguay and Brazil. Also, Uribe has built up foreign investment in his country by building confidence in counternarcotics and antiterrorism programs that the U.S. has funded. In 2007, BusinessWeek hailed the new Colombia as the most “extreme emerging market” in the world, because Uribe had successfully changed the country’s image from a haven for drugrunners to a center for investors. If Uribe can find alternatives to Venezuela for the country’s exports, he may not need to continue relations with Chavez.
And if so, the Colombian truckers now stalled at the Venezuelan border may find cause to turn around and never look back.


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