Sunday, September 13, 2009

Ideology vs profit; Colombia and Venezuela's trade dispute gets nasty

Economist Article --

Venezuela and Colombia -- Politics versus trade

From The Economist print edition
Hugo Chávez stamps out regional economic integration

BUSINESS is slack at José Nelson Uribe’s tiny grocery store in San Antonio del Táchira, just a stone’s throw from Venezuela’s border with Colombia. “I’m not selling even a quarter of what I sold before,” says Mr Uribe. His woes are a result of the political conflict between his namesake, Colombia’s president, Álvaro Uribe, and Venezuela’s Hugo Chávez. “Before” means before July 28th, when Mr Chávez declared a “freeze” on diplomatic ties and said he would seek alternatives to Colombian goods. This was officially a response to an agreement formalising American use of seven Colombian bases for anti-drug operations, but it also coincided with questions as to how anti-tank rocket-launchers sold by Sweden to the Venezuelan army ended up in a camp belonging to the FARC guerrillas in Colombia. It is not the first time that Mr Chávez has threatened trade sanctions, but this time he seems serious.

The impact on the border region was swift. For each country, the other is the second-biggest trading partner (after the United States in both cases). Bilateral trade totalled $7.2 billion last year, of which $6 billion consisted of Colombian exports, mainly of food, live animals, clothing and cars. Four-fifths of that trade passed along the twisting mountain road that links San Antonio with the state capital, San Cristóbal. “That represents 50,000 direct jobs and 250,000 indirect [ones],” says José Rozo, a local business leader. Many of these are in transport firms and customs agencies. “Before, the local lorry drivers were doing around 500 trips a day,” Mr Rozo says. “Now it’s down to about 80.” Industry in Táchira has been hit too, since many companies depended on imports from Colombia.

The border is not closed. But few of the 30,000 Colombians who used to cross each day to shop do so now, because Venezuela’s National Guard confiscates their goods when they recross the border, says Mr Uribe, the shopkeeper. Venezuela’s government has stopped issuing import permits, nor is it providing dollars at the official exchange rate for imports from Colombia (a dollar costs almost three times more on the parallel market)...

Click here to read the complete article from the Economist



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