Trade between Venezuela and Colombia Back on Track

Posted on Feb 11 2013 - 10:08am by Editor

Trade between Venezuela and Colombia increased 40.4% in 2012 compared with the previous year, Colombia’s customs and tax authority has reported. This represents a jump in twelve months of almost US $1 billion in commercial exchange, from $2.34 bn to $3.28 bn.

The figures confirm that trade between the two Andean nations continues its recovery from the 2008 – 2010 crash, when bilateral exchange fell from $7.29 bn to $1.68 bn.

Analysts consider that the plummet and recovery is due to political rather than economic factors, in particular due to improved diplomatic relations since Juan Manuel Santos became Colombian president in August 2010.

“The trust between Juan Manuel Santos and (Venezuelan president) Hugo Chavez has generated this recovery of trade between the two countries,” said Pavel Rondon, a former Venezuelan ambassador to Colombia.

He argued that bilateral trade crashed from 2009 due to “the aggressive position of ex-Colombian president Alvaro Uribe,” who, by declarations made toward the end of his presidential term, appeared to be ready to declare war on Venezuela.

Uribe took an increasingly radical stance against President Chavez and the Bolivarian revolution during his presidency. The former president subsequently admitted in an interview last August that he had indeed considered military intervention in Venezuela towards the end of his term, but said that he had “lacked time”.

However when Santos came to the Colombian presidency diplomatic relations were quickly restored.

In November 2011 thirteen new bilateral agreements were signed between the neighboring countries, including a new customs regime to stimulate trade. This replaced Andean Community (CAN) agreements, from which Venezuela withdrew in 2006.

“Conditions are set for trade. It has been growing progressively in recent months and this should give it a definite boost,” said Santos at the time.

Meanwhile, Chavez heralded the agreements as evidence that “We want to strengthen our friendship, trust, and policies,” and transform Caracas and Bogota “into examples of governments that put their [political] differences aside so as to benefit their peoples”.

Changing the balance

However, Venezuelan officials have raised concerns that the balance of trade between Venezuela and Colombia continues to be unfavorable to the OPEC nation.

Colombian exports to Venezuela accounted for 81.8% of total trade in 2012, with Venezuelan exports at 18.2%; and while both nations increased exports on 2011, Colombia did so at a faster rate.

Ex-ambassador Rondon argued that “It’s necessary to turn around the negative balance of trade with Colombia…this has to be a national objective”.

Rondon highlighted that the national government is giving new stimuli to national producers, with Vice President Nicolas Maduro announcing public support for “producers who take the country into consideration”.

This is being backed by the new governors of Venezuela’s border states with Colombia, Zulia and Tachira. These states were previously held by opposition governors, until the United Socialist Party of Venezuela (PSUV) won them in last December’s regional elections.

Observers also point out that the balance of trade between Venezuela and Colombia will not change overnight. “It’s going to depend on market development and that the Caracas – Bogota political axis is maintained, stimulating trust not only between the presidents but also producers,” said Rondon.

Another ex-Venezuelan ambassador to Colombia, Gustavo Marquez, concurred with Rondon’s conclusion that improved diplomatic relations were stimulating trade growth.

Speaking on Venezuelan public channel VTV, he argued that to overcome Venezuela’s negative balance of trade “we need to enter a process of not just commercial, but socio-productive integration”.

He further explained, “It’s not just about buying and selling finished products, but we should also pursue a strategy that drives us to a far more profound economic integration, evidenced in the industrial development of both countries”.

According to the trade report, the main products Colombia exports to Venezuela are cattle, diapers, sweets and biscuits. Meanwhile principal imports into Colombia from Venezuela are steel, iron, chemical products and oil derivatives.