TRADE-VENEZUELA: Out with Colombia, In with Argentina

• by Humberto Márquez (caracas)
• Wednesday, August 12, 2009
• Inter Press Service

Trade between Argentina and Venezuela amounted to 1.4 billion dollars in 2008, compared to 7.3 billion dollars in trade between Venezuela and Colombia, with a balance of six to one in favour of Bogotá.

Venezuelan President Hugo Chávez once again put his country's relations with Colombia 'in the freezer,' ordering a halt to fuel exports to the neighbouring country and to purchases from Colombian companies, which last year sold six billion dollars worth of goods, mainly cars, foodstuffs, cosmetics, textiles, footwear, pharmaceuticals and veterinary medicines, to Venezuela.

Chávez accused his Colombian counterpart Álvaro Uribe of creating a new threat to Venezuela by allowing the United States to use at least seven military bases in Colombia, with the stated purpose of shoring up joint efforts against drugs and the guerrillas.

In response, he decided to completely cut off Venezuelan exports to Colombia and reduce purchases from that country as far as possible, 'a measure to tread on Uribe's toes by making his companies pay the price of the political confrontation, through the loss of markets, revenue and jobs,' political scientist Beatriz de Majo, an expert in regional integration issues, told IPS.

As the latest conflict escalated over the past few weeks, Argentine President Cristina Fernández flew to Venezuela with several of her ministers and around 70 members of the business community, to sign 22 agreements on trade and cooperation with Chávez, basically involving Venezuelan purchases of goods and technology.

Venezuela's admission as the fifth full member of the Southern Common Market (Mercosur) trade bloc, made up of Argentina, Brazil, Paraguay and Uruguay, is pending approval by the parliaments of Brazil and Paraguay. Three years ago Venezuela pulled out of the Andean Community, now comprised of Bolivia, Colombia, Ecuador and Peru.

'We aren't taking anything away from anyone. On the contrary, the car industry market, which exported 19,000 cars to Venezuela in 2007, has been opened up again,' said Fernández, pleased that 'all of the key sectors of the Argentine economy are represented in these agreements.'

But Venezuelan Trade Minister Eduardo Samán put it differently: 'Those 10,000 cars that we were going to buy from Colombia, let (U.S. President Barack) Obama buy them.'

Argentina 'is in a position to gradually substitute all of the goods coming from Colombia,' said Samán, 'and at lower prices as well, from cars to pharmaceutical products.'

But Emilia Peraza, an adviser to Venezuela's main trade association, Consecomercio, told IPS that 'although the products may have a lower FOB (freight on board, or export) price, that doesn't necessarily mean that the final price is lower.'

A truck from Colombia might bring only one container, while a ship from Argentina carries 300, which lowers costs. 'But to that are added costs of stowage, docking, transferring containers, storage, tariffs, refrigeration, security and returning the empty containers to the shipping company,' said Peraza.

But the agreement between Argentina and Venezuela will rely on state intervention to cut red tape and keep costs down. 'The private sector will make its requests and a state enterprise will carry out the purchases, to avoid overbilling,' said Samán.

Pedro Bergaglio of the Fundación Pro Tejer, which represents part of Argentina's textile industry, underlined that it will take advantage of 'a perfectly valid opportunity to do business, and Minister Samán assured us that we will not have problems with tariffs, import certificates or hard currency transfers.'

These are aspects that have caused headaches for Colombian exporters each time bilateral relations have become tense – a common enough occurrence over the last few years.

Vicente Bauducco, president of the Argentine dairy cooperative SanCor, closed a deal to sell Venezuela 18,000 tons a year of UHT (extended shelf life) milk, 3,000 of which will pay off a 55 million dollar loan received from Caracas in the past.

In addition, Venezuela will purchase machinery to set up 40 garment factories in Caracas that will produce jeans, and study the feasibility of building soy processing plants.

Carlos Larrazábal, president of the Venezuelan Council of Industry, said 'substituting products will not necessarily be easy or fast, and there could be temporary shortages in pharmaceutical products and the car industry.'

Venezuela has put in place 'a kind of trade blockade against Colombia, when it has criticised such actions with respect to other countries,' like the nearly five-decade U.S. embargo of Cuba, said Larrazábal.

For now, few trucks are crossing the border between the two countries, and trade and customs activity in border towns in the northeastern Colombian provinces of Guajira and Norte de Santander and the western Venezuelan states of Táchira and Zulia have ground almost to a standstill.

'Sales have plunged, the National Guard controls have become excessive again, and Colombians aren't coming over to buy for fear that the military will confiscate their merchandise as contraband,' the local head of the main business association, Fedecámaras, José Rozo, told IPS by phone.

On the Colombian side of the border, the biggest worry revolves around supplies of gasoline from Venezuela, because the tanker trucks that carried the fuel are no longer arriving after Chávez's order for 'zero' deliveries to Colombia.

Under the previous agreement, Caracas supplied 4.5 million gallons (around 17 million litres) a month of gasoline to Colombia's border provinces, at a price midway between the international and domestic prices, because Venezuela has the world's cheapest gasoline: just four cents of a dollar per litre.

'We are always hit hardest, those of us who are along the border. If the imports are frozen, we'll have to sell gasoline at 6,000 pesos (three dollars) a gallon,' compared to the normal price of 1.75 dollars a gallon, complained María Eugenia Martínez, with the Cúcuta chapter of Fendipetroleo, which groups Colombia's main fuel distributors.

One thing that remains to be seen is how the cancellation of supplies will affect the smuggling of fuel across the border from Venezuela, estimated by the local press at five million gallons a month between Norte de Santander and Táchira alone.

Hundreds of 'pimpineros' carry five-gallon plastic containers of fuel - 'pimpinas' - on their shoulders, on bicycles or by other means at points where there are no controls.

In the past, these roadside vendors of cheap Venezuelan gasoline over the border in Colombia have clashed with the authorities in protests against similar restrictions.

In the end, Colombia decided not to interrupt supplies of 250 million cubic feet of gas from Punta Ballenas, in the extreme north, to Maracaibo in northwest Venezuela, while in Venezuela measures are being taken to replace Colombian natural gas, which feeds power plants.

'It won't be any problem for us to stop buying natural gas from Colombia,' said Venezuelan Energy Minister Rafael Ramírez.

© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service