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C O N F I D E N T I A L BOGOTA 000378

SIPDIS

E.O. 12958: DECL: 01/31/2019
TAGS: ECON EFIN EINV PGOV PREL VE CO
SUBJECT: PRESIDENTS URIBE AND CHAVEZ MEET, ANNOUNCE JOINT
FUND TO CONFRONT GLOBAL FINANCIAL CRISIS

REF: A. 07 BOGOTA 800
¶B. 07 BOGOTA 4243

Classified By: ECONOMIC COUNSELOR LAWRENCE J. GUMBINER FOR
REASONS 1.4 (B) AND (D)

¶1. (C) SUMMARY: In Venezuelan President Hugo Chavez' first
visit to Colombia since the March 2007 diplomatic row over
the GOC killing of FARC Secretariat member Raul Reyes (Ref
A), President Uribe and he announced the creation of a USD
200 million joint fund and consultative commission to help
businesses in both countries survive the global economic
downturn. Although the plan is short on details, GOC
officials say the fund will concentrate on assisting small
and medium enterprises as well as promote infrastructure
development along the shared border. There was little
progress on other trade issues of importance to Colombia.
Chavez reportedly sought Uribe,s help to reach out to the
USG, but Uribe said it would be difficult to do so given the
increasing drug traffic through Venezuela. This lack of
clear progress on economic issues, coupled with the inherent
volatility of the Colombian-Venezuelan relationship, augur
poorly for substantial progress from this latest meeting. END
SUMMARY.

Making Up with Big Ideas
------------------------

¶2. (SBU) Presidents Uribe and Chavez met for the first time
since July of 2008 in Cartagena on January 24, focusing on
the bilateral trade relationship and shared concern over the
regional impact of the global financial crisis. The leaders
highlighted the increase in bilateral trade to a record USD
7.2 billion in 2008, with Chavez predicting trade would reach
USD 10 billion in 2009 despite falling oil prices and
consequent drops in Venezuelan purchasing power. Against
this backdrop, the presidents announced plans to create a USD
200 million investment fund to support businesses and
infrastructure development in their border regions as a
stimulus against a recession.

We'll Fill in the Details Later
-------------------------------

3.(C) The decision on the funds was reached in a
non-systematic manner. Venezuelan Embassy Commercial
Counselor Eduardo Delgado told EconCouns that during the
discussion Chavez blurted out, "I'll put in $100 million."
Not to be outdone, Uribe turned to his Ministers of Trade and
Commerce and stated "We will do the same; we have the funding
through (state development bank) Bancoldex, no?" The Finance
Ministry has been charged with putting the pieces together
from the Colombian end. Public Credit Director Viviana Lara
confirmed to Econoff that Colombia's USD 100 million
contribution would come from recent credits that Bancoldex
received from the World Bank, the Inter-American Development
Bank (IDB), and the Andean Development Corporation (CAF).
This was news to those institutions' local representatives,
none of whom had been contact by or consulted with on this
proposal. IDB resident representative Rodrigo Parot told
EconCouns that Bank credits were subject to pre-existing
contracts and that the GOC did not have flexibility to alter
the destination of the funds. World Bank representative
Eduardo Somensatto was more blunt: "We are not involved in
this initiative, and we will not be." Only the CAF's Freddy
Rojas indicated to EconCouns that there might be space to
utilize existing credits for the purposes agreed upon by
Uribe and Chavez.

¶4. (C) The GOC's goal is to develop a implementation plan
with identified small business and infrastructure plan by the
next scheduled bilateral presidential meeting in Caracas
April 28. Lara emphasized that the infrastructure component
was completely separate from recent announcements of new
public-private infrastructure investment fund and the GOC's
ambitious mega-project infrastructure plan for 2009 (ref B).
The BRV will resist involving the multilateral bank community
in this initiative because of continued bad blood, according
to Delgado. The Venezuelans would prefer to structure the
joint operation similar to the system presently applied to
bilateral funds with China and others.

Little Progress on Colombian Trade Issues
-----------------------------------------

¶5. (SBU) In addition to the establishment of the joint
investment fund and the appointment of new bilateral
ambassadors (Maria Luisa Chiappe as Colombia's Ambassador to
Venezuela and former trade minister Gustavo Marquez as
Venezuelan Ambassador to Colombia), the Presidents also
announced the creation of a binational economic commission
comprised of the foreign and economic ministers and their
staffs to analyze the impact of the global financial crisis
and identify steps to expand bilateral trade.

¶6. (C) However, no significant progress was made on
Colombia's most pressing trade concern with
Venezuela--increased market access for Colombian-manufactured
automobiles and auto parts. Colombia exported some 45,000
vehicles to Venezuela in 2007, but only about 15,000 in 2008
in the face of Venezuelan-imposed quotas. According to
Colombian Trade Ministry's Director of Economic Integration
Alfredo Ramos, Venezuelan vehicle quotas for 2009 have still
not been set, though the talks in Cartagena touched on how
Venezuela might increase Colombia's quota on certain types of
vehicles. Delgado, while optimistic about the continuation
of strong bilateral trade, confessed that he saw little
chance that the Colombian quota could be expanded in any
significant manner.

¶7. (SBU) Likewise, the two sides made little progress in
defining what kind of agreement would govern bilateral trade
starting in 2011, when Venezuela's commitments based on its
former membership in the Andean Community of Nations (CAN)
expire. Ramos told us that the Venezuelans favor some sort
of economic complementarity agreement, with a focus on
cooperative projects. While Colombia would prefer a model
closer to a free trade agreement, Ramos admitted that the GOC
was willing to do whatever was necessary to ensure the
continued flow of bilateral trade.

Chavez Seeks Uribe's Help With USG
----------------------------------

¶8. (C) Presidential Communications Director Jorge Mario
Eastman told us that in the private meeting, Chavez asked
Uribe to pass the message to President Obama that he should
"leave Chavez alone" and allow bilateral relations to
improve. Uribe reportedly replied that it would be difficult
to pass such a message given the increasing narcotrafficking
activity in Colombia. According to Delgado, Uribe told
Chavez that the upcoming Summit of the Americas in Trinidad
would offer a logical opportunity for Obama and Chavez to
meet and get the relationship on a better footing. Uribe
also gave Chavez the coordinates of nine FARC camps in
Venezuela.

Comment: More Optics than Substance
-----------------------------------

¶9. (C) The Uribe-Chavez meeting satisfied both leaders' need
for positive political symbolism after a raucous year in the
Colombian-Venezuelan relationship, The fund and commission
proposals were clearly last-minute initiatives that had not
been staffed. Similar to Uribe's snap decision to join the
Bank of the South on the margins of a 2007 meeting with
Chavez (ref C), the announcements stemmed largely from the
President's own initiative, sending technical officials
scurrying to craft the details after the fact. Rather than
real progress on the bilateral trade issues of genuine
significance, Colombia is now left with a half-baked
fund/commission proposal. The GOC considers this the "foot
in the door" to construct a more positive economic
relationship with its volatile neighbor, but it is equally
likely that the fund and commission, announced with such
fanfare, will wilt away when faced with the hard realities of
financing and operating these projects in the midst of a
deepening global crisis.
BROWNFIELD