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C O N F I D E N T I A L SECTION 01 OF 03 BOGOTA 002449 
 
SIPDIS 
 
E.O. 12958: DECL: 07/30/2019 
TAGS: PREL PGOV ECON ETRD VZ CO
SUBJECT: GOC CALM AS TENSIONS RISE WITH VENEZUELA, BUT 
ECONOMIC UNCERTAINTY REMAINS 
 
REF: A. BOGOTA 2409 
     ¶B. CARACAS 983 
     ¶C. BOGOTA 1431 
 
Classified By: Charge d'Affaires Brian A. Nichols 
Reasons 1.4 (b and d) 
 
SUMMARY 
------- 
¶1. (C) The GOC is trying to keep an even keel in its latest 
bilateral dispute with Venezuela, hoping measured responses 
can lower the temperature and win international support.  GOC 
officials note the GOC's calm responses to Chavez's 
provocative rhetoric position the GOC to come out ahead, but 
they concede Chavez's unpredictability worries them. 
Government and industry actors alike are particularly 
concerned about the economic fallout, especially in the face 
of already-declining Venezuela trade.  End Summary 
 
GOC SEES OPPORTUNITY, THREAT IN TENSIONS 
---------------------------------------- 
¶2. (C) Colombian officials tell us the Government of Colombia 
(GOC) is trying to remain calm and take advantage of roiled 
regional relations by giving measured responses to President 
Chavez's recent accusations and actions against Colombia. 
(NOTE: Venezuela on July 28 recalled its Ambassador to 
Colombia and other senior diplomats in Bogota to protest GOC 
accusations that the Bolivarian Republic of Venezuela (BRV) 
supplied Swedish-made missiles to the Revolutionary Armed 
Forces of Colombia (FARC) - see reftel A.  Chavez and other 
BRV officials had earlier charged that the pending 
US-Colombian Defense Cooperation Agreement (DCA), along with 
the GOC decision to let the US use Colombian bases for 
counternarcotics flights, represented threats to the BRV. 
End Note).  Presidential Communications Director Jorge Mario 
Eastman told us on July 24 that President Uribe hoped to 
avoid an escalation of rhetoric with Chavez by refusing to 
engage in a tit-for-tat exchange of verbal barbs. 
 
¶3. (C) Eastman noted Uribe had stayed silent while Chavez 
"ranted himself into a frenzy" immediately after the July 15 
base use agreement announcement.  Uribe and Foreign Minister 
Jaime Bermudez waited until the next week to respond, he 
said, with Uribe denying any aggressive intent (and avoiding 
direct mention of Venezuela) and Bermudez emphasizing 
Colombia's sovereign right to make such decisions.  Bermudez 
also noted Colombia had not objected to BRV military deals 
with Russia and China.  Eastman conceded the GOC had probably 
erred in keeping the DCA talks secret, then announcing them 
at a diplomatically sensitive time, and he acknowledged the 
lack of transparency let Chavez and others paint the 
agreement as a GOC-USG conspiracy.  Still, he argued, the 
GOC's "grown-up" response to the spat would help tamp down 
rising tensions while allowing the GOC to come off better 
internationally.  In the same vein, Ministry of Defense (MOD) 
official Francisco Rodriguez acknowledged the GOC had known 
about the Swedish missiles for several months, but had waited 
to use it to the GOC's advantage in a "high tension moment 
like this." 
 
¶4. (C) Still, GOC officials are worried.  German Castaneda of 
the Colombian Ministry of Foreign Affairs (MFA) remarked on 
July 24 that Chavez's unpredictability made the situation 
more dangerous.  He hastened to add that the possibility of 
an armed confrontation was remote, but that the FARC presence 
across the Venezuelan border--along with Chavez's announced 
intention to bolster the BRV's military presence at the 
border--increased the chance for costly mistakes.  General 
Gustavo Matamoros, commander of the Colombian military's 
Joint Caribbean Command (which includes long stretches of 
border territory in the northeast), told us on July 16 that 
Colombian armed forces in the area are far superior to those 
of the BRV, but conceded that in the unlikely event of a 
conflict, the BRV could inflict physical and political damage 
in border areas before being defeated rapidly. 
 
TRADE, ECONOMIC TIES AT GREATEST RISK 
------------------------------------- 
¶5. (C) Castaneda insisted the MFA--and most of the GOC--was 
far more concerned with the economic fallout from the 
bilateral dispute.  He noted that Chavez threatened to 
"freeze" economic relations along with political ones, and 
argued that despite the irrationality of such a move, one 
 
BOGOTA 00002449  002 OF 003 
 
 
could not rule it out.  Thus far, no specific measures have 
been put in place, but Venezuelan Embassy Commercial 
Counselor Eduardo Delgado told EconCouns that the BRV was 
seriously analyzing what steps they might wish to take. 
 
¶6. (C) Trade Minister Luis Guillermo Plata told us that 
moving forward on Colombia's free trade agreements remained a 
top priority to reduce Colombian dependence on Venezuela and 
Ecuador, given the mercurial nature of the trade ties.  He 
hoped that progress toward ratification of deals with Canada 
and the EU would continue, though political issues in 
Canada's minority government made it difficulty to see quick 
ratification, he said.  Alfredo Ramos, director of economic 
integration at the Ministry of Trade, Industry, and Tourism, 
believes Chavez's actions could hurt Venezuelans as well as 
Colombians, making it likely the current row will blow over. 
He noted that Colombia and Venezuela are natural trade 
partners, and that neither can readily replace the other. 
Ramos highlighted Chavez's stated desire to import more from 
Brazil and Ecuador, noting that such a switch would be 
extremely difficult--and costly.  Venezuela is Colombia's 
second-largest trading partner after the U.S., buying 16 
percent of Colombia's exports in 2008 (reftel C).  According 
to media reports, however, after two years of sustained 
growth, Venezuelan imports of Colombian goods in January-May 
2009 dropped compared to the same period in 2008. 
 
¶7. (SBU) The general reaction of Colombia's business 
community is of uncertainty, mixed with a strong hope for a 
swift political resolution that will prevent political 
tensions from spilling over to the commercial sphere. Rafael 
Mejia Lopez, president of the Colombian Agricultural Society 
(SAC), told us that while Colombian imports from Venezuela 
are relatively low, Venezuelan firms do provide some key 
inputs for Colombian industry.  He also mentioned that 
Venezuela's attempts to substitute Brazilian imports are not 
going well because Brazilian firms do not want to deal with 
the temperamental Chavez.  Still, some companies particularly 
sensitive to trade restrictions are implementing 
precautionary measures.  The President of Occidental 
Petroleum Colombia said that activity on the border region 
where they operate (Arauca) is normal, but that since they 
bring all materials for their refinery across the border, 
they were "activating their contingency plans." 
 
SPECIFIC INDUSTRIES VULNERABLE 
------------------------------ 
¶8. (SBU) The associations that have expressed the most 
concern over Venezuela's actions are those of the textile, 
vehicle, poultry, and meat sectors.  Ivan Amaya, president of 
Colombia's National Association of Textile Producers, said 
Venezuela was Colombia's main export destination, and that it 
would be impossible for the industry to quickly find new 
markets.  He mentioned that Colombian textile exports had 
fallen 35 percent between January-May 2009, and that Chavez's 
recent threats left the industry unable to forecast future 
export numbers with any accuracy. 
 
¶9. (SBU) Similar statements were given by Tulio Zuloaga, 
president of Colombia's Automotive and Parts Association, and 
Jorge Bedoya, president of the National Aviculture 
Federation.  Zuloaga emphasized that Venezuela had agreed to 
a quota of 10,000 vehicles for 2009, which had not been 
fulfilled.  He estimated that vehicles and parts exports to 
Venezuela--which totaled USD 1.3 billion in 2008--might not 
reach USD 250 million in 2009.  All contacts noted the need 
for Colombian industry to expand to markets less susceptible 
to political tensions. 
 
NATIONALIZATION OF COLOMBIAN CAPITAL--IDLE THREAT? 
--------------------------------------------- ----- 
¶10. (SBU) Chavez's statements raising the possibility of 
nationalizing Colombian interests in Venezuela has also 
generated uncertainty.  According to Liberal Party Senator 
Cecilia Lopez, a much greater bilateral conflict would arise 
if the BRV decided to go after one or more of the Colombian 
companies with capital in Venezuela.  Local contacts note, 
however, that the BRV cannot implement such measures without 
first evaluating the cost to its own economy.  Central Bank 
General Manager Jose Dario Uribe said that the most tangible 
effect so far has been a strong devaluation of the Colombian 
peso, which reached 1.58 percent in late July. 
 
 
BOGOTA 00002449  003 OF 003 
 
 
IMPORT SUBSTITUTION DIFFICULT BUT NOT IMPOSSIBLE 
--------------------------------------------- --- 
¶11. (SBU) Javier Diaz, president of Colombia's National 
Association of Exporters, emphasized that while it is 
impossible for Colombia or Venezuela to eliminate all trade 
relations, Venezuela is already moving forward in reducing 
its dependence on Colombian products.  Diaz said Venezuela 
has already succeeded in doing so with poultry and vehicle 
imports, which could be followed by textiles, leather, and 
footwear.  While Venezuela was able to cut off bilateral ties 
for only three days in 2009, the continued outbreaks of 
crises may lead the BRV to increase its efforts to substitute 
the import of Colombian goods. 
 
 
 
 
 
 
 
Nichols