VZCZCXYZ0008
PP RUEHWEB

DE RUEHBO #2627/01 2331313
ZNR UUUUU ZZH
P 211313Z AUG 09
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC PRIORITY 0243
INFO RUEHBR/AMEMBASSY BRASILIA PRIORITY 9081
RUEHCV/AMEMBASSY CARACAS PRIORITY 2659
RUEHLP/AMEMBASSY LA PAZ AUG 0238
RUEHPE/AMEMBASSY LIMA PRIORITY 7958
RUEHZP/AMEMBASSY PANAMA PRIORITY 4082
RUEHQT/AMEMBASSY QUITO PRIORITY 8617
RUEHSG/AMEMBASSY SANTIAGO PRIORITY 2507
RHEHNSC/NSC WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS BOGOTA 002627 
 
SENSITIVE 
SIPDIS 
 
WHA/EPSC 
WHA/AND 
 
E.O. 12958: N/A 
TAGS: ECON ETRD PREL PGOV CO
SUBJECT: WILL COLOMBIA-VENEZUELA TRADE SURVIVE THE RHETORIC? 
 
REF: A. CARACAS 1062 
     ¶B. BOGOTA 1431 
 
¶1. (SBU) SUMMARY. Venezuela's July 28 decision to freeze 
diplomatic relations with Colombia has put the Colombian 
business community on edge and complicated bilateral trade 
discussions.  While Colombian exports to Venezuela for the 
first half of 2009 had remained resilient in the face of an 
overall export decline, Chavez' decision to restrict imports 
from Colombia will cause short-term pain.  The longer-term 
trade implications of the latest diplomatic spat are less 
clear, as Colombian-Venezuelan trade has weathered, and even 
thrived under, previous adverse situations.  Venezuela has 
the ability to restrict imports from Colombia, but the high 
degree of interdependence along the border, coupled with the 
costs of substituting away from Colombia, lead many 
Colombians to see the latest spat as just another bump on the 
trade relationship's rocky road.  The situation further 
reinforces the GOC's commitment to diversifying its export 
markets through the pursuit of free trade agreements.  END 
SUMMARY. 
 
EXPORTS TO VENEZUELA RESILIENT IN FIRST HALF OF 2009 
--------------------------------------------- ------- 
 
¶2. (U) Colombia's exports to Venezuela through June, 2009 
declined by only three percent compared to the same period in 
¶2008.  This contrasts with an 18 percent decline in global 
Colombian exports and defies (at least for the first six 
months) predictions of a sharp decrease in bilateral trade 
for 2009 (Ref B).  Carlos Fabian Cepeda, Director of Economic 
Studies at the Colombian-Venezuelan Chamber of Commerce, 
noted that the overall composition of Colombian exports to 
Venezuela is beginning to shift from manufactured items to 
primary goods, as a result of Venezuela's endogenous 
growth/import substitution model. 
 
DIPLOMATIC ROW MEANS SHORT-TERM PAIN, LONG-TERM UNCERTAINTY 
--------------------------------------------- -------------- 
 
¶3. (SBU) President Chavez' decision to "freeze" diplomatic 
relations with Colombia and exact trade-related punishment 
will certainly cause Colombia problems in the short term. 
While GOC officials hesitate to estimate the impact on trade 
of the latest dust-up, Trade Ministry's Director for Economic 
Integration Alfredo Ramos noted that the bureaucratic steps 
for Colombian exporters to Venezuela have increased 
exponentially and that frequent, random border closings and 
arbitrary rejection of Colombian goods have become the norm. 
 
¶4. (SBU) Ramos said that the Venezuelan website to apply for 
preferential exchange rate dollars (Cadivi) no longer offers 
Colombia on its drop-down menu of import-origin countries. 
(Note: Venezuelan importers still owe US$275 million to 
Colombian exporters, funds that are tied up in the Cadivi 
bureaucracy.  End note.)  Venezuela's suspension of cheap 
gasoline exports to Colombia will certainly affect the border 
department of Norte de Santander and lead to increased 
smuggling.  The Venezuelan decision to revoke import licenses 
for 10,000 Colombian vehicles, on the other hand, will have 
little effect since Colombian carmakers had not tooled up for 
those orders out of fear of not getting paid. 
 
¶5. (SBU) What these measures mean for the medium and long 
term is less clear and depends on how willing Chavez is to 
inflict economic pain on Venezuelans for the sake of making 
his point to Colombia.  According to Cepeda, the border 
region has a high degree of interdependence and substituting 
Argentine or Brazilian goods for Colombian ones will 
introduce higher prices into an already tenuous Venezuelan 
inflation environment.  GOC officials privately hope that, 
like previous upsets with Venezuela, this one will blow over 
and some normality can be restored to the trade relationship. 
 Business community leaders acknowledge that their current 
malaise is not new; it is merely an extension of the 
fragility of the bilateral relationship over the last several 
years. 
 
BILATERAL TRADE TALKS STILL GOING NOWHERE, EVEN SLOWER 
--------------------------------------------- --------- 
 
¶6. (SBU) According to Ramos, GOC trade officials' principal 
underlying fear over this latest round of bad blood is how 
much it will delay bilateral talks on an agreement to replace 
Venezuela's Andean Community (CAN) commitments, which expire 
in April, 2011.  Talks were never moving fast to begin with 
(Ref B) and are now non-existent.  Trade Minister Plata was 
in Caracas Wednesday, August 19, for an Andean Development 
Corporation (CAF) event and spent a total of 30 seconds 
talking with his Venezuelan counterpart, Eduardo Saman. 
 
LATEST SPAT UNDERSCORES NEED TO DIVERSIFY EXPORT MARKETS 
--------------------------------------------- ----------- 
 
¶7. (SBU) Colombia's push to have nine FTAs in place with 45 
countries by 2010 is part of its efforts to diversify its 
export markets. Chavez' latest show of bluster reinforces the 
need to diversify away from its second largest, (and most 
erratic) export market.  Some in the business community 
opined that this most recent incident may in fact have a 
silver lining in that uncertainty over Venezuela will force 
traditionally cautious and complacent Colombian 
businesspeople to explore non-traditional export markets more 
than any free trade agreement could. 
Brownfield