Venezuela and Colombia today

Two weeks ago I attended a conference identified as Venezuela and Colombia in the new millennium. This event was sponsored by the Pensamiento y Acción Foundation, the Rómulo Betancourt Foundation and the IESA. It was also supported by the Andean Development Corporation (CAF) and the Banco Mercantil.

The event was excellent, having managed to impose a strictly academic ambiance in spite of an extremely delicate subject. There was absolute respect for different and contradicting ideas and sentiment. Since the event allowed for moments of reflection and thought, I would like to share a personal concern.

Over the last few years, trade between the two countries has grown dramatically in nominal terms. As a result of this, it seems that the idea that an irreversible process of integration led by markets, business and consumers now exists has become popular. On top of this, this process seems to be occurring behind the political sector’s back.

This idea is somewhat dangerous. Specially when you consider that a substantial part of the trade we have observed over the last few years is based on false premises and on factors that are not sustainable in the long run. Among these we can observe the following:

The explosion in the volumes exchanged between the two countries originated during the early eighties at a time when Venezuela was entering into its “impoverishment” phase. Before this, with the exception of certain strictly unilateral commercial activity of basically local and borderline character, Venezuela negotiated at its will, need or extravagance with the most sophisticated commercial centers in the world. Colombia had virtually no chance to participate in the Venezuelan market.

At the same time, Venezuela’s oil income caused the country to sustain an extraordinarily strong currency which made it virtually impossible to achieve levels of competitivity that would have allowed the country’s business community to make inroads into the Colombian market. Evidently, there was no incentive to export when the country was required to maintain a policy of high tariffs and import quotas in order to protect local markets.

In recent years, the introduction of artificial economic measures helped to feed this mirage of increased trade. Among these measures, one of the more important ones was the appearance of currency exchange subsidies offered Venezuelan industry in order to facilitated imports of raw material and even finished goods. This obviously generated an “export of subsidies” both in the formal as well as in the informal markets. It is also important to note that in the face of barriers such as exchange controls of various types, commerce naturally gravitated towards countries that belonged to the ALADI compensation agreement, including of course, Colombia. This also artificially stimulated Venezuelan imports from these countries.

I also harbor a suspicion that commercial flows, even when expressed in hard currency and apparently favorable to Venezuela, hide problems that should be looked at more closely. Among these problems, looked at (perhaps subjectively) from the Venezuelan perspective, we can find the following: Is the generation of jobs produced by this trade equitable? Is Venezuela exporting commodities to Colombia for which the country has always had available markets? Is Colombia being favored by this exchange, gaining access to an export market for products that are really not competitive elsewhere?

I am certainly not criticizing the increase of trade between Venezuela and Colombia. I am totally for it. However, I am convinced that the commercial trade between Colombia and Venezuela by itself does not constitute a sufficiently strong foundation to support the integration. Most specially when, as all Venezuelans desire, the country manages to emerge from its current impoverished state and as a consequence totally alters its management of trade flows.

We should definitely not paralyze this integration, but we must promote new and solid foundations that can support it. For example, it is of utmost importance for any beneficial integration between the two countries to reach agreements on the management of hydrological basins and catchment areas which will guarantee the supply of potable water to future Colombo Venezuelan generations.