VENEZUELAN CRACKDOWN ON SMUGGLING UNLIKELY TO HURT

UNCLAS BOGOTA 000277 SIPDIS SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ETRD PREL ECON CO SUBJECT: VENEZUELAN CRACKDOWN ON SMUGGLING UNLIKELY TO HURT COLOMBIA REF: A. (A) 07 BOGOTA 8519 ¶B. (B) 07 BOGOTA 7225 ¶1. (SBU) On January 21, Venezuela initiated a crackdown on the smuggling of subsidized food and gasoline into Colombia via the northeastern Colombian border town of Cucuta. Contacts tell us that so far the crackdown has had limited impact. Pedro Sayago, Executive Director of the local Chamber of Commerce, compared the posting of hundreds of Venezuelan National Guards to the border near Cucuta with President Chavez's threats to close cross-border trade late last year (ref A) and the two border shutdowns earlier in 2007 (ref B). He said none of the three actions changed the "rhythm" of border relations ¶2. (SBU) According to Lorena Garnica, special advisor to the Colombian Ministry of Agriculture and Rural Development, northeastern Colombia does not face the risk of a food shortage. Garnica said Colombia easily produces sufficient food to meet internal needs, noting that food exports to Venezuela topped USD 750 million between January-October 2007 while legal food imports from Venezuela were less than USD 30 million during the same period. Still, Garnica agreed that no one knows the value of the food smuggled into Colombia from Venezuela. ¶3. (SBU) Colombian Farmers' Association (SAC) President Rafael Mejia cautioned, nevertheless, that reducing the flow of subsidized food from Venezuela would almost certainly raise the price of food, especially milk, for Colombians near the border. He estimated that border consumers might spend 15-25 percent more for food if the crackdown continues. Mejia said the critical issue is whether the crackdown might foreshadow a Venezuelan reduction in food imports from Colombia. Such a reduction could, depending on its size, have significant repercussions for Colombian farmers. However, given Venezuela's large demand for imported food, Mejia described such a reduction as Venezuela "cutting off their nose to spite their face." Brownfield