COLOMBIAN EXPORTS TO VENEZUELA FALL OFF A CLIFF

C O N F I D E N T I A L BOGOTA 000177

SIPDIS

E.O. 12958: DECL: 2020/02/08
TAGS: ETRD ECIN ECON PREL CO
SUBJECT: COLOMBIAN EXPORTS TO VENEZUELA FALL OFF A CLIFF

REF: 09 BOGOTA 3313; 09 BOGOTA 2627; 09 BOGOTA 1431

CLASSIFIED BY: Timothy Stater, Economic Counselor; REASON: 1.4(B),
(D)


1. (C) SUMMARY. The last six months of 2009 saw a dramatic
decrease in Colombia's exports to Venezuela. Any exports that
require administrative permits or preferential exchange rate
dollars have virtually dried up. The GOC speculates that smuggling
has spiked and holds out little hope for a bilateral agreement
before Venezuela's trade obligations under the Andean Community
expire in April 2011. The GOC is moving toward filing a WTO case
against Venezuela. END SUMMARY.



EXPORTS TO VENEZUELA IN FREEFALL

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2. (SBU) During the first half of 2009, Colombian exports to
Venezuela remained virtually unchanged, compared to 2008, despite
the global recession's negative impact on overall Colombian
exports. However, following Venezuelan President Chavez' July 28
announcement of a freeze in bilateral diplomatic relations and
mid-October instructions to issue no more sanitary or phytosanitary
certificates to Colombian products, Colombian exports to Venezuela
took a dramatic tumble. Exports of products that require any sort
of administrative forms or preferential exchange rate dollars have
fallen to virtually zero, according to GOC officials. Overall
monthly declines were: July -29%; August -46%; September -49%;
October -70%; November -71%; and December -76%.




3. (SBU) The net result for 2009 was just over $4 billion in
Colombian exports to Venezuela, a 33% drop, compared to a 14%
overall decrease in exports. While the fall is dramatic, two
important factors offer some context. First, exports to Venezuela
jumped significantly in 2007 (from $2.6 billion to $5.1 billion).
They set another record in 2008 ($6 billion). So even if the
decline continues at its current pace, which is likely, 2010
exports to Venezuela will finish at roughly 2006 levels. Second,
GOC officials tell us they believe that contraband exports to
Venezuela have increased, based on the fact that border regions --
those hardest hit by trade restrictions -- have not complained
nearly as vociferously as one would expect, given the sharp fall in
trade.



NO AGREEMENT IN SIGHT

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4. (SBU) Venezuela is supposedly bound by its Andean Community
commitments for five years from its April 2006 withdrawal from the
organization. The Colombian government had made it a priority for
the last several years to reach some sort of bilateral trade
agreement that could be in place by April 2011 (Ref C). GOC
officials even crafted a cut-and-paste of ALBA agreements that they
thought might gain more traction with their Venezuelan
counterparts, but to no avail. Colombian Trade Ministry officials
continue to take a pragmatic approach to Venezuela, but note there
is little meaningful they can do as exports to their second largest
market trend toward zero.




5. (C) In October 2009, Colombia notified the WTO Committee on
Sanitary and Phytosanitary Measures of the Venezuelan measures to

restrict agricultural exports from Colombia. According to
Colombian Trade Ministry Director of Economic Integration, Alfredo
Ramos, Colombia will likely file a formal case against Venezuela in
the coming weeks. Ramos said that the case is less about
recovering the Venezuelan market and more about bringing
international attention to Chavez' bellicose actions.
BROWNFIELD