With No Thaw in Frozen Relations, Who Suffers from Limits on Venezuelan-Colombian Trade?

This past weekend President Chávez of Venezuela’s reiterated his commitment to maintaining “frozen relations” with the administration of Alvaro Uribe and Colombia. (You can read more at this link.) He stated that based on trade agreements with Brazil and Argentina, “we are not going to have problems with supplies”. This may be the plan, with a different reality on the ground. Caracas and other parts of Venezuela have suffered from shortages of some basic commodities over the past few years. For example, white granulated sugar was nowhere to be found in July, and there were previous shortages of milk and butter.

If trade remains disrupted, however, it may Venezuelans of the middle class who will suffer, rather than the country’s poorest and its elite. (Not to mention the small-scale producers in Colombia who are dependent on selling their goods to Venezuela.) Whereas Venezuela primarily exports products related to energy such as oil, plastics and pharmaceuticals, its imports from Colombia equal 13.7% of its trade and include basic necessities for the average citizen. There may be some shortages of items such as eggs, milk, sugar, coffee and rice, and perhaps even beans, cooking oil and certain types of leather and paper.

The poorest in Venezuela depend on Mercal for basic foodstuffs. This government-run program provides food at reduced prices for more than one-third of the country’s population. Its markets pull sometimes-limited supplies away from the private grocery stores and markets where the middle class shops. In a year in which inflation has already risen 15.1% in the first six months, these mid-level consumers are increasingly hard-pressed to pay for basic goods.

Meanwhile, Venezuela’s economy continues to function for those who have money – increasingly the ideologues of Chávez – and access to dollars that are valued on the black market at approximately three times the official exchange rate. With these funds they can more easily purchase existing foods, not to mention buy the latest trendy clothing or cell phones.

At the same time, illicit trade continues along the border, and will likely remain. Many smugglers drive across the border into Colombia and then siphon fuel from the car’s tanks to sell at a significant profit.

Chávez is talking a big game right now when it comes to trade. In the future, there is the chance that his plan will backfire if the disruptions in commerce with Colombia lead to food shortages, and to greater hardships for many Venezuelans. A disgruntled public could then against the current administration. Elections for the National Assembly are scheduled for 2010 and those for the presidency follow in 2011.