APPAREL, LEATHER

Colombia – Venezuela: Bilateral trade relations restored after 13 month impasse

by FNA posted on 06 Sep 2010

RICHARD SMITH

Venezuelan flag

Colombian flag

After more than a year of declining trade relations during which Colombian exports to Venezuela all but collapsed, Caracas and Bogotá appear to have finally reconciled their differences at least for now.

The coming into office of new Colombian president, Juan Manuel Santos, at the beginning of August was followed by a high level meeting of both countries respective foreign ministers in Caracas on August 10th. Venezuela agreed to honor the US$200 million debt owed to Colombian exporters and once this is settled entrepreneurs will go about rebuilding bilateral trade.

From 1998 to 2008 trade between these two neighboring Andean nations blossomed from US$1 billion to US$7 billion but when Colombia signed an agreement in mid 2009 to allow the use of seven military bases to station US troops and equipment on its soil, Caracas saw this as a direct military threat and froze all relations with Colombia. Bilateral trade declines as a result and in the first six months of 2010 only reached US$652 million, almost back to levels seen more than a decade ago.

Main route between Colombia and Venezuela

Footwear and leather goods exports under pressure

Until 2008 both Colombian footwear and leather goods manufacturers were highly dependent upon Venezuela as their main export market. Venezuela is one of the biggest importers of textiles and apparel from Colombia. In addition, 80% of Colombia’s footwear exports went to Venezuela and 60% of leather good exports in 2008, according to figures given to APLF in November 2008 during a visit to the Leather Chamber in Bogotá.

Within the context of trade having declined between to the two countries by 52% in 2009 and in 2010 by 70% in July this year from its high point in 2008, Colombian leather goods and footwear exporters had an extremely tough time. Latest figures from the DANE (Colombian Customs Authority) indicate that value of footwear and leather goods exports to all market fell by 54% and 82% respectively in July 2010 compared to the same month last year.

The effects on small and medium companies in Colombia has also been felt with job losses estimated at more than 350,000 according to Magdalena Pardo, director of the Colombia-Venezuela Chamber of Commerce.

It will take time for activity to be reestablished but 2011 should see a normalization of trade relations between two countries which formed one sovereign nation from 1821 – 1831 called La Gran Colombia.