Call: Colombia and Venezuela won’t fight a trade war

By Ian Bremmer

Sometimes there’s less to a story than meets the eye. Take Venezuelan President Hugo Chávez’s announcement last week that he would freeze diplomatic and commercial relations with Colombia. There’s nothing new about tensions between these two governments, but markets responded badly to what sounded like a drastic step. This story is much ado about almost nothing.

Chávez is angry that Colombia has invited a few hundred additional US troops into the country, granting them access to three Colombian military bases. (There are currently about 300 American soldiers in the country. Colombia’s government insists it will not amend an existing bilateral agreement that caps the total of US troops at no more than 800.) Colombian President Alvaro Uribe insists the troops are there to help target narcotics trafficking, but Chávez has warned his people of an impending Yanqui invasion. Meanwhile, Uribe accuses the Venezuelan government of selling military materiel to FARC guerillas inside Colombia.

There’s nothing new about any of this tension. Trade between Venezuela and Colombia briefly shut down in 2005 after Colombia captured a FARC spokesman in Caracas. It happened again in 2008 after a Colombian bombing raid killed FARC’s second in command inside neighboring Ecuador, a Venezuelan ally. In both cases, trade between Colombia and Venezuela briefly halted but was quickly restored.

That will happen again this time, because the two governments need the commerce more than they need the conflict. About 14 percent of Venezuela’s imports come from Colombia. Venezuela needs these products, particularly processed food, because the tight price controls Chávez has ordered and his ongoing threats to nationalize companies and entire industries have depressed production levels inside his country. Closing the door to inexpensive and easily accessible Colombian imports would worsen already significant shortages and put extra pressure on inflation and fiscal accounts.

The dependence works both ways. About 18 percent of Colombia’s exports go to Venezuela. President Uribe has fewer political vulnerabilities than Chávez, and with an election next year, some fear he might take a tougher than usual line — rallying core supporters, riding out protests from the export sector, and boosting his chances of securing a third presidential term.

But Uribe will probably abandon hopes for a third term, since he’s unlikely to win support from lawmakers to launch the referendum he would need to remove constitutional term limits. Uribe already faces criticism that he hasn’t done enough to refloat the country’s floundering economy. It makes little sense for him to make economic matters worse, just as he’s moving into retirement.

It’s one thing for Chávez and Uribe to stir up nationalist fury in a bid to change the subject from tough economic times. It’s quite another to launch a mutually damaging trade war that can only make matters worse.

JUAN BARRETO/AFP/Getty Images