Venezuela needs to pay $800m debt to resume Colombia trade

13 August 2010 19:04  [Source: ICIS news]

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HOUSTON (ICIS)--Venezuela needs to pay off $800m (€624m) in past-due debt to Colombian exporters before commercial relations and chemicals trading return to normal, local sources in both countries said on Friday.

The trade impasse could persist even though the two countries are trying to improve relations, sources said.

Colombian president Juan Manuel Santos and Venezuelan president Hugo Chavez met on 10 August in Santa Marta, Colombia, three days after Santos took office on 7 August, to repair the ailing relationship between the two countries.

Expectations over the relationship and future trade between Colombia and Venezuela improved from a few weeks ago, but participants in both countries were cautious about any optimistic projections.

Industry participants in Venezuela said that Chavez has been known to abruptly change his mind. “How long is the honeymoon going to last?” one asked.

In addition, sources in both countries questioned whether Venezuela had sufficient foreign exchange for companies to pay off their debt.

“We have to wait even if commerce is reopened, as they have no foreign exchange,” a source in Colombia said in Spanish.

Much hinges on Venezuela’s payment of over $800m in past-due debt to Colombia and Venezuela’s elimination of a ban on fresh-food imports from Colombia, sources in both countries said.

Commerce between the two countries currently stands at around $1.5bn , a dramatic drop from $7.2bn in 2008, according to media sources.

Colombian industry participants said the recent re-establishment of diplomatic relations with Venezuela would be successful only if conditioned by measures needed to develop a fair trade balance between the two countries.

In Venezuela, currency and import limitations continued to dampen business initiatives, despite the resumption of diplomatic relations with Colombia.

As an example, Venezuela’s Pequiven agreed to pay up front for the purchase of 2,600 tonnes of polyvinyl chloride (PVC) from a major US producer to cover the country’s requirements during its plant maintenance turnaround, which would last from the end of August and into September, local participants said.

Pequiven, in turn, was asking its customers for pre-payment with a 15 August deadline for material to be delivered in September. The prompt payment terms were established because the government remained strapped for cash, according to local sources.

($1 = €0.78)

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By: Ron Coifman
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