Venezuela-Colombia Smuggling Trade Thrives

After months of violent protests by opponents demanding an end to the economic crisis and crime wave, Venezuelan President Nicolás Maduro is facing another, growing problem. Government-subsidized scarce goods are making their way to Colombia as part of a massive smuggling trade that moves tons of gasoline, car parts and food. Governments, business leaders and even the smugglers themselves aren’t happy with current developments.

The oil-rich country relies heavily on imports, but strict currency controls have hindered its ability to pay for foreign-made products, and locals are suffering amid product shortages that have sparked massive protests around the country in recent months.

“It’s not an easy task because there is a reality on our side of the border, where we have a system of protection for the people, food subsidy, and fair prices; and without a doubt on the other side it’s not like that,” Vice President Jorge Arreza said in a recent address, according to The Wall Street Journal.

These days, a kilogram of corn flour costs about 20 cents (14 bolivares) in the border city of San Cristobal, Venezuela, while the same amount will sell for about $1.25 in Cucuta, Colombia, according to the Economist. The local state government estimates that as much as 40 percent of imported food ends up in Colombia.

Venezuela’s military leader Vladimir Padrino said on state television that the border patrol confiscated enough food to feed about 400,000 people for a month in the first three months of 2014, up from just 20,000 tons seized in all of last year.

Many people take bags of groceries or small goods over the border by bus to make some quick cash.

Government officials blame loose border security and smugglers, but the larger economic picture tells a different story.

Venezuela’s economy has long been in trouble. This year currency reserves have dipped to $20 billion, while Colombia’s hover around $45 billion, even though Venezuela earns more than $100 billion from oil exports. Inflation is the highest in the Western Hemisphere at 59 percent, thanks to severe currency controls.

The bolivar has lost more than 60 percent of its value against the dollar in the past year on the black market, where the U.S. dollar is traded at rates that diverge far from those imposed by the Venezuelan government.

The central bank’s scarcity index, which measures the percentage of goods available in shops, has reached an all-time high of 28 percent, meaning that more than a quarter of staple products such as corn, flour, eggs and even toilet paper couldn’t be found easily.

Smuggling between Colombia and Venezuela “has always existed,” Ines Ferrero, a university professor in San Cristobal, told Global Post. “That is not the problem. That is not a good excuse for the shortages,” she added.

A series of massive protests in Venezuela’s major cities broke out in February in response to high crime rates and food shortages. Many called for Maduro’s resignation. He was elected in April with promises to maintain predecessor Hugo Chavez’s “21st-century socialism” that includes widespread nationalization and social programs. But state control of the economy hasn’t turned out very well.

“Price controls, for example, act as a disincentive to local producers, forcing them to cut output,” said the survey organization Consensus Economics, according to the BBC.

“The resulting scarcity forces up inflation, defeating the entire purpose of price controls in the first place.”