The implacable economics of the Venezuela-Colombia border

The contraband business has long been a lucrative one at the Venezuela-Colombia border, by many accounts the busiest crossing in South America.

Oil-rich Venezuela has the world’s cheapest gasoline, for instance, at less than five cents a gallon, while in Colombia—where fuel sales are not government-subsidized—the price is more than $4 a gallon. This means no Colombian gas tank goes home on empty.

In recent months, though, as the economic policies of the two nations diverge more and more, the incentives for smuggling are bigger than ever.

Venezuelan president Nicolas Maduro says his country’s border with Colombia is a key front in the “economic war” he blames for his government’s financial woes, like 60 percent inflation and supermarket shelves perpetually short on diapers, corn meal, deodorant and other basics. Medicines are disappearing from Venezuelan pharmacies too, worsening the sense that the country is being systematically cleaned out.

To block shoppers from gobbling up price-capped items that can be sold in Colombia at a huge markup, the government says it will mandate  fingerprint scanners in the supermarket aisles. Shoppers would have to lay down a thumbprint for every sack of sugar or toilet paper roll sold.

The scanners, which would cost tens of millions of dollars to install, drew widespread ridicule. Maduro then said the system would be voluntary, raising questions as to why any business-minded smuggler would choose to submit to it.

Next came a new clarification: the fingerprint system would only be mandatory in areas along the Colombia border. That announcement touched off protests and street clashes last week in San Cristobal, the border city where the shortages are especially bad but many locals subsist on contraband.

In a televised speech Tuesday night, Maduro said the government would go forward with its fingerprinting plans, but he disappointed Venezuelans who were hoping for news of more significant economic moves. Maduor said he would appoint new officials to oversee food distribution and track the whereabouts of delivery trucks.

Government opponents dismiss Maduro’s claims about the high costs of contraband as a bunk excuse, saying it’s a straw man to deflect attention from the mismanagement and failed policies that are truly to blame for the country’s problems.

But by some official estimates, as much as 40 percent of Venezuelan-made goods are taken over the border and sold in Colombia.

Since Aug. 12, Venezuelan authorities have arrested that least 250 suspects on contraband charges as part of their crackdown, seizing 1,168 tons of foodstuffs and 121,000 gallons of gasoline. Maduro’s Twitter feed has been a rotating gallery of confiscated cargo trucks and decommissioned crates of Colombia-bound edibles.

"We're putting a stop to the hemmorage and healing our economy," he said last month.

Yet the market incentives for contraband may be too many to make a difference, especially given the reputation for corruption among the Venezuelan border guards tasked with holding back this South American river of commerce.

Venezuela is a country of 30 million with a state-run economy that depends on oil sales for 96 percent of foreign trade revenue and imports the majority of its consumer goods. The socialist government fixes prices on a range of household essentials, it says, in order to protect the poor from shocks. It has also artificially frozen the national currency – the “Strong Bolivar”—at a fixed rate of 6.3 to the U.S. dollar.

The real rate on the black market, where the good intentions of socialism go to die, topped 90 to the dollar last week.

Next door to this experiment is Colombia, a country of 50 million with a wide-open, manufacturing economy that produces all manner of goods and allows its currency to trade freely against the U.S. dollar.

The fast-weakening “Strong Bolivar” means anyone with Colombian pesos or U.S. dollars has nearly 15 times the purchasing power of someone holding Venezuelan bank notes.

With their currencies so badly out of whack, it’s amazing that there’s anything at all in stores on the Venezuelan side. By the time fingerprint scanners do arrive, there may be nothing left to buy.

Nick Miroff is a Latin America correspondent for The Post, roaming from the U.S.-Mexico borderlands to South America’s southern cone. He has been a staff writer since 2006.
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