Colombia, Venezuela Agree to Restore Diplomatic Relations After Dispute

(Corrects date of Bolivar’s death in sixth paragraph.)

Venezuela and Colombia agreed to restore diplomatic relations and vowed to step up security along their border to prevent Marxist guerrillas and drug traffickers from mounting attacks or using dense jungle for hideouts.

The two countries will form joint committees to work on any lingering issues, Colombian President Juan Manuel Santos said yesterday after meeting with his Venezuelan counterpart, Hugo Chavez. The nations had been locked in a dispute over Colombian accusations that Venezuela was harboring rebels.

“We are starting this relationship from zero in a frank and sincere way,” Santos, who was inaugurated as president Aug. 7, told reporters in a joint news conference with Chavez in the town of Santa Marta. “The two countries will re-establish diplomatic relations and create a roadmap so that all aspects of relations can progress, advance and deepen.”

The agreement paves the way for a restoration in trade between the countries, which plummeted during the past two years amid accusations that Chavez was aiding the Revolutionary Armed Forces of Colombia in its campaign to disrupt the government. Chavez put troops on high alert along the 1,375-mile (2,200- kilometer) border July 30 after Santos’ predecessor, Alvaro Uribe, said as many as 1,500 rebels are launching cross-border attacks from Venezuela.

Chavez, speaking after Santos, said he doesn’t allow illegal groups to operate in Venezuela. He said he examined documents that Colombia said proved the existence of rebel camps in Venezuela and found that there were no outposts.

‘Always Doubts’

“There are always doubts, but President Santos has promised to believe me when I say that Venezuela’s government does not support Colombian guerrillas,” Chavez told reporters after the meeting at the estate where his 19th-century independence hero Simon Bolivar died in 1830. “If I supported the guerrillas the results would be quite notable -- they would have weapons and money.”

Colombian Foreign Minister Maria Angela Holguin will travel to Caracas within two weeks to jumpstart relations, Chavez said.

Venezuela gave assurances that it will pay debts to exporters dating from July 2009 when Chavez first froze commerce, Santos said. Venezuela owes some $800 million to Colombian exporters, according to the Venezuela-Colombia Chamber for Economic Integration, a Caracas-based business group.

Trade between the nations tumbled to $651 million in the first five months of this year from $2.26 billion in the same period of 2008, the last year of normal relations, according to Colombia’s statistics agency. Colombia’s central bank, while acknowledging that the ongoing row cut into trade, says the impact is being offset by the global economic recovery.

‘Kick in the Pants’

“Santos knows he needs better diplomacy with Venezuela, he knows he can’t enter office kicking Chavez in the shins, he has to open talks and look super reasonable,” said Myles Frechette, U.S. ambassador to Colombia from 1994 to 1997. “He won’t be confrontational but he will give Chavez a good kick in the pants if need be.”

Venezuela’s economy will shrink 2.6 percent this year, according to the International Monetary Fund.

“It would be convenient to reopen the border, but it’s not a matter of life or death for Colombia’s exporters,” said Rafael Mejia, president of the Colombian Agriculture Society. “The real issue is that Venezuela doesn’t pay.”

The yield on Colombia’s benchmark 11 percent bonds due 2020 has dropped to 7.2 from 7.96 since Santos’ election June 20. The peso has gained 4.7 percent over the same period, the most among major Latin American currencies tracked by Bloomberg.

Even if Chavez opens the border to trade, many exporters are wary of rushing back, said Jorge Bedoya, head of the National Federation of Colombian Poultry Farmers.

Trade Tensions

“It’s important that Chavez takes it seriously and abides by the rules,” said Bedoya, whose members lost as much as $60 million in trade to Venezuela before finding new markets locally and in Asia.

The collapse in commercial ties likely contributed to rising prices in Venezuela because of the costs of importing food and other items from longer distances, said Luis Alberto Rusian, president of the Venezuelan-Colombian Chamber for Economic Integration, or CAVECOL.

“Colombia’s natural market has always been Venezuela just as the natural market for Venezuela is Colombia,” Rusian said. “We also need to rebuild confidence between businesses and this is going to take some time.”

To contact the reporter on this story: Helen Murphy in Bogota at hmurphy1@bloomberg.net

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