Colombia: Venezuelan Meltdown Has Consequences


January 27, 2010: The economic meltdown in Venezuela is hurting Colombia, mainly because 40 percent of Colombian exports go to Venezuela. As the Venezuelan economy shrinks, and the Venezuelan government blocks many imports from Colombia, the Colombian economy suffers slower growth (by a fraction of a percent) and higher unemployment (a fraction of a percent higher rate). For the Colombians living on the border, the impact is heavier, along with the danger of military activity and more crime in general. For Colombian owned businesses in Venezuela, there is growing risk of being shut down, or taken over by the government.

Venezuela continues to complain that Colombia, and the U.S., are preparing to attack Venezuela. There's no evidence of this, but that doesn't matter. The Venezuelan government needs some way to distract Venezuelans from the collapse of their economy, and starting a war is a traditional short term solution. To that end, Venezuela will send most of its 92 new (well, slightly used) T-72 tanks to the Colombian border. This is not good tank country, there being lots of forests and hills, and few roads. Colombia has no tanks, but its aircraft have American anti-tank weapons that have proved very effective against T-72s. Venezuela also has 200 older tanks, which would probably have a hard time moving around a lot, and are more useful in the cities, keeping an eye on unhappy Venezuelans.

There is fear that Venezuela may be tempted to get deeper into the cocaine business, as a way to repair the damage to their economy. President Chavez is a big fan of radical socialism, in which the state directly controls much of the economy. No one has ever been able to make this work, and it usually has a very negative effect on economic productivity, which is what is happening in Venezuela. In Colombia, FARC has been earning a lot more money from its drug activities, especially since it began selling directly to the Mexican drug cartels (instead of using a middleman, who offered a much lower price to the Colombian producers). By dealing direct, FARC has to absorb transportation losses (over 200 tons of cocaine was seized last year), but even with that, FARC is making more than a billion dollars a year from its drug activities. That, plus the loss of territory controlled (over two-thirds) and gunmen on the payroll (over half) in the last decade, has transformed FARC from a leftist rebel group that dabbled in the cocaine trade, to a drug gang that dabbles in leftist politics. The new FARC has found a friend, and business partner, in Venezuela. There, the guys in charge need money, and there aren't too many other sources of quick cash, besides cocaine. More and more of FARC, and its drug activity, is moving into Venezuela.

It's getting more and more difficult for drug gangs to operate in Colombia, because the government has developed techniques that go straight for the top leadership of the drug gangs, and can interfere with the huge money transactions that result from the production of so much cocaine. The gang leaders may be able to hide in the jungle, but it's much more difficult to hide all that economic activity, particularly when the U.S. is using its control, and influence, in the world banking system, to detect the drug money, and grab it, or force the drug gangs to pay a lot more in fees and bribes to secure their cash and assets.

The U.S. has found that Islamic terrorists are involved in the cocaine smuggling pipeline that extends from Venezuela, to West Africa and thence to Europe and the Persian Gulf. Moslem gangsters have long been a staple of West African life (the northern areas of many countries there are usually predominately Moslem). Islamic terrorists are taught to use crime to raise money for the cause, and dealing drugs, at all levels, is a favorite way to support Islamic radical activities.

The Colombian mobile phone market is saturated. With a population of 45 million, there are 42 million active cell phones. Obviously, many people have more than one, and those are being consolidated. Thus in the last quarter of 2009 the number of active cell phones fell 300,000. The ubiquity of cell phones has been a major blow to the drug gangs and leftist rebels. Since these groups rely on terror to operate, they are not popular, and cell phones made it much easier for anyone to tip off the police on what the gangsters or rebels were up to.




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