The Colombian government Tuesday declared 30 day “social emergency” in 37 municipalities that border Venezuela and suspended taxes on all commercial transactions, in a bid to deal with the economic crisis caused by the socialist nation’s decision to break all relations with Colombia.
Minister of the Treasury Oscar Ivan Zuluaga said that through decree 2694 the government “excludes the charge of the 16 per cent IVA [sales tax] in the municipalities with a physical border with Venezuela.”
Zuluaga said that the suspension of the sales tax will be in place for 120 days following the publication of the decree. The minister added that another decree will facilitate the creation of free trade zones in border areas, excluding the mining and petrol sectors and their off-shoot industries.
The decrees officialize measures that the Colombian government announced Monday designed to alleviate an economic crisis in border regions.
Venezuela broke all ties with Colombia last week, following a presentation to the Organization of American States (OAS) alleging that the socialist nation harbors guerrillas within its border.
Venezuelan Foreign Minister Nicolas Maduro then announced that all land, air and sea trade between the two countries would be frozen.
Businessmen and political experts have said that they do not expect a major change in the trade relations between Colombia and Venezuela. Venezuelan President Hugo Chavez has discouraged cross-border trade since 2009, after Colombia signed an agreement granting the U.S. military access to seven Colombian army bases. Chavez has consistently expressed his belief that the pact is an attempt to undermine regional sovereignty.
As such, Colombia’s exports to Venezuela were worth $652 million between January and May of 2010, 71.4% lower than the same period in 2009. According to El Tiempo experts estimate that the crisis has caused Colombians around half a million jobs over the past year.
Venezuela has strenuously denied Colombia’s accusations and said it views the affair as an attempt by Colombian President Alvaro Uribe to stir trouble before for the incoming administration of Juan Manuel Santos, who takes office on August 7.