Colombia’s President Juan Manuel Santos and his Venezuelan counterpart, Nicolas Maduro, have agreed to create a new exchange rate in order to combat illegal contraband trafficking across the border, national media reports.
After meeting in Cartagena on Friday to discuss key bilateral issues, Presidents Santos and Maduro announced an agreement to facilitate trade between their countries and curb the growing problem of trafficked goods across the border, according to Dinero magazine.
The new exchange rate, yet to be agreed upon, will allow each country to use its own currency to trade, and aims to drop the US dollar as an international standard. For the moment, however, monetary surpluses will need to be converted into international currency.
After the declaration by the heads of state, Colombian Minister of Finance Mauricio Cardenas and Venezuelan Minister of Interior Miguel Rodriguez Torres signed off on the agreement.
Maduro then announced that he and Santos had created “a meticulously-detailed shock plan to address the structures that permit contraband and the mafias that operate within them,” according to reports by independent news site, Venezuela Analysis.
Cardenas later told reporters that the new exchange rate is expected to increase bilateral trade, which has plummeted 70% in the last five years due to disputes between former heads of state Hugo Chavez and Alvaro Uribe.
The business of contraband
Police intelligence reports that the contraband business in Colombia is permeated by criminal gangs, estimating that Colombia loses nearly $800 million a year in revenue, which then goes to the illegal groups to finance the armed conflict.
On the Venezuelan side, Major General Garcia Duque of the National Guard also said that criminal bands are using Venezuela’s subsidized food distribution as resources. In June, he issued a warning that about 60% of food arriving legally in the state of Tachira is being sent to border towns, because the exchange rate allows a large profit to those who market food.
Smuggling hot spots
Contraband is largely trafficked through the Guajira peninsula, shared by Colombia and Venezuela, and along the main road connecting the Venezuelan state Tachira to Cucuta, in Norte Santander. Guajira is home to indigenous Wayuu, who do not recognize national borders, and many of whom act as willing or unwilling “mules” for goods from Venezuela.
- Colombia y Venezuela crearán nueva tasa de cambio (Dinero Magazine)
- Venezuela’s Maduro, Colombia’s Santos Agree to New Exchange Rate, Other Accords (Venezuelanalysis)