The Colombian peso weakened 1.8% in early trading Wednesday in a
volatile session after Venezuelan President Hugo Chavez threatened to
break commercial and economic relations with Colombia.
The Colombian peso traded at 2,061.50 early Wednesday from
COP2,025, Tuesday’s closing mark, in a session that has traded about
$300 million in just one hour.
Chavez froze diplomatic relations with Bogota while threatening
Colombian companies on Venezuelan soil with expropriation and pledging
to break commercial ties if there is any new “aggression” from the
neighboring country.
Chavez said on state television Tuesday night that he “ordered the
withdrawal of our ambassador to Bogota.” He added that Venezuela “will
freeze relations with Colombia.”
The deteriorating ties follow accusations from top officials in
Bogota that Swedish-made rocket launchers sold to Venezuela were found
in the hands of the Revolutionary Armed Forces of Colombia, or FARC.
“If Venezuela closes trade with Colombia it would hit Colombian
textile and food companies,” said Cesar Tovar, head of research at
local brokerage Nacional de Valores.
Colombia is a key supplier of food, textiles and other manufactured
products to Venezuela. Despite the diplomatic spats in the past,
Colombia’s exports to Venezuela rose to $6.09 billion in 2008, from
$5.21 billion in 2007.
Colombian exports to Venezuela totaled $2.24 billion in the first
five months of the year, down 1% from the same period last year,
according to the most recent figures from the country’s statistics
department, DANE.
If Venezuela nationalizes Colombian companies operating there, it
would target food companies such as Alpina and retailer Almacenes Exito
(EXITO.BO), which has a stake in Cadenas de Tiendas Venezolanas, or
Cativen, among other companies, Tovar added. (Dow Jones)