The Colombia/Venezuela Border Reopening: Was it Worth It?
Amer Goel
In September of this year, newly inaugurated Colombian president Gustavo Petro collaborated with Venezuelan president Nicolás Maduro to reopen the Colombia/Venezuela borders to trade. This comes after seven contentious years of political conflict between Iván Duque, Colombia’s former conservative president, and Maduro. Under Duque’s administration, the border closed in 2015, causing significant economic and social disruptions, but the idea of border reopening has been controversial since then. Petro’s move to reestablish diplomacy with Venezuela this way was highly contested, but it was worthwhile. It significantly improved the quality of life by providing safer international exchange, encouraging Maduro to confront revolutionary groups, and progressing against a massive economic loss.
Since 2015, tensions have persisted on the border between Colombia and Venezuela, especially related to the smuggling of cheap Venezuelan goods, but diplomatic pressures first grew when three Venezuelan soldiers were killed, prompting the Venezuelan president to close the border after they were mistaken as smugglers in Colombia. Later, in 2019, tensions were exacerbated when Colombia’s government provided supplies to Venezuelan rebel groups who opposed Maduro’s administration. Finally, Duque refused to recognize Maduro as Venezuela’s legitimate president, which Maduro saw as an act of political aggression towards the entire nation.
Petro, however, does not take the same stance as Duque towards Maduro or towards Venezuela. “This is our house,” he said in a speech to CNN, referring to South America as a whole. “We don’t have to close the doors to our own house.” He sees an established international relationship with Venezuela as productive to ease national anxiety and increase economic output, and he views this new border policy as the first step.
Although relations with Venezuela are politically controversial, almost all economists can agree that the reopening of the border will contribute economic value to both countries. As one baseline estimate, the Venezuelan government predicts it to be upwards of 4 billion USD, which would be a very significant increase in bilateral trade and activity.
To calculate the (purely economic) price of the trade restrictions, a proprietary model was created to evaluate how much the two countries lost each year. Past data about trade between the two countries was used to forecast how much trade there would have been without the restrictions, and then all values for the years 2015-2020 were compiled to calculate the total loss from trade restrictions during those years. For a complete methodology, see here. For a look at the data, click here. It’s important to note that the model was intended to stay as objective as possible, so only commercial relations were considered when calculating cost, not humanitarian objectives or sentiments of national pride.
As calculated, the two countries lost 9,891,700,000 USD in total from 2015-2020, due mostly to political tensions. For reference, the amount the two traded from 2015-2020 was 3,614,000,000 USD, but this model predicts that they would have made 13,505,700,000 USD during that time. The border reopening was a necessary part of the plan to start recovering from this loss.
For the Maduro administration, it was a show of national strength, because he could show Colombia that there were consequences to their opposition and set an example for other countries in the region. He was frustrated by Colombia’s attempt to undermine their power by supporting rebel groups, and by closing their borders he demonstrated the lengths he was willing to go to, and the loss he was willing to incur to assert himself against political rivals.
For Colombia, and specifically for President Duque, it was an opportunity to stand up to Maduro, often regarded as a tyrant and a dictator. Maduro ignored guerrilla and paramilitary groups along the border to foster unrest on the Colombian side, and he hypocritically supported Colombian rebels. To show their citizens that they were just as strong and willing as Venezuela, Duque ceased diplomatic relations.
It’s also important to consider Duque’s humanitarian agenda. During the trade closures in the 2010s, more than 6 million individuals fled Venezuela, with 1.8 million coming to Colombia. It was an important act of compassion for him to show these refugees that he was willing to protect them against Venezuela’s malicious economic actions.
Note that because the border was reopened so recently, specific policy actions to increase cooperation and quality of life have not been implemented yet, but just by being open social and economic tensions will soon ease automatically.
The border reopening re-incentivizes people to use safe, legal business practices. On both sides of the border, manufacturing companies (mainly textile and chemical manufacturers) depend on raw materials unavailable domestically. Some of these materials, however, are available in the other country, but because of import restrictions, they were still inaccessible. To compensate for this, some companies resorted to smugglers or criminals to supply them with necessary inputs, often raising costs or putting business owners in dangerous situations. Supply chains became less dependable, slower, and less profitable. Consumers in border towns had access to less variety with less regularity, and businesses struggled financially. A more accessible trade policy would eliminate the need for these smugglers and allow legitimate businesses to operate with appropriate means and supply chains. It would also bolster confidence in the economies of the border towns because consumers would have a more dependable supply, and producers could standardize their production processes without worrying about satisfying criminals/third parties.
Plus, the new diplomatic relationship with Petro incentivizes Maduro to address corruption and rebel groups in their country. Rebel groups like the National Liberation Army (ELN) operate in Venezuelan borderlands, which Maduro saw as a useful deterrent to an undiplomatic Colombia before this year. Now, however, it could put pressure on him to begin peace talks, because those groups will prove to be disruptive to a partnership with Colombia. They are a public enemy in the eyes of Colombia’s electorate, so any friendliness Maduro shows to them will be seen as anti-Colombian. Maduro will likely prioritize his relationship with Colombia over his relationship with those revolutionary groups, which will force him to reduce his support. This again provides safer exchange along the border, because merchants and businesses will not have to worry about terrorism from these revolutionary groups as they transport their products or service. It’s a good way to reduce the frequent violence that often deters merchants and inhabitants of both countries from the borderlands and encourages people to go back into the borderlands, furthering the economies of those towns.
Overall, it would provide immense economic opportunity for both nations. Reopening trade creates a need for middlemen in the international supply chain like transporters and managers, generating jobs. It would also restore Colombians’ and Venezuelans’ confidence in the border towns like Cucuta, which will likely increase output in those towns, many of which depend on cross-border transportation. Combined, this could create an estimated 120,000 jobs per year, which could be transformative for people struggling in the border regions. According to forecasts from Colombian commerce minister German Umana, trade between the two countries could reach up to 1.2 billion USD just this year, and by 2026, he optimistically projects bilateral trade of 4.5 billion USD, which would be important progress against the almost 10 billion USD loss they incurred from 2015-2020. More importantly, it could be a way for them to improve economic prosperity in their countries, and finally reinvigorate some of their suffering border towns.
The reopening of the Colombia-Venezuela border is a landmark occasion for the region. It marks a new era of diplomacy and trade between the two countries, but it could not come soon enough. The countries suffered massive economic loss in the seven years the border was closed, and only now, after reevaluating the repercussions of the border closure, have the presidents of the country decided to compromise for their economic good. Whether or not the externalities and lost surplus will ever be recovered is hard to predict, but Petro and Maduro have finally taken the first, necessary step towards progress.
