Colombia frets Venezuela devaluation may fuel contraband trade

BOGOTA Tue Feb 12, 2013 11:19am EST

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BOGOTA Feb 12 (Reuters) - Colombia's government is worried the devaluation of the Venezuelan currency may push more contraband across its border, the finance minister said on Tuesday, adding to the flow of Venezuelan goods already smuggled into neighboring Colombia.

"We cannot allow that as a result of devaluation in Venezuela, we are flooded by contraband in the Colombian market," Finance Minister Mauricio Cardenas said on local Caracol radio.

Venezuela devalued its bolivar currency by 32 percent last week, the country's fifth devaluation a decade, making Venezuela's exports cheaper for foreign customers.

Wide-ranging Venezuelan price controls on consumer goods have already driven gangs to smuggle fuel, meat and appliances into the Colombian border area, where they were cheaper than domestically made Colombian goods.

The devaluation will make that contraband even cheaper when priced in Colombian pesos.

The devaluation, which takes effect on Wednesday, was announced Friday before a four-day weekend in Venezuela to minimize political or market repercussions. It had been widely forecast by economists as a way of redressing distortions.

Tensions between Colombia and left-wing neighbor Venezuela have eased considerably since President Juan Manuel Santos took office in 2010. The thawing ties have boosted cross-border trade - which slumped when Venezuela's leader broke off ties in 2008.

Excluding off-the-books trade, Colombia ran a trade surplus with Venezuela of around $2 billion in the January to November period last year, according to the latest data, rising from $1.2 billion in all of 2011 and $1.1 billion in 2010.

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