August 11, 2009 / 11:37 PM / 10 years ago

Venezuela shops in Argentina after Colombia spat

CARACAS/BOGOTA, Aug 11 (Reuters) - Venezuelan President Hugo Chavez has turned to South American allies to replace imports from Colombia after vowing to reduce trade with his neighbor over its plan to open bases to U.S. troops.

Venezuela signed over a billion dollars of trade deals with Argentina on Tuesday, buying tractors, meat and rice days after halting the import of 10,000 vehicles from Colombia.

“This exchange, which means technology transfer, is worth $1.1 billion,” said Argentina’s President Cristina Fernandez, who added that trade between the two countries was just $1.4 billion during the whole of last year.

Chavez is furious with his Colombian counterpart President for agreeing to host more U.S. troops at seven military bases to fight drug trafficking and has repeatedly warned that the deal risks war in the region.

A fierce Washington critic who rarely follows through on threats, Chavez sees the move as a direct threat to him and ordered the revision of all trade agreements with his second largest trading partner. The two countries shared $7 billion in commerce last year.

If he is serious about ending Venezuela’s reliance on Colombian products, especially food, Chavez must urgently find new trade partners to avoid politically damaging shortages.

Petro-state Venezuela struggles to produce its own food and kinks in supply chains quickly produce problems, raising prices in a country that suffered inflation of 31 percent last year.

Chavez has already told Colombia’s state oil company Ecopetrol it is not welcome in the Orinoco oil region and ended a deal to sell cheap gasoline across the border.

Colombia, one of the world’s top coffee exporters, will also have smarted when Venezuela bought 1,500 tonnes of the bean from Brazil on Monday to offset shortages at home.

Trade Minister Eduardo Saman said on Tuesday Venezuela will substitute all imports of basic materials from Colombia by the end of the year. Venezuela currently imports 300 million cubic feet of natural gas per day from its neighbor.

Colombia’s government says trade with Venezuela has already slowed considerably and analysts predict commerce will fall by a half this year.

“Venezuela is an important market for Colombia, but we have to diversify,” said Colombia’s Finance Minister Oscar Zuluaga. “We are still looking for the right channels to alleviate the effect on trade.”

The deals Venezuela signed with Argentina on Tuesday included the purchase of 80,000 tonnes of beef. Venezuela consumes 600,000 tonnes of beef a year, a third of which came from Colombia last year with a value of $755 million.

Venezuelan subsidies on many products, an oil boom and a long shared border have made the OPEC nation a big growth market for Colombian exporters in recent years.

Representatives of the 3,000 businesses that sell to the neighboring country worry they will struggle to replace their customers locally.

“The situation is very complicated,” said the president of a Colombian poultry farmers group. “But it’s worse for Venezuela’s citizens and their food security.” (Reporting by Patricia Rondon in Caracas and Javier Mozzo in Bogota; writing by Frank Jack Daniel; editing by Anthony Boadle)

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