Colombia approves investment agreement and strengthens relations with Venezuela

The Colombian Congress approved this Wednesday (22) the Agreement for the Promotion and Reciprocal Protection of Investments with Venezuela. The objective is to create a legal instrument that regulates and encourages public and private investment between the two countries.

The document had been agreed between the countries in February 2023, but still needed approval from the Colombian Congress. The approval was celebrated by the Colombian ambassador in Caracas, Milton Rengifo Hernández. According to him, the agreement is beneficial to create jobs and expand exchanges between the two neighboring countries.

“In addition to increasing confidence between the two countries, it will undoubtedly stimulate job creation and this important factor will lead to increased trade and investment volumes,” Rengifo said in a statement.

The document also creates a system for resolving conflicts and controversies, whether between governments –through diplomatic channels– or related to the transport of cargo and passengers across the border.

Growth potential

Colombia and Venezuela share a land border of 2,219 kilometers. Land crossings between the two countries had been closed since 2015 and were reopened in September 2022 after the election of Colombian president, Gustavo Petro. The countries also severed diplomatic relations from 2019 to 2022.

The agreement still needs to be ratified by the Colombian Constitutional Court to enter into force. According to the Colombian Minister of Commerce, Industry and Tourism, Germán Umaña Mendoza, the document “adds to other agreements that countries have in trade and transport”. According to Colombian newspapers, the minister submitted his resignation shortly after the project was approved, but did not explain the reason for leaving the government.

Despite the proximity and economic potential of the two countries, Colombia is only Venezuela’s 10th commercial partner in terms of transaction volume. According to the Economic Complexity Observatory of the Macro Connections group at the MIT Media Lab, in 2022 Colombia exported US$632 million (R$3.2 billion) to Venezuela. The main product was confectionery sugar. From Venezuela to Colombia there were only 99.8 million (R$550 million), with fertilizer being the best-selling product.

Direct investments between countries have also changed over time. A survey by the Bank of the Republic of Colombia indicates that, in the 1990s, investments by Colombian companies predominated in Venezuela. From 1994 to 2003, Colombia invested US$590.3 million in the neighboring country. In the same period, Venezuela invested less than half: US$205.9 million.

After the consolidation of Hugo Chávez in government, the scenario changed. Venezuelans invested US$589.5 million in Colombia from 2003 to 2014. In the same period, Colombian investments fell to US$55.6 million.

The presidents of Venezuela, Nicolás Maduro, and Colombia, Gustavo Petro, met in Caracas in April to discuss trade, economic and energy agreements and establish a permanent dialogue between the two countries.

Repost from Brasil de Fato