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Venezuela Pays Price for Smuggling









LATIN AMERICA NEWS







President Loses Popularity Amid Protests as Cheap Goods Move Across Border to Colombian Consumers









By
KEJAL VYAS
Updated June 8, 2014 8:18 p.m. ET







Smugglers on the Colombia-Venezuela Border








A vendor sells diapers from Venezuela on the street in Cúcuta, Colombia. "Everything you see on this street is Venezuelan," says Alejandro Valbuena, a 32-year-old merchant. Natalie Keyssar for The Wall Street Journal










CÚCUTA, Colombia—Venezuelan President Nicolás Maduro's sliding popularity amid persistent street protests can be partly blamed on the humming smuggling market on this border, which shows how Colombia's unbridled free-market capitalism is eclipsing Venezuela's socialism and hurting ordinary Venezuelans.




When Norbis Berrocal, a homemaker on the Colombian side, buys baby formula in a bustling street market here in Cúcuta for a fraction of the usual retail price, Venezuela indirectly pays the rest.





"We're lucky to have Venezuela so close by,"
said Ms. Berrocal, as she bought a case of infant formula for shipment to relatives in Colombia's interior.






She is one of many Colombian consumers who benefit from a massive smuggling trade involving subsidized and price-controlled goods from oil-rich Venezuela—including near-free gasoline, car parts, corn flour and deodorant, all bought cheap in Venezuela and marked up before being sold here.








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Kejal Vyas Reports From Cucuta Market







With its heavy intervention in the economy, Venezuela now imports three-quarters of what it consumes but loses a third of its goods to illegal cross-border trade, its government estimates. 






Some economists say Caracas exaggerates the smuggling problem to mask its own inability to keep supermarkets stocked.





The scarcity has eroded Mr. Maduro's popularity to a low of 37%, as recent polls show food shortages surpass rampant crime as citizens' top concern. 





And in Colombia, there is so much anxiety among businessmen about the incoming, cheap products that the National Poultry Federation on Sunday started a public-awareness campaign to discourage the purchase of contraband chicken.






"We're not so much living here as much as surviving,"
said Isabel Castillo, president of the Chamber of Commerce in San Antonio, a struggling town by Venezuela's side of the Táchira River that divides the countries.








Stifled by inefficient state-owned factories and price controls, domestic production in Venezuela has plummeted. 





Moreover, the massive weakening of Venezuela's currency makes its goods cheaper in Colombia. 






These factors lead to frequent shortages that make life especially trying for Venezuelans along the border, where smugglers leave little behind on store shelves.





That is partly why the protest movement that kicked off in February against Mr. Maduro's administration took root here before spreading nationwide. 





Scattered demonstrations and rallies still take place, including one on Sunday in which members of the Popular Will party spoke out against the government's arrest of their leader, Leopoldo Lopez, who is accused of instigating violent demonstrations.







Venezuela's government says it is working with its neighbor to try to crack down on trafficking with an increased military presence on the border. That led smugglers, who see their work as legitimate, to block traffic last week on the bridge connecting the two countries here.







"The problem is that on the Venezuelan side what these smugglers do is illegal but just one kilometer down the road in Colombia, no one thinks they're doing anything wrong,"
said Carlos Chacon, a San Antonio city councilman, referring to Colombian customers.






To make ends meet, many residents turn to running bags of groceries from Venezuela to Cúcuta—an errand that can yield more than a typical workman's salary.






Here they have become known as "bachaqueros," a reference to South American leaf-cutter ants that can deplete a terrain of resources when working together.







One 26-year-old Venezuelan university student in San Antonio said he made pocket money during the week by hopping on a public bus with a crate of items like bath sponges and windshield wipers that he sells for a quick buck in Colombia.






"Half the people on the bus are carrying a case of something: milk, cooking oil, anything," he said.






Venezuela threatens to punish smugglers with up to 14 years in prison. But the student said he and other traffickers on the bus pass through Venezuelan National Guard checkpoints with small bribes.

Venezuelan authorities acknowledge that handsome profit makes contraband difficult to contain.






"It's not an easy task because there is a reality on our side of the border, where we have a system of protection for the people, food subsidy, and fair prices; and without a doubt on the other side it's not like that,"
Vice President Jorge Arreaza said in a recent address.






Business leaders complained, he said, that a detergent selling in Barcelona in eastern Venezuela was turning up in shops 1,000 miles by road west in Bogotá, in Colombia's capital.






In this year's first three months, Venezuela's border patrol in Táchira state confiscated more than 14,000 tons of food and meat—enough to feed about 400,000 people for a month—compared with 20,000 tons of food seized in all of 2013, Venezuela military commander Vladimir Padrino said on state television.





Fueling the illicit trade is Venezuela's bolívar currency, which has shed more than 60% of its value against the dollar over the past year on the black market, enabling buyers with stable U.S. dollars and Colombian pesos.






As a major clash point between the two countries' economic models, many Venezuelans look to Cúcuta to find out how much their bolívares are worth. 






For years, the exchange rate determined by currency houses in Cúcuta has been posted on underground websites to be used as a reference for dollars on the black market in Venezuela, where strict currency controls make dollars difficult to obtain.





The resulting distortions are most visible in street markets in Cúcuta. Here, one kilogram of Primor brand rice bought in Venezuela at the regulated price of nine bolívares—about 13 cents at the black-market exchange rate—is sold for 1,700 Colombian pesos, or 89 cents, merchants say. 





The popular Venezuelan brand of corn flour Harina P.A.N., used to make the ubiquitous corn cakes known as arepas, fetches similar profit. Stacks of its iconic yellow packaging can be found all over roadside markets here.









In a nearby pigeon-filled plaza, across from the Cúcuta mayor's office, groups of old men sit around drinking cases of Polar and Solera, popular Venezuelan beer brands smugglers bring over for a steep markup.






"Everything you see on this street is Venezuelan," Alejandro Valbuena, a 32-year-old merchant, said on a recent day as a steady stream of loading trucks hauled in crates of dishwashing detergent and diapers behind him. 




"Looking around here, you can tell why socialism doesn't work."






Write to Kejal Vyas at
kejal.vyas@wsj.com










http://online.wsj.com/articles/venezuela-pays-price-for-smuggling-1402271308







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