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Venezuela's economy is in tatters -- and its border crisis could destabilize the region

Less than four months before crucial elections that may make or break its legislative advantage, the government of Venezuelan President Nicolas Maduro has embarked on an effort to clamp down the country’s western border with Colombia.

The ultimate consequences of the “state of emergency” imposed on western border areas remain unclear, but the country’s current situation threatens the rattle the overall stability of the region, particularly that of Colombia.

Crashing oil prices have left the Venezuela, which gets 95% of its export income from oil, in a precarious situation. Declining state revenues have restricted imports, and the resultant shortages, exacerbated by hoarding and rampant smuggling, have aroused popular ire.

Unrelenting inflation has also staggered the economy. The rate reportedly reached 69% in December 2014, and estimates for annual inflation this year range between 150% and 250%.

It has left many in the country hoping for new bills with larger denominations, just to have pocket change.

Violence has also grown to shocking levels. Estimates at the end of 2014 judged Venezuela to be the second-most-violent country in the world, with 82 homicides per 100,000 people. Government crackdowns as well as a spike in incidents of vigilante justice have led to more violence.

Maduro’s approval rating has slipped below 25%, and his efforts to crackdown on smuggling and direct popular frustration are likely meant to direct blame away from his government. Observers and members of Venezuela’s opposition have suggested Maduro is only stoking tensions to influence elections in December.

In recent days, Venezuela has shut down the Colombian border and begun widespread deportations of Colombians living in Venezuela.

Colombia’s peace in the balance

Unlike its eastern neighbour, Colombia has gained some measure of stability after emerging from the throes of civil war and drug-related crime it saw during much of the 20th century.

In addition to reductions in violence, the country has achieved notable economic gains. GDP per capita has grown steadily since 2000, and increased oil exports have helped the oil sector become the largest source of foreign direct investment.

Colombia Venezuela mapWikipedia Commons

Further, the unemployment rate was the lowest in 15 years in July, and the number of Colombians living in poverty has shrunk. (Extreme poverty and inequality, however, remain.)

And in 2012, Colombia began negotiations to end the more than 50-year civil war waged by the leftwing Revolutionary Armed Forces of Colombia (FARC) rebels.

The talks have had some success, with the rebel group maintaining a ceasefire with the government since late July after several violent clashes earlier in the year.

The successful completion of a peace deal is important for Colombia and the region.

Colombia “has very serious human rights and rule of law challenges, but it also has a politically diverse, vibrant civil society … and opposition political parties.” Rep. James McGovern (D-Massachusetts) told Business Insider.

“If the peace process is successful, it could come to offer a very interesting model for future democratization in the region.”

But the spike in tensions along the border could endanger this progress.

Venezuela, Rep. McGovern said, has played an important role in advancing the peace process between Colombia and the FARC. But with a Maduro government more interested in casting Colombia as an enemy, and some elements in Venezuela only interested in maintaining the drug trade along the border, the success of the peace process seems to be at risk. (Venezuela and Colombia have also clashed over FARC activity in Ecuador, giving the tension a regional dynamic.)

Maduro has frequently inveighed against Colombian criminal groups and “paramilitaries” operating in the border areas.

There is also substantial evidence that Venezuelan military forces have worked with criminal gangs and other delinquent groups in drug trafficking and smuggling operations.

Colombia stratforCourtesy of Stratfor

A fraught security situation on the frontier and the continued profitability of contraband could increase the competition (and the cooperation) between criminal gangs, paramilitaries, and the remnants of guerrilla groups.

Not only would this erase security gains Colombia has made in recent years, but it could hinder and undermine one of the most important facets of a prospective peace deal: transitional justice.

“However it is ultimately designed and determined in the final accord, [transitional justice] must apply to all parties to [FARC-Colombia] conflict,” Rep. McGovern told Business Insider.

“All belligerents responsible for grave human rights abuses need to be held to the same standards, including and especially in regard to satisfying victims’ rights.”

An increase in criminal activity could help guilty parties — both government officials and rebels — avoid prosecution and undermine the peace deal as a whole.

Rising tensions with Venezuela also deepens the possibility of Colombian politics interfering with peace talks.

Colombia will begin municipal elections on October 6, and rightwing elements of the opposition, led by former President Alvaro Uribe, have criticised the government of Juan Miguel Santos over its dealings with Venezuela, aw well as its negotiations with FARC rebels.

Increased tensions at the border could bolster Uribe’s allies. Should the Uribe-aligned opposition secure a broader legislative foothold, it could hinder or scuttle negotiations.

Indeed, the Colombian government has cautioned “political leadership in both countries to resist the easy temptation of using this complex situation to fish for electoral benefits as we approach elections in Colombia and Venezuela.”

This crisis has also arrived at an inopportune time for the Santos government, as signs of a slumping economy grow more evident.

The mining and energy sectors produce more than 50% of Colombia’s exports, and the country’s oil revenue in 2015 is projected to be six times less than in 2014.

Additionally, the drop of the Colombian peso to historic lows has raised concerns about inflation and more expensive imports.

The combination of a weaker peso and falling oil revenues pushed Colombia’s trade balance to a $US4.8 billion deficit in 2014, after six years of surpluses.

The exodus from Venezuela have added to Colombia’s problems with displaced persons. According to Reuters, 10,000 Colombians have left Venezuela, in addition to the thousands who have been deported.

‘It’s clear that the strategy of the Venezuelan government is to blame Colombia …’

International support for peace has been crucial throughout negotiations, and it likely grows more important as regional tensions increase.

“Colombia will require significant economic and development aid from the US and the international community to help support its efforts to implement the development and reconciliation provisions of a final peace accord,” Rep. McGovern told Business Insider in an email.

“Expressions of international support for the peace process help signal … that Colombia is not alone in its effort to end its decades-old internal conflict,” said Rep. McGovern, “and they also help offset internal opposition by political interests that have a stake in continuing the conflict.”

Yet recent events indicate that international assistance is not forthcoming. Colombia has requested that the Organisation of American States call a high-level summit on the issue — a request the OAS did not approve.

And Colombian officials independent of the Santos administration have also called for Maduro to stand before the International Criminal Court.

Santos himself has decried the lack of international response to the “humanitarian tragedy,” and the threat it presents to peace. The Colombian president went so far as to compare Venezuela’s treatment of Colombians there to Nazi ghettos.

“It’s clear that the strategy of the Venezuelan government is to blame Colombia for all its ills,” he said on September 1.

NOW WATCH: Police in Colombia just seized $US240 million worth of cocaine

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