Inside the Booming Smuggling Trade Between Venezuela and Colombia
Smuggling is a way of life in the Colombian border town of Cúcuta—and for decades, that’s meant drugs. But in recent years it’s ordinary goods like gasoline or oranges or diapers that make their way from Venezuela to Colombia. The side of the road into Cúcuta is dotted with illegal gasoline vendors, while the shelves of the local stores are stocked with products labeled “Produced for the Venezuelan market.” That’s because the combination of the extremely low valuation of the Venezuelan Boliviar—it takes 800 boliviars to buy a U.S dollar compared to just 200 one year ago—and the strong price controls that the Venezuelan government has applied to many basic goods has made it extremely profitable to buy just about anything cheaply in Venezuela, and smuggle it into neighboring Colombia, where no such price controls exist and the local currency, the peso, is significantly stronger.
Venezuela is hurting—for the second year in a row, Bloomberg has ranked the Venezuelan economy “the most miserable economy” and the IMF predicts that the country’s inflation rate will hit 720 percent this year, up from 141.5 percent near the end of last year. For comparison, the U.S. has maintained an inflation rate between one and five percent over the last decade. Venezuelan President Nicolas Maduro has repeatedly blamed both the smuggling and the migration of people into Venezuela to take advantage of the highly subsidized health and education for his country’s economic woes.
But the truth is that Venezuela’s economic problems have been building since before the time of Maduro’s predecessor, President Hugo Chavez, says Adam Isacson, a Colombian security expert at the Washington Office on Latin America. Ninety-seven percent of Venezuela’s export revenue comes from oil, which leaves the country high and dry when oil prices crash—as they have for the past several months. With oil prices around $30 per barrel for much of this year, Venezuela is making only $30 billion per year off of exports to support a country of over 30 million people. “It’s amazing they have managed to stay afloat this long,” said Isacson.
Additionally the Venezuelan government artificially controls the exchange rate for its cash. This has led to the rapid decline in the value of the currency. The government has responded by simply printing more money–in February 36 Boeing 747 cargo planes delivered at least 5 billion new bank notes to the country. The currency has become so worthless that it costs more to make a color photocopy of a 100-boliviar bill than the bill is even worth. “You put all these things together and it’s crippling,” said Isacson.
The economy along the border of the two nations has always been based in smuggling. In the past that smuggling was relegated to cocaine and heavily-subsidized gasoline, with one U.S. official saying last year that more than half of all the cocaine leaving Colombia first passes through Venezuela before entering the international market. Petrol too is a popular good to move. “Maduro has raised the price of petrol in Venezuela but its still the cheapest fuel in the world and at this price its not going to make any dent in the contraband industry,” says Jeremy McDermott, co-director and cofounder of InSight Crime, a think tank based in Medellin that covers organized crime in the Americas. “The profits of the contraband industry are so huge that it has corrupted the officials on both sides of the border.”
Though Maduro announced a crackdown on smuggling last year and closed the major border crossings, the financial incentive to keep goods flowing is high. McDermott estimates that the smuggling trade is back up to previous levels. And Colombian smugglers like Gabriela and Camila—two sisters in their 30s, each divorced, who work to support their mother and multiple children—are part of the reasons why.
Early each morning Gabriela and Camila hitch a ride along a road that runs north from Cúcuta and traces the river that makes up the border between Colombia and Venezuela. They head past the small city of San Faustino and across the river into Venezuela. Once there, they meet a local who has purchased about 60 kilos of beef at the Mercal, the state subsidized supermarket, for the equivalent of just $54. By the end of the day that same quantity of meat will be on a market shelf in Cucuta, where it will sell for over $200.
On one recent morning, the sisters hitched a ride back to Cúcuta from Venezuela. Along the way they had to pass back through San Faustino, where a police check point was established to crack down on just this kind of smuggling. Their car was stopped, and as police officers began to inspect the plastic bags of meat in the trunk, Camila slipped a 10,000-peso bill–worth just over three dollars–to the police officer. After initially expressing concern over the goods, he decides everything is fine and allows the car to continue on.
The sisters explain that the bribe is daily cost of business. Since they are small-time, their rate is low, but for those engaged in larger operations the bribes can be as high as $25 per shipment. San Faustino is sleepy town that comes alive at night, thanks to the smuggling trade. Though it is nowhere near an official border crossing, fully-loaded semi trucks rumble through the night along the patchy and sometimes dirt road, headed for Cúcuta, a town of 650,000 that’s more than an hour away.