Caracas, Bogota talks fuel hope; pitfalls abound

BOGOTA, (Reuters) – A day after taking office,  Colombian President Juan Manuel Santos took a step toward  mending Bogota’s frayed ties with Venezuela’s President Hugo  Chavez by securing a meeting with him in Colombia.

The announcement on Sunday helped drive up Colombia’s peso  as investors hoped for restored trade between the Andean  neighbours who have a long history of messy diplomatic sparring  that has often fueled concern over regional stability.

But optimism aside, the two leaders will still struggle at  today’s meeting in Colombia to manage underlying differences, lingering charges of Chavez’s complicity with Colombian rebels and his opposition to Bogota’s close U.S. ties.

Santos, the son of a wealthy Bogota family, says he and  socialist Chavez are like “oil and water” and the neighbouring  nations often break and make up: Since Chavez came to power a decade ago they have severed ties at least three times.

“I don’t think anyone has any illusions that the underlying issues will be resolved or the mistrust will be overcome, at  least in the short-term,” said Michael Shifter at the  Washington-based Inter-American Dialogue. “Economic imperatives  are also driving this attempt at reconciliation.”

Colombia’s four-decade-old guerrilla conflict has spilled  over the border, where kidnappings, contraband and drug  trafficking are common. Chavez’s ideological affinity with the  Marxist rebels has led Washington and Bogota to accuse him of  supporting the guerrillas. Chavez denies the charges.

Andean tensions have run high since 2008 when Colombian  troops attacked a FARC rebel base hidden over the border in Ecuador. Both Quito and Caracas warned of war and sent troops  to the frontiers before a regional summit defused tensions.

The latest chapter began last year when Colombia inked a  deal to allow U.S. troops more access to its bases for  anti-narcotics and counter-insurgency efforts. Chavez accused  Bogota of working with Washington to undermine his government.

Chavez again broke off ties with Colombia last month after departing President Alvaro Uribe accused him of harbouring more than 1,000 leftist Colombian FARC rebels on his territory from  where Bogota says they have launched attacks into Colombia.

While tensions with Venezuela simmer, relations with  neighbouring leftist and Chavez ally, Ecuador, appear on the  mend. Ecuador’s President Rafael Correa attended Santos’  swearing in ceremony over the weekend.

Correa, who clashed with Santos over his role as defense  minister in the 2008 attack in Ecuador, believes relations  could be restored within six months. Santos’ government is  already handing over more details and documents on the attack.

However, an arrest warrant for Santos by an Ecuadorean  judge and charges that Colombian intelligence agents spied on  Correa and other officials will complicate restoring ties. But  Ecuador is now also more reliant on Colombia for electricity.

Santos is still a diehard conservative and, after an  initial honeymoon period, he may clash with his leftist  neighbors over Colombia’s close ties to Washington and his own  tough stance against guerrillas.

The issues with Venezuela will not go away easily,  especially concerning the presence of leftist rebels but also  other messy affairs such as border security and Caracas’ debt  to Colombian companies working in Venezuela.

But reopening $7 billion in Venezuela-Colombia commerce  would benefit both leaders as they try to spur economic growth,  especially for Caracas which is mired in a recession that is hurting Chavez’ popularity before September elections.

Colombia’s economic recovery would get a boost from renewed  trade. The central bank had warned the Venezuelan trade dispute shaved around one percentage point off its gross domestic  product. In 2008, Colombian exports to Venezuela were $6  billion; this year they are expected at $1 billion.

“Even if both governments agree to restore diplomatic and  commercial ties, Colombian exports are unlikely to recover to anywhere near previous levels,” Eurasia Group said in a note.

Santos appears to have taken a more pragmatic approach from  the start. In his inauguration ceremony he took a conciliatory  tone with Andean neighbours, saying “the word war is not in my  dictionary.” He also named an experienced diplomat and former  ambassador to Venezuela as his foreign minister.

“Santos … has opened a window of opportunity for a fresh  start in bilateral relations, which the increasingly embattled Venezuelan government appears keen on exploiting,” said Christian Voelkel, an analyst at IHS Global Insight.