In the latest drama in Latin America, Nicaragua has officially broken diplomatic ties with Colombia, and Venezuela’s Chavez is threatening to seize Colombian assets in the country. Naturally this has had a dramatic effect on the Colombian corporations operating in Venezuela, which was evident in the sell-off of those corporations’ stock yesterday.

In my previous post, I said that the chance of a full on war was minimal, which was echoed by U.S. defense secretary Robert Gates according to a CNN article. However, there could be serious economic consequences. It appears that Venezuela, Ecuador, and now Nicaragua might be preparing to engage in economic warfare.

I’m not sure if Chavez will actually follow through on his threats—as he tends to make a lot of them—but threats alone have already caused damage to Colombian investors. It doesn’t appear that this thing is going to end as quietly as many thought.

Labels: Colombia, international, nicaragua

Things appear to be getting a little sticky down in Colombia, South America. The nation has shown signs of moving away from its long-standing reputation as the cocaine capital of the world, but it is now facing new turmoil. This time, the trouble is with their neighbors Ecuador and Venezuela.

In short, Colombia crossed the Ecuador border in a raid on the FARC (a Colombian guerilla group) which claimed the life of the FARC’s number two in command, Raul Reyes. The major conflict is that they did so without the permission of the Ecuadorian government, and naturally that did not sit well with them. The FARC is a group of leftist-leaning rebels who have the support of Venezuela and Ecuador, which are both leftist-leaning governments. That fact only adds another log to the fire.

In response to the raid by Colombia, Ecuador and Venezuela have both started moving troops to the Colombian border. There is no knowing where this will lead , but either way it doesn’t appear to be a good thing for people who have invested in Colombia.

Colombia was on the road to a dramatic turn around, and many investors looked to Colombia as a great emerging opportunity for investment. That still might prove to be the case, but until this situation gets resolved, most potential investors are going to wait to see how this thing pans out. Nothing scares away investors like the threat of conflict.

My thought is that Venezuela and Ecuador are just ruffling their feathers in response, and that they won’t take any military action beyond that. The bigger concern would be how this event affects Colombia’s economic relationship with its two neighbors and, potentially, other Ecuadorian and FARC sympathizers.

Labels: Colombia, international