Spat with Venezuela weighs on Colombian economy

Sept 21--Trade-stifling diplomatic tensions with Venezuela could help push Colombia's economy into a contraction this year as the cross-border spat suppresses manufacturing and exacerbates fallout from the world crisis.

July industrial output fell in Colombia due to slow demand for exports caused by the global slowdown. Also taking a toll is the clampdown on commerce by No.2 trade partner Venezuela in protest at Colombia's deepening military ties with Washington.

Colombia's economy shrank in the last three months of 2008 and in the first quarter of this year. The government says it expects an improvement in the second half and that growth for full 2009 will probably be be nil to slightly positive.

'The issue with Venezuela could delay Colombia's recovery,' said Alberto Ramos, a Goldman Sachs ( GS - news - people ) analyst who predicts more or less flat growth for Colombia's economy this year.

Industrial production slumped 6.5 percent in July versus July 2008. The data was in line with expectations and showed improvement from earlier this year when output tumbled 7.5 percent in the first quarter and by 14.5 percent in April.
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