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.