Venezuela and Ecuador Consolidate Bilateral Agreements, SUCRE Currency System
By Tamara Pearson, 18 January 2011.
Venezuelan President Hugo Chavez and Foreign Minister Nicolas Maduro met on Monday with the Ecuadorian Foreign Minister, Ricardo Patiño, to evaluate the progress of their country’s bilateral agreements. Among the ambitious goals set during the meeting was an increase in the use of the sucre, a regional currency being used in trade between the two countries.
Increasing the Use of the SUCRE System
This month, according to Radio Mundial, Venezuela bought palm oil from Ecuador using the sucre. The first use of the sucre involved Venezuela selling Ecuador 15,000 tonnes of rice, Venezuela paid 1.89 million sucres (there are 1.25 sucres to the dollar) for the rice.
The sucre gets its name from the Spanish initials for Sistema Único de Compensación Regional, or Unified System for Regional Compensation, and is also named after Antonio Jose de Sucre, a Latin American independence leader who fought alongside Simón Bolívar.
The sucre is a regional currency used in commercial exchanges between members of the Bolivarian Alliance of the Americas (ALBA) – instead of the U.S dollar – in order to decrease dependence on the U.S. dollar. It is currently a virtual currency but the long-term plan is to make it into a hard currency. Paying for goods with the sucre avoids the transaction costs incurred when using dollars on the international market and encourages a more stable trading system that is less influenced by global economic conditions.
“The development of the SUCRE from July [last year] to December has advanced at a moderate, but positive pace. Over 40 million [U.S] dollars in value was exchanged [between Venezuela and Ecuador], that is, over 38 million sucres, which represents an important overall percentage of trade during that time,” said Patiño.
Maduro said that the July to December trading served to “remove any doubts,” and that the aim is to eventually conduct all trade between the two countries using the sucre. For this year, the aim is “at least 50% of commercial bi-national trade,” he said.
“This unified system of compensation of payments is a completely logical idea, and scientifically demonstrated that it is important, positive, and convenient for our countries,” Patiño said.
The foreign ministers and the Venezuela president also discussed their advancement on forty projects they are jointly developing, which can be categorised into six areas of cooperation: social sovereignty, energy sovereignty, security and defence sovereignty, productive sovereignty, financial and commercial sovereignty, and knowledge sovereignty.
Many of the agreements are centred on technology and knowledge exchange. One agreement includes taking Venezuela’s “Infocentros” – public centres with free internet and computer usage - to Ecuador. This will involve Venezuelans training Ecuadorians, and mutual development of scientific and technical knowledge. Another agreement involves a similar exchange of experiences, knowledge, and technology in both traditional and Western medicine.
Finally, the ministers and the president also discussed putting a joint investment fund for economic projects that mutually benefit Ecuador and Venezuela, into practice. The two governments evaluate the progress of the agreements every three months. According to Patiño, overall trade between the two countries reached $1 billion in 2010, an amount he estimates will be exceeded this year.
Solidarity from Ecuador
Maduro also thanked the Ecuadorian minister for the help and expressions of solidarity his country shared with Venezuela following the intense flooding towards the end of last year. Ecuador sent Venezuela food and medicine on four occasions during December last year. According to AVN, the most recent donation from Ecuador was on 21 December, when Ecuador sent 13 tonnes of medicine, water purifiers, and non-perishable food kits.