International observers are calling for restraint and dialogue between Colombian President Alvaro Uribe and Venezuelan President Hugo Chávez, after Venezuela cut off diplomatic ties with its neighbor Thursday.

The latest spat between the fierce foes comes after Colombia presented evidence alleging that Venezuela is giving shelter to leftist rebels, a charge Venezuela denies. It comes as Colombia inaugurates its new president, Juan Manuel Santos, Aug. 7, and highlights the incoming administration's challenge of smoothing over a decade of diplomatic difficulties with Venezuela.

United Nations Secretary General Ban Ki-moon called for restraint. “The Secretary-General hopes that the differences between Colombia and Venezuela will be worked out through dialogue,” according to a UN statement issued Thursday night. Latin American leaders reiterated calls for dialogue, some even offering to step in as mediators.

With none able thus far to prevent the two leaders from sparring, this latest fight might seem to create an insurmountable obstacle to improved relations. But Michael Shifter, president of the Inter-American Dialogue in Washington, says pragmatics and voter sentiment will drive the relationship in the coming years, and that calmer seas are ahead – despite this most recent spat.

“This is vintage Chávez, and vintage Uribe, playing out their last act together as presidents at each other for eight years,” says Mr. Shifter. “But I think when Santos takes over, things are going to calm down. I think there is a lot at stake for both countries.”

On Thursday, the Colombian ambassador to the Organization of American States (OAS) presented evidence to back up charges that Chávez is protecting Marxist guerrillas, including aerial photos and videos. He demanded that Venezuela allow international teams to inspect sites where Colombia alleges some 1,500 rebels are hiding. "We have the right to demand that Venezuela doesn't hide those wanted by Colombia," Luis Alfonso Hoyos said.

His Venezuelan counterpart, Roy Chaderton, called the evidence suspect. Chávez has long denied Colombian accusations against him. On Friday, however, the US State Department said the allegations should be taken "very seriously."

Hopes for improved relations

Chávez and Uribe, a staunch US ally, have squabbled for years – over Colombia's claim that Venezuela supports the Revolutionary Armed Forces of Colombia (FARC), and over Venezuela's claim that Colombia's close relationship with the US could destabilize the region. At times the prospect of a military conflict has flared, such as when a Colombia raided on a FARC base on Ecuadorian soil in 2008. Chavez also suspended trade last year to protest plans for a US military base in Colombia.

Yet the two share a long border and both stand to gain economically by improved bilateral relations.

According to a new report by the UN Economic Commission for Latin America and the Caribbean (ECLAC) in Santiago, Chile, Colombia is expected to grow by 3.7 percent, slower than many of its neighbors, while Venezuela's growth estimates are negative 3 percent, the worst in Latin America, excluding the Caribbean.

President-elect Santos has indicated a willingness to forge a warmer relationship with Chávez, but this latest rift will set back those aspirations, says Carlos Romero, a political analyst at the Central University of Venezuela in Caracas. “The real loser here is Santos,” he says.

Mr. Romero agrees with Shifter that with Uribe out of office, there is hope of a stronger relationship. Even Chávez on Thursday indicated some willingness to put tensions behind. "Hopefully [Santos will] understand that leftist and right-wing governments can live together," Chávez was quoted saying.

“Colombia and Venezuela have different allies, but they are neighbors,” Mr. Romero says. “Unfortunately, Santos faces more obstacles now.”

Related: