WASHINGTON, August 5, 2015 – Stonegate Bank of Pompano Beach, Fla., a $2 billion bank that does most of its business in eight south Florida counties, has obtained the first correspondent banking relationship with a Cuban bank since the United States relaxed financial restrictions on the island nation last December.
The relationship is “symbolic but very important,” says David C. Lyons, head of government relations for FaegreBD Consulting who gained extensive experience in agricultural trade with Cuba when he headed the Washington office of the Louis Dreyfus trading company.
Stonegate said it signed an agreement in Havana July 21 with the government-owned Banco Internacional de Comercio S.A. (BICSA), created in 1993 mostly to handle foreign transactions. “The ability to move money easily between the two countries will only increase trade and benefit American companies wishing to do business in Cuba,” said Stonegate CEO David Seleski.
“It’s a start,” says Lyons, who does not represent either bank, because it would allow a U.S. food exporter to make a sale to Alimport, the Cuban import monopoly, “and get payment directly to your bank without the cost of going through a Spanish bank.” He adds that it would also make it easier for Cuban-Americans to send money to relatives in Cuba directly through the bank.
Lyons expects other, larger banks to execute similar relationships with Cuba. “Development of direct banking relationships will provide the foundation for more normal business transactions and payment terms for U.S. food and agricultural goods,” he said. He pointed out that most U.S. trade with Cuba is still prohibited by U.S. law “and there is little prospect that Congress will lift the trade embargo anytime soon.” However, a 2001 exception for food and agricultural goods resulted in about $750 million dollars in sales to Cuba at the peak in 2008 but it has since declined to an estimated $200 million-$300 million per year, he added.
“Until now, all payments for these U.S. goods as well as remittances to family members living in Cuba were required to be made through third-country banks, adding costs and inefficiencies to Cuban transactions. Direct banking between the two countries will promote the export of more food and agriculture products to Cuba,” said Lyons.
Direct banking relationships were made possible when President Obama announced the new policy toward Cuba in December 2014. “Although it may take a little while for U.S. banks to develop relationships with Cuban banks, eventually a U.S. exporter should be able to sell U.S. goods under a letter of credit issued by a Cuban bank and confirmed and guaranteed by a U.S. bank,” Lyons said at the time. “These changes will allow U.S. agricultural and food commodities to compete for Cuban business on the same basis as goods from competitor nations like Canada, Brazil and the European Union.”
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