CUBA-MEXICO: US Embargo Blocks Bank Operations

By Patricia Grogg Reprint | | Print |

Patricia Grogg

HAVANA, Aug 9 2001 (IPS) - The suspension of bank operations between Cuba and Mexico due to the acquisition of Mexico’s Banco Nacional (Banamex) by the U.S. financial conglomerate Citigroup has thrown a wrench into the aim of the two Latin American countries to intensify business ties.

Nevertheless, local authorities in Cuba have not yet commented on the matter, not even to blame the new complications on the four- decade old U.S. embargo that prohibits any ties whatsoever between Cuban banks and the U.S. financial system.

Banamex’s joint ventures with state-owned banks in Cuba like the Banco Financiero Internacional (BFI) were cut off last month, when the Grupo Financiero Banacci, to which the Mexican bank belongs, was acquired by Citigroup. Banamex’s transactions in Cuba mainly involved processing receivables and issuing credit and charge cards.

“This contradicts the spirit of the Accord for the Promotion and Protection of Reciprocal Investment” (APPRI) signed by Cuba and Mexico, a visibly upset Mexican businessman told IPS after hearing that he would have to find other routes for administering his account containing funds from his country.

Cuba’s BFI had been involved in a joint venture with Banamex for four years, and the Mexican bank’s change of hands has left Mexican entrepreneurs and residents in Cuba without the only route available to them for carrying out bank transfers.

The sale of the Grupo Financiero Banacci to Citigroup subordinated Banamex to U.S. laws on Cuba, which stipulate that no financial institution in this Caribbean island nation can have any kind of relationship with a U.S. bank.

But “this country is accustomed to the blockade, it always finds alternative mechanisms and solutions,” commented one Latin American diplomat.

The source, who preferred not to be identified, added that the restrictions imposed on Havana by Washington forced him to do his banking through London, which meant he lost “between two and 2.5 percent of each transfer.”

The fact that it cannot use the U.S. dollar – the benchmark currency of the global economy – for its external commercial and financial transactions has forced Cuba to work with currency from third countries.

“That situation leads to major economic losses, due to the appreciation and depreciation of the U.S. dollar against the currencies of this country’s main trading partners,” states a Cuban report on the impact of the embargo. The contracts for Cuba’s exports are arranged in dollars, but Havana is paid for them in other currencies.

The BFI issued a circular stating that it would inform its Mexican clients of possible alternatives “with all possible speed.”

“Discretion is the best way to find a solution to this problem,” said a manager of the Cuban bank, who declined to discuss the new mechanisms under consideration.

Money orders issued by Banamex entered accounts in Cuba normally only until mid-July.

The banking complications have come shortly before the expected ratification by the Mexican Senate, slated for October, of APPRI, an agreement signed in Mexico City last May to promote investment between the two countries.

Mexican investment in Cuba currently stands at 60 to 80 million dollars, while trade between the two countries amounted to 339 million dollars last year.

Shortly before the agreement was signed, the U.S. Securities and Exchange Commission pointed out that any company doing business with countries subject to U.S. embargoes must report the amount and nature of their business transactions.

Companies that fail to submit such reports could be banned from the U.S. stock markets, the Commission warned in a circular distributed to companies in Mexico.

The first of the series of provisions that make up Washington’s embargo were passed in October 1960, when economic ties were suspended. In 1963, that suspension was extended to sales of food and medicine to Cuba as well.

The U.S. ban prohibiting companies or individuals from carrying out financial and commercial transactions in Cuba has been in effect since February 1963.

In 1996, then-president Bill Clinton signed into law the Cuban Liberty and Democratic Solidarity Act, better-known as the Helms- Burton Act for the legislators who sponsored it, which codified all previous measures in a single legal instrument, while adding new provisions as well.