Stonegate Bank, based in Florida, and a Cuban bank, Banco Internacional de Commercio SA (BICSA), have agreed to establish a correspondent banking relationship, the first approved under President Obama’s initiative, announced late last year, to begin the normalization of relations 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.
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. In 2001 Congress granted an exception for food and agricultural goods. Trade in U.S. agricultural goods was about $750 million dollars in 2008, but has now declined to an estimated $200 million-$300 million per year. 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.
Before this change, the Cuban buyer of U.S. agricultural goods (the government of Cuba) would have to transfer payment to a bank in a third country such as Spain, which then would make U.S. dollar payments to a U.S. bank for release to the U.S. seller. Now, through this direct banking arrangement between Stonegate Bank and BICSA, the U.S. dollars for payment of U.S. goods could be transferred by BICSA directly to Stonegate bank for release to the U.S. seller of the exported goods.
Full normalization of the relationship between the two countries will require congressional action to lift the trade embargo, but this movement to direct banking relationships is an important step in normalizing banking and commercial business between the two countries.