Banks Will Profit From Cuba's Removal From Terrorism Watch

Banks Will Profit From Cuba's Removal From Terrorism Watch
ByLuis EscobarFollow | 04/17/15 - 04:02 PM EDT

NEW YORK (TheStreet) -- Banks will be keeping a close eye on U.S.
Congress over the next 42 days. If the legislative body fails to act, it
could open up a $68 billion economy to levels of financing it has never
seen.

We're talking about Cuba, of course. For almost five decades, the island
nation of 11 million has been excluded from the international credit
markets, and its access to financing from international banks and
institutions has been limited -- mostly due to being on the U.S.
government's list of state sponsors of terrorism

Earlier this week, President Obama recommended that Cuba be removed from
the list. This follow's the State Department's recommendation a week
prior. Congress has 45 days from the day of the President's announcement
to block the move. If Congress does nothing, Cuba will leave Syria, Iran
and Sudan as the three remaining members of the list.

The initial benefits of leaving this list will mostly be in the banking
sector. Most banks won't do business with states on the list for fear of
reprisal from the U.S. Treasury Department. Countries on the list face
"miscellaneous financial and other restrictions," according to the State
Department Web site. That vague threat has been enough to keep most
banks away from Cuba. As Alex Sanchez, president and CEO of the Florida
Banking Association told TheStreet last month in reference to this
issue, "Capital does not go where there is risk."

Once Cuba is off the list, banks and other financial institutions will
have flexibility to open accounts and establish limited banking
relationships and credit card processing activities with Cuban
counterparts, according to the changes and updates of rules in the
Office of Foreign Assets Control of the U.S. Treasury Department. OFAC
is in charge of administering and enforcing economic and trade sanctions
against countries and organizations that engage in activities that
threaten the national security, foreign policy or economy of the United
States.

Bankers at large national banks who didn't want to have their names or
employers identified for fear of Treasury Department reprisal said they
were excited at the opportunity to enter the market and are eager to be
the first ones to establish normal banking infrastructure in the
country. Two of these banks are already considering plans to bring
refurbished ATM machines to Cuba. Tourists don't like to travel with
cash and the banks are eager to be the first to provide in Cuba the
kinds of financial services they expect when they travel anywhere else.

Businesses, too, could use the services of banks in Cuba.

"Businesses depend on a banking system that conforms to international
rules," says Milton V. Vescovacci, head of international business
practices and the Cuba sub practice at GrayRobinson, a law and
consulting firm based in Miami. "With the further relaxation of the OFAC
regulations that exist now, trade will be financeable and people will be
able to buy things with credit from institutions based in in the U.S."

Of course, perhaps the largest beneficiary of having access to capital
markets would be Cubans themselves and the Cuban government.

Currently, large development projects are often financed by China,
Russia, Venezuela and others. The Mariel port rehabilitation project is
being financed in part by Brazil and China. That limited source of
financing means that many projects that could get done, don't.

Business leaders in the U.S. seem to be in favor of this recent small
but important step toward normalization of relations.

"For too long, the relationship between the United States and Cuba has
been defined by its differences and burdened by its past, while lacking
a clear path forward," Jody Bond, vice president of the Americas at U.S.
Chamber of Commerce, says of the development.

Not everyone in a position to comment on the move is in favor of it.

"They should have remained in the list of states sponsors of terrorism,"
Senator Marco Rubio, a Republican senator from Florida, said in a
statement. "The White House is not longer serious about calling
terrorism by its proper name." Rubio, whose parents fled Cuba shortly
before Castro took over in 1959, announced his bid for the presidency in
2016.

Source: Banks Will Profit From Cuba's Removal From Terrorism Watch -
TheStreet -
http://www.thestreet.com/story/13117031/1/banks-will-profit-from-cubas-removal-from-terrorism-watch.html