Cuban bank assets in a foreign bank system drop

Posted on Thursday, 07.05.12

Cuban bank assets in a foreign bank system drop
By Juan O. Tamayo
Miami Herald

Cuban bank assets deposited in foreign financial institutions that
belong to an international reporting system showed a stunning plunge of
$1.55 billion, or 24 percent, in just the last three months of last year.

"It's highly unusual for those deposits to drop so much, especially
because Cuba had been building up its liquidity until then," said Luis
R. Luis, a former chief economist at the Organization of American States
who first reported the fall.

A Bank for International Settlements report dated June 4 showed Cuban
bank deposits in the BIS's 43 member central banks and financial centers
nosedived from $5.65 billion at the end of September to $4.1 billion at
the end of December.

Luis, on the board of directors of the Association for the Study of the
Cuban Economy, said that there are no confirmed reasons but lots of
possibilities for both the growth of Cuban assets in BIS institutions
until September, and their plunge afterwards.

The increase may have reflected Cuban efforts to grow or streamline its
commercial trade with BIS member nations, he noted. A country's bank
deposits abroad usually are used to pay for or guarantee import deals.

With Venezuelan President Hugo Chávez, a generous Havana ally up for
reelection and reportedly suffering from cancer, the economist added,
Cuban officials also may have been increasing their reserves "to protect
themselves against a Venezuelan shock."

BIS reports showed that Cuban assets deposited in member institutions
almost doubled from 2008 to the middle of 2011, to $5.8 billion, and
surpassed Cuban debts to BIS members for the first time in about 10
years. The debt remained at about $1.7 billion during the same period.
Most BIS members are in western and developed countries.

More puzzling are the reasons for the 24 percent plunge in the last
three months of 2011 recorded in the latest figures made public by BIS.
Cuba has made no comment on the drop.

"We don't know exactly why this drop happened, but we can talk about
several possibilities for why the money became invisible," Luis told El
Nuevo Herald. "And maybe there's something else that we don't know about."

The government may have shifted the money to financial institutions in
countries like China and Venezuela, where the banks are not BIS members,
the economist noted, in order to streamline its growing commercial trade
with those countries.

Cuban ruler Raúl Castro is now visiting China and Vietnam on one of his
rare trips abroad since he succeeded brother Fidel.

Perhaps the island's government drew down on its foreign deposits to pay
for imports of agricultural and other products, Luis added. Cuba has
been importing an estimated $1.5 billion a year in agricultural products
alone.

Cuba, which had large deposits in Spanish banks, also may have been
scared by the euro crisis and moved out a large part of its assets. "But
then why not put the money in other BIS banks, like Canadian banks?"
Luis said.

Cuban officials also may have spent the assets to settle outstanding
debts, Luis added, or turned them into gold in hopes of protecting
themselves from global economic swings.


http://www.miamiherald.com/2012/07/05/2883055/cuban-bank-assets-in-a-foreign.html