Ohio Loans To Bank Opening Office In Havana |
Trade sanctions are an important issue in Washington because American firms can be put at a competitive disadvantage by embargoes. The Cuban exile community in Florida generally supports U.S. policy that make the island off limits, and there have been tensions between the exiles and business interests who want to lift the sanctions.
The loans to Scotiabank are from STAR Ohio, a massive investment fund managed by the treasurer's office. It pools money from local governments -- counties, cities, and school districts -- and tries to get the best available return from financial markets. STAR Ohio began operation in 1995, long before Mandel became treasurer. There is no suggestion the assets in the fund are at risk -- only that money is going to a company doing business in a country under U.S. sanctions. Mandel has loaned funds in the past to European and Eurozone banks. He has unwound those deals. Financial markets are extremely skittish about the safety of investments of banks in the Eurozone where a sovereign debt crisis could overwhelm economies and trigger economic recession or worse.
Scotiabank's efforts to expand into Cuba became public this week, including a report from the Brazil- Canada Chamber of Commerce that said the news first broke in London from the Financial Times: London-based Financial Times on Sunday night.
The loans to Scotiabank are from STAR Ohio, a massive investment fund managed by the treasurer's office. It pools money from local governments -- counties, cities, and school districts -- and tries to get the best available return from financial markets. STAR Ohio began operation in 1995, long before Mandel became treasurer. There is no suggestion the assets in the fund are at risk -- only that money is going to a company doing business in a country under U.S. sanctions. Mandel has loaned funds in the past to European and Eurozone banks. He has unwound those deals. Financial markets are extremely skittish about the safety of investments of banks in the Eurozone where a sovereign debt crisis could overwhelm economies and trigger economic recession or worse.
Scotiabank's efforts to expand into Cuba became public this week, including a report from the Brazil- Canada Chamber of Commerce that said the news first broke in London from the Financial Times: London-based Financial Times on Sunday night.
Amid economic reforms on the island, Bank of Nova Scotia has reportedly applied to Cuban authorities to set up a representative office in the capital. Royal Bank is also considering opening an office in Havana, the report said. Scotiabank, which has extensive operations across South America and the Caribbean, and RBC, Canada’s largest bank, both had branches in the country before the 1959 Cuban Revolution ushered in Communism, and a subsequent U.S. embargo, which slowed foreign investment . . .The Federal Reserve definition of commercial paper -- the type of loan Mandel has made to the Canadian bank -- is as follows:
The Cuba Trade and Economic Council lists more than 80 companies in Canada with business ties to Cuba, including Bell Canada, Bombardier, and dozens of oil and gas companies.
Commercial paper (CP) consists of short-term, promissory notes issued primarily by corporations. Maturities range up to 270 days but average about 30 days. Many companies use CP to raise cash needed for current transactions, and many find it to be a lower-cost alternative to bank loans.Crowell & Moring, a Washington law firm active in the trade arena, has published a background paper about the U.S. embargo on Cuba. Some pertinent excerpts:
The statutory basis for the U.S. embargo on Cuba is the Trading With the Enemy Act ("TWEA"), which confers broad authority on the President to impose restrictions in furtherance of U.S. policy. The embargo is administered by the OFAC and is implemented through the Cuban Assets Control Regulations ("CACR"). The restrictions imposed by the CACR apply to:
Accordingly - and this is important - the restrictions of the U.S. embargo on Cuba apply not only to U.S. businesses but also to foreign businesses that are "owned or controlled" by a U.S. person(s). This is in contrast to other U.S. embargo programs, such as those applicable to Iran or Libya, which are authorized by the International Emergency Economic Powers Act ("IEEPA"), and which do not permit direct U.S. jurisdiction over foreign corporations.
- any U.S. citizen or resident of the United States;
- any person within the United States;
- any business entity organized under U.S. law; and
- any "corporation, partnership, or association, wherever organized or doing business, that is owned or controlled" by a U.S. person or persons.
Companies with activities in the United States - be they U.S. or foreign companies - can find themselves entangled in the Cuban embargo. The CACR's expansive jurisdiction reaches a wide range of offshore activities, including the activities of U.S. persons wherever they may be, and even applies to non-U.S. persons who are employees of or acting on behalf of U.S. persons. It applies as well to non-U.S. parent corporations that are owned or controlled by U.S. interests
Well, according to a video found here (at about the 1:15 mark):
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But there's tiny hints that Cuba is starting to open up a little bit. Well who knows what's going to happen and nothing is going to go much further until Fidel Castro dies and then we may see things open up a little bit more. But there are tentative steps being made, and I think Royal Bank and Scotia Bank are trying to position themselves to get in there, at least with a representative office, so that when things do open up further they'll be able to take advantage of this.
But of course the thing you mentioned is the problem of what will happen to their relationship with the U.S.?
... You want to have your foot in the door if Cuba does open up.
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Well, it seems like Mandel won't really have to worry about this unless Fidel dies -- unless setting up an office while doing no real business somehow violates the sanctions. And it looks like even that might not happen for quite a while. Until then, just thinking about it or even talking with the Cuban government without actually doing anything doesn't count.
By that time, he might be a U.S. Senator.
Tom Blumer
BizzyBlog.com
Returns on Mandel's investments are a pittance. He should run for the Canadian Parliament instead of the U.S. Senate. Mandel would be much more comfortable in Ottawa doing bidding of the Nova Scotia bankers. New title: MP Mandel. For "member of parliament". He could serve on the Castro Committee and puff Cuban cigars.
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