Cuba is poised to join the development bank club in a move that could see it receive a loan by the end of the year once both parties have overcome strict US legal barriers.
The Central American Bank for Economic Integration (Cabei) admitted Cuba as an extra-regional member in April and said it could conclude the process with a paid-in capital contribution by the end of the year.
“This is a major change, because it is the first time that Cuba is going to be a member of a development bank,” Cabei president Nick Rischbieth told GlobalMarkets. “While [US President Donald] Trump has rolled back some of the openness, we believe that in the long run Cuba will normalise its relations with the world and will look to have a larger relationship with multilateral institutions.”
Letting in Cuba is no easy feat. Cabei has been extremely careful to guarantee that future loans to Cuba would not run afoul of US law. The bank has set up different mechanisms for loaning to Cuba — it would be eligible for $200m in loans — that segregates loans from the rest of the bank’s operations. Loans to Cuba cannot be in US dollars.
“Attending to Cuba is not simple. We have to make sure that anything we do is not related to the United States,” he said. The CAF-Development Bank of Latin America had toyed with admitting Cuba a few years back, but membership never materialised.
Broader strategy
The decision to accept Cuba is part of a broader strategy adopted by Cabei to expand its membership beyond the original five borrowing countries — Costa Rica, El Salvador, Guatemala, Honduras and Nicaragua — to the full region.
It brought in Belize, Dominican Republic and Panama last year. The Dominican Republic, while not physically part of Central America, is part of the Central American Integration System. Cuba is also looking at joining that system.
South Korea had been expected to join this year, but the process was stalled by the political turmoil created by former President Park Geun-hye’s impeachment in late 2016.
The bank’s role has been expanding rapidly even without the incorporation of South Korea and it has top-notch investment ratings from the three big agencies.