Cuba expands trade relations with South Korea

South Korea’s government-run trade insurer said Tuesday (Feb. 10) that it has signed a memorandum of understanding to set up a formal credit line and payment guarantee arrangement with Cuba that will allow South Korean companies to trade with Havana.

Under the deal reached in Havana, the Korea Trade Insurance Corporation (K-sure) will provide $67.9 million worth of credit line to the Banco Central de Cuba (BCC) and the Banco Exterior de Cuba (BEC), and establish a payment insurance arrangement.

The arrangement can ensure that South Korean companies are paid for goods shipped to Cuba by getting a letter of credit issued by BEC — the island’s foreign trade operator — that is approved by the central bank.

“The memorandum of understanding removes a major uncertainty that has held up local companies from entering the Cuban market,” K-sure President Kim Young-hak said.

In the past, even if a company got a letter of credit, it had to be confirmed by a third country bank, a process that took a considerable amount of time.

K-Sure’s senior manager, Nam Ki-seol, said that the deal would help double South Korean exports to Cuba, which currently stand at around $70 million per year. South Korean providers of electrical generation equipment and household appliances are likely to benefit. There is considerable demand in Cuba for power generators, related parts and various energy-efficient electronic appliances, as well as basic necessities.

The agreement comes as Cuba negotiates the restoration of diplomatic relations with the United States. Cuba has no formal diplomatic relations with South Korea but maintains unofficial trade relations with that country. It does have diplomatic relations with North Korea.

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UPDATE: South Korea will try to establish normal diplomatic relations with Cuba, in an effort to expand its diplomacy in Central and South America, the South Korean Foreign Ministry announced on Tuesday (Feb. 10).

Foreign Minister Yun Byung-se told his nation’s parliament that this year Seoul will try to improve its relations with Havana and strengthen its ties with nations in Central and South America.

[Sources: Yonhap News Agency and Global Trade Review.]