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March 22, 2022

How Will Sanctions on Russian Banks Hit Latin America?

Latin America Advisor, The Dialogue

International Trade attorneys Francisco Sanchez and Mackenzie Zales spoke with The Dialogue's Latin America Advisor about the effects of sanctions on Russian Banks in Latin America and the Caribbean. In the Q&A style interview, the publication explains that the U.S. and EU imposed sanctions on banks in Russia, which bar more than a dozen Russian banks from using the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network and financial institutions use to execute overseas transactions, could cause problems for countries such as Venezuela, Cuba and Nicaragua which often rely on Russian banks.

Mr. Sanchez and Ms. Zales explain how important Russian banks are to Latin American countries and commercial ties. "Sanctions targeting Russian banks' ability to rely on SWIFT will have repercussions for Russia's allies, including allies in Latin America. With Russian banks banned from SWIFT, Russia and its allies will be severely impeded in transacting business, including in providing and receiving natural resources."

When asked which Russian allies in Latin America are most affected by the banking sanctions and what effect the sanctions will have on them, the attorneys responded that the U.S. has an "interesting policy decision" involving Venezuela which has historically used Russian banks to avoid sanctions. They then mentioned that "U.S. officials recently traveled to Venezuela to determine whether the governments can work together during this crisis to alleviate sanctions on the Venezuelan government in exchange for collaboration on energy supply issues."

Mr. Sanchez and Ms. Zales go on to explain which sectors in Latin America will experience the biggest effects from the sanctions on Russia. "For those countries that rely on reserves held in Russian banks, the foreign governments will face setbacks in trying to make good on their reserves held in rubles because the currency is crashing. Limiting Russian banks' use of SWIFT will also create issues for the tourism industry. Combined with Russian aircraft restrictions, wealthy Russian tourists will be hindered in their ability to travel to Latin American destinations. Russian tourists will likely stay home if they are unable to access resources while abroad, use the airspace above a growing number of countries or make use of luxury assets. For many Latin American countries, tourism is a major source of income for the private and public sectors, so we will continue to watch for the effects of sanctions on the industry."

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