Foreign banks are refusing to accept letters of credit (L/Cs) for transactions involving Nicaragua according to the president of the country's Consultants for Business Development group, Nestor Avendano.

Wells Fargo Bank meanwhile has reportedly said it will terminate correspondent relations with Nicaraguan banks.

L/C implications

The moves apparently respond to Washington's Global Magnitsky Designations for Nicaragua (Magnitsky Nica) issued in June 2018 that prohibited US people and entities from engaging in transactions with blocked persons, including entities owned or controlled by designated persons.

"Foreign banks are telling Nicaraguan companies that they will not continue accepting L/Cs issued by Nicaraguan banks to avoid US sanctions contemplated in the Magnitsky Nica," according to Avendano.

He says the banks are responding to fears that they will fall foul of the US sanctions.

Correspondent withdrawals

Wells Fargo Bank meanwhile has reportedly informed four banks with which it has maintained correspondent relations in Nicaragua that it intends to withdraw from the country.

Several banks including Bank of America, Citibank and JP Morgan Chase have reportedly increased Nicaragua's country risk profile in response to poor relations between the regime of Daniel Ortega and the Trump administration as well as the sanctions imposed on the Central American country earlier this year.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.