JPRM-2022-015-M — Policy for Services to Operate with the Exterior

RESOLUTION No. JPRM-2022-015-M THE MONETARY AND FINANCIAL POLICY BOARD

CONSIDERING:

That, Article 226 of the Constitution of the Republic of Ecuador prescribes that public servants and persons acting under a state authority shall exercise only the competencies and powers attributed to them in the Constitution and the Law;

That, Article 227 of the same states that the Public Administration constitutes a service to the community governed by the principles of effectiveness, efficiency, quality, hierarchy, coordination, planning, among others;

That, the first paragraph of Article 303 of the Constitution of the Republic determines that the formulation of monetary, credit, exchange, and financial policies is the exclusive authority of the Executive Branch and will be implemented through the Central Bank of Ecuador;

That, Article 15 of the Organic Monetary and Financial Code was expressly repealed by the Organic Law Reforming the Organic Monetary and Financial Code for the Defense of Dollarization, published in the Official Register Supplement No. 443, on May 3, 2021;

That, Article 41 of the Organic Monetary and Financial Code, regarding financial operations of the non-financial public sector, establishes: “The institutions, organisms, and companies of the non-financial public sector must carry out, through the Central Bank of Ecuador or its accounts, all payments they must make, as well as all financial operations and services they require, including foreign trade operations, in accordance with the regulations and exceptions issued by the Monetary and Financial Policy Board.

Except for the entity in charge of public finances, social security entities, Decentralized Autonomous Governments, and the Deposit Insurance Corporation, Liquidity Fund, and Private Insurance Funds, non-financial public sector entities may not carry out financial investments, unless expressly authorized by the entity in charge of public finances.

Operations carried out by public institutions or public companies, through the Central Bank of Ecuador, as the State’s financial agent, whether in the country or abroad, are of a public nature.

RESOLUTION No. JPRM-2022-015-M Page | 2

---

The Central Bank of Ecuador will sanction the non-observance or failure to comply with the provisions of this article as a serious infringement.”;

That, Article 43 of the aforementioned Code, regarding information on the negotiation of currencies other than the United States dollar, establishes: “Entities of the national financial system authorized to negotiate in currencies other than the United States dollar will communicate to the Central Bank of Ecuador, in the form and with the periodicity determined by the Monetary and Financial Policy Board, for statistical purposes, the amounts and exchange rates of the operations they carry out, as well as the information the Central Bank of Ecuador requires regarding the movement of their accounts in foreign currencies. The Central Bank of Ecuador will sanction the non-compliance with this provision as a very serious infringement in accordance with this Code.”;

That, Article 47.1 of the aforementioned norm created the Monetary and Financial Policy Board as part of the Executive Branch, responsible for the formulation of monetary policy, the highest governing body of the Central Bank of Ecuador;

That, paragraphs 1 and 7 of Article 47.6 of the aforementioned Code, regarding the functions of the Monetary and Financial Policy Board, establish: “(…) 1. Formulate policy in the monetary sphere and observe its application by the Central Bank of Ecuador, to preserve the integrity and sustainability of the dollarization monetary system and the financial system, in accordance with the provisions of this Code; (…) 7. Formulate the policy of the operations of the Central Bank of Ecuador; (…)”;

That, paragraph 1 and the final clause of Article 53.1 supra, establish: “The Central Bank of Ecuador, to achieve its objective established in Article 27 and its functions, must:

1. Collect, compile, analyze, extract, prepare, and publish on the website and/or by any other means, with the periodicity determined by the Monetary and Financial Policy Board, the following information: figures corresponding to monetary, financial, credit, and exchange indicators; macroeconomic synthesis statistics of the country; interest rates; authorized payment systems and authorized operating institutions; statistics of payment systems and means; and, additional information required by the Monetary and Financial Policy Board. (…)

For the fulfillment of this function, the Central Bank of Ecuador may require any public or private institution to provide the information it deems necessary. The non-observance of providing the information, in accordance with the regulations of the Monetary and Financial Policy Board,

RESOLUTION No. JPRM-2022-015-M Page | 3

---

will be sanctioned as provided in this Code.”;

That, Article 140 of the aforementioned Organic Code, regarding debt service, establishes: “In its capacity as the State’s fiscal agent, it corresponds to the Central Bank of Ecuador to acquire foreign currency to carry out debt service and payments to public sector entities.

The Monetary and Financial Policy Board will authorize the opening and maintenance of accounts abroad for the use of public sector entities, prior to favorable reports from the entity in charge of public finances”;

That, Article 141 supra states: “The Monetary and Financial Policy Board will regulate the purchase and sale of foreign currency and determine the cases in which the sale of foreign currency is mandatory to the Central Bank of Ecuador.

Other exchange transactions may be carried out in the free market. The entity in charge of public finances will deliver to the Central Bank of Ecuador the programming of transfers abroad of the General State Budget.”;

That, Transitory Provision Fifty-Fourth supra prescribes: “Resolutions contained in the Codification of Monetary, Financial, Securities, and Insurance Resolutions of the Monetary and Financial Policy Board and Financial Policy Board and norms issued by control bodies will remain in effect until the Monetary and Financial Policy Board and the Financial Policy Board Board resolve what corresponds, within their competencies.”;

That, Chapter XIV: “On Foreign Currency”, of Title I: “Monetary System”, of Book I: “Monetary and Financial System” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, issued by the former Monetary and Financial Policy Board, regulates matters related to exchange transactions, foreign currency operations of public sector institutions, payment of imports, liquidation of hydrocarbons, whose analysis and treatment correspond to this Board;

That, it is necessary to adapt the aforementioned foreign currency policy in order to comply with the express provisions of current regulations;

That, it is the authority of the Monetary and Financial Policy Board to resolve on the norms contained in the Codification of Monetary, Financial, Securities, and

RESOLUTION No. JPRM-2022-015-M Page | 4

---

Insurance Resolutions, issued by the former Monetary and Financial Policy Board and Financial Policy Board, that relate to the monetary sphere, in order to incorporate these provisions into the own regulations of the Monetary and Financial Policy Board, prior to the analysis of the pertinence of each norm and provision, in a disaggregated manner;

That, the Monetary and Financial Policy Board, in an extraordinary virtual session on April 16, 2022, reviewed the proposal sent via memorandum No. BCE-BCE-2022-0097-M, of April 14, 2022, by the General Manager of the Central Bank of Ecuador to the President of the Monetary and Financial Policy Board, as well as the technical report No. BCE-SGSERV-2022-020/DNSP-2022-185/DNSF-2022-312, of April 13, 2022, and the legal report No. BCE-CGJ-054-2022, of April 14, 2022; and,

In exercise of its functions and in attention to Article 47.7 of the Organic Monetary and Financial Code, the Monetary and Financial Policy Board resolves to issue the:

POLICY OF SERVICES OF THE CENTRAL BANK OF ECUADOR TO OPERATE WITH THE EXTERIOR

CHAPTER I.- EXCHANGE TRANSACTIONS.-

Art. 1.- The Central Bank of Ecuador will publish daily the table of quotations of currencies other than the United States dollar, based on the purchase and sale foreign currency information registered by the market. The quotation table will be used for accounting purposes of the Central Bank of Ecuador.

The Central Bank of Ecuador may acquire foreign currency in international markets to carry out debt service and payments it must make.

Art. 2.- All legally permitted operations of purchase and sale of currencies other than the United States dollar, except those that must be carried out at the Central Bank of Ecuador, will be negotiated with financial entities legally authorized to operate in the purchase and sale of foreign currency.

Art. 3.- Entities of the national financial system authorized to negotiate in currencies other than the United States dollar, for statistical purposes, must report monthly to the Central Bank of Ecuador the purchase and sale operations of currencies other than the United States dollar that they carry out, including those agreed upon for the future or through other derivative instruments, indicating amount, term, and exchange rate.

RESOLUTION No. JPRM-2022-015-M Page | 5

---

CHAPTER II.- OPERATIONS OF THE PUBLIC SECTOR WITH THE EXTERIOR.-

Art. 4.- Payments and income of resources with the exterior, for any concept carried out by financial and non-financial institutions that make up the public sector, must be carried out obligatorily through the Central Bank of Ecuador.

Art. 5.- The Monetary and Financial Policy Board may authorize public sector entities to constitute, open, and maintain accounts abroad for debt service, prior to favorable reports from the entity in charge of public finances and the Central Bank of Ecuador.

Art. 6.- It corresponds to public institutions to carry out the control of accounts they open abroad for debt service.

CHAPTER III: FOREIGN TRADE OPERATIONS OF THE PUBLIC SECTOR.-

Art. 7.- The payment of public sector imports will be carried out through the Central Bank of Ecuador, via bank transfer and/or letter of credit, which the Central Bank of Ecuador will grant up to one hundred percent (100%) of the value of the merchandise, insurance, and freight plus a tolerance margin; for which, the Central Bank of Ecuador will require the prior deposit of the corresponding countervalue, in the account it designates for such effect. Imports requiring the use of letters of credit may be carried out under the modality of payment to the international correspondent bank at the beginning, at the maturity of the aforementioned letters, or through a combination of the two mechanisms.

For import operations of petroleum derivatives, the Central Bank of Ecuador will require the prior deposit of the corresponding countervalue, in coordination with the public entity in charge of the import and the entity in charge of public finances. The prior deposit of the corresponding countervalue will not be required for imports carried out using letters of credit payable at their maturity.

With the deposited values corresponding to the countervalue, the Central Bank of Ecuador will cover the letters of credit issued, being able to pay international correspondent banks that confirm the letter of credit, from the moment of the issuance of the letter of credit.

Once the Central Bank of Ecuador receives the final documents of the import, it will liquidate the values in favor or against the public entity.

CHAPTER IV: LIQUIDATION OF HYDROCARBONS.-

RESOLUTION No. JPRM-2022-015-M Page | 6

---

Art. 8.- The Central Bank of Ecuador will distribute resources arising from hydrocarbon exports, according to the instructions issued for this effect by the entity in charge of public finances, the detail contained in the hydrocarbon export invoices sent by the corresponding public entity, and the information sent by the ministry in charge of the energy and mining sectors, or whoever takes their place. The distribution of resources will not proceed if there is a difference in the information sent.

Art. 9.- At the request of the orderer of the distribution of resources, the Central Bank of Ecuador may carry out the corresponding debits and credits to the accounts that participants maintain at the Central Bank of Ecuador, provided that the accounts have sufficient resources.

GENERAL PROVISIONS

FIRST.- The Monetary and Financial Policy Board recognizes the provisions contained in Chapter XIV: “On Foreign Currency”, of Title I: “Monetary System”, of Book I: “Monetary and Financial System” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, issued by the former Monetary and Financial Policy Board and Financial Policy Board as part of the monetary regulations on which it corresponds to resolve.

SECOND.- The Central Bank of Ecuador will carry out transfers from and to the exterior that private banks, savings and credit cooperatives, and housing savings and credit mutual associations, international organizations, foreign governments, donor organizations, and central banks require, affecting the accounts they maintain at the Central Bank of Ecuador, as appropriate.

For the execution of these operations, the Central Bank of Ecuador will require the requesting entities to provide the necessary information so that this institution complies with the current tax provisions for this type of operations.

THIRD.- The distribution of hydrocarbon resources, as well as their re-liquidations, are the exclusive responsibility of the public company in charge of hydrocarbon management, the entity in charge of public finances, and the ministry in charge of the energy and mining sectors, or whoever takes their place, within the scope of their attributes and competencies.

FOURTH.- For statistical purposes, entities of the National Financial System will report to the Central Bank of Ecuador, in the structure and frequency that the latter determines for the effect, money transfers coming from the exterior, as well as money transfers to the exterior, that have been carried out on their own account, by order of their clients, or for any other concept.

RESOLUTION No. JPRM-2022-015-M Page | 7

---

The General Management of the Central Bank of Ecuador will report quarterly to the Monetary and Financial Policy Board the results of the analyses carried out with this information.

FIFTH.- For the purposes of what is established in this norm, the Central Bank of Ecuador may sign banking service contracts with public sector entities, for the fulfillment of its obligations.

SINGLE TRANSITORY PROVISION: Entities of the National Financial System will continue to report the structures of entry and exit of foreign currency to the Central Bank of Ecuador, under current conditions, until an administrative resolution establishes the structure and frequency that adapt to the fourth general provision of this norm.

SINGLE REPEALING PROVISION: Chapter XIV: “On Foreign Currency”, of Title I: “Monetary System”, of Book I: “Monetary and Financial System” of the Codification of Monetary, Financial, Securities, and Insurance Resolutions, issued by the former Monetary and Financial Policy Board and Financial Policy Board, is expressly repealed.

FINAL PROVISION.- This resolution will enter into effect from its issuance, without prejudice to its publication in the Official Register.

It is entrusted to its publication on the institutional website, to the Directorate of Documentary Management and Archive of the Central Bank of Ecuador.

COMMUNICATE.- Given in the Metropolitan District of Quito, on April 16, 2022.

THE PRESIDENT Dr. TATIANA MARIBEL RODRÍGUEZ CERÓN

The aforementioned resolution was signed by Dr. Tatiana Maribel Rodríguez Cerón - President of the Monetary and Financial Policy Board, in the Metropolitan District of Quito, on April 16, 2022.- I CERTIFY.

ADMINISTRATIVE SECRETARY Att. MARÍA ALEXANDRA GUERRERO DEL POZO