Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 019/2016

SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES REGULATIONS FOR CREDITS TO STRATEGIC NATIONAL STATE-OWNED ENTERPRISES WITHIN THE FRAMEWORK OF THE GENERAL STATE BUDGET LAWS.

VISTOS (VIEWED):

Law No. 1670, dated October 31, 1995, of the Central Bank of Bolivia (BCB).

The Statute of the BCB, approved via Board Resolution No. 128/2005, dated October 21, 2005, and its subsequent modifications.

Board Resolution No. 023/2011, dated February 22, 2011, which approves the Regulations for the Granting of Credit to Strategic National State-Owned Enterprises within the framework of the General State Budget – Management Periods 2010 and 2011, modified via Board Resolutions No. 026/2011 of March 2, 2011, No. 027/2011 of March 18, 2011, No. 030/2011 of March 22, 2011, No. 097/2011 of August 9, 2011, No. 039/2012 of March 23, 2012, No. 064/2012 of May 29, 2012, No. 024/2013 of March 12, 2013, No. 144/2013 of October 15, 2013, No. 008/2014 of January 28, 2014, No. 040/2014 of April 29, 2014, and No. 039/2015 of March 17, 2015.

Law No. 650 of January 15, 2015, which elevates the “Patriotic Agenda for the Bicentennial 2025” to the rank of Law.

Law No. 769 of December 17, 2015, which approves the General State Budget for the 2016 management period (PGE – 2016).

The report from the Monetary Operations Management Department, Reference: BCB-GOM-SOSP-DCE-INF-2016-2, dated January 27, 2016.

The report from the Legal Affairs Management Department, Reference: BCB-GAL-SANO-INF-2016-21, dated January 29, 2016.

CONSIDERING:

That via Board Resolution No. 023/2011, the BCB Board of Directors approved the Regulations for the Granting of Credit to Strategic National State-Owned Enterprises within the framework of the General State Budget – Management Periods 2010 and 2011, which was modified via Board Resolutions No. 026/2011, No. 027/2011, No. 030/2011, No. 097/2011, No. 039/2012, No. 064/2012, No. 024/2013, No. 144/2013, No. 008/2014, No. 040/2014, and No. 039/2015, with the objective of regulating the granting of credits in favor of Strategic National State-Owned Enterprises (EPNE).

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That Law No. 650 elevates the “Patriotic Agenda for the Bicentennial 2025” to the rank of Law, which contains the thirteen (13) pillars of Dignified and Sovereign Bolivia.

That Law No. 769, which approves the PGE – 2016, in its Article 9 determines granting an extraordinary credit of up to Bs12,270,161,994.- (Twelve Billion Two Hundred Seventy Million One Hundred Sixty-One Thousand Nine Hundred Ninety Four 00/100 Bolivianos), in favor of the National Electricity Company – ENDE, under concessional conditions. In its Article 10, it establishes that the guarantees granted by the General Treasury of the Nation to back the credits conceded by the BCB in favor of EPNEs will be gradually substituted when the projects financed with these credits are in operation. In its Second Final Provision, it extends the validity of Article 12 of Law No. 614.

That within the framework of what is provided by Laws No. 650 and No. 769, for the consideration of new credit requests to be presented by EPNEs, it is necessary to adapt the Regulations for the Approval of Credit to Strategic National State-Owned Enterprises within the framework of the General State Budget – Management Periods 2010, 2011, 2012, 2013, 2014, and 2015, incorporating the provisions of the aforementioned Laws.

That the Monetary Operations Management Department, via report Reference: BCB-GOM-SOSP-DCE-INF-2016-2, concludes that it is necessary to modify its various clauses of the Regulations for the Approval of Credit to EPNEs, within the framework of the current legal order, and therefore recommends that the BCB Board of Directors consider the modifications inserted in Annex 1.

That the Legal Affairs Management Department, via report Reference: BCB-GAL-SANO-INF-2016-21, concludes that the proposal for modification of the Regulations for the Approval of Credits to Strategic National State-Owned Enterprises of the Central Bank of Bolivia is legally appropriate, insofar as it does not contravene the current legal order, being the competence of the Board of Directors to consider its approval by two-thirds of the votes of all its members, in accordance with what is established in Article 54 subsection o) of Law No. 1670 and Article 11 numeral 29 of the BCB Statute.

That Article 11 numeral 29 of the BCB Statute, concordant with Article 54 subsection o) of Law No. 1670, establishes that the Board of Directors has the authority to approve, modify, and interpret the Statute and regulations by two-thirds of the votes of its members, without the need for any additional administrative act.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the “Regulations for Credits to Strategic National State-Owned Enterprises within the framework of the General State Budget Laws.”

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Article 2.- These Regulations shall enter into force from the date of their approval.

Article 3.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, February 2, 2016

Marcelo Zabalaga Estrada
Sergio Velarde Vera
Ronald Polo Rivero
Abraham Pérez Alandia
Reynaldo Yujra Segafes
Álvaro Rodríguez Rojas

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ANNEX

REGULATIONS OF THE CENTRAL BANK OF BOLIVIA FOR THE APPROVAL OF CREDITS TO STRATEGIC NATIONAL STATE-OWNED ENTERPRISES WITHIN THE FRAMEWORK OF THE GENERAL STATE BUDGET LAWS

CHAPTER I

PRELIMINARY PROVISIONS

Article 1.- (Object)
The purpose of these Regulations is to regulate the granting of extraordinary credits by the Central Bank of Bolivia (BCB) in favor of Strategic National State-Owned Enterprises (EPNE), within the framework of what is provided in the General State Budget Law for each management period.

CHAPTER II

CREDIT REQUEST

Article 2.- (Credit request of the EPNE)
To consider and approve the credit request, the EPNE must comply with the following requirements:

I. The EPNE, through its highest executive authority, will send a duly signed note addressed to the President of the BCB, requesting that the credit authorized by the respective PGE law be granted, specifying the following:
a. Articles of the PGE Law that authorize the granting of the credit, b. Amount requested,
c. Proposed disbursement schedule and payment plan,
d. Proposed deadline for disbursements, e. Proposed term and method of payment of principal and interest, f. Guarantees.

II. The following documents must be attached to the request note:
Documents accrediting the legal personality of the EPNE, in simple photocopy.

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a. Document accrediting Legal Representation for the signing of the credit contract, in original or legalized photocopy and photocopy of the legal representative's identity card. b. Presidential Decree appointing the Minister head of the sector, in original or legalized photocopy and photocopy of their identity card.

III. Attach the Ministerial Resolution from the Head Sector Ministry (MCS), which must:
a. Justify that the use and destination of the resources of the credit to be acquired by the EPNE are of national priority within the framework of Law No. 650, of January 19, 2015, “Patriotic Agenda for the Bicentennial 2025” and the National Economic and Social Development Plan 2016 – 2020. b. Approve the Technical Feasibility Report of the project,
c. Approve the economic-financial evaluation prepared by the EPNE, which justifies and ensures the credit repayment capacity,
d. Establish that the future cash flows of the EPNE will be used for the payment of the credit, e. Establish the commitment of the MCS to carry out the evaluation and monitoring of the execution of the credit resources and determine its periodicity.

IV. Administrative Resolution issued by the Board of Directors or Highest Decision-Making Body of the EPNE, through which the Investment Plan and Disbursement Schedule of the credit resources are approved, with a breakdown of expenses in National Currency and Foreign Currency.

V. Attach communication notes of the Investment Plan and Disbursement Schedule, from the EPNE addressed to the Ministries of Development Planning (MPD), of Economy and Public Finances (MEFP), and MCS.

Article 3.- (Repayment Capacity)
The EPNE, to back the payment of its obligations, must have and demonstrate the capacity to commit a sufficient flow of its own resources. This flow must consider the flows corresponding to the parent company, its subsidiaries, or those in which it maintains participation and/or the flow of resources of the project subject to the credit.

Article 4.- (Credit Guarantees)
The payment of the principal and interest of the credit granted to the EPNE will be guaranteed by Non-Negotiable Treasury Bonds issued in favor of the BCB or by the authorization of the debit

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from any of the accounts that the EPNE possesses or acquires, as determined by the respective Law, which aspect will be expressly stated in the credit granting contract to be signed.

The Treasury Bonds to be issued by the MEFP will be requested jointly by the BCB and the MCS.

Article 5.- (Substitution of Guarantees and Debt Service).

I. For the gradual substitution of guarantees granted by the TGN that back projects financed with credits conceded by the BCB, the MCS of the beneficiary EPNE will send to the MEFP the report accrediting that the project is in operation with the capacity to cover the credit obligations with the BCB.

II. With the report provided in the preceding paragraph, the BCB and the beneficiary EPNE, at the request of the MEFP, will adapt the corresponding credit contracts within a period of sixty (60) calendar days, extendable at the request of either party, with prior justification, in order to substitute the guarantees granted by the TGN, under the terms provided by Paragraph II of Article 10 of Law No. 769.

III. The gradualness, conditions, and other related aspects for the substitution of guarantees will be approved by the MEFP, via Ministerial Resolution.

IV. In the event that there are insufficient funds for automatic debit, the BCB will request the pertinent instance to block the debit of the fiscal checking account and/or the checking account of the beneficiary EPNE, until the total restitution of the debt service installment.

Article 6.- (Reports for the consideration of the credit). Upon receipt of the request and the documentation established in Article 2 of these regulations, prior to the consideration by the Board of Directors, the President of the BCB will request the following reports:
a. Technical report on the financial conditions, which must be issued by the Monetary Operations Management (GOM). b. Legal report regarding compliance with regulations and presentation of required documentation, which must be issued by the Legal Affairs Management (GAL).
c. Other reports to be issued by other areas of the BCB, as required.

# Central Bank of Bolivia
## Board of Directors

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## Article 7.- (Approval of financial conditions)

Considering the reports described in Article 6 of these regulations, the BCB Board of Directors will take note of the EPNE's credit request, determine and approve the financial conditions of the credit, considering the EPNE's request and the degree of concessionality established by the MEFP via Ministerial Resolution for each management period, following the procedure set forth in the Appendix of these regulations.

Once the financial conditions are determined and approved, they will be communicated in writing to the EPNE, which must express its acceptance or rejection via a note signed by the HAE (Highest Executive Authority).

The determination and approval of the financial conditions must be recorded in the Minutes corresponding to the respective Board of Directors meeting.

## Article 8.- (Approval of the Credit)

Upon receipt of the EPNE's conformity with the financial conditions, the BCB Board of Directors will approve the granting of the credit via Resolution, with the favorable vote of two-thirds of its members present at the respective meeting.

It will also authorize the President of the BCB to sign the respective contract.

## Article 9.- (Contract)

The conditions of the credit approved by the BCB Board of Directors will be recorded in the contract to be signed between the EPNE, the BCB, and the MCS. The Contract must be notarized before the General Directorate of Government Notaries, of the Autonomous Departmental Government of La Paz.

The notarization procedures of the Contract will be carried out by the BCB. The expenses incurred by these procedures will be covered by the EPNE within a maximum period of six months from the signing of the contract, in order to give continuity to the corresponding disbursement requests.

## Article 10.- (Conditions for Disbursements)

The disbursements of the resources of the granted credit will be made only when the following are available:

a. Disbursement request note signed by the highest executive authority of the EPNE, specifying:
    i. Contract Number.
    ii. Disbursement Number,

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    iii. Amount requested.

b. Disbursement authorization note signed by the Minister head of the sector, to which the monitoring and evaluation reports duly approved by this authority must be attached, in accordance with the periodicity established in the Ministerial Resolution issued by the MCS.

c. Two specific accounts enabled at the BCB in Bolivianos, one for disbursements and another for the payment of the credit service. For this effect, the EPNE must request the MEFP to open them at the BCB.

## Article 11.- (Modifications to the Investment Plan or Disbursement Schedule)

In the event that the Investment Plan or Disbursement Schedule is subject to modification, the EPNE must accredit before the BCB the corresponding approval by its Highest Decision-Making Body through a Board or Administrative Resolution that must be sent to the MPD, MEFP, and MCS.

## Article 12.- (On registration and accreditation, the use and destination of the Credit resources)

The registration and accreditation of the credit in the TGN, as well as the use and destination of the credit resources, are the exclusive responsibility of the EPNE. The evaluation and monitoring of the resources of the granted credit are the exclusive responsibility of the Head Sector Ministry.

## FINAL PROVISION

Credit contracts signed prior to the validity of these Regulations will be subject to the regulations in force at the time of their signing, except for modifications made by superior norm.

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## Appendix

### PROCEDURE TO DEFINE THE DISCOUNT RATE AND THE DEGREE OF CONCESSIONALITY IN CREDITS TO BE GRANTED TO STRATEGIC NATIONAL STATE-OWNED ENTERPRISES (EPNE)

#### Section 1.- (Discount Rate)

The Discount Rate will be calculated as the average of at least the last twelve allocation rates in the Auction of the General Treasury Bonds of the Nation, corresponding to the term of the credit request. In the event that the obtained discount rate is not congruent i.e., is not higher for longer terms (and vice versa) with the discount rates of credits approved in the last twelve months, an additional observation must be systematically added, until the result is coherent.

#### Section 2.- (Degree of Concessionality)

The degree of concessionality will be defined based on the Ministerial Resolution issued by the MEFP for this effect. In the event that the Resolution explicitly establishes the degree of concessionality, this data will be taken.

If the Resolution establishes a minimum value for this variable, the BCB will follow the following procedure:

1) Calculate $i^{max}$ consistent with a minimum degree of concessionality established by Resolution of the Ministry of Economy and Public Finances.

2) Take as the reference rate $i^{ref}$ the yield of the Net International Reserves ($i^{ref} = i^{RIN}$) of the last twelve (12) months.

3) The $i^*$ of the credit to be granted will be:
    - $i^{max}$ if $i^{ref} \geq i^{max}$
    - $i^{max}$ if $i^{ref} < i^{max}$ and the lower, if the project to be financed corresponds to a company that at the time of the credit request is not in the operation stage.

If the Resolution establishes a minimum and maximum value for the degree of concessionality, the interest rate will be established according to the procedure mentioned.

4) In the event that the EPNE requests a grace period for principal and interest when the company at the time of requesting the credit is not in the operation stage, the calculation of the interest rate will be carried out as follows:
    i. Calculate ($i^{ref} = i^{RIN}$) considering the grace period only for capital.

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    ii. Maintain constant the Degree of Concessionality resulting from the previous operation $\overline{GC}$.

    iii. Take that $\overline{GC}$ to perform the calculation of the new interest rate considering the grace period for capital and interest.

5) In the event that the obtained interest rate is above the highest historical interest rate granted in the same term of the requested credit, within the framework of the Degree of Concessionality established in the current Ministerial Resolution issued by the Ministry of Economy and Public Finances, the BCB Board of Directors may determine interest rates between the maximum and minimum indicated in the previous numerals.