Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 041/2017

SUBJECT: MONETARY OPERATIONS MANAGEMENT - AMENDS THE OPEN MARKET OPERATIONS REGULATION

VIEWING:

• Law No. 1670 of October 31, 1995 of the Central Bank of Bolivia (BCB).
• Law No. 1883 of March 31, 1998, on the Securities Market.
• The BCB Statute approved by Board Resolution (B.R.) No. 128/2005 of October 21, 2005 and its subsequent modifications.
• The Open Market Operations Regulation (OMA), approved by Board Resolution No. 149/2015 of August 25, 2015, modified by Board Resolution No. 164/2015 of September 1, 2015.
• Act No. 016/2017 of the meeting of the Board of Directors of the Central Bank of Bolivia (BCB) dated March 21, 2017.
• The Report from the Monetary Operations Management BCB-GOM-SOMA-INF-2017-31 of March 27, 2017.
• The Report from the Legal Affairs Management BCB-GAL-SANO-DLBCI-INF-2017-67 of March 27, 2017.

CONSIDERING:

That Article 6 of Law No. 1670 empowers the BCB to execute monetary policy and regulate the money supply and credit volume according to its monetary program, being able to issue, place, and acquire securities and carry out other open market operations for this purpose.

That Law No. 1670 in its Article 3 establishes that the BCB, within the framework of this Law, will formulate policies of general application in monetary, exchange, and payment system matters for the fulfillment of its object; and in Article 6, it provides that the BCB will execute monetary policy and regulate the money supply and credit volume according to its monetary program. To this effect, it may issue, place, and acquire securities and carry out other open market operations.

That the aforementioned law in Article 44 establishes that the highest authority of the BCB is its Board of Directors, which is responsible for defining its policies, specialized regulations of general application, and internal norms; as well as for establishing administrative, operational, and financial strategies of the BCB, approving their respective short and medium-term programs.

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For the follow-up and supervision of their execution, it will have independent information, analysis, and audit services.

That in virtue of subsections a), d), and o) of Article 54 of Law No. 1670 and items 1), 4), and 29) of Article 11 of the BCB Statute, the BCB Board of Directors is empowered to issue norms and adopt general decisions so that the BCB fulfills the functions, competencies, and powers assigned by Law, as well as to issue norms for the open market operations carried out by the BCB and approve the BCB Regulations, by two-thirds of the votes of all its members.

That Law No. 1883 in its Article 3 establishes that: "The over-the-counter market shall be understood as that which is carried out outside the exchanges, with the participation of authorized intermediaries, with Securities registered in the Securities Market Registry. Only Securities authorized by the Securities Superintendency may be traded in the over-the-counter market."; and in its Article 5 that the secondary market comprises all transactions, operations, and negotiations carried out with Public Offer Securities, previously issued and placed, through authorized intermediaries.

That the Open Market Operations Regulation, approved by Board Resolution No. 149/2015, in its Article 4 states that the BCB Board of Directors defines monetary policies in general and open market operations policies in particular. Likewise, in its Article 14 paragraph II establishes that operations in the secondary market may be carried out with any value issued by the TGN, the BCB, or with values from private issuers expressly authorized by the BCB Board of Directors, through repo operations, swaps, purchase-sale, and others authorized by the BCB Board of Directors and by the COMA, when applicable.

That through Report BCB-GOM-SOMA-INF-2017-31, the Monetary Operations Management proposes a Mechanism for the Exchange of DPF for Direct Sale Securities, through which BCB Bolivianization Bonds will be issued as consideration for the acquisition of private dollar DPF, as requested in Board Act No. 016/2017 and to this effect recommends approving the issuance prospectus for the BCB Bolivianization bonds, approving the proposed modifications to Article 13 of the Open Market Operations Regulation, approved by Board Resolution No. 149/2015 of August 25, 2015, and approving the Regulation for the Exchange of DPF for Direct Sale Securities.

That Report BCB-GAL-SANO-DLBCI-INF-2017-67 from the Legal Affairs Management establishes that in accordance with Law No. 1670 and the BCB Statute, the Issuing Entity, through its Board of Directors, is legally empowered to approve the Issuance Prospectus of the BCB Bolivianization Bonds, approve the modification of Article 13 of the Open Market Operations Regulation, and at the same time approve the Regulation for the Exchange of DPF for Direct Sale Securities.

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THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Modify Article 13 of the Open Market Operations Regulation in the following terms:

SAYS:

Article 13 (Operating Mechanisms).-

OMAs may be carried out through operating mechanisms authorized by the BCB Board of Directors, among which are:

(...)

VI. Other Mechanisms. The BCB Board of Directors may authorize the execution of OMAs with mechanisms different from those previously established.

MUST SAY:

"Article 13 (Operating Mechanisms).-

OMAs may be carried out through operating mechanisms authorized by the BCB Board of Directors, among which are:

(...)

VI. Exchange of DPF for Direct Sale Securities. It is a mechanism by which the BCB acquires DPF in dollars that natural persons hold in the financial system and delivers BCB Bolivianization Bonds as consideration.

VII. Other Mechanisms. The BCB Board of Directors may authorize the execution of OMAs with mechanisms different from those previously established."**

Article 2.- The Presidency and the General Management are in charge of the execution and compliance of this Resolution.

La Paz, March 28, 2017

Pablo Ramos Sánchez

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Luis Baudoin Olea Ronald Polo Rivero Abraham Pérez Alandia Sergio Velarde Vera