Board Resolution No. 048/2002 Approving the Transitional Portfolio Regulation under Law 2297

BOARD RESOLUTION NO. 048/2002 SUBJECT: FINANCIAL ENTITIES MANAGEMENT – APPROVES THE TRANSITIONAL PORTFOLIO REGULATION UNDER LAW 2297.

HAVING SEEN: Law 1670 of October 31, 1995.

Law 2297 on Strengthening Financial Norms and Supervision of December 20, 2001. Supreme Decree 26575 of April 3, 2002, regulating Law 2297. Board Resolution No. 053/99 of June 22, 1999. Board Resolution No. 045/2000 of July 4, 2000. Board Resolution No. 068/2000 of October 3, 2000. Board Resolution No. 095/2000 of December 12, 2000. Board Resolution No. 032/2001 of April 17, 2001. The Report from the Legal Affairs Management and Financial Entities Management GEF-GAL No. 108/2002 of May 9, 2002.

CONSIDERING: That Article 1 of Law 2297 establishes the terms for the restructuring of portfolios from intervened entities for forced sale and from financial entities in liquidation process.

That Article 21 of Law 2297 establishes, for payment in cash, the benefit of forgiveness up to a maximum amount of five thousand United States dollars ($us.5,000), in favor of borrowers corresponding to non-linked credit portfolios whose balances are equal to or less than ten thousand United States dollars ($us. 10,000), prior to cash cancellation in a single payment of fifty percent (50%) of the outstanding capital balance.

That Chapter I of Supreme Decree 26575 regulates payment in goods and write-off of operations.

That Chapter II of Supreme Decree 26575 regulates the benefit for cash payment.

That Chapter IV, Article 13 of Supreme Decree 26575 establishes that the Central Bank of Bolivia, for compliance with the provisions contained in articles 17, 20 and 21 of Law 2297, in the administration of its portfolio originated in processes of forced sale or liquidation of financial intermediation entities, will consider in its internal procedures what is provided by Supreme Decree 26575.

That Chapter IV, Article 14 of Supreme Decree 26575 regulates the cancellation by the General Treasury of the Nation with bonds in favor of the Central Bank of Bolivia for the forgiveness operations indicated in Chapter II of the aforementioned Decree.

That the Financial Entities Management and Legal Affairs Management, in their Report GEF–GAL No. 108/2002 recommend, within the framework of Law 2297, approving a Transitional Portfolio Administration Regulation.

THEREFORE, THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES:

Article 1.- Approve the Transitional Portfolio Administration Regulation under Law 2297 on Strengthening Financial Norms and Supervision and Supreme Decree No. 26575, corresponding to the BCB portfolio received in dation in payment from financial entities in liquidation and from the portfolio administered by the former INALPRE, in its VI chapters and 29 articles, which as an annex forms part of this Resolution.

Article 2.- Instruct the Financial Entities Management that at the end of the validity of the Regulation, request reimbursement from the General Treasury of the Nation of the amounts forgiven in capital and current interest, with negotiable instruments in favor of the Central Bank of Bolivia.

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

La Paz, May 14, 2002

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Juan Antonio Morales A.

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Juan Medinaceli V. Armando Méndez M.

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Roberto Camacho S. Javier Comboni S.

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Enrique Ackermann A.

//4. R.D. Nº 048/2002 ANNEX OLD PORTFOLIO IN DEFAULT TRANSITIONAL REGULATION FOR PORTFOLIO ADMINISTRATION OF THE BCB AND IN ADMINISTRATION UNDER LAW NO. 2297

CHAPTER I GENERAL PROVISIONS

Article 1.- (Scope of Application) This regulation will apply to borrowers of the credit portfolio ceded to the Central Bank of Bolivia by entities in liquidation: Bancos Potosí S.A., Del Progreso Nacional S.A.M., Crédito Oruro S.A., Internacional de Desarrollo S.A. and the San José Obrero Cooperative. Likewise, it will apply to the credit portfolio transferred in administration to the BCB by the former INALPRE.

Article 2.- (Validity) This regulation has a transitional character, in application of Article 1st paragraph a) of Law 2297 and articles 9th paragraph d) and 10th paragraph d) of Supreme Decree 26575.

Borrowers who opt for the restructuring of their credits, can only do so within a period of up to 180 calendar days computable from the public notification made by the BCB.

Borrowers with credits whose outstanding capital balances on December 20, 2001 are equal to or less than ten thousand United States dollars ($us.10,000), can benefit from capital forgiveness up to a maximum amount of five thousand United States dollars ($us.5,000), provided that they cancel in cash and in a single payment fifty percent (50%) of the outstanding capital balance. This benefit will be valid until December 31, 2002.

Borrowers, with credits generated with public resources destined to small farmers and peasant producers, whose outstanding capital balances are greater than five thousand United States dollars ($us.5,000), can benefit with the forgiveness of said amount, prior to cash payment of the capital debt exceeding the amount of the forgiveness. This benefit will be valid until December 31, 2002.

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Article 3.- (Public Notification) Beneficiary borrowers of this regulation will be publicly notified of the application of the restructuring provided for by Law 2297.

Article 4.- (Report to the Risk Central and Credit Information of the SBEF) Any credit subject to this regulation will be reported to the corresponding category in the Central Risk Information and Control System (CIRC) under the Superintendence of Banks and Financial Entities.

Article 5.- (Forgiveness of Judicial Costs) The forgiveness established in this regulation of professional fees and judicial expenses will be assumed by the Central Bank of Bolivia.

CHAPTER II RESTRUCTURING OF CREDITS

Article 6.- (Subjects of Restructuring) Subjects of restructuring are all borrowers regardless of the sector to which they belong and of the risk classification of their credits. Consequently, in the restructurings provided for in this regulation, it will not be necessary to comply with what is established in Article 12nd of Circular SB/291/99 Regulation for Evaluation and Classification of Credit Portfolios and subsequent updates.

Borrowers whose credits were already restructured under the scope of the Regulation for Collection of Old Portfolios in Default, can also adhere to the provisions of this Regulation.

Article 7.- (Consolidation of Credits) All credit operations corresponding to a borrower or group of borrowers, will be consolidated into a single restructuring document.

The restructuring of the credit will be carried out only once, considering what is established in this regulation.

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Article 8.- (Guarantees) I. The guarantees constituted in the original credit documents will be maintained. Mortgage guarantees will retain the same degree of registration, or in their absence, at the request of the borrower, guarantees can be substituted and released maintaining at all times a relationship of outstanding capital – guarantee, taking as a base 64% of the commercial value of the guarantee. II. Personal guarantors will ratify their initial guarantee updating their asset declarations. III. Restructuring will not proceed in the absence of guarantees. The exhaustion of the useful life of the asset and the non-updating of asset declarations of personal guarantors will also be considered as absence of guarantees.

Article 9.- (Term for Restructuring) I. The restructuring will be carried out for a term of up to eight (8) years including two years of grace for capital payment. The restructuring may consider the capitalization of interest according to what is provided by Article 800 of the Commercial Code. II. Borrowers whose credits have maturity terms greater than those indicated above, may request the restructuring of the same submitting to the conditions established in this regulation.

Article 10.- (Debt Service) Payments for debt service will be made semiannually, monthly, bimonthly or quarterly. In no case will amortizations be annual. Any amortization will be imputed first to the payment of interest and then to the payment of capital.

Article 11.- (Recognition of Outstanding Balance) The borrower will recognize one hundred percent (100%) of the outstanding capital balance plus current interest calculated at the reference interest rate (TRe) in foreign currency plus five (5) percentage points, valid in the month prior to the date of restructuring.

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Article 12.- (Interest Rate) The interest rate of the restructured credit will be the reference interest rate (TRe) in foreign currency plus five (5) percentage points, valid in the month prior to the date of payment.

Article 13.- (Currency) Restructurings will be carried out in United States dollars.

Article 14.- (Term for Application of Restructuring) Once the beneficiary borrowers of the restructuring provided for in this regulation are notified, a term of 180 days from publication is granted to adhere to said benefit.

Article 15.- (Expenses borne by the Borrower) The expenses required for the restructuring will be at the expense of the borrower. In case the credit object of the restructuring is under judicial execution, the fees of the sponsoring lawyer will be paid by the borrower.

Article 16.- (Forgiveness of Penal, Late Interest and Other Expenses) 100% of penal interest, late interest, judicial expenses, forms will be forgiven when the debtor restructures the operation under the conditions established in this regulation.

Article 17.- (Provision Regime and Classification for Credit Portfolio) The classification of credits and provisions constituted on the date of restructuring will be maintained until the cancellation of the restructured credit.

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CHAPTER III RECEPTION OF GOODS WITH PERFORMANCE DIVERSE FROM THE DUE

Article 18.- (Requirements for Payment with Performance Diverse from the Due) I. Payment with performance diverse from the due will proceed when the borrower has failed to pay one of the installments of the restructured credit under the conditions of this regulation. II. The goods offered as payment will have legal documentation in order and payment of taxes up to date; likewise, they must be free of liens or debts, attachments and possession by third parties. In all cases, the borrower will grant the guarantee of eviction and legal soundness. Rural goods must comply with the economic and social function according to what is established by Law 1715 INRA. III. The term for this operation ends on December 31, 2002.

Article 19.- (Benefits) Borrowers who make payments with performance diverse from the due will benefit from the forgiveness of one hundred percent (100%) of penal interest, administrative and judicial expenses.

Article 20.- (Value Accepted in Payment) The value of the good to be received in payment will be equivalent to sixty percent (60%) of its commercial value according to updated appraisal.

Article 21.- (Nullity) The performance diverse from the due will be celebrated through a contract, in which nullity will be stipulated in case of hidden defects or subsequent problems that prevent the BCB from exercising its proprietary right or the realization of the received goods. In this case, the originally contracted obligation will subsist, and legal collection actions must be initiated or continued.

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Article 22.- (Expenses borne by the Borrower) The expenses of payment with performance diverse from the due such as appraisal, taxes, notarial expenses and others that may be necessary, will be at the expense of the borrower. In case of judicial execution, the fees of the sponsoring lawyer of the creditor will be honored by the borrower.

CHAPTER IV CASH PAYMENT BENEFIT

Article 23.- (Beneficiaries) Borrowers who on December 20, 2001, have one or more credits and whose individual balances are equal to or less than ten thousand United States dollars ($us.10,000), can benefit from the forgiveness of 50% of the capital per operation.

Article 24.- (Procedure) I. Beneficiaries will cancel in cash and in a single payment fifty percent (50%) of the capital debt, as well as the total of the sponsoring lawyer's fees in case the credit is under judicial execution. II. Once the payment is made, the forgiveness will be applied to the rest of the obligation (capital balance plus current interest, penal interest and other charges as well as administrative and judicial expenses of the total obligation). III. The term for this operation ends on December 31, 2002.

Article 25.- (Prohibition) Operations that are restructured under the conditions established in this regulation, cannot adhere to the cash payment benefit.

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CHAPTER V FORGIVENESS OF CREDITS TO THE AGRICULTURAL SECTOR GENERATED WITH PUBLIC RESOURCES

Article 26.- (Beneficiaries) Small farmers and peasant producers who have one or more credits generated with public resources and mixed financing, and whose individual outstanding capital balances are greater than five thousand United States dollars ($us.5,000.-), can benefit with the forgiveness of five thousand United States dollars ($us.5,000.-).

Article 27.- (Procedure) I. Beneficiaries will cancel in cash and in a single payment the difference resulting between the total amount owed in capital and the amount to be forgiven of five thousand United States dollars ($us.5,000.-). II. Once the payment is made, the forgiveness will be applied to the five thousand United States dollars ($us.5,000.-) and to all current interest, penal interest, and other charges, as well as administrative expenses and judicial costs of the total obligation. III. The term for the forgiveness expires on December 31, 2002.

CHAPTER VI FINAL PROVISIONS

Article 28.- (Execution) The Financial Entities Management through the Sub-Management of Recovery and Asset Realization will be in charge of the execution of this Regulation, being able to request the services that are necessary from the other areas of the BCB.

Once the restructuring and payment procedures are completed, with the corresponding technical and legal reports, the contracts will be elevated for the signature of the General Manager of the Institution.

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Article 29.- (Payment of Forgiven Amounts) The amounts forgiven in capital and current interest will be reimbursed by the General Treasury of the Nation with bonds in favor of the Central Bank of Bolivia. The Financial Entities Management will determine said amounts for collection from the TGN, one month after the end of validity of this regulation. ---ooo---