Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 110/2019

SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES THE REGULATION FOR THE APPROVAL OF CREDITS TO THE PUBLIC SECTOR UNDER LAW NO. 1670.

VISTOS (VIEWED):

• The Political Constitution of the State (CPE).
• Law No. 1670 of the Central Bank of Bolivia (BCB) of October 31, 1995.
• The BCB Statute approved by Board Resolution No. 128/2005 of October 21, 2005, and its subsequent modifications.
• The Regulation on Credits to the Public Sector approved by Board Resolution No. 95/2006 of November 7, 2006.
• Internal Communication BCB-APEC-SMF-CI-2019-106 of August 27, 2019, from the Economic Policy Advisory (APEC).
• Report BCB-GOM-SOSP-DCE-INF-2019-152 of August 27, 2019, from the Monetary Operations Management (GOM).
• Report BCB-GAL-SANO-DLBCI-INF-2019-243 of August 27, 2019, from the Legal Affairs Management (GAL).

CONSIDERING:

That Article 327 of the CPE establishes that the BCB is a public law institution, with legal personality and its own assets. Within the framework of the State's economic policy, it is the function of the BCB to maintain the stability of the internal purchasing power of the currency, to contribute to economic and social development.

That Article 22 of Law No. 1670 provides that the BCB may not grant credit to the public sector nor incur contingent liabilities in its favor. Exceptionally, it may do so in favor of the National Treasury, with the favorable vote of two-thirds of the members present at a Board meeting, in the following cases: a) to attend to urgent needs derived from public calamities, internal or international unrest, declared by Supreme Decree; and b) to attend to temporary liquidity needs, within the limits of the monetary program.

That Article 23 of said Law determines that the operations provided for in the previous article shall be documented in all cases through negotiable debt securities

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issued by the National Treasury, which, in the case provided for in subsection b), shall have a maximum term of one year.

That subsections a) and o) of Article 54 establish that the BCB Board has the authority to issue norms and adopt general decisions that may be necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by the Law, as well as to approve, modify, and interpret the Statute and Regulations of the BCB.

That the BCB Statute in items 1) and 29) of Article 11 determines that the Board is empowered to approve general decisions and issue the norms that may be necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by the Law, and to approve, modify, and interpret the Statute and Regulations of the BCB, by two-thirds of the votes of all its members, without the need for any additional administrative act.

That furthermore, in the second paragraph of Article 26, it provides that every draft Board Resolution must be motivated and justified by a Technical Report from the Management or Managements to whom the subject matter of the Resolution corresponds, and by a Report from the Legal Affairs Management. These reports must be submitted to the Board by the General Management with its recommendation.

That the Regulation on Credits to the Public Sector regulates Articles 22, 23, and 25 of Law No. 1670 and establishes the basic norms and procedure for granting public credit in the cases provided for in Article 22 of said Law.

CONSIDERING:

That through Internal Communication BCB-APEC-SMF-CI-2019-106, APEC suggests that in the new Regulation for the Granting of Credits to the Public Sector under Law No. 1670, the report of APEC be excluded from Article 5, considering that only subsection b) of Article 22 of the aforementioned Law requires the pronouncement of APEC for liquidity credits.

That GOM, through Report BCB-GOM-SOSP-DCE-INF-2019-152, states that it is necessary to modify its various articles of the Regulation on Credits to the Public Sector approved by Board Resolution No. 095/2006 of November 7, 2006, and recommends that the BCB Board consider the new version of the Regulation.

That through Report BCB-GAL-SANO-DLBCI-INF-2019-243, GAL concludes that the approval of the Regulation for the Approval of Credits to the Public Sector in the Framework of Law No. 1670 does not contravene the current legal order, therefore it is legally procedent, being the competence of the BCB Board to consider its approval by two-thirds of the votes, in observance of subsection o) of Article 54 of Law No. 1670 and item 29) of Article 11 of the BCB Statute.

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THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the Regulation for the Approval of Credits to the Public Sector in the Framework of Law No. 1670, which forms part of this Resolution as an annex.

Article 2.- Establish the entry into force of the aforementioned Regulation from the approval of this Resolution.

Article 3.- Repeal Board Resolution No. 095/2006 of November 7, 2006.

Article 4.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, August 27, 2019

Pablo Ramos Sánchez Gabriel Herbas Camacho Sergio Velarde Vera Ronald Polo Rivera Luis Baudoin Olea

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ANNEX

REGULATION FOR THE APPROVAL OF CREDITS TO THE PUBLIC SECTOR IN THE FRAMEWORK OF LAW NO. 1670

CHAPTER I

OBJECT, TERMINOLOGY, AND ABBREVIATIONS

Article 1 (Object).-

This instrument aims to regulate the granting of credits to the public sector within the framework of Articles 22 and 23 of Law No. 1670, establishing the requirements and procedures in the cases provided for in Article 22, namely:

1.1 To attend to urgent needs derived from public calamities, internal or international unrest, declared by Supreme Decree.

1.2 To attend to temporary liquidity needs, within the limits of the monetary program.

Article 2 (Public Credit Operations).-

"Public Credit Operations" are defined as money loans with public value guarantees, granted by the Central Bank of Bolivia in favor of the Ministry of Economy and Public Finance, to attend to the needs indicated in Article 1.

Article 3 (Terminology and Abbreviations).-

For the purposes of this regulation, the following terms and abbreviations will be used:

• BCB: Central Bank of Bolivia
• MEFP: Ministry of Economy and Public Finance
• APEC: Economic Policy Advisory of the BCB
• GAL: Legal Affairs Management of the BCB
• GOM: Monetary Operations Management of the BCB
• TGN: General Treasury of the Nation, represented by the MEFP, with sufficient legal capacity to incur obligation.

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VALUES: Any negotiable debt security, public papers issued by the MEFP, or dematerialized public values represented by book entries.

CUT: Single Treasury Account

EDV: Securities Depository Entity

SIRTEX: Over-the-Counter Transfer Registration System

CHAPTER II

CREDITS FOR PUBLIC CALAMITIES, INTERNAL OR INTERNATIONAL UNREST

Article 4 (Requirements).-

For the consideration of the credit, it is necessary that the MEFP comply with the following requirements:

4.1 The corresponding Supreme Decree in the terms indicated in Article 1 of this Regulation.

4.2 Note from the Highest Executive Authority (MAE) duly signed, addressed to the President of the BCB, requesting the credit and specifying the following:

a) Normative backing the credit request b) Amount requested c) Currency d) Term e) Public value backing the credit f) Method of payment of principal and interest

4.3 Disbursement schedule and payment plan.

4.4 Legalized Presidential Decree of the appointment of the Minister of Economy and Public Finance and copy of identity card.

Article 5 (Reports for Credit Consideration).-

Upon receipt of the request and documentation established in Article 4 of this Regulation, prior to Board consideration, the President of the BCB will request the following:

5.1 Technical Report to the Monetary Operations Management specifying the outstanding debt balance as of the date of the request, future payment deadlines of the TGN to the BCB, and suitability of the public value offered to back the operation.

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5.2 Report to the Legal Affairs Management regarding compliance with regulations and submission of required documentation.

Article 6 (Financial Conditions).-

The financial conditions of the credit will be proposed by the MEFP, except for the interest rate, which will be equal to the last and highest average yield rate of bills issued by the BCB in national currency, for monetary regulation purposes. In the absence of such references, the financial conditions will be established by the BCB Board.

Article 7 (Approval of Credit Request).-

The BCB Board will consider the reports presented by the areas, and if appropriate, approve the credit by the favorable vote of two-thirds of its members present at a Board Session, for which it will issue an express Resolution.

Article 8 (Contract).-

The conditions of the credit approved by the BCB Board will be recorded in the contract to be signed between the BCB and the MEFP.

Article 9 (Conditions for Disbursements).-

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

a) Disbursement request note signed by the MAE of the MEFP specifying:

• a. Contract Number.
• b. Disbursement Number.
• c. Requested disbursement amount.

b) BCB Board Resolution approving the granting of the Credit and the Public Credit Contract signed between the MEFP and the BCB.

c) Account Numbers in the Single Treasury Account CUT (in bolivianos) for both disbursements and credit payment communicated by the MEFP.

d) Public Values issued by the MEFP in favor of the BCB that back and guarantee the operation.

In case the Disbursement Schedule is subject to modification, this will be communicated to the BCB.

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CHAPTER III

CREDITS FOR TEMPORARY LIQUIDITY NEEDS

Article 10 (Requirements).-

For the consideration of the credit, it is necessary that the MEFP send the following documentation to the BCB:

10.1 Note from the MAE duly signed, addressed to the President of the BCB, requesting the credit and specifying the following:

a) Amount requested b) Currency c) Term d) Public value backing the credit. e) Method of payment of principal and interest f) Payment Plan

10.2 Legalized Presidential Decree of the appointment of the Minister of Economy and Public Finance and copy of identity card.

10.3 Monthly cash flow projections, incorporating repayments to the BCB according to the payment plan, and ensuring these flows are consistent with the fiscal-financial program agreed upon between the BCB and the MEFP.

Article 11 (Reports for Approval).-

Upon receipt of the request and documentation established in Article 10 of this Regulation, prior to Board consideration, the President of the BCB will request the following:

11.1 Technical Report to the Monetary Operations Management specifying the outstanding debt balance as of the date of the request, future payment deadlines of the TGN to the BCB, and suitability of the public value offered to back the operation.

11.2 Report to the Legal Affairs Management regarding compliance with regulations and submission of required documentation.

11.3 APEC will issue a report considering the impact of said credit on the monetary program that forms part of the Execution Decision of the Fiscal-Financial Program that the highest authorities of the BCB and the MEFP sign annually.

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Article 12 (Financial Conditions).-

Credits will be granted with the following financial conditions:

12.1 The Board will set interest rates and terms considering, as a reference, the prevailing yield rates of public values in the market in either of the two currencies.

12.2 Maximum term of 12 months, prior to the issuance of a public value by the TGN. Credits with terms shorter than the maximum may be renewed, prior to approval by the BCB Board and the issuance of a new value by the TGN. The term of the renewal will be subject to the total term, including renewals, which may not exceed one (1) year.

12.3 Upon maturity of the credit, the public value guaranteeing the obligation will be automatically redeemed through debit in the account as established in subsection b) of Article 14 of this Regulation.

Article 13 (Approval of Credit Request).-

The BCB Board will consider the reports presented by the areas, and if appropriate, approve the credit by the favorable vote of two-thirds of its members present at a Board Session, for which it will issue an express Resolution.

Article 14 (Conditions for Disbursement).-

To make the disbursement of public credit resources effective, the following requirements must be met:

a) The BCB Board Resolution approving the granting of the Credit and the Public Credit Contract, between the MEFP and the BCB.

b) Account Numbers in the Single Treasury Account CUT (in bolivianos) for both disbursement and credit payment.

c) Issuance in favor of the BCB of the Public Value and its physical delivery by the TGN backing the operation specifying amount, currency, and term. The Public Value must be issued under the same Rate and term conditions approved in the B.R. In the case of dematerialized values, the BCB must verify in the SIRTEX that the EDV has made the respective book entry.