BOARD

BOARD RESOLUTION NO. 148/2024

SUBJECT: INTERNATIONAL OPERATIONS MANAGEMENT – MODIFY THE REGULATION FOR THE ADMINISTRATION OF INTERNATIONAL RESERVES.

CONSIDERING:

• The Political Constitution of the State of February 7, 2009 (CPE).
• Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia (BCB) and its modifications.
• Law No. 1503 of May 5, 2023, on the purchase of gold intended to strengthen International Reserves.
• The BCB Statute approved by Board Resolution No. 095/2022 of October 6, 2022.
• The Regulation of the International Reserves Committee, approved by Board Resolution No. 017/2023 of January 25, 2023.
• The Regulation for the Administration of International Reserves, approved by Board Resolution No. 071/2023 of May 9, 2023, and its modifications.
• Report BCB-GOI-SRES-DNI-INF-2024-76 of November 4, 2024, issued by the International Operations Management (GOI).
• Report BCB-GAL-SANO-DLBCI-INF-2024-464 of November 4, 2024, issued by the Legal Affairs Management (GAL).

CONSIDERATIONS:

That Article 327 of the CPE determines that the Central Bank of Bolivia (BCB) is a public law institution, with legal personality and its own assets, which, within the framework of the State's economic policy, has the function of maintaining the stability of the internal purchasing power of the currency, to contribute to economic and social development.

That numeral 5) of paragraph I of Article 328 of the CPE establishes that the BCB has the authority to administer International Reserves.

That Article 1 of Law No. 1670 establishes that the BCB is a State institution, of public law, of an autarkic nature, of indefinite duration, with its own legal personality and assets and with its legal domicile in the city of La Paz. It is the sole monetary and exchange authority of the country, with administrative, technical, and financial competence and specialized normative faculties of general application.

That Article 14 of Law No. 1670 establishes that the BCB will ensure the strengthening of International Reserves so as to allow the normal functioning of Bolivia's international payments.

That Article 15 of the aforementioned Law No. 1670 provides that the BCB's International Reserves are constituted by one or more of the following assets, in accordance with international order norms: a) Physical gold and e) Public securities and other negotiable instruments issued by foreign governments, entities, and international organizations or first-tier foreign financial institutions, duly qualified as eligible by the BCB Board.

That Article 16 of Law No. 1670 provides that the BCB will administer and manage its International Reserves, being able to invest them and deposit them in custody, as well as dispose of and pledge them, in the manner it considers most appropriate for the fulfillment of its object and functions and for their adequate safeguarding and security. It may also purchase foreign exchange hedging instruments with the aim of reducing risks.

That Article 44 of Law No. 1670 establishes that the highest authority of the BCB is its Board, which is responsible for defining its policies, specialized norms of general application, and internal norms.

That subsections a), c), and o) of Article 54 of Law No. 1670 indicate the following as attributions of the BCB Board: Issue norms and adopt general decisions that are necessary for the BCB to fulfill the functions, competencies, and faculties assigned to it by the Law; monitor the execution of monetary, exchange, credit, financial intermediation, and International Reserves administration policies and regulations; and 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 paragraph II of Article 9 of Law No. 1503 establishes that the BCB must maintain a minimum of twenty-two (22) tonnes of gold reserves from the International Reserves, computable semi-annually from the approval of said Law.

That the Final Provision of Law No. 1503 states that within the framework of Articles 327 and 328 of the CPE, the BCB, with the objective of complying with its constitutional mandate, is authorized to apply what is provided in Law No. 1670 of October 31, 1995, of the BCB and its modifications, being this sufficient for the development of its functions, without requiring further provisions from said Law.

That according to numerales 1) and 3) of Article 5 of the BCB Statute, the Issuing Entity has normative, administrative, technical, and financial competence, among which are the norms to issue specialized norms in the fields assigned to it by Law and technical competence for the formulation of policies and the application of instruments that allow it to fulfill its object.

That Articles 6 and numerales 1), 6), and 30 of Article 10 of the BCB Statute provide that the Board has the faculty to approve general decisions and issue norms that are necessary for the BCB to fulfill the functions, competencies, and faculties assigned to it by the Law; as well as approve the policy and norms for the administration of International Reserves and monitor their execution, and 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 an additional administrative act.

That paragraph I of Article 24 of the aforementioned Statute provides that Board Resolutions and decisions are adopted by a simple majority of votes of its members present in a meeting, except in cases where Law No. 1670 or this Statute require qualified majorities.

That Article 26 of the Statute stipulates that the Board pronounces on matters within its competence through Resolutions. It may also do so through decisions that will be expressly recorded in the Minutes. Likewise, every draft Board Resolution must be motivated and justified by a technical report from the Management or Managements to whom the matter subject to the resolution corresponds, and by a report from the Legal Affairs Management. These reports must be sent to the Board by the General Management with its recommendation.

That numerales 3 and 4 of Article 6 of the Regulation of the International Reserves Committee establish as functions of its Committee to periodically evaluate compliance with the Regulation for the Administration of International Reserves and the Annual Investment Policy, and to recommend policies or guidelines to the BCB Board for the adequate administration of International Reserves according to investment criteria.

That Articles 8, 9, and 18 of the Regulation for the Administration of International Reserves establish that International Reserves have the object of maintaining the normal functioning of the country's international payments and backing monetary and exchange policies, determining their structure composed of International Monetary Reserves, Gold Reserves, and SDR Holdings. It also enumerates investment operations and instruments, establishing the Global Credit Risk Policy.

That report BCB-GOI-SRES-DNI-INF-2024-76 from the GOI concludes that it is necessary to strengthen the liquidity position of International Reserves, so it is technically viable to modify the Regulation for the Administration of International Reserves in order to authorize operations and provide flexibility to operations with Gold Reserves, and thus maintain the normal functioning of international payments in the country; recommending to put before the Board the approval of the proposed modifications to said Regulation.

That report BCB-GAL-SANO-DLBCI-INF-2024-464 concludes that considering Report BCB-GOI-SRES-DNI-INF-2024-76, the modification proposed by the GOI to the Regulation for the Administration of International Reserves approved by Board Resolution No. 071/2023 and its modifications has the object of strengthening the liquidity position of International Reserves, as well as authorizing operations and providing flexibility to operations with Gold Reserves, and thus maintaining the normal functioning of international payments in the country, being legally viable for its approval, consequently recommending to the BCB Board its approval.

THEREFORE,

THE BOARD OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Modify Article 11 of the Regulation for the Administration of International Reserves, approved by Board Resolution No. 071/2023 of May 9, 2023, and its modifications, with the following text:

“Article 11.- (Gold Reserves) I. Gold Reserves are constituted by physical gold in BCB vaults, investments in fixed-term deposits in this metal, and balances in gold accounts abroad. II. The total of Gold Reserves may be invested abroad. III. The BCB must maintain a minimum of twenty-two (22) tonnes of Gold Reserves, computable semi-annually on May 5 and November 5 of each fiscal year. IV. Based on market conditions and foreign exchange liquidity of International Reserves, the BCB will take the necessary actions for the replenishment of gold reserves. V. The AIP (Annual Investment Policy) will define the maximum amount of gold to be converted into foreign currency for each fiscal year. The conversion of gold into foreign currency above the limit established in the AIP will be approved by the BCB Board. VI. The exit of locally purchased gold from the national customs territory to carry out investment operations will be approved by Board Resolution.”

Article 2.- Modify Article 16 of the Regulation for the Administration of International Reserves, approved by Board Resolution No. 071/2023 of May 9, 2023, and its modifications, with the following text:

“Article 16.- (Intermediaries) The purchase and sale of securities will be carried out with primary dealers, eligible financial institutions, or institutions registered in the Stock Exchanges of the countries defined in the risk policy of this Regulation.”

Article 3.- Modify Article 18 of the Regulation for the Administration of International Reserves, approved by Board Resolution No. 071/2023 of May 9, 2023, and its modifications, with the following text:

“Article 18.- (Authorized Investments, Operations, and Instruments) I. Authorized investments are:

• Fixed-term deposits
• Securities Lending
• Purchase-sale of assets, securities, and instruments
• Risk hedging with derivatives
• Asset swap
• Currency swaps
• Securities repurchase agreements (when the BCB acts as the Repo Seller) II. Authorized operations are:
• Securities repurchase agreements (when the BCB acts as the Repo Buyer)
• Purchase of Gold
• Sale of gold acquired in the domestic market
• Conversion of gold to foreign currency
• Purchase-Sale of foreign currency For the purchase-sale of foreign currency and securities repurchase agreements (when the BCB acts as the Repo Buyer), the country of the head office of the institutions must have a long-term sovereign risk rating equal to or greater than AA- (S&P), AA- (Fitch), or Aa3 (Moody’s). All operations must be carried out with counterparties that are duly authorized and regulated by the competent financial authorities in their jurisdictions by country of origin. III. Authorized investment instruments are:
• Overnight Deposits
• Commercial Paper
• Certificates of Deposit
• Fixed-term Deposits
• Bills
• Notes
• Bonds
• Strips
• Medium Term Notes
• Floating Rate Notes
• Treasury Inflation Protected Securities (TIPS)
• Interest rate futures/forward contracts
• Currency futures/forward contracts.”

Article 4.- Modify Article 23 of the Regulation for the Administration of International Reserves, approved by Board Resolution No. 071/2023 of May 9, 2023, and its modifications, with the following text:

“Article 23.- (Credit Risk) I. The country where the investments are made and the country of the head office of the institutions in which the investments of International Monetary Reserves are made or with which intermediation is carried out, must have a long-term sovereign credit risk rating equal to or greater than A (S&P), A (Fitch), or A2 (Moody’s). II. For gold investments, the country where the investments are made and the country of the head office of the institutions in which the investments are made, must have a long-term sovereign credit risk rating equal to or greater than AA- (S&P), AA- (Fitch), or Aa3 (Moody’s). III. The long-term issuer credit risk rating where International Reserves investments are made must be equal to or greater than A (S&P), A (Fitch), or A2 (Moody’s) and short-term equal to or greater than A-1 (S&P), F1 (Fitch), or P-1 (Moody’s). IV. Investments are made in non-subordinated debt securities. V. Investments are made in securities with no component associated with the equity market. VI. Investments of International Reserves may be made in Bolivia Global Bonds and financial instruments issued by international organizations Bank for International Settlements (BIS), World Bank (WB), Latin American Association for Regional Development (BLADEX), and Latin American Reserve Fund (FLAR). VII. For gold operations, financial entities must be members of the London Bullion Market Association. VIII. The maximum credit loss in a year, measured by Credit Value at Risk (Credit VaR), is 1% for International Monetary Reserves denominated in United States dollars, with a confidence level of 99.9%. In case of non-compliance, the Investment Control Department will report it to the CRI, the body that will put corrective actions to be followed before the Board for approval. Bolivia Global Bonds will not be included in the calculation.”

Article 5.- This Resolution will enter into force from its publication.

Article 6.- The Presidency and the General Management are charged with the compliance of this Resolution.

La Paz, November 5, 2024.

SIGNED. ROGER EDWIN ROJAS ULO, Gumercindo Héctor Pino Guzmán, Miguel Angel Marañon Urquidi, Victor Gonzalo Calisaya Gomez