Central Bank of Bolivia

Board of Directors

BOARD RESOLUTION NO. 151/2019

SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES THE GRANTING OF A CREDIT TO THE PUBLIC SECTOR TO ADDRESS TEMPORARY LIQUIDITY NEEDS UNDER LAW No. 1670.

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VISTOS (SEEING):

• The Political Constitution of the State (CPE).
• Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia (BCB).
• The Decision on the Execution of the 2019 Fiscal-Financial Program, signed on February 25, 2019, between the Ministry of Economy and Public Finance (MEFP) and the BCB.
• The Regulation for the Approval of Credits to the Public Sector under Law No. 1670, approved via Board Resolution No. 110/2019 of August 27, 2019.
• The Statute of the BCB, approved by Board Resolution No. 128/2005 of October 21, 2005, and its subsequent modifications.
• Note MEFP/VTCP/DGCP/UEPS-1630/2019 of December 2, 2019, from the MEFP.
• Report BCB-GOM-SOSP-DCE-INF-2019-272 of December 3, 2019, from the Monetary Operations Management (GOM).
• Report BCB-APEC-SMF-INF-2019-56 of December 2, 2019, from the Economic Policy Advisory (APEC).
• Report BCB-GAL-SANO-DLBCI-INF-2019-399 of December 3, 2019, from the Legal Affairs Management (GAL).

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CONSIDERING:

That the CPE in paragraph I of its article 306 establishes that the Bolivian economic model is plural and oriented toward improving the quality of life and vivir bien (living well) for all Bolivians.

That in paragraph I of its article 326, it determines that the State, through the Executive Branch, will determine the objectives of the country's monetary and exchange rate policy in coordination with the BCB.

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That its article 327 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 its article 328 states that the attributions of the BCB, in coordination with the economic policy determined by the Executive Branch, in addition to those indicated by the Law, are to determine and execute monetary policy, execute exchange rate policy, regulate the payment system, authorize the issuance of currency, and administer international reserves.

That Law No. 1670 in the second paragraph of its article 4 establishes that the relationship between the BCB and the Government will be carried out through the Minister who holds the Treasury Portfolio (currently the MEFP).

That subsection b) of its article 22 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 meeting of its Board of Directors, to address temporary liquidity needs within the limits of the monetary program.

That its article 23 establishes that the operations provided for in article 22 will be documented in all cases through negotiable public debt securities issued by the National Treasury, which, in the case provided for in subsection b), will have a maximum term of one year.

That subsection a) of its article 54 indicates as attributions of the Board of Directors of the BCB to issue norms and adopt general decisions that may be necessary for the Issuing Entity to fulfill the functions, competencies, and powers assigned to it by the Law.

That the Decision on the Execution of the 2019 Fiscal-Financial Program determines in its fifth numeral "Liquidity Credit," disposing that in compliance with what is established in article 22, subsection b) of Law No. 1670, and with the purpose of allowing the BCB adequate management of monetary policy, all liquidity credit from the BCB to the National Treasury (TGN) must be within the framework of the 2019 Fiscal-Financial Program.

That in said Decision, the MEFP ratifies its commitment to use the liquidity credit of the Issuing Entity in a manner circumscribed to the Fiscal-Financial Program, temporarily, and that for 2019, Bs2.8 billion has been allocated for liquidity credits.

That the Regulation for the Approval of Credits to the Public Sector under Law No. 1670 aims to regulate articles 22 and 23 of Law No. 1670 and establish the requirements and procedures in the cases provided for in said article 22.

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That said Regulation in its article 10 establishes the requirements for the consideration of credit for temporary liquidity needs.

That its article 11 states that upon receipt of the credit request and the documentation established in article 10, prior to the consideration by the Board of Directors, the President of the BCB will request the issuance of a technical report by the GOM specifying the balance of pending debt as of the date of the request, future payment maturities of the TGN to the BCB, and the suitability of the public value offered to back the operation; a report to the Legal Affairs Management regarding compliance with regulations and presentation of required documentation; and a report from APEC considering the impact of said credit on the monetary program that forms part of the Decision on the Execution of the Fiscal-Financial Program, which is annually signed by the highest authorities of the BCB and the MEFP.

That its article 12 establishes the financial conditions under which the credit request from the MEFP will be considered.

That its article 13 provides that the Board of Directors of the BCB will consider the reports presented by the areas, and if appropriate, approve the credit through the favorable vote of two-thirds of its members present at the Board Session, and for this purpose, will issue an express Resolution.

That the Statute of the BCB in numerales 1) and 10) of its article 11 establishes that the Board of Directors of the Issuing Entity has the attributions to approve general decisions and issue norms 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 by two-thirds of the votes of the members present, credits to the National Treasury (TGN) to address temporary liquidity needs, within the limits of the Monetary Program.

That the second paragraph of its article 26 determines that every draft Resolution of the Board of Directors must be motivated and justified by a technical report from the Management or Managements to which the subject matter of the Resolution corresponds, and by a report from the GAL. These reports must be sent to the Board of Directors by the General Management with its recommendation.

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CONSIDERING:

That the MEFP through Note MEFP/VTCP/DGCP/UEPS-1630/2019, within the framework of subsection b) of article 22 of Law No. 1670 and point five of the Decision on the Execution of the 2019 Fiscal-Financial Program, states that considering the temporary liquidity need of the General Treasury of the Nation, it requests the granting of a liquidity credit, in the amount of Bs2,800,000,000.00 (Two Thousand Eight Hundred Million 00/100 Bolivianos), which will be backed by the issuance of Negotiable Treasury Bonds with the following characteristics: i) amount and currency: Bs2,800,000,000.00 (Two Thousand Eight Hundred Million 00/100 Bolivianos), ii) term: 1 year, iii) interest payment: at

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maturity, iv) backing value: Negotiable Treasury Bonds, and v) payment method: annual.

That in compliance with the requirements established in article 10 of the Regulation for the Approval of Credits to the Public Sector under Law No. 1670, it submits the required documentation for this purpose.

That the GOM through Report BCB-GOM-SOSP-DCE-INF-2019-272, concludes that the liquidity credit request made by the MEFP falls within what is established in Law No. 1670; therefore, the GOM within the framework of article 11 (reports for approval) of the Regulation for the Approval of Credits to the Public Sector under Law No. 1670, presents the balance of pending debt of the MEFP as of the date of the request, future payment maturities of the TGN to the BCB, and the suitability of the public value offered to back the operation, and recommends considering the prevailing market yield rate for public securities corresponding to one year. Prior legal opinion, in case the credit request is considered favorably, the MEFP must open the corresponding accounts.

That APEC in its Report BCB-APEC-SMF-INF-2019-56, concludes that the MEFP's credit request for Bs2.8 billion for liquidity credits is within the limits of the 2019 Monetary Program, contemplated in the Decision on the Execution of the 2019 Fiscal-Financial Program, constituted by the targets of said program.

That it also states that the main objective of the BCB, which is price stability, would not be affected by the requested credit, and with high probability, inflation at the end of the management period will be within the expected range. While the deceleration in GDP growth responds mainly to exogenous factors, and a monetary expansion resulting from the MEFP's credit request would not have an adverse effect on this objective.

That regarding the impact of the credit on the Monetary Program targets, taking as a base the execution as of November 29, 2019, the targets for CIN, CIN to the SPNF, and RIN show slight deviations, and there is a high probability that the targets programmed for the end of the year will not be met unless the adjustments and reversals indicated in point 3 are applied. A liquidity credit from the BCB to the TGN has a direct effect on the increase of CIN and CIN SPNF and an indirect effect on the decrease of RIN. Therefore, the impact of the liquidity credit requested by the MEFP will be a greater overdraft in the Monetary Program targets.

That through Report BCB-GAL-SANO-DLBCI-INF-2019-399, the GAL concludes that the credit request to the public sector to address temporary liquidity needs, made by the MEFP through Note MEFP/VTCP/DGCP/UEPS-1630/2019, falls within what is provided in subsection b) of article 22 and article 23 of Law No. 1670, considering that said Credit is contemplated within the limits of the

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2019 Monetary Program, contemplated in the Decision on the Execution of the 2019 Fiscal-Financial Program signed on February 25, 2019, and that the MEFP has complied with the presentation of the documentation provided for in the Regulation for the Approval of Credits to the Public Sector under Law No. 1670.

That in this context, the MEFP's request should be submitted to the consideration of the Board of Directors of the BCB, an instance that may approve the public credit in case there is a favorable vote of at least two-thirds of the members present, through an express resolution, as provided in subsection a) of article 54 of Law No. 1670, article 13 of the Regulation for the Approval of Credits to the Public Sector under Law No. 1670, and numeral 10) of article 11 of the Statute of the BCB.

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THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Within the framework of what is provided in subsection b) of article 22 and article 23 of Law No. 1670 and what is established in numeral five of the Decision on the Execution of the 2019 Fiscal-Financial Program, approve the granting of a liquidity credit in favor of the TGN – Management 2019, represented by the MEFP, under the following terms and conditions:

Concept	Value
Amount:	Bs2,800,000,000.00 (Two Thousand Eight Hundred Million 00/100 Bolivianos).
Currency:	Bolivianos.
Term:	1 year.
Interest Rate:	0.73%.
Interest Payment:	At maturity.
Backing Value:	Negotiable Treasury Bonds.
Payment Method:	Annual.

Article 2.- Authorize the Acting President of the BCB to sign the contract with the MEFP under the terms of this Resolution.

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

La Paz, December 3, 2019

Pablo Ramos Sánchez

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//6. B.D. No. 151/2019

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