BOARD OF DIRECTORS

BOARD RESOLUTION NO. 016/2024

SUBJECT: INTERNATIONAL OPERATIONS DEPARTMENT – AMEND THE REGULATION FOR THE ADMINISTRATION OF INTERNATIONAL RESERVES.

VIEWED:

• 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.
• The Technical Report BCB-GOI-SRES-DNI-INF-2024-11 of January 29, 2024, from the International Operations Department (GOI).
• The Legal Report BCB-GAL-SANO-DLBCI-INF-2024-30 of January 29, 2024, from the Legal Affairs Department (GAL).

CONSIDERING:

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 Law No. 1670 in its Article 1, modified by Article 67, section A3, numeral 1 of Law No. 1864 of June 15, 1998, on Popular Property and Credit, determines 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 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 Law No. 1670, in Article 4, establishes that the BCB will take into account the Government's economic policy, within the framework of the Law, when formulating its policies.

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-rank foreign financial institutions, duly qualified as eligible by the BCB Board of Directors.

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 objective of reducing risks.

That Article 44 of Law No. 1670 establishes that the highest authority of the BCB is its Board of Directors, 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 of Directors: 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; carry out follow-up on 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 Law No. 1503 aims to authorize the BCB to purchase gold from the domestic market to strengthen International Reserves and to carry out financial operations with International Reserves in gold in international markets.

That paragraph I of Article 9 of Law No. 1503 establishes that the BCB will carry out operations in international markets with gold reserves, being able to buy, invest, deposit in custody, use in hedging instruments, transform, and convert them into foreign currency, in order to optimize the liquidity and/or yield of International Reserves.

That the Sole Final Provision of Law No. 1503 states that within the framework of Articles 327 and 328 of the Political Constitution of the State, 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 Central Bank of Bolivia and its modifications, being this sufficient for the development of its functions, without requiring greater provisions than said law.

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

That in virtue of Articles 6 and numerales 1), 6), and 30 of Article 10 of the BCB Statute, it provides that the Board of Directors 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 carry out follow-up on their execution, as well as 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 resolutions and decisions of the Board of Directors 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 of Directors pronounces itself 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 Department or Departments to which the matter subject to the Resolution corresponds, and by a report from the Legal Affairs Department. These reports must be sent to the Board of Directors by the General Management with its recommendation.

That Article 6 of the Regulation of the International Reserves Committee provides as functions of its Committee to periodically evaluate compliance with the International Reserves Administration Regulation and the Annual Investment Policy.

That Articles 1, 8, 9, 18, 23, and 24 of the Regulation for the Administration of International Reserves establish that International Reserves aim to maintain the normal functioning of international payments and back monetary and exchange policies, determining their structure composed of International Monetary Reserves, Gold Reserves, and SDR Holdings. Likewise, it enumerates investment operations and instruments, establishing the Global Policy on credit risk and market risk.

That the Technical Report BCB-GOI-SRES-DNI-INF-2024-11 from the GOI concludes that in order to increase the liquidity position of International Reserves, it is necessary to include the operation of selling gold acquired in the domestic market and its exit from the national customs territory, approved by Board Resolution, since it is not contemplated in the current Regulation for the Administration of International Reserves, considering it pertinent that the BCB have the possibility to operate with Bolivia Global Bonds to have access to operations in the international market, for which it puts before the Board of Directors the approval of the modification to the Regulation for the Administration of International Reserves.

That Report BCB-GAL-SANO-DLBCI-INF-2024-30 concludes that the modification of Articles 11, 18, 23, and 24 of the Regulation for the Administration of International Reserves approved by Board Resolution No. 071/2023 and its modifications aims to increase the liquidity position of International Reserves, will allow the BCB to have access to specific operations or projects, being legally viable, therefore it recommends to the Board of Directors of the BCB its approval.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.

Incorporate paragraph VI into Article 11 (Gold Reserves) 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)

(...)

VI. The exit from the national customs territory of locally purchased gold, to carry out investment operations, will be approved by Board Resolution.”

Article 2.

Modify Paragraph I of Article 18 (Investment Operations and Instruments) 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.- (Investment operations and instruments)

I. The authorized investment operations are:

• Establishment of time deposits
• Securities Lending
• Purchase-sale of assets, securities, and instruments
• Purchase of gold
• Sale of gold acquired in the domestic market
• Conversion of gold into foreign currency
• Purchase-sale of foreign currency
• Risk hedging with derivatives
• Asset swap
• Currency swap
• Securities repurchase agreements.”

Article 3.

Modify Paragraphs VII, VIII, and IX of Article 23 (Credit Risk) 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)

(...)

VII. Investments of International Reserves may be made in Bolivia Global Bonds and financial instruments issued by international organizations such as the Bank for International Settlements (BIS), World Bank (WB), Latin American Bank of Foreign Trade (BLADEX), Latin American Reserve Fund (FLAR).

VIII. For gold operations, financial entities must be members of the London Bullion Market Association.

IX. 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 on it to the CRI, the body that will put corrective actions to follow before the Board of Directors for approval. Bolivia Global Bonds will not be included in the calculation.”

Article 4.

Modify Paragraph II of Article 24 (Market Risk) 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 24.- (Market Risk)

(...)

II. Bolivia Global Bonds and the instruments resulting from asset swap operations, derivatives of the temporary liquidity needs of International Reserves, which are denominated in United States dollars, will not be included in the calculation of market VaR.”

Article 5.

This Resolution will enter into force from its publication.

Article 6.

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

La Paz, January 30, 2024

SIGNED. ROGER EDWIN ROJAS ULO, Oscar Ferrufino Morro, Gabriel Herbas Camacho, Gumercindo Héctor Pino Guzmán, Diego Alejandro Perez Cueto Eulert.