Official Gazette - Foreign Exchange Law of São Tomé and Príncipe

Decree-Law No. 32/99
October 26

Whereas the foreign exchange system in São Tomé and Príncipe is regulated by a set of legal provisions characterized by a lack of uniformity in principle, little coherence in objectives and methods, and consequently requires a complete reformulation aimed at its modernization; Whereas it is necessary to adapt the foreign exchange legislation to the main objectives of the national economy, stability and sustained growth based on market economy principles with the necessary openness to the outside world; Whereas there is also a need to implement a regulatory system that is modern and adequate to the step-by-step process of foreign exchange liberalization around the balance of payments structure, in order to progressively eliminate the restrictions that still exist in the foreign exchange sector, according to the stage of development of the national economy; Whereas the strengthening of the national financial system and, likewise, of the national currency also passes through the banking of the economy and the fight against informality, which will provide a single foreign exchange market; Whereas it is advisable to highlight the role of the Central Bank as the foreign exchange authority and responsible for the management of the country's external reserves, articulated with the Government's general strategy that is consistent with an adequate fiscal policy, allowing the Issuing Bank, in turn, to exercise a balanced, responsible monetary policy capable of combating excess liquidity in the economy, thereby providing monetary equilibrium as the main pillar of sustainability for the ongoing foreign exchange liberalization policy; In these terms, in the exercise of the powers conferred by paragraph d) of Article 99 of the Constitution, the Government of the Democratic Republic of São Tomé and Príncipe decrees and I promulgate the following:

CHAPTER I
FOREIGN EXCHANGE OPERATIONS
Section I
General Provisions
Article 1.
Scope of Application

1. The carrying out of foreign exchange operations and the exercise of foreign exchange trading in São Tomé and Príncipe shall be subject to the provisions of this Decree-Law, as well as to the regulations and technical instructions of the Central Bank.
2. The carrying out abroad, by residents, of foreign exchange operations shall also be subject to the regime defined in the preceding paragraph, when such operations relate to goods situated in national territory or to rights over such goods or concern activities carried out in national territory.
3. The provisions referred to in paragraph 1 shall also apply to the import, export or re-export of:
   a) Banknotes and coins of the country in circulation or foreign legal tender in their respective countries of issue and other means of payment;

b) Shares, bonds and other securities of an analogous nature, issued by public or private entities, whether national or foreign.
Article 2.
Foreign Exchange Competence of the Central Bank

1. The carrying out of foreign exchange operations and the exercise of foreign exchange trading by the Central Bank shall be governed by the provisions of its Organic Law and by the provisions of this instrument that expressly concern it.

2. All foreign exchange availability in the country must be under the supervision of the Central Bank. In this regard, the Central Bank shall determine the portion of foreign exchange availability, notably from exports, that remains in its possession to meet the State's needs.
   Article 3.
   Concept of Foreign Exchange Trading
   The exercise of foreign exchange trading is understood as the habitual and profit-making carrying out, on one's own or on behalf of others, of foreign exchange operations, as defined in this Decree-Law.
   Article 4.
   Definition of Residents and Non-Residents

3. For the purposes of applying foreign exchange legislation, the following are considered residents in national territory:
   a) National citizens with habitual residence in São Tomé and Príncipe; b) National citizens with habitual residence abroad, regarding activities developed in national territory in a non-occasional manner; c) Foreigners who habitually reside in the country regarding activities developed in national territory; d) Private legal entities with their seat in the country; e) Public legal entities of São Tomé and Príncipe, as well as public funds endowed with administrative and financial autonomy; f) Branches, agencies or any other forms of stable representation in national territory of legal entities or other non-resident entities.

4. The following are considered non-residents for foreign exchange purposes:
   a) National citizens with habitual residence in São Tomé and Príncipe regarding activities developed in foreign territory in a non-occasional manner; b) National citizens with habitual residence abroad, without prejudice to the provisions of paragraph b) of the preceding number; c) Private legal entities with their seat in the country, but which carry out their main activity abroad regarding activities exercised outside national territory; d) Branches, agencies or any other forms of stable representation in foreign territory of legal entities or other resident entities; e) Other natural or legal persons who are not covered by the preceding paragraph.

5. Residence is presumed habitual after one year has passed since its beginning, without prejudice to the possibility of proving such habitual residence for prior periods.

6. The following are also considered non-residents for foreign exchange purposes:
   a) Embassies, Consulates and other Diplomatic Representations accredited to the Government of the Democratic Republic of São Tomé and Príncipe;

b) Foreign citizens who exercise technical functions in the country, under the terms of cooperation agreements or contracts signed with international organizations.
Section II
Foreign Exchange Market
Article 5.
Constitution of the Foreign Exchange Market
The foreign exchange market in São Tomé and Príncipe is constituted by the Central Bank, commercial banks, exchange houses and other duly authorized institutions. Any other agent that carries out foreign exchange operations as defined in this instrument shall be sanctioned under the terms of this Decree-Law.
Article 6.
Powers of the Central Bank

1. It is incumbent upon the Central Bank, as the country's foreign exchange authority, to regulate the functioning of the foreign exchange market, supervise the authorities authorized to exercise foreign exchange trading, and monitor the carrying out of foreign exchange operations.
2. The Central Bank shall also exercise its powers through regulations and instructions, which shall become enforceable from the date fixed therein.
3. The Central Bank may freely place the country's foreign exchange availability with foreign banks and proceed to purchase and sell such foreign exchange availability with national credit institutions.
   Article 7.
   Authorized Entities
4. The exercise of foreign exchange trading, except in the case of authorized commercial banks, depends on special and prior authorization from the Central Bank, which shall establish, for each authorized entity, the conditions and limits of such exercise.
5. The Central Bank shall publish annually in the Official Gazette the list of entities authorized to carry out foreign exchange trading.
   Article 8.
   Duty to Report
   Entities authorized to exercise foreign exchange trading must send to the Central Bank, in accordance with the technical instructions transmitted to them and within the deadlines set by it, statistical information elements or others requested, notably for the purpose of preparing the country's balance of payments.
   Section III
   Exchange Regime
   Article 9.
   Definition of the Exchange Regime
   The exchange rate to be used in all foreign exchange operations shall be entirely free, and its determination shall be in accordance with supply and demand in the market.
   Article 10.
   Powers of the Central Bank
   The Central Bank may alter the exchange regime indicated in the preceding article when economic conditions so advise.
   Section IV
   Foreign Exchange Operations
   Article 11.
   Definitions of Foreign Exchange Operations
6. For the purposes of this Decree-Law, the following are considered foreign exchange operations:
   a) Imports; b) Exports; c) Current or capital invisible items; d) The opening and movement of national accounts expressed in currency with legal tender in a foreign country or in units of account used in international payments; e) The simple purchase and sale of foreign currency.
7. These operations shall receive the operational treatment indicated in each of the following articles.
   Article 12.
   Imports
8. The sale of foreign exchange and its corresponding transfers abroad regarding import operations are fully liberalized. However, the only authorized agents to carry out such sales and transfers are commercial banks and the Central Bank, the latter exclusively as the Government's financial agent. This concept of sale includes up to the CIF value of each import.
9. The Central Bank guarantees the convertibility and transfer abroad of the foreign exchange necessary for import payments, whenever the importer has the necessary funds to cover the corresponding value in commercial banks.
10. Any resident or non-resident of the country may carry out imports of goods provided they are registered as an importer.
11. The Central Bank shall regulate the procedures to be observed by commercial banks regarding import operations.
    Article 13.
    Exports
12. Exporters may freely dispose of the foreign exchange proceeds from exports, except for the portion retained by the Central Bank. In this case, the Central Bank shall credit their account at the intervening commercial bank at the day's purchase exchange rate.
13. The total external resources received by exports must be fully delivered to the financial system, which is composed of the Central Bank, commercial banks and other authorized financial institutions.
14. Any resident or non-resident of the country may carry out exports of goods provided they are registered as an exporter.
15. The Central Bank shall regulate the procedures to be observed by commercial banks regarding export operations.
    Article 14.
    Sale of Foreign Exchange for Current Invisible Items The sale of foreign exchange and its transfer abroad regarding current invisible item operations are fully liberalized. In the case of sales, they may be carried out at commercial banks or authorized exchange houses. However, only commercial banks are authorized to proceed with their transfer abroad.
    Article 15.
    Sale of Foreign Exchange for Capital
    The sale of foreign exchange and its transfer abroad regarding the following operations are subject to prior authorization from the Central Bank, which may progressively liberalize them as determined by foreign exchange market conditions:
    a) Operations on securities; b) Granting and obtaining of loans and financial credits; c) Granting and obtaining of personal nature loans; d) Establishment of guarantees not linked to current operations; e) Other capital operations.
    Article 16.
    Opening of Deposit Accounts
    Deposit accounts in dobras or any foreign currency may be freely opened and operated, both by residents and non-residents, without any restriction, complying with legal procedures.
    Article 17.
    Exchange Houses
    Exchange houses duly authorized by the Central Bank may only buy and sell foreign currency under the concepts of current invisible items, excluding, consequently, import and export operations of goods and services. They may not carry out transfers abroad from the sale of foreign currency they conduct.
    Article 18.
    Central Bank
16. The Central Bank may buy and sell foreign exchange only to commercial banks and other duly authorized financial institutions for the purpose of regulating foreign exchange supply in the market, without prejudice to the mandatory purchase of foreign exchange from exports, as referred to in Article 2 of this instrument. Except for the latter case, operations shall be carried out indiscriminately according to the external situation and the need to regulate monetary supply. For this purpose, the Central Bank shall regulate this general procedure.
17. The Central Bank shall buy and sell foreign exchange to the State, as its financial agent, except for import sales to the private sector, which shall be carried out in all cases under the general procedures indicated in paragraph 1 of this article. Likewise, the State must deposit with the Central Bank, for its administration, all external resources it receives.
    Article 19.
    Statistical Information
    To fulfill the objectives of foreign exchange policy, the Central Bank shall establish, in coordination with the National Institute of Statistics, the Finance Directorate, the Customs Directorate, and commercial banks and other entities authorized to exercise foreign exchange trading, the directives for the latter's action, notably regarding statistical organization and control systems, in order to obtain the maximum possible statistical coverage.
    Article 20.
    Duty of Verification
18. Entities authorized to exercise foreign exchange trading must verify, before carrying out operations in which they intervene, their reality, nature, and compliance with applicable legal and regulatory provisions.
19. For the purposes of the preceding paragraph, interested parties must provide the indispensable proof elements to characterize the legal and economic nature of the required operation.
    Article 21.
    Purpose of Acquiring Means of Payment
20. Means of payment acquired abroad for the settlement of any transaction provided for in this instrument must not be used for other purposes.
21. If the transaction or settlement that determined the acquisition of those means of payment has not been executed, in whole or in part, the same must be surrendered to an entity authorized to exercise foreign exchange trading.
    CHAPTER II
    FOREIGN EXCHANGE OFFENSES
    Section I
    General Provisions
    Article 22.
    Liability for Offenses and Payment of Fines
22. The fines provided for in this instrument may be applied to both natural persons and corporate entities, even if irregularly constituted, as well as to associations without legal personality.
23. The persons referred to in the preceding paragraph are liable for the offenses provided for in this instrument when committed by the holders of their respective bodies or by their representatives in the name and in the interest of the collective entity.
24. The liability of the entities referred to in the preceding paragraph does not exclude the individual liability of their respective agents.
    Article 23.
    Compliance with Omitted Duty
    Whenever the offense results from the omission of a duty, the payment of the fine does not dispense the offender from fulfilling it, if this is possible.
    Article 24.
    Destination of Fines
    The proceeds from fines shall revert entirely to the State.
    Article 25.
    Attempt, Negligence and Personal Favoritism
25. Attempt, negligence, and personal favoritism are always punishable.
26. In cases of attempt, negligence, and personal favoritism, the minimum and maximum limits of the fines provided for in the corresponding legal type shall be reduced by half.
    Section II
    Foreign Exchange Offenses in Particular
    Article 26.
    Exercise of Unauthorized Activity
    Whoever, without being duly authorized, carries out, for profit, on their own or on behalf of others, foreign exchange operations, shall be punished with a fine calculated between 50% for the first offense and 75% for the second and subsequent offenses, of the value of the goods or rights to which the violation relates.
    Article 27.
    Offense Relating to Import and Export of Goods Violation of the legal and regulatory provisions regarding the processing and settlement of imports and exports, giving rise to the undue transfer of foreign exchange, shall be punished as follows:

a) Temporary or permanent loss of the capacity to import or export, as appropriate; b) An additional fine equivalent to 50% for the first offense, and 75% for the second and subsequent offenses, of the value of the goods to which the violation relates.
Article 28.
Violation of the Duty to Report
Whoever violates the provisions regarding the provision of information or the sending, presentation, or exhibition of any declarations or other documents, within the scope of this instrument and the regulations and instructions of the Central Bank, as well as in the specific legislation applicable to the carrying out of foreign exchange operations, shall be punished with a fine up to a maximum of USD 2 million (two million United States dollars).
Article 29.
Accessory Sanctions
Depending on the seriousness of the offense, the fault, and the economic situation of the agent, the following sanctions may also be applied:
a) Loss of goods in favor of the State; b) Suspension or revocation, total or partial, of the authorizations necessary for the exercise of foreign exchange trading; c) Inhibition from exercising social offices and functions of administration, supervision, direction, or leadership in entities authorized to exercise foreign exchange trading.
Section III
Procedure
Article 30.
Investigation and Instruction

1. The investigation of the offenses referred to in this instrument, whoever commits them, and the instruction of the respective processes shall be the competence of the Central Bank in its capacity as the entity responsible for the supervision of the banking and financial system.
2. It is incumbent upon the duly accredited technicians and senior managers of the Central Bank to carry out the investigation of the offenses and the instruction of the respective processes, and they may resort to the assistance of authorities or public services.
   Article 31.
   Seizure of Funds
   The seizure of banknotes, coins, checks or other titles or values that constitute the object of an offense may be carried out when such seizure is necessary for the investigation or instruction of the process or in the case of an indicated offense liable to impose its loss in favor of the State, as an accessory sanction.
   Article 32.
   Accusation and Defense
3. Upon completion of the instruction, the accusation shall be filed by the technicians or managers referred to in paragraph 2 of Article 30, indicating the offenders, the facts imputed to them and their respective circumstances of time and place, as well as the law that prohibits and punishes them.
4. The said accusation shall be notified to the agent so that, within a period of 5 working days, they may present a written defense or appear to be heard, in which case a record of statements shall be drawn up and also signed by the agent.
   Article 33.
   Submission of the Process to the Competent Entity After carrying out the measures necessitated by the defense, provided for in paragraph 2 of the preceding article, and maintaining the accusation, the process shall be submitted to the competent entity to apply the fines and accessory sanctions, accompanied by a duly justified proposal regarding the offenses that should be considered proven and the sanctions applicable to them.
   Article 34.
   Competent Entity
   It is the competence of the Governor of the Central Bank to apply the fines and accessory sanctions provided for in this legal instrument.
   Article 35.
   Appeal
   The decision that imposes a fine is subject to judicial challenge through an appeal to be filed with the competent court.
   Article 36.
   Repealing Clause
   The legal provisions contrary to the provisions of this instrument are hereby repealed, notably Decree-Laws No. 2/93, 47/93 and 51/93 and the dispatch No. 37/93 of November 9, 1993 of the Ministry of Industry, Commerce, Tourism and Fisheries.
   Article 37.
   Entry into Force
   This instrument shall enter into force according to legal terms.
   Reviewed and approved in the Council of Ministers in São Tomé, on May 13, 1999. – The Prime Minister and Head of Government, Guilherme Posser da Costa, – The Minister of Justice and Parliamentary Affairs, Paulo Jorge Rodrigues do Espírito Santo, - The Minister of Foreign Affairs and Communities, Alberto Paulino, - The Minister of Defense, João Quaresma Viegas Bexigas, - The Minister of Planning, Finance and Cooperation, Adelino Santiago Castelo David. – The Minister of Economy, Maria das Neves Seita Batista de Sousa, - The Minister of Education and Culture, Peregrino do Sacramento da Costa, - The Minister of Infrastructure, Natural Resources and Environment, Luís Alberto Carneiro dos Prazeres, - The Minister of Health, Antonio Soares Marques de Lima. - The Minister of Internal Administration and Territory, Manuel da Cruz Marçal Lima.

Promulgated on August 3, 1999.
Publish it.
The President of the Republic, Miguel Anjos da Cunha Lisboa Trovoada.