Resolution 010/99 Approving the Regulation on Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes

BOARD RESOLUTION NO. 010/99 SUBJECT: CURRENCY AND CREDIT - APPROVES REGULATION ON OPERATIONS WITH SECURITIES ISSUED BY THE GENERAL TREASURY OF THE NATION FOR FISCAL POLICY PURPOSES.

HAVING SEEN: Law No. 1670 of October 31, 1995. The Interinstitutional Agreement on operations with securities issued by the GTN for fiscal policy purposes, signed on January 6, 1999, between the Central Bank of Bolivia and the Ministry of Finance. Supreme Decree No. 23380 of December 29, 1992, which authorizes the General Treasury of the Nation to issue securities. The Open Market Operations Regulation, approved by Board Resolution No. 074/98 of August 11, 1998. The Report from the Currency and Credit Management No. 004/99 of February 4, 1999. The Report from the Legal Advisory Office ALEG No. 028/99 of February 24, 1999.

CONSIDERING: That Article 29, subsection e) of Law No. 1670 of October 31, 1995, authorizes the Central Bank of Bolivia (BCB), in its capacity as Financial Agent of the Government, to participate in the issuance, administration, and placement of public debt securities. That the Interinstitutional Agreement signed between the BCB and the Ministry of Finance on January 6, 1999, establishes the administrative guidelines for the issuance, placement, administration, and redemption operations of GTN securities. That Report from the Currency and Credit Management No. 004/99 recommends the approval by the Board of the draft Regulation on Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes.

That in the opinion of the Legal Advisory, the aforementioned draft regulation meets the necessary requirements and consequently there is no impediment to its approval.

THEREFORE, THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES:

Article 1.- Approve the Regulation on Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes, in its 6 chapters and 33 articles, which as an annex forms part of this Resolution.

Article 2.- The aforementioned Regulation shall enter into force on April 1, 1999.

Article 3.- Repeal Board Resolution No. 150/93 of December 7, 1993, and any other provision contrary to the aforementioned Regulation.

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

La Paz, March 2, 1999

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G.

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Juan Medinaceli Fernando Campero P.

REGULATION ON OPERATIONS WITH SECURITIES ISSUED BY THE GENERAL TREASURY OF THE NATION FOR FISCAL POLICY PURPOSES

CHAPTER I GENERAL PROVISIONS

Article 1 (Object).- This Regulation aims to determine the conditions for the auction, allocation, redemption, administration, and control of operations with short and long-term securities issued by the General Treasury of the Nation (GTN) with fiscal policy objectives.

Article 2 (Administration).- The Central Bank of Bolivia (BCB), in its capacity as Financial Agent of the Government, administers the auctions, allocations, redemptions, and other operations with securities issued by the GTN, at the request and on behalf and account of the GTN.

Article 3 (Characteristics of securities).- The characteristics of the securities issued by the GTN will be defined by it. These securities may be allocated through Public Auction, Money Market, or other mechanism that may be authorized by the Interinstitutional Council established in Article 6.

Article 4 (Currency of issuance).- Securities may be issued by the GTN in national currency, national currency with value maintenance against the United States Dollar (MVDOL), or in United States Dollars. Additionally, coupon-bearing securities may be fixed or variable income.

Article 5 (Public Offer).- For public offering, securities issued by the GTN shall be registered in the National Registry of Securities of the Superintendence of Pensions, Securities, and Insurance.

CHAPTER II TREASURY SECURITIES ADMINISTRATION COUNCIL (CATT)

Article 6 (Object of the CATT).- In compliance with the Interinstitutional Agreement signed between the BCB and the Ministry of Finance (MH) on January 6, 1999, the Treasury Securities Administration Council (CATT) is established, composed of representatives from the BCB and the MH, as an interinstitutional body responsible for establishing the policy and conditions of operations with securities issued by the GTN with fiscal policy objectives and administered by the BCB.

Article 7 (Organization).- The CATT is composed as follows:

• The President of the BCB, who presides over meetings, or by delegation, a Director or the General Manager of the BCB.
• The General Manager of the BCB.
• The Undersecretary of Treasury and Public Credit.
• The Currency and Credit Manager of the BCB.
• The General Director of Public Credit of the GTN.
• The Main Economic Policy Advisor of the BCB, with voice but no vote.
• The Deputy Manager of Open Market Operations of the BCB, with voice but no vote, who acts as Secretary.
• The Head of the Internal Public Debt Unit of the GTN, with voice but no vote.
• BCB Directors may participate in the CATT in an informational capacity.

Article 8 (Powers).- The CATT has the following powers: a) Ensure compliance with this Regulation. b) Define offered quantities, currencies, security term, coupon modality, and, where applicable, frequency of issuances. c) Reject bids, when it considers the rate too high or, alternatively, the price too low. d) Determine the dates of the auctions. e) Declare the auction totally or partially void in the following cases: i) When no bids are submitted. ii) When none of the bids meet the requirements established in this Regulation. f) Resolve situations not contemplated in this Regulation. g) Propose to the Ministry of Finance and the BCB Board amendments and/or modifications to the provisions in force in this matter.

Article 9 (Sessions).- Ordinary sessions of the CATT will be held once a week. The President may convene extraordinary sessions when deemed necessary.

Article 10 (Quorum).- The number required to establish a quorum is four of its members with voice and vote, one of whom must necessarily be a representative of the Ministry of Finance.

Article 11 (Resolutions).- CATT resolutions shall be taken by an absolute majority of votes of the members present at the session. In case of a tie, the President of the Council shall have the casting vote. The Ministry of Finance shall take, in its favor, totally or partially, the bids not rejected by the CATT and shall have preference in the definition of issuance requirements for securities for the next auction.

Article 12 (Minutes).- The Secretary shall draft minutes of each CATT session, which shall be approved in the following session.

Article 13 (Activity Report).- The Council President shall keep the BCB Board informed about the development of CATT activities. Representatives of the Ministry of Finance shall report on securities operations to the authorities of the Ministry of Finance.

Article 14 (Executing Body).- The Currency and Credit Management of the BCB shall be responsible for carrying out all operations related to the Public Auction, Money Market, and others with securities authorized by the CATT.

CHAPTER III PUBLIC AUCTION

Article 15 (Call for Bids).- Auctions shall be held at the BCB, with prior public notice at least one business day before their realization in one or more written media, without prejudice to the use of other means or mechanisms authorized by the CATT.

Article 16 (Authorized Agents).- All financial entities with a license granted by the corresponding Sectoral Superintendencies of the Financial Regulation System (SIREFI) that meet the requirements of Article 16 of the Open Market Operations Regulation and those defined in this Regulation may participate in the auctions.

Individuals and non-financial entities in the private sector may participate in Treasury Securities auctions through financial entities covered by the SIREFI regime.

Article 17 (Application).- The application for participation in the auction must specify the legal name of the applicant, number of bids, and for each of them, as applicable, rate or price, quantity of securities, currency, payment method, security term, as well as other additional data according to the call. The application must be submitted to the BCB up to 15 minutes before the scheduled time for the opening of the auction session, in one of the following forms: a) In a closed envelope, with signatures of its legal representatives duly registered in the Deputy Manager of Open Market Operations (SOMA). b) Through the Open Market Operations Information System (SIOMA). c) Any other means accepted by the CATT. The Deputy Manager of Open Market Operations shall certify the time of receipt of the applications.

Article 18 (Fund Provision).- To participate in the auction, authorized entities must provide funds in one of the following ways: a) Through written communication to the BCB authorizing the debit of their current account or their legal reserve resources, for their own operations or on behalf of other authorized financial entities. This authorization may be indefinite. b) Through a deposit equivalent to 2% of the nominal value of the requested securities in the account named "Diverse Creditors - Treasury Securities Operations" of the BCB.

Article 19 (Acceptance of terms and conditions).- By submitting the application, the applicant submits to the terms of this Regulation and the call, and may not withdraw their application after the deadline mentioned in Article 17.

Article 20 (Reading of Bids).- In the public auction session, the number of received applications and bids, as well as their characteristics, will be announced.

Article 21 (Grounds for Rejection).- The following are grounds for rejection of applications: a) Lack of fund provision. b) If the application contains incomplete, incorrect, or contradictory information.

CHAPTER IV ALLOCATION AND SALE AT AUCTION

Article 22 (Allocation).- The allocation of Treasury Securities in public auction shall be carried out: a) on explicit prices or rates proposed by participants and b) through proposals adhering to the prices or rates resulting from the auction. a) In the first modality, the CATT will allocate Treasury Securities to the best proposals, in descending order of price or ascending in terms of discount rate or yield. At the time of allocation, the CATT may reject bids with prices lower or rates higher than their reference levels. If there is equality of prices, discount rates, or yields between bids at the margin, they shall be allocated by the pro-rata system when applicable. The available offer under this modality shall be calculated after deducting the amount demanded in modality b), which shall represent up to 25% of the auction offer. If at the margin the quantity demanded in a single bid exceeds the remaining available offer under this modality, only that remainder shall be allocated. b) In the second modality, the CATT will define the maximum offer and allocate Treasury Securities to participating entities at the average price or rate obtained in the modality described in point a) of this article. The amount offered through this modality shall be at most 25% of the total amount. If the total demand for Treasury Securities in this modality exceeds the available offer, the CATT will allocate them by pro-rata, up to the limit of the available amount. In all cases, the amount requested under this modality by each participating entity may not exceed the value of US$1,000,000 for foreign currency titles and Bs.1,000,000 for national currency titles. If there are no allocations in the first modality, and therefore it is not possible to determine an average allocation price or rate, the CATT will not make assignments of Treasury Securities under this second modality.

Article 23 (Effective Sale).- The sale shall be effective 48 hours after the auction allocation or in another period defined by the CATT. Within this period, the adjudicataire must ensure the existence of sufficient funds in the following manner: a) In one of the accounts mentioned in Article 18. b) With matured securities issued by the BCB or the GTN, endorsed in favor of the BCB. c) Other modalities authorized by the CATT.

Article 24 (Sanctions).- If on the day of the sale, the adjudicataire does not have sufficient resources to make payment for the securities issued for fiscal policy purposes, the BCB shall consolidate, in favor of the GTN, as a fine, 2% of their nominal value, without prejudice to other sanctions that the CATT may determine.

Article 25 (Publication).- The Currency and Credit Management of the BCB shall publish the results of the auction, without specifying the legal name of the adjudicataires.

Article 26 (Commercial Year).- The calculation of rates and prices shall be based on a commercial year of 360 days.

CHAPTER V ISSUANCE, REGISTRATION, AND CUSTODY

Article 27 (Issuance).- The BCB, on behalf of the GTN, shall issue a title for each sale carried out through Auction, Money Market, or other mechanism authorized by the CATT, with the characteristics and security requirements that back the issuance. The buyer must pay the cost of replacement of forms and custody that are established in the Table of Terms and Conditions for the Collection of Commissions and Other Income of the BCB.

Article 28 (Registration and Custody).- The BCB shall electronically register in the SIOMA the name of the buyer of the securities and all definitive purchase and sale operations of the same. Communication, in writing or by another means authorized by the COMA, of definitive purchase and sale operations of the same in the secondary market is mandatory. In the absence of this communication, the transfer of ownership of the negotiated titles cannot be registered at the BCB and shall therefore lack validity for their holder. Additionally, the BCB may be custodian, in physical or electronic register, of the issued securities. The BCB may also register repo operations carried out between agents.

Article 29 (Exchange Rate).- MVDOL operations shall be carried out at the BCB's buying exchange rate in effect on the date.

CHAPTER VI REPLACEMENT, REDEMPTION, AND PRESCRIPTION

Article 30 (Replacement).- In case of loss or misplacement of the allocated securities, replacement shall proceed according to the norms established in the Commercial Code.

Article 31 (Redemption).- Public securities issued by the GTN are redeemed by the BCB, on behalf and account of the GTN, on the maturity dates of the title, and their coupons are paid after verification of the holder's ownership with the BCB records and subject to the presentation of the title, where applicable. The CATT may determine modalities for early redemption and conversion of existing securities. Additionally, the BCB may request verification of public securities with the GTN records. Interest will not be recognized after the maturity date, nor will automatic renewal be accepted.

Article 32 (Prescription).- Actions to collect the issued securities prescribe in favor of the State within a period of ten years from the date of their enforceability.

Article 33 (Transitional Provision).- Securities issued by the GTN prior to this Regulation are subject to the provisions that gave rise to them, until their maturity.