Resolution 015/2012

BOARD RESOLUTION NO. 015/2012 SUBJECT: BOARD - APPEAL FOR REVOCATION AGAINST BOARD RESOLUTION NO. 164/2011, OF DECEMBER 20, 2011, WHICH MODIFIES THE REGULATIONS FOR OPERATIONS OF ACCOUNTS IN BOLIVIANOS WITH VALUE MAINTENANCE WITH RESPECT TO THE UFV

VIEWED: The Political Constitution of the State, approved by Referendum on January 25, 2009, and promulgated on February 7, 2009. Law No. 1670, of October 31, 1995, of the Central Bank of Bolivia (BCB). Law No. 2434, of December 21, 2002, on Update and Value Maintenance. Law No. 211, of December 23, 2011, on the General State Budget – Management 2012 (PGE-2012). Supreme Decree No. 26878, of December 21, 2002. Board Resolution No. 017/2003, of February 6, 2003, which approves the Regulations for Operations of Accounts in Bolivianos with Value Maintenance with respect to the Housing Development Unit (UFV). Board Resolution No. 145/2011, of November 8, 2011, which approves the modification of Article 3 of the Regulations for Operations of Accounts in Bolivianos with Value Maintenance with respect to the UFV. Board Resolution No. 162/2011, of December 13, 2011, which resolves to partially revoke Board Resolution No. 145/2011, of November 8, 2011. Board Resolution No. 164/2011, of December 20, 2011, which approves the modification of the Regulations for Operations of Accounts in Bolivianos with Value Maintenance with respect to the UFV. The note from the International Operations Management BCB-GOI-CE-2011-35 of December 22, 2011. The Revocation Appeal against Board Resolution No. 164/2011, of December 20, 2011, filed by the Minister of Economy and Public Finance on behalf of the General Treasury of the Nation (TGN).

//2. B.R. No. 015/2012 The Internal Communication from the International Operations Management BCB-GOI-CI-2012-8, of February 2, 2012. The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2012-35, of February 6, 2012.

CONSIDERING: That through Board Resolution No. 164/2011, of December 20, 2011, the Highest Authority of the BCB resolved to modify the Regulations for Operations of Accounts in Bolivianos with Value Maintenance with respect to the UFV, ordering the following:

Article 1.- Modify Article 10 of the Regulations for Operations of Accounts in Bolivianos with value maintenance with respect to the Housing Development Unit (UFV) approved with Board Resolution No. 017/2003 in the following manner:

SAYS:- Article 10.- (Account Closure) The closure of the Accounts indicated in Article 3 of these Regulations may be carried out upon written request of the Ministry of Economy and Public Finance.

SHOULD SAY:- “Article 10.- (Account Closure) The closure of the Accounts indicated in Article 3 of these Regulations may be carried out upon written request of the Ministry of Economy and Public Finance or within the framework of what is provided in Article 12.”

Article 2.- Include in Chapter III “Procedure for Operations of the Regulations for Operations of Accounts in Bolivianos with Value Maintenance with respect to the UFV”, Article 12 with the following wording: “Article 12.- (Termination of value maintenance of accounts at the BCB) I. The Board of Directors of the Central Bank of Bolivia, through express resolution, may order the termination of value maintenance of UFV accounts opened at the BCB, except for the Diálogo 2000 accounts and the Municipal Solidarity Fund for School Education and Public Health. To this effect, the BCB will communicate to the TGN the date until which the account or accounts will have value maintenance with respect to the UFV at the expense of the BCB. II. The TGN may choose to assume this value maintenance, for which it must authorize the daily debit of its accounts. Otherwise, on the date established in paragraph I of this article, the resources of the account or accounts will be made available to the TGN in a payable account in Bolivianos, enabled for this effect.”

That Article 55 of Law No. 1670 provides that resolutions of the BCB Board may be challenged by any natural or legal person, by filing a revocation appeal with devolutive effect before the same Board, within thirty (30) days of the Resolution being known by the interested or affected persons, and the Board must rule within a period of twenty (20) days following the presentation of said appeal.

CONSIDERING: That with the formalities and within the period established in Article 55 of Law No. 1670, the Minister of Economy and Public Finance on behalf of the TGN, through a memorial of January 19, 2012, filed on January 20 of the current year, an Appeal for Revocation against Board Resolution No. 164/2011, arguing primarily the following:

1. With the modification of Article 10 of the Regulations for Operations of Accounts in Bolivianos with value maintenance with respect to the UFV and the inclusion of Article 12, the BCB could arbitrarily and unilaterally close the accounts it maintains for the TGN in Bolivianos with value maintenance with respect to the UFV without the need for express authorization or prior knowledge of the Account Holder. The termination of value maintenance in UFV accounts established in Article 12 of said regulations implies that the TGN assumes the value maintenance of the accounts or, otherwise, that the resources are made available to it in a payable account in Bolivianos enabled for such effect, an aspect that limits the policy emanating from the Executive Branch by conditioning the action of the TGN as the holder of the accounts, since any norm affecting them requires prior authorization. From this provision, it is inferred that the termination of value maintenance is an action or operation understood within the closure of an account.

2. The BCB, in its capacity as the government's financial agent, acts as an intermediary for the government to negotiate, promote, and control loans with another bank or financial agency; therefore, the exercise of the functions provided by Law No. 1670 is subject to participation and coordination based on policies emanating from the Executive Branch through the MEFP in the various matters or issues in which the BCB operates. As an intermediary instance, it requires coordination with the Executive Branch so that its actions are linked to Government policies. Regarding this, subsection h) of Article 29 of Law No. 1670 provides that the BCB, in its capacity as a financial agent, must carry out operations and activities requested by the Government, functions that are subject to intervention and coordination based on policies emanating from the Executive Branch through the MEFP in different matters. Law No. 211 did not incorporate the “Relief beyond HIPC II” Account into its scope of application, so it could not be affected by Board Resolution No. 164/2011.

3. Board Resolution No. 164/2011 is arbitrary and unilateral, as it was not brought to the knowledge of and did not have authorization from the TGN to decide on the management of its accounts in Bolivianos with value maintenance with respect to the UFV, which causes prejudice to the public policies of the National Government. Within the framework of Articles 326 and 328 of the Political Constitution of the State, the BCB has the duty to coordinate with the Executive Branch; therefore, when formulating its policies, it must take into account the economic policy previously implemented by the Executive Branch, considering that in the exercise of its functions it is subject to participation and coordination with said Branch.

4. The operational management of the TGN accounts cannot be attributed, much less without consent and prior knowledge, under any circumstances by the BCB; therefore, Board Resolution No. 164/2011 violates the rights of the TGN since by providing that the Issuer Entity can close the accounts, it would be creating for itself a parallel indirect attribution that causes prejudice to the structured economic planning, which is the exclusive competence of the MEFP to determine the management of its accounts according to the policies of the Executive Branch.

CONSIDERING: That according to the Internal Communication BCB-GOI-CI-2012-8 from the International Operations Management, the Report BCB-GAL-SANO-INF-2012-35 from the Legal Affairs Management, and the information and criteria raised in the Board meeting of February 7, 2012, it is necessary to state the following:

1. Board Resolution No. 164/2011 was approved within the framework of the BCB's attributions with the Public Sector and as Financial Agent of the Government contained in Articles 24 and 29 of Law No. 1670, by which all entities of the Public Sector must deposit their funds in fiscal accounts of the BCB, which is also empowered to carry out other activities and operations that could be requested by the Government, provided they are compatible with the object and nature of the Issuer Entity. In this context, Board Resolution No. 164/2011, which modifies the Regulations for Operations of Accounts in Bolivianos with Value Maintenance with respect to the UFV, cannot be considered arbitrary, as it responds to the attributions and competencies of the BCB, without contravening the current legal framework, nor reason or justice; therefore, it is fully valid, legal, and does not affect third parties. Nor can what is provided in Board Resolution No. 164/2011 be considered a unilateral act, because Article 12 does not determine the arbitrary and unilateral closure of an account or the Alivio más Allá del HIPC II account, but rather the termination of value maintenance of UFV accounts, expressly providing that the TGN may choose to assume this value maintenance, authorizing the daily debit of its accounts; otherwise, on the established date, the resources of the account or accounts will be made available to the TGN in a payable account in Bolivianos, enabled for this effect. In this context, the closure of an account will depend on what its holder determines, since this person must pronounce themselves on whether to maintain the account by assuming the value maintenance of their UFV accounts or not.

2. The BCB, in the exercise of its functions, including those of financial agent of the Government, must ensure compliance with its object, which is to maintain the internal purchasing power of the national currency. That is, the exercise of the functions of Financial Agent of the Government provided for in Article 29 of Law No. 1670, or if you will, as a financial intermediary, is subject to compliance with its object. It must be emphasized that Law No. 1670, which attributes the quality of financial agent of the government to the Issuer Entity, nowhere establishes that in compliance with this labor the BCB finances or assumes the cost of the operations or policies of the TGN. In this sense, said article does not imply attributing to the BCB the limitation of policies emanating from the Executive Branch, because, according to the Political Constitution of the State, Law No. 1670, and current regulations, it does not have the duty to assume the cost of value maintenance of UFV accounts, and thus finance the activities of the TGN, and also because, according to what is provided in Article 12 of the Regulations for Operations of Accounts in Bolivianos with Value Maintenance with respect to the UFV, the TGN is the one who determines whether to maintain the opening of UFV accounts at the BCB, assuming the cost of indexation.

3. Regarding the approval of Board Resolution No. 164/2011 allegedly constituting an arbitrary and unilateral act that causes damage and prejudice to the structured economic planning and that, having not been coordinated with the MEFP, does not fall within the policies adopted by the Government, the International Operations Management in its Internal Communication BCB-GOI-CI-2012-8 states that the decision cannot be considered arbitrary since it was not issued contrary to justice, reason, or laws; likewise, Board Resolution No. 164/2011, being an act of normative order, is essentially an act that responds to the normative competence of the BCB, according to subsection o) of Article 54 of Law No. 1670, which provides that the Board of the Issuer Entity may approve or modify the BCB regulations without the need for any additional administrative act, so consensus or prior compatibility is not required for the approval of the referred resolution. Likewise, to consider Board Resolution No. 164/2011 arbitrary, it must have been issued contrary to justice, reason, or laws, dictated solely by the will or whim of the competent organ or instance; however, according to the technical basis of the cited resolution, it is a norm that safeguards the legitimate interests of the BCB in pursuit of compliance with its object and functions, subject to its attributions and consequently, it falls within the current legal framework. On the other hand, what is provided by Board Resolution No. 164/2011 is also not contrary to what is provided in Law No. 211, which is limited to regulating the conversion to Bolivianos of outstanding balances, flows, and accounts related to the HIPC II Relief Program, repealing paragraph II of Article 3 of Law No. 2434, of December 21, 2002, and not the “Relief beyond HIPC II” Program; there is currently no norm, whether Law or Supreme Decree, that regulates the maintenance of UFV accounts for said program, much less that the BCB is responsible for assuming the cost of its value maintenance under that denomination.

4. Regarding the damage or prejudice caused to the structured economic planning by the appellant, it must be reiterated that the BCB does not constitute a financing institution through its operations, either directly or indirectly to the MEFP or any other public institution; therefore, prejudice to structured planning cannot be alleged regarding income from the value maintenance of TGN accounts. Likewise, in the revocation appeal filed, the MEFP does not evidence the alleged damage caused, limiting itself to affirming that it exists; however, according to what was stated by the International Operations Management in Report BCB-GOI-INF-2011-6, of December 13, 2011, since June 2008, the MEFP has not requested any payment with resources from the “Relief beyond HIPC II” account; therefore, no prejudice or damage can be perceived. On the contrary, as noted in Internal Communication BCB-GOI-CI-2012-8, the modification to the Regulations for Operations of Accounts in Bolivianos with Value Maintenance with respect to the UFV constitutes a measure whose purpose is to prevent future positive operational results of the BCB from turning into negative results (Net loss of the period), which decreases the Equity of the Institution. Regarding the lack of coordination alleged in the appeal memorial, within the framework of what is provided in Articles 326 and 328 of the Political Constitution of the State and what is provided in Article 4 of Law No. 1670, it is necessary to highlight that such coordination does not imply or entail that the Issuer Entity is subordinated in the fulfillment of its functions to its existence; that is, it does not mean or constitute a sine qua non condition for the exercise of the functions, attributions, and powers of the BCB imposed by the current legal framework. With respect to coordination with the MEFP, the International Operations Management in the cited Internal Communication BCB-GOI-CI-2012-8 states that the BCB takes into account and coordinates economic policy with the Executive Branch in the weekly meetings of the so-called “Macro Group,” attended by the Ministries of Planning and Development and of Economy and Public Finance, where monetary and exchange rate policies are coordinated. However, the definition regarding the maintenance with respect to the UFV of an account (Beyond HIPC) in the Balance Sheet of the Issuer Entity cannot be considered part of economic policy. Although, as the MEFP points out, the maintenance of value of the Alivio Más Allá del HIPC II account has been adopted as policy, it is also the policy of the Central Government and the BCB to Bolivianize the economy, which, under the protection of the second paragraph of Article 326 of the Political Constitution of the State, seeks that economic agents use the national currency for their operations and economic transactions, within which framework, Law No. 211 of the PGE-2012 has disposed of the Bolivianization of the Diálogo 2000 accounts and the Municipal Solidarity Fund for School Education and Public Health starting from the current management.

That for the arguments exposed above, Board Resolution No. 164/2011 does not contravene the current legal framework and has the purpose of avoiding negative results that would decrease the institutional equity of the BCB, a situation that could limit or prejudice the adequate fulfillment of its object provided for in the Political Constitution of the State and Law No. 1670. That in virtue of Article 55 of Law No. 1670, the Board of the BCB is empowered to resolve the Revocation Appeal filed by the MEFP.

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

Article 1.- Deny the revocation appeal filed by the Minister of Economy and Public Finance on behalf of the TGN against Board Resolution No. 164/2011, of December 20, 2011.

Article 2.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, February 7, 2012

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Rafael Boyán Téllez

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Hugo Dorado Araníbar Ernesto Yáñez Aguilar

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Rolando Marín Ibáñez