Resolution 021/2005 Approving New Public Sector Credit Regulations

BOARD RESOLUTION NO. 021/2005 SUBJECT: ECONOMIC POLICY ADVISORY – APPROVES NEW REGULATIONS FOR CREDITS TO THE PUBLIC SECTOR

HAVING REVIEWED: Law No. 1670 of October 31, 1995. Board Resolution No. 160/97, Regulations for Credits to the Public Sector. Board Resolution No. 121/2001, Modification to the Regulations for Credits to the Public Sector. Technical Report APEC-INEP No. 004/2005 from the Economic Policy Advisory dated February 1, 2005. Report from the Legal Affairs Management SANO No. 093/2005 dated February 1, 2005.

CONSIDERING: That Articles 22, 23, and 25 of Law 1670 establish the conditions under which the Central Bank of Bolivia (BCB), as an exception, may grant public credit in favor of the General Treasury of the Nation (TGN). That the Regulations for Credits to the Public Sector and their modification define the specific conditions under which the BCB will grant credits to the Public Sector. That Report No. 004/2005 from the Economic Policy Advisory recommends the approval of said Regulations. That Report SANO No. 093/2005 from the Legal Affairs Management states that there is no legal impediment for the Board of Directors of the BCB to consider the approval of the New Regulations.

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

Article 1.- Approve the new Regulations for Credits to the Public Sector in its 11 articles, which, as an annex, form part of this Resolution.

Article 2.- The new Regulations will enter into force as of February 1, 2005.

Article 3.- Board Resolutions 160/97 and 121/2001 are hereby repealed.

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

La Paz, February 1, 2005

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Juan Antonio Morales A.

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Juan Medinaceli V. Enrique Ackermann A.

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Fernando Paz B.

ANNEX REGULATIONS FOR CREDITS TO THE PUBLIC SECTOR

CHAPTER I OBJECTIVE, TERMINOLOGY, AND ABBREVIATIONS

Article 1 (Objective). This instrument aims to regulate Articles 22, 23, and 25 of Law No. 1670, establish the basic norms and procedures for granting public credit in the cases provided for in Article 22, namely: 1.1 To address urgent needs arising from public calamities, internal or international unrest, declared by Supreme Decree. 1.2 To address temporary liquidity needs, within the limits of the monetary program.

Article 2 (Public Credit Operations). "Public Credit Operations" are defined as money loans with guarantee of public securities, granted by the Central Bank of Bolivia in favor of the Ministry of Finance, to address the needs indicated in Article 1.

Article 3 (Terminology and Abbreviations). For the purposes of these regulations, the following terms and abbreviations will be used: BCB: Central Bank of Bolivia MH: Ministry of Finance APEC: Economic Policy Advisory of the BCB GAL: Legal Affairs Management of the BCB GOM: Monetary Operations Management of the BCB LT: Treasury Bill, a public security issued at a discount TGN: General Treasury of the Nation, representative of the MH, with sufficient legal capacity to incur obligations. Securities: Any negotiable debt security or public papers issued by the MH, whose public offering is authorized by the Securities Commission.

CHAPTER II CREDITS FOR PUBLIC CALAMITIES, INTERNAL OR INTERNATIONAL UNREST

Article 4 (Requirements). To consider the credit, it is necessary for the MH to submit to the BCB a plan incorporating at least the following documentation: 4.1 The corresponding Supreme Decree, in the terms indicated in Article 1 of these Regulations. 4.2 Credit application specifying: a) Amount b) Currency c) Term d) Public security backing the operation. 4.3 The disbursement schedule, the expenditure program, and the payment plan.

Article 5 (Procedure). The public credit application will be subject to the following procedure: 5.1 The GOM will issue a report specifying the outstanding debt balance as of the date of the application and the future payment maturities of the TGN to the BCB. It will also rule on the suitability of the offered public security to back the operation. 5.2 The GAL will issue a report regarding whether the application complies with the Law, these Regulations, and other pertinent legal norms. 5.3 The APEC will issue a report considering the impact of said credit on the monetary program. 5.4 The application will be presented for consideration by the Board of Directors of the BCB, which may approve the public credit only if there is a favorable vote of at least two-thirds of the members present. For this purpose, it will issue an express resolution.

Article 6 (Financial Conditions). The financial conditions of the credits will be equal to the prevailing conditions in the long-term securities market. In the absence of such references, the financial conditions will be established by the Board of Directors of the BCB.

Article 7 (Conditions for Disbursement). To make the disbursement of public credit resources effective, the following requirements must be met: 7.1 Signing of the respective public credit contract between the MH and the BCB. 7.2 Written commitment from the TGN specifying the issuance dates in favor of the BCB and the physical delivery of the public security backing the operation. 7.3 Disbursements will be made in accordance with the proposed plan.

CHAPTER III CREDITS FOR TEMPORARY LIQUIDITY NEEDS

Article 8 (Requirements). To consider the credit, it is necessary for the MH to submit to the BCB the following documentation: 8.1 Credit application specifying: a) Amount b) Currency c) Term d) Treasury Bills backing the operation e) Payment plan 8.2 Monthly cash flow projections, incorporating repayments to the BCB according to the payment plan.

Article 9 (Procedure). The public credit application will be subject to the following procedure: 9.1 The GOM will issue a report specifying the outstanding debt balance as of the date of the application and the future payment maturities of the TGN to the BCB. It will also rule on the suitability of the offered public security to back the operation. 9.2 The GAL will issue a report regarding whether the application complies with the Law, these Regulations, and other pertinent legal norms. 9.3 The APEC will issue a report regarding the compatibility of the requested public credit with the monetary program and with other limits that may have been agreed upon between the BCB and the MH. 9.4 The application will be presented for consideration by the Board of Directors of the BCB, which may approve the public credit only if there is a favorable vote of at least two-thirds of the members present. For this purpose, it will issue an express resolution.

Article 10 (Financial Conditions). The credits described will be granted with the following financial conditions: 10.1 The Board will set interest rates and terms considering, as a reference, the prevailing yields of public securities in the market in either of the two currencies. 10.2 Maximum term of 12 months, prior to the issuance of a security by the TGN. Credits with terms shorter than the maximum may be renewed, prior to approval by the Board of Directors of the BCB and the issuance of a new security by the TGN. The term of the renewal will be subject to the total term, including renewals, which may not exceed one (1) year. 10.3 Upon maturity of the credit, the public security guaranteeing the obligation will be automatically redeemed through debit in any account that the TGN maintains at the BCB.

Article 11 (Conditions for Disbursement). To make the disbursement of public credit resources effective, the following requirements must be met: 11.1 Signing of the respective public credit contract between the MH and the BCB. 11.2 Issuance in favor of the BCB and physical delivery by the TGN of the LT backing the operation, specifying amount, currency, and term. The LT must be issued under the same rate and term conditions approved in the Board Resolution for the credit for temporary liquidity needs to the public sector. -o -