Resolution 029/2001 Approving New Regulations for Monetary Regulation Operations with Securities Issued by the General Treasury of the Nation or the Central Bank of Bolivia

BOARD RESOLUTION NO. 029/2001 SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES NEW REGULATIONS FOR OPERATIONS FOR MONETARY REGULATION PURPOSES WITH SECURITIES ISSUED BY THE GENERAL TREASURY OF THE NATION OR BY THE CENTRAL BANK OF BOLIVIA.

HAVING SEEN: Law No. 1670 of October 31, 1995. Board Resolution No. 145/97 of September 2, 1997, which approves the Regulations of the Open Market Operations Committee (COMA). Board Resolution No. 074/98 of August 11, 1998, which approves the Open Market Operations Regulations. Board Resolution No. 075/98 of August 11, 1998, which approves the Regulations for Operations with Certificates of Deposit (CDs) of the Central Bank of Bolivia. Board Resolution No. 021/99 of March 30, 1999, which approves the Regulations for Operations with Securities Issued by the General Treasury of the Nation for Monetary Regulation Purposes. Board Resolution No. 007/2000 of February 1, 2000, which modifies the Regulations for Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes and for Monetary Regulation Purposes. Board Resolution No. 028/2001 of April 10, 2001, which approves the new Regulations for Operations with Securities Issued by the General Treasury of the Nation for Fiscal Policy Purposes. The Inter-institutional Agreement signed on January 6, 1999, between the Central Bank of Bolivia and the Ministry of Finance and the Addendum of February 4, 1999. The Technical Report from the Monetary Operations Management No. 003/2001 of March 27, 2001.

//2. B.R. No. 029/2001 The Report from the Legal Affairs Management SANO 054/2001 of April 4, 2001.

CONSIDERING: That Article 6 of Law 1670 authorizes the Central Bank of Bolivia to regulate the amount of money and the volume of credit according to its monetary program, through the execution of open market operations. That Clause Eighth of the Inter-institutional Agreement signed on January 6, 1999, between the Central Bank of Bolivia and the Ministry of Finance, establishes the conditions for the issuance of public securities for monetary regulation purposes. That the Technical Report from the Monetary Operations Management No. 003/2001, recommends the approval by the Board of Directors of the new Regulations for Operations for Monetary Regulation Purposes with Securities, issued by the General Treasury of the Nation or by the CBB. That in the opinion of the Legal Affairs Management, there is no legal impediment for the Board of Directors to approve a new Regulation.

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

Article 1.- Approve the new Regulations for Operations for Monetary Regulation Purposes with Securities, issued by the General Treasury of the Nation or by the Central Bank of Bolivia, which forms an annex to this Resolution in 6 chapters and 35 articles.

Article 2.- These Regulations shall enter into force on May 15, 2001.

Article 3.- Repeal with effect from May 15, 2001, the following Board Resolutions: • Board Resolution No. 145/97 of September 2, 1997, which approves the Regulations of the Open Market Operations Committee (COMA). //3. B.R. No. 029/2001 • Board Resolution No. 075/98 of August 11, 1998, which approves the Regulations for Operations with Certificates of Deposit (CDs) of the Central Bank of Bolivia. • Board Resolution No. 021/99 of March 30, 1999, which approves the Regulations for Operations with Securities Issued by the General Treasury of the Nation for Monetary Regulation Purposes.

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

La Paz, April 10, 2001

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G. Juan Medinaceli V.

//4. B.R. No. 029/2001 ANNEX REGULATIONS FOR OPERATIONS FOR MONETARY REGULATION PURPOSES WITH SECURITIES, ISSUED BY THE GENERAL TREASURY OF THE NATION OR BY THE CENTRAL BANK OF BOLIVIA

CHAPTER I GENERAL PROVISIONS

Article 1.- (Object) These Regulations aim to determine the conditions for the auction, adjudication, redemption, administration, and control of operations with short- and long-term securities issued by the General Treasury of the Nation (TGN) or by the Central Bank of Bolivia (CBB), and placed by the latter with monetary policy objectives.

Article 2.- (Characteristics of Securities) The securities covered by these regulations are Treasury Bills (LTs) D, Treasury Bonds (BTs) D, and other securities authorized by the TGN, whose characteristics will be determined jointly by the TGN and the CBB, as well as Certificates of Deposit (CDs) and other securities approved by the CBB. These securities will be adjudicated by the CBB through Public Auction, Money Desk, or another mechanism authorized by the CBB Board of Directors.

Article 3.- (Currency of Issuance) The securities, which may be indexed, will be issued in national currency or in United States dollars.

Article 4.- (Registration) For public offering, the securities will be registered in the Registry of the Securities Market of the Superintendence of Pensions, Securities, and Insurance.

CHAPTER II OPEN MARKET OPERATIONS COMMITTEE (COMA)

Article 5.- (Object of COMA) The Open Market Operations Committee (COMA) is responsible for the management and administration of Open Market Operations (OMAs), within the framework of the CBB Statutes and the Open Market Operations Regulations.

Article 6.- (Organization) COMA is composed of the following CBB authorities: //5. B.R. No. 029/2001 • The President, who presides over meetings or, by delegation, a Director or the General Manager. • The General Manager. • The Monetary Operations Manager. • The Main Advisor for Economic Policy. • The CBB Directors, in an informative capacity. • The Deputy Manager of Open Market Operations, who acts as Secretary, with the right to speak but without voting rights.

Article 7.- (Powers) The powers of COMA, in addition to those established in Article 51 of the CBB Statutes and in the OMA Regulations, are: a) Design and propose to the Board of Directors the application of monetary policy instruments through OMAs. b) Apply the quarterly guidelines concerning OMAs, defined by the CBB Board of Directors, as well as the recommendations of the Monetary and Exchange Policy Committee. c) Define the cutoff rates, offered quantities, terms, currencies, and the characteristics of the securities for operations authorized by the Board of Directors. d) Determine the autonomous trading ranges of the Executive Body defined in Article 13, for authorized operations, when applicable. e) Publicly summon the auction session at least one day in advance. f) Declare the auction totally or partially void in the following cases:

• When no bids are submitted.
• When the submitted bids have been rejected due to the causes defined in Article 20. //6. B.R. No. 029/2001 g) Ensure compliance with these Regulations, propose amendments to the Board of Directors, and resolve situations not contemplated therein. h) Recommend to the Board of Directors the necessary actions for the development and control of OMAs.

Article 8.- (Sessions) Ordinary COMA sessions will be held at least once a week. The President may call extraordinary sessions when deemed necessary.

Article 9.- (Quorum) The number required to establish a quorum will be at least three of its members, two of whom must necessarily be the President, or their representative, and the Monetary Operations Manager.

Article 10.- (Resolutions) COMA resolutions will be taken by a simple majority of votes of the members present at the session. In case of a tie, the President will have the casting vote.

Article 11.- (Minutes) The Secretary will draw up Minutes of each COMA session, which will be approved in the next session.

Article 12.- (Activity Report) COMA, through its President, will keep the Board of Directors informed about the development of its activities.

Article 13.- (Executive Body) The Monetary Operations Management of the CBB will be responsible for carrying out all operations related to the Public Auction process, at the Money Desk, and other operations with securities authorized by COMA.

CHAPTER III PUBLIC AUCTION

Article 14.- (Call for Bids) The public auction will be held at the CBB prior to a call, which will be published at least one business day before its realization. The publication will be made in at least one written communication medium, without prejudice to the use of other means authorized by COMA.

Article 15.- (Authorized Agents) All financial entities with a license of operation granted by the Superintendence of Banks and Financial Entities or by the Superintendence of Pensions, Securities, and Insurance may participate in the auctions, with prior authorization from COMA, and provided they meet the requirements of the //7. B.R. No. 029/2001 Open Market Operations Regulations and those defined in these Regulations. Private individuals and non-financial entities in the private sector may participate in the securities auctions through the financial entities authorized by COMA.

Article 16.- (Application) For participation applications in the auction to be considered valid, financial agents must specify the legal name of the bidder, number of bids, and for each of them, as applicable, rate or price, quantity of securities, currency, payment method, term of the security, as well as other additional data according to the call. The application will be submitted to the CBB up to 15 minutes before the time fixed for the opening of the auction session, in one of the following forms: a) In a closed envelope, with signatures of their legal representatives duly registered in the Deputy Management of Open Market Operations (SOMA). b) Through electronic means authorized by COMA. c) Any other means accepted by COMA. SOMA will certify the time of receipt of the applications, without this implying any order of precedence.

Article 17.- (Provision of Funds) To participate in the auction, authorized entities must provide funds in one of the following forms: a) Through written or electronic communication to the CBB authorizing the debit of their current and reserve accounts, for their own operations or in favor of other authorized financial entities. This authorization may be indefinite. b) Through a deposit equivalent to 2% of the nominal value of the demanded securities in the "Diverse Creditors - Open Market" account, authorized for this effect at the CBB.

Article 18.- (Acceptance of Terms and Conditions) With the written or electronic submission of the application, the bidder submits to the terms of these Regulations and the call, and may not withdraw their application after the deadline mentioned in Article 16. //8. B.R. No. 029/2001

Article 19.- (Reading of Bids) In the public auction session, the number of applications and bids received, as well as their characteristics, will be announced, without specifying the legal name of the bidders.

Article 20.- (Causes for Rejection) The following are causes for rejection of applications: a) Lack of provision of funds. b) If the application contains incomplete or incorrect information regarding what is established in these Regulations and the conditions defined in the public call. c) Submission of the application outside the established schedule.

CHAPTER IV ADJUDICATION AND PURCHASE MODALITIES

Article 21.- (Adjudication) The adjudication of securities in public auction may 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, COMA will adjudicate the Securities to the best proposals, in descending order of price or ascending in terms of discount rate or yield. At the time of adjudication, COMA 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, the securities will be adjudicated by the pro-rata system when applicable. If at the margin the quantity demanded in a single bid exceeds the remaining available supply under this modality, only that remaining amount will be adjudicated. //9. B.R. No. 029/2001 b) In the second modality, COMA will define the maximum supply and will adjudicate the Securities to participating entities at the average price or rate obtained in the modality described in paragraph a) of this Article. The amount offered through this modality will be at most 50% of the total amount in each currency and term. If the total demand for securities in this modality exceeds the available supply, COMA will carry out the adjudication by pro-rata, up to the limit of the available amount. The amount requested under this modality by each participating entity may not exceed the value of US$ 1,000,000 for securities in foreign currency and Bs. 1,000,000 for securities in national currency, in each term. These amounts may be modified by COMA. COMA will not effect assignment of securities under this second modality if there were no adjudications in the first modality, as it is not possible to determine an average adjudication price or rate.

Article 22.- (Other Purchase and Sale Modalities in Auction) The purchase and sale of Public Securities may be carried out under other modalities defined by COMA with the approval of the Monetary and Exchange Policy Committee.

Article 23.- (Effective Sale) The sale will become effective 48 hours after the auction adjudication or in another period defined by COMA. Within this period, the adjudicatee must ensure the existence of sufficient funds in one of the accounts mentioned in Article 17.

Article 24.- (Sanctions) If on the day of the sale the adjudicatee does not have sufficient resources to effect the payment of the securities issued for monetary policy purposes, the CBB will consolidate in its favor, as a fine, 2% of their nominal value, without prejudice to other sanctions that COMA might determine.

Article 25.- (Publication) The Monetary Operations Management of the CBB will publish the results of the auction, without specifying the legal name of the adjudicatees.

Article 26.- (Commercial Year) The calculation of rates will be carried out taking as a base the commercial year of 360 days. //10. B.R. No. 029/2001

CHAPTER V ISSUANCE, REGISTRATION, AND CUSTODY

Article 27.- (Issuance) The CBB will place one security for each sale carried out through Auction, Money Desk, and another mechanism authorized by COMA, 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 Commissions and Other Income of the CBB.

Article 28.- (Registration and Custody) The CBB will electronically register the name of the buyer of the securities and all definitive purchase and sale operations of the same. It is mandatory to communicate to SOMA, in writing or by another means authorized by COMA, the definitive purchase and sale operations of the same in the secondary market. In case this communication does not exist, the transfer of ownership of the negotiated securities cannot be registered at the CBB and will lack validity for their holder until the omission of registration is remedied.

Additionally, the CBB may be custodian, in physical or electronic register, of the issued securities. The CBB may also register the repo operations carried out between agents.

Article 29.- (Accounting Registration) The Treasury Securities placed by and on behalf of the CBB for monetary policy purposes will be registered in the CBB accounting as determined by the Inter-institutional Agreement and these Regulations, with the TGN not authorized to credit or debit the accounts that the CBB enables in its name and for this purpose. The resources resulting from the sale of these securities will be credited to the Monetary Regulation Account opened at the CBB in the name of the TGN, in the corresponding currencies. The CBB will account for the operations carried out according to the following guidelines: a) Operations between the CBB and the TGN. The securities that the CBB acquires from the TGN on behalf of third parties will be registered in the CBB account named "Monetary Regulation Securities". Simultaneously, the CBB will credit the corresponding value of the acquired securities in the "Monetary Regulation Account" opened by the CBB in the name of the TGN. Monthly, or with the periodicity decided by the CBB Administration, the accrued interest on the securities valid in the aforementioned "Monetary Regulation Account" will be credited. Upon maturity of the securities, or in case of early redemption, the CBB will debit the corresponding amount from the TGN's "Monetary Regulation Account". //11. B.R. No. 029/2001 b) Operations between the CBB and system agents. Simultaneously with the operation between the TGN and the CBB, the latter will effect the placement to third parties by crediting the CBB's "Monetary Regulation Securities" account and debiting at the same time the accounts indicated by the agents for the value of the mentioned securities. Upon maturity of the securities, or in case of early redemption, the value of the matured securities will be credited to the agents from the "Monetary Regulation Account". c) Cost of operations. The CBB will cover all costs related to operations with securities issued by the TGN for monetary policy purposes.

Article 30.- (Exchange Rate) Operations in national currency indexed to the United States dollar will be carried out at the CBB's buying exchange rate in effect on the date.

Article 31.- (Fractionation) The securities issued by the TGN may be fractionated according to the modalities defined by COMA and the costs stipulated in the Table of Commissions and Other Income of the CBB, respecting the characteristics and conditions of the original issuance.

CHAPTER VI REPLACEMENT, REDEMPTION, AND PRESCRIPTION

Article 32.- (Replacement) In case of loss or misplacement of the adjudicated securities, replacement will proceed according to the norms established in the Commercial Code.

Article 33.- (Redemption) Public securities and, when applicable, their respective coupons, will be redeemed by the CBB on the maturity dates, prior to verification of the holder's ownership with the CBB records and, if necessary, prior to presentation of the security. COMA may determine the modalities and conditions for early redemption and conversion of valid securities.

Interest will not be recognized after the maturity date nor will automatic renewal of the securities be accepted. If the maturity of the security or coupon coincides with a non-working day, they may be redeemed on the previous working day at curve price upon request of the holder. //12. B.R. No. 029/2001

Article 34.- (Prescription) Actions to collect securities prescribe in favor of the State within a period of ten years from the date of their enforceability.

Article 35.- (Transitional Provision) Securities issued by the TGN or the CBB, and placed by the latter for monetary regulation purposes prior to these Regulations, are subject to the provisions that gave rise to them, until their maturity.

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