Resolution 031/2009 Approving the New Foreign Exchange Operations Regulation

RESOLUTION OF THE BOARD OF DIRECTORS NO. 031/2009 SUBJECT: INTERNATIONAL OPERATIONS MANAGEMENT – APPROVES NEW FOREIGN EXCHANGE OPERATIONS REGULATION

SEEN: The Political Constitution of the State promulgated on February 7, 2009. Law No. 1670 of October 31, 1995, of the Central Bank of Bolivia (BCB). Supreme Decree No. 29894 of February 7, 2009, which approves the Organizational Structure of the Executive Branch of the Plurinational State. The BCB Statute approved by Board Resolution No. 128/2005 of October 21, 2005, and subsequent modifications. Board Resolutions Nos. 144/2002, 092/2005, and 140/2008 of December 20, 2002, August 9, 2005, and November 25, 2008, respectively, which approve the Foreign Exchange Operations Regulation.

The Report from the International Operations Management (GOI) No. 06/2009 of March 19, 2009. The Report from the Legal Affairs Management (SANO) 082/2009 of March 23, 2009.

CONSIDERING: That with Resolution No. 144/2002, the BCB Board of Directors approved the Foreign Exchange Operations Regulation. That with Resolutions Nos. 092/2005 and 140/2008, modifications were made to said Regulation. That the Political Constitution of the State establishes in its Article 326 that “The State, through the Executive Branch, will determine the objectives of the country's monetary and exchange policy, in coordination with the BCB.” That the International Operations Management in its Report GOI No. 06/2009 recommends approving a new Foreign Exchange Operations Regulation that aligns with the current Political Constitution of the State and includes provisions regarding the purchase and sale of United States dollars (USD) conducted by financial entities with their users and clients.

That according to the Report from the Legal Affairs Management SANO 082/2009, in accordance with the attribution conferred by Article 54, paragraph o) of Law 1670, the Board of Directors is authorized to approve the BCB Regulations.

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

Article 1.- Approve the new Foreign Exchange Operations Regulation, which is attached and forms part of this Resolution. Article 2.- The Foreign Exchange Operations Regulation will enter into force starting April 6, 2009. Article 3.- Repeal, effective from April 5, 2009, Board Resolutions Nos. 144/2002, 092/2005, and 140/2008. Article 4.- The Presidency and General Management are charged with the execution and compliance of this Resolution.

La Paz, March 31, 2009.

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Gabriel Loza Tellería

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Gustavo Blacutt Alcalá Hugo Dorado Araníbar

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Rolando Marín Ibáñez Ernesto Yáñez Aguilar Rafael Boyán Téllez

ANNEX FOREIGN EXCHANGE OPERATIONS REGULATION

CHAPTER I OBJECT

Article 1.- (Object and Scope) The purpose of this Regulation is to govern the procedures for determining the exchange rate of the Boliviano and for the purchase and sale of United States dollars (USD) by the Central Bank of Bolivia (BCB) and by financial entities with their clients and users.

CHAPTER II ON EXCHANGE POLICY

Article 2.- (Objective and Nature of Exchange Policy) The Exchange Policy is directed towards consolidating the process of inflation stabilization, promoting, as far as possible, the remonetization of the national economy to preserve the stability of the national financial system and mitigate the effects of external shocks. The Ministry of Economy and Public Finance, within the framework of this objective, will determine the nature of the exchange policy, in coordination with the BCB.

CHAPTER III SALE AND PURCHASE OF UNITED STATES DOLLARS (USD)

Article 3.- (Sale of USD) The BCB will sell USD to financial entities through a competitive allocation mechanism, known as the Bolsín. The sale of USD and other currencies to the public sector will be conducted exclusively through the Ministry of Economy and Public Finance and will be assigned at the official selling exchange rate in effect on the date of the operation.

Article 4.- (Purchase of Currencies) The BCB will purchase USD from the public sector and the financial system at the purchase exchange rate, crediting Bolivianos into accounts that the entities maintain at the BCB.

CHAPTER IV ON THE MONETARY AND EXCHANGE POLICY COMMITTEE

Article 5.- (Attributions of the Monetary and Exchange Policy Committee) Within the framework established in Chapter II of this Regulation, the Monetary and Exchange Policy Committee, constituted in accordance with the BCB Statute, will have the following functions: a) Recommend to the Board of Directors modifications to the exchange policy for coordination with the Ministry of Economy and Public Finance. b) Propose to the Board of Directors modifications regarding the modalities for implementing the exchange policy.

CHAPTER V DETERMINATION OF THE EXCHANGE RATE

Article 6.- (Reference Currency for the Exchange Rate) The exchange rate will be determined in relation to the United States dollar (USD).

Article 7.- (Official Selling Exchange Rate) The official selling exchange rate is defined as the minimum allocation price resulting from the Bolsín, if the USD offered for the session are fully sold out in the public sale. In the event that there is a surplus of the offer remaining, the official selling exchange rate will be the base quotation.

Article 8.- (Purchase Exchange Rate) The purchase exchange rate is defined as the result of subtracting a certain amount in Bolivianos, known as the “differential,” from the official selling exchange rate, which will be established by the BCB.

Article 9.- (Validity of the Exchange Rate) The selling and purchase exchange rates will enter into force the day after the Bolsín session and will govern until the day of the next session.

CHAPTER VI SALE OF USD THROUGH THE BOLSIN

Article 10.- (Administration of the Bolsín) The Bolsín will be administered by the International Operations Management of the BCB.

Article 11.- (Frequency of Bolsín Sessions) Bolsín sessions will be held on all business days.

Article 12.- (Participants in the Bolsín) Financial entities that maintain a current and reserve account, reserve account, or current account at the BCB may participate in the Bolsín. This participation will be on their own account or on behalf of third parties.

Article 13.- (Submission of Requests) Requests to participate in the Bolsín session will be submitted through the means determined by the General Management of the BCB, detailing the amount of USD requested, with a minimum amount of USD 100,000.00 (One hundred thousand 00/100 United States dollars) and in multiples of that amount, the proposed exchange rate, and general information about the applicant.

Article 14.- (Deadline Hour) Proposals must be submitted to the BCB by 15:00 hours. Any modification to the deadline hour will be communicated to financial entities by the General Management of the BCB.

Article 15.- (Base Quotation) The Manager of International Operations will inform the President of the BCB of the proposals received in the Bolsín, who will set the base quotation for each session considering the decisions of the Committee.

Article 16.- (Allocation of Currencies in the Bolsín) The base quotation will be communicated by the President of the BCB to the Manager of International Operations, who will instruct that the allocation of USD proceed in descending order of price, provided that the price of the proposals is greater than or equal to the base quotation, until the offer is exhausted.

In the event that the amount of USD offered is not sufficient to meet the received proposals at the same exchange rate, the USD will be allocated under a pro-rata system. In this case, the financial entity will be obligated to accept the allocation of partial amounts.

Article 17.- (Rejection of Requests) Rejected requests and the reason for rejection will be communicated to financial entities upon conclusion of the Bolsín session.

Article 18.- (Delivery of Currencies) On the same date as the Bolsín session, the current and reserve account, reserve account, or current account in national currency of the financial entity will be debited, and on the next business day, the allocated USD will be delivered via credit to their current and reserve account, reserve account, or current account in USD.

Article 19.- (Lack of Provision of Funds) In the event that the financial entity does not have the resources in national currency in its current and reserve account, reserve account, or current account, by the deadline established in Article 14, its request will be rejected, and it will be suspended from participating in Bolsín sessions for five (5) business days.

Article 20.- (Dissemination of Bolsín Results) The results of each Bolsín session will be disseminated on the day through the BCB website and news agencies.

CHAPTER VII PURCHASE AND SALE OF UNITED STATES DOLLARS (USD) BY THE FINANCIAL SYSTEM WITH ITS CLIENTS AND USERS

Article 21.- (Maximum Selling Exchange Rate for USD) Entities supervised by the Financial System Supervision Authority (ASFI) will sell USD to their clients and users at an exchange rate no greater than one (1) centavo of a Boliviano above the official selling exchange rate of the BCB in effect on the date of each operation.

Article 22.- (Minimum Purchase Exchange Rate for USD) Entities supervised by the ASFI will purchase USD from their clients and users at an exchange rate no less than one (1) centavo of a Boliviano below the purchase exchange rate of the BCB in effect on the date of each operation.

Article 23.- (Coordination with ASFI) The BCB will coordinate with the ASFI the supervision and control of compliance by entities of the financial system with the provisions of Articles 21 and 22 of this Regulation.

Article 24.- (Application of Suspensions for Non-Compliance) Once information from the ASFI regarding non-compliance with these norms is received, the BCB will proceed to suspend the offending financial entity according to the following details: i) For the first non-compliance, suspension for 15 calendar days to buy and sell USD to the BCB. ii) For the second non-compliance, suspension for 30 calendar days to buy and sell USD to the BCB and to conduct open market operations (OMA) with the BCB. iii) For the third and subsequent non-compliances, suspension for 60 days to buy and sell USD to the BCB and to conduct open market operations (OMA) with the BCB.

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