Resolution 065/98 - Sale of Portfolio Ceded as Guarantee by BIDESA to the Central Bank of Bolivia

BOARD RESOLUTION NO. 065/98 SUBJECT: FINANCIAL SYSTEM - SALE OF PORTFOLIO CEDED AS GUARANTEE BY BIDESA TO THE CENTRAL BANK OF BOLIVIA FOR THE LIQUIDITY CREDIT APPROVED BY BOARD RESOLUTION NO. 163/97.

HEARD:

Law No. 1670 of the Central Bank of Bolivia dated October 31, 1995. Supreme Resolution No. 216145 of August 3, 1995, relating to the Basic Norms of the Goods and Services Administration System. Board Resolution No. 154/97 of October 7, 1997, which approves the Specific Regulations of the Goods and Services Administration System of the Central Bank of Bolivia. The Liquidity Loan Contract, with guarantee of assignment of credits, signed between the Central Bank of Bolivia and the International Development Bank S.A. on November 18, 1997. The Account Reconciliation Act at the End of the Administration of the Portfolio Ceded to the Central Bank of Bolivia, signed between the Central Bank of Bolivia and the Liquidating Superintendent on June 10, 1998. The Report from the Financial System Management No. 089/90 dated June 19, 1998. The Legal Advisory Report No. 020/98 dated June 26, 1998.

CONSIDERING:

That Article 39 of Law 1670 of October 31, 1995, establishes that overdue obligations of Banks and Financial Entities with the Central Bank of Bolivia may be collected through debits to the legal reserve account and other accounts maintained by the debtor entity at the Central Bank, without prejudice to using other forms of recovery of such obligations.

That Supreme Resolution No. 216145 of August 3, 1995, and Board Resolution No. 154/97 of October 7, 1997, establish the basic norms of strict and mandatory application in all administrative operations carried out by the Central Bank of Bolivia regarding contracts, management, and disposal of goods and services.

That Clause Ninth, numeral 2 of the Liquidity Loan Contract with Guarantee of Assignment of Credits celebrated between the Central Bank of Bolivia and BIDESA on November 18, 1997, confers upon the Central Bank of Bolivia, as sole owner and creditor of the ceded portfolio, the right to receive payments at all times and by any means obtained to credit the pending balance of payment; likewise, the right to proceed to its substitution, sale, collection, or direct execution and to continue the judicial actions initiated by BIDESA, when the latter for any reason fails to comply with one or all of the obligations arising from the aforementioned contract.

That Clause Thirteenth of the Liquidity Loan Contract with Guarantee of Assignment of Credits grants the Central Bank of Bolivia the right to freely dispose of the ceded portfolio in case of non-payment of obligations by BIDESA.

That Point Three of the Account Reconciliation Act at the End of the Administration of the Portfolio Ceded to the Central Bank of Bolivia establishes the obligation on the part of the Central Bank of Bolivia to return to the International Development Bank S.A. in Liquidation, once the sums owed to the issuing entity have been recovered, the remaining portfolio by the difference or the residual product of its collection.

That Report No. 089/98 from the Financial System Management dated June 19, 1998, presents three options for the treatment of the portfolio ceded to the Central Bank of Bolivia: sale, delivery for collection, and administration on its own account, recommending to the Board of the entity to choose the best option in terms of maximizing recoveries up to covering the amount disbursed for the liquidity credit, plus accrued interest as of December 12, 1997, and expenses associated with the recovery of the ceded portfolio, seeking, at the same time, that the remaining portfolio or the residual product of its collection be of the highest possible value in order to safeguard the interests of the creditors of BIDESA, among whom the Central Bank of Bolivia also figures.

That Legal Advisory Report No. 020/98 dated June 26, 1998, states that the Central Bank of Bolivia, both based on contract and in law, has the authority to dispose of the ceded portfolio owned by BIDESA, in the most appropriate manner for the recovery of the liquidity loan granted, and that the three options proposed in the GSF Report No. 089/98 do not contravene the national legal framework and are legally viable.

THEREFORE

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

Article 1.- Approve, prior to determining the base price, the sale through competitive mechanisms of the portfolio ceded as guarantee by BIDESA to the Central Bank of Bolivia, in accordance with the procedures established by Supreme Resolution No. 216145 of August 3, 1995, and Board Resolution No. 154/97 of October 7, 1997.

Article 2.- Authorize, in accordance with current legal procedures, the hiring of a legal and/or natural person specialized in the matter, to determine the commercial value of the portfolio ceded to the Central Bank of Bolivia, which will serve to establish the base price.

Article 3.- Deduct, from the total income obtained from the sale of the Portfolio Ceded by BIDESA to the Central Bank of Bolivia: i) The amount owed to the Central Bank of Bolivia for the Liquidity Credit plus the interest accrued up to December 12, 1997 (prior to deducting the income that the Issuing Entity receives for capital amortizations up to the date of sale). ii) The expenses arising from the sale process of the Ceded Portfolio incurred by the Issuing Entity.

Article 4.- If there is a remaining portfolio, once the total amount owed to the Central Bank of Bolivia is covered, this must be returned to the Entity in Liquidation.

Article 5.- Authorize the forgiveness of penalty interest to borrowers who partially or fully amortize their obligation to the Central Bank of Bolivia, in order to incentivize the recovery of the portfolio ceded by BIDESA to the Central Bank of Bolivia.

Article 6.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, July 7, 1998

---

Juan Antonio Morales A.

---

Armando Pinell S. Jaime Ponce G.

---

Fernando Campero P.