Resolution 077/2002

BOARD RESOLUTION NO. 077/2002 SUBJECT: FINANCIAL ENTITIES MANAGEMENT - APPROVES MODIFICATIONS TO THE ADMINISTRATION MANDATE CONTRACT AND THE PORTFOLIO ADMINISTRATION AND ASSET SALE REGULATIONS

HAVING SEEN:

The Law of the Central Bank of Bolivia No. 1670 of October 31, 1995. The Law of Economic Reactivation No. 2064 of April 3, 2000. The Law of the Special Fund for Economic Reactivation and Strengthening of Financial Intermediation Entities No. 2196 of May 4, 2001. The Law on Strengthening Financial Norms and Supervision No. 2297 of December 20, 2001. Supreme Resolution No. 218899 of October 15, 1999.

Board Resolution No. 093/99 of October 15, 1999.

Board Resolution No. 101/99 of November 23, 1999. The Administration Mandate of December 1, 1999.

The proposal from Banco Mercantil S.A. presented with note MDT.ADM.-BCB.EXT. 0659/2002 dated May 15, 2002.

The Report from the Financial Entities Management and Legal Affairs Management GEF-GAL No. 177/2002 of July 11, 2002.

The report from the Legal Affairs Management and Financial Entities Management SAJU 391/2002 of May 14, 2002. The report from the Legal Affairs Management GAL No. 10/2002 of July 12, 2002.

//2. B.R. No. 077/2002 CONSIDERING:

That according to subsection a) of Article 54 of Law 1670, the Board has the authority to issue norms and adopt general decisions necessary for the BCB to fulfill the functions, competencies, and powers assigned to it by that legal provision. That through Laws 2064 and 2196, the restructuring of the credit portfolio of financial entities for terms of up to 10 years is authorized. Additionally, by Law No. 2297, the restructuring of the credit portfolio from intervened financial entities for forced sale is expressly provided, establishing the terms of such restructuring regarding terms, grace periods, and interest payments.

That Supreme Resolution No. 218899 establishes the norms by which the Central Bank of Bolivia will be governed in the administration of assets resulting from financial support granted for the strengthening, intervention, or liquidation of financial entities. That Board Resolution No. 093/99 approves the Terms of Reference of the Direct Invitation No. 001/99 for the administration mandate of the assets received in dation in payment from the BBA. As a result of said process, the service was awarded to Banco Mercantil S.A. through BCB Presidency Resolution No. 09/99 of November 5, 1999. That Board Resolution No. 101/99 approves the Portfolio Administration and Asset Sale Regulations, corresponding to the Administration Mandate granted by the BCB to Banco Mercantil S.A., which, as an annex, forms part of said Resolution. That through the administration mandate contract signed between the Central Bank of Bolivia and Banco Mercantil S.A., the former transferred to the latter the administration of the asset package (credit portfolio and movable and immovable property) received in dation in payment from the Ex-BBA. That through note MDT.ADM.-BCB.EXT. 0659/2002, Banco Mercantil S.A. requests the review of the Mandate Contract and its Regulations.

//3. B.R. No. 077/2002 That the Financial Entities and Legal Affairs Managements, in their report GEF-GAL No. 177/2002, after analyzing the proposal presented by Banco Mercantil S.A. and considering the impact of the application of laws 2064, 2196, and 2297 and the prevailing economic situation in the country, recommend that the request of Banco Mercantil S.A. be considered only regarding the fixed commission. Likewise, in order to avoid misunderstandings in the contractual relationship, they recommend complementing the Portfolio Administration and Asset Sale Regulations by establishing a procedure for the sale of assets awarded and received in dation in payment.

That the Legal Affairs Management in its report GAL No. 010/2002, also recommends the expansion of the contract and the power conferred on Banco Mercantil S.A. incorporating into its faculties the attention of ordinary lawsuits instituted against the BCB as a result of the assets received from the Ex-BBA. THEREFORE, THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES:

Article 1.- Authorize the BCB Administration, starting from the month of July 2002, to modify the fixed commission agreed upon in the administration mandate contract signed with Banco Mercantil S.A., by a variable commission of 0.05% corresponding to the relationship of the original commission ($US 55,000) with respect to the gross portfolio balance (capital plus current interest). This variable commission will be calculated monthly based on the portfolio balances of the month to be paid.

Article 2.- Authorize the BCB Administration to expand the faculties and power conferred on Banco Mercantil S.A. for the attention of the following ordinary lawsuits initiated against the BCB by borrowers of the ex-BBA:

//4. B.R. No. 077/2002 No. Plaintiff Defendant Dept. Concept Amount Process Status 1 CABLEBOL BCB Cbba. Reduction of Guarantees No amount. Favorable judgment for BCB. Appealed by CABLEBOL. 2 Javier Cremer Torrico BCB Cbba. Nullity of BBA-BCB Assignment Documents No amount. Lawsuit responded by BCB. 3 Waldo Álvarez Justiniano BBA BCB L.P. Breach of contract and payment of damages and losses No amount. The process is at the stage of parties' arguments before the judgment is issued. 4 Johny Nogales Viruez BCB L.P. Extinction of mortgage guarantee and payment of damages and losses. No amount. Against the unfavorable judgment, the BCB filed an appeal. 5 Carlos Zanier BCB-BME-CLISA L.P. Extinction of personal guarantee No amount. The lawsuit will be responded to by the BCB. 6 José Vacaflor Burgos BCB L.P. Breach of contract No amount. The BCB raised exceptions of lack of standing, which must be resolved as a preliminary matter. As well as any ordinary lawsuit that may be presented in the future against the BCB as a result of the credit portfolio and movable and immovable property delivered in administration mandate to Banco Mercantil S.A.

For its services, the BCB will recognize the following commissions in favor of Banco Mercantil S.A.:

1. For lawsuits without a specific amount, the following percentages apply: a) 8% in lawsuits for contract nullity, even if compensation for damages and losses is also requested. The percentage will be calculated on the outstanding capital balance owed by the assigned debtor who files the lawsuit. b) 8% in lawsuits for breach of contract, even if compensation for damages and losses is also requested. The percentage will be calculated on the (total or partial) amount of the contract declared in breach. c) 8% in lawsuits for reduction, extinction, or nullity of real guarantees. The percentage will be calculated on the value of the guarantees according to their mortgage value recorded in the appraisals that served as the basis for granting the credit or, if applicable, those used to restructure it. d) 8% in lawsuits for nullity of award. The percentage will be calculated on the award value of the property involved.

e) In lawsuits for extinction of guarantee and payments with diverse performance (dations in payment), the mandatary will receive the following fixed commissions: //5. B.R. No. 077/2002 i) $US 5,000.- when the capital debt of the committed credit is in the range of $US 1 to $US 100,000. ii) $US 15,000.- when the capital debt of the committed credit is in the range of $US 100,001 to $US 500,000.- iii) $US 25,000.- when the capital debt of the committed credit is in the range of $US 500,001 and above. 2) For lawsuits with a specific amount, 8% of the litigated amount. 3) The commissions will be paid as follows: a) 20% at the time of filing exceptions, responding, or counterclaiming the lawsuit, with the filing of any corresponding exception; b) 20% at the time of proposing evidence within the term fixed for this; c) 20% at the time the first-instance judgment has been issued; d) 20% once the Auto de Vista (Appellate Review Order) has been issued; and the e) 20% remainder, against the issuance of the Auto Supremo (Supreme Order). 4) Additionally, at the time of payment, the following considerations will be taken into account: a) If the raised exceptions are declared proven, the initial 40% will be consolidated, thus satisfying the commission even if the lawsuit had been responded to. b) If before the judgment any of the forms of extraordinary conclusion of the process occurs, an additional 20% will be paid on what has already been received. However, if peremption is declared and the plaintiff attempts the action again, the mandatary will be obliged to attend the lawsuit deducting from their commission the percentages already received. c) If the extraordinary conclusion of the process operates when the lawsuit has a Judgment but before the Auto de Vista, an additional 20% will be paid. d) If the Judgment, Auto de Vista, or Auto Supremo condemns the plaintiff to pay court costs, these will be waived in favor of the BCB, and the mandatary will be obliged to process the corresponding form until its execution and payment. e) The commission does not include the judicial processing costs of the process, so the BCB will reimburse said costs, prior to accreditation by the mandatary and approval by the BCB. f) The agreed commissions will be reimbursed by the BCB against the presentation of the tax invoice issued by the mandatary. //6. B.R. No. 077/2002 5) Finally, the mandatary will assume the defense of the processes already initiated in the state in which they are found, and in that state, will receive their commissions, except if it reverses a ruling against them, in which case the full commission will be recognized.

Article 3.- Modify Article 58 of the Portfolio Administration and Asset Sale Regulations in the following terms: SAYS: Article 58.- The Mandatary will pay on behalf of the Mandator the annual taxes corresponding to each of the real estate properties. The payment will be reimbursed by the Mandator upon presentation of the legalized copy of the tax payment. The original document will be incorporated into the legal document folder of each real estate property. The payment receipts issued by fiscal or municipal entities must be issued in the name of the Mandator. MUST SAY: “Article 58.- The Mandatary will pay on behalf of the Mandator the annual taxes that will correspond to each of the real estate properties. The payment made will be reimbursed by the Mandator upon presentation of the legalized copy of the tax payment. The original document will be incorporated into the legal document folder of each real estate property. The payment receipts issued by fiscal or municipal entities must be issued in the name of the Mandator. It is the duty of the mandatary to process the exemption from property tax payment for real estate and vehicles, from the registration of the ownership right in the name of the Mandator.”

Article 4.- Modify Article 68 of the Portfolio Administration and Asset Sale Regulations in the following terms:

SAYS: Article 68.- The value of the real estate for insurance purposes will be determined by the commercial value of the annual appraisals. The value of the real estate for its sale will be the commercial value determined by appraisals carried out every one hundred eighty (180) days. The value of the real estate registered //7. B.R. No. 077/2002 in the Financial Statements (book value) will be determined at the time of delivery to the Mandatary. MUST SAY: “Article 68.- The value of the real estate, for insurance purposes, will be determined by the commercial value of the appraisals. The value of the real estate for its sale will be the commercial value determined by annual appraisals. The value of the real estate registered in the Financial Statements (book value) will be the one corresponding according to current SBEF regulations.”

Article 5.- Modify Article 84 of the Portfolio Administration and Asset Sale Regulations in the following terms: SAYS: Article 84.- The initial base sale value will be the one established in the commercial value of the updated appraisals that the Mandator will deliver to the Mandatary. After six (6) months have passed since the actions for the sale of movable goods, real estate, equipment, and vehicles, the Mandatary will carry out new technical appraisals of those goods that were not appraised and submit them for the approval of the Mandator. MUST SAY “Article 84.- The initial base sale value will be the one established in the commercial value of the updated appraisals, which must not be older than one year. After one year has passed since the actions for the sale of movable goods, real estate, equipment, and vehicles, the Mandatary will carry out new technical appraisals of those goods that were not appraised.”

Article 6.- Include in Chapter IX of the Portfolio Administration and Asset Sale Regulations a new Section, with the following wording: //8. B.R. No. 077/2002 CHAPTER IX PROCEDURE FOR THE SALE OF MOVABLE AND IMMOVABLE PROPERTY “Section 3 Article 102.- Based on Articles 87 and 95 of this Regulation, the sale of movable or immovable property will be determined by the Mandatary through open bidding, public auction, direct invitation, or direct sale. Article 103.- The sale process will begin once the BCB's ownership right is perfected and registered in the corresponding records and the Mandatary is in possession of the goods.

Article 104.- The sale of movable goods, equipment, and vehicles may be carried out in lots or retail at the discretion of the Mandatary. Article 105.- The sale of movable and immovable property follows the following procedure:

1. The base sale value will be equal to the commercial value established in the latest appraisals, prepared under the responsibility of the Mandatary.

2. In case of no bidders, the mandatary will carry out, within the year of the initiation of the process, at least quarterly offers considering proportional and gradual reductions until the discount reaches the rapid sale or liquidation value provided in the respective appraisals. This procedure will be taken into account for the sale of each good or lot of goods individually considered, even if the sale actions consider a set of goods or lots.

3. Any offer received by the Mandatary outside the procedure previously provided will be submitted for consideration and approval by the Mandator.

4. The Mandatary will send a monthly report to the Mandator of the actions and results obtained in the sale of the goods. Likewise, it will send all information regarding the appraisals carried out. Article 106.- If, after completing the procedure, the realization of the goods is not achieved, with a cost-benefit report that considers maintenance, custody, insurance, taxes, and other expenses, the Mandatary will request from the Mandator the continuation of the sale actions. //9. B.R. No. 077/2002 In case of obtaining said authorization, the Mandatary, based on a new appraisal, will restart the sale actions complying with the procedure previously referred to.”

Article 7.- Add to the Portfolio Administration and Asset Sale Regulations a new chapter with the following wording: “CHAPTER X FINAL PROVISIONS Section 1 Article 107.- The provisions provided in the preceding Chapters VIII and IX will be applied insofar as they are relevant to the receipt and custody of movable and immovable property awarded via judicial means and received in dation in payment by the Mandatary as a result of credit recovery with the following exceptions: a) The expenses required for the sale of these goods, whether movable or immovable, will be borne by the Mandator, including notary fees and auctioneer commissions (if applicable). b) In case of dations in payment, the expenses incurred until the perfection of the ownership right in favor of the Mandator will be borne by the borrower. c) Regarding property awarded via judicial means, the expenses incurred until the perfection of the ownership right in favor of the Mandator will be borne by the Mandator

Article 8.- Authorize the Administration to reimburse the mandatary for the expenses incurred for maintenance, custody, and insurance of the awarded and dation-in-payment assets from December 1, 1999, the date of entry into force of the administration mandate contract.

Article 9.- Authorize the Administration to conduct a review of the annual cash recovery targets for the portfolio in non-judicial collection established in the administration mandate contract based on the impact that the application of Law No. 2297 will have as of December 31, 2002.

//10. B.R. No. 077/2002 Article 10.- Authorize the President of the BCB to sign with Banco Mercantil S.A. the modifications that may be necessary in the administration mandate contract signed on December 1, 1999.

Article 11.- The Presidency and the General Management are entrusted with the execution and compliance of this Resolution. La Paz, July 16, 2002

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Juan Antonio Morales A.

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Juan Medinaceli V. Armando Méndez M.

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Roberto Camacho S. Javier Comboni S. Enrique Ackermann A.