Resolution 095/2006 Approving the New Regulation on Credit to the Public Sector

BOARD RESOLUTION NO. 095/2006

SUBJECT: ECONOMIC POLICY ADVISORY – APPROVAL OF THE NEW REGULATION ON CREDIT TO THE PUBLIC SECTOR

HAVING SEEN: Law No. 1670, of October 31, 1995. Law No. 1834, of March 31, 1998, on the Securities Market. The New Regulation on Credit to the Public Sector, approved by Board Resolution No. 021/2005 of February 1, 2005. The Regulation on Operations with Public Securities Represented by Book Entries, approved by Board Resolution No. 115/2005 of September 20, 2005. The Technical Report from the Monetary Operations Management SOSP 013/2006. The Report from the Legal Affairs Management SANO No. 201/2006. The internal communication from APEC /SMyF-176/2006.

CONSIDERING:

That Articles 22, 23, and 25 of Law No. 1670 establish the conditions under which the Central Bank of Bolivia (BCB), on an exceptional basis, may grant public credit to the General Treasury of the Nation (TGN). In this regard, Article 23 states that these credits must be documented in all cases through negotiable public debt securities issued by the National Treasury.

That Article 2, literal b) of Law No. 1834, establishes that the expression "Security" includes its documentary meaning, as well as its representation by book entry, understanding "Security" to refer to those issued by the Bolivian State and its entities.

That the Regulation on Credit to the Public Sector regulates Articles 22, 23, and 25 of Law No. 1670, establishing the basic norms and procedures for granting public credit in the cases provided for in Article 22.

That Article 1 of the Regulation on Operations with Public Securities Represented by Book Entries establishes the mechanism for the dematerialization of public securities and the operational procedures with public securities represented by book entries.

That the Report from the Monetary Operations Management SOSP No. 013/2006 recommends modifying the Regulation on Credit to the Public Sector, with the purpose of incorporating the use of securities represented by book entries to document credit operations with the Public Sector.

That the Economic Policy Advisory proposes a modification in Chapter III, Article 8, point 8.2, which has been incorporated into the Regulation.

That, in the opinion of the Legal Affairs Management, there is no legal impediment for the Board to approve the proposal for the new Regulation on Credit to the Public Sector under the provisions of Law No. 1670 and the Statute of the BCB.

THEREFORE,

THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA

RESOLVES:

Article 1.- Approve the new Regulation on Credit to the Public Sector, which is attached and forms part of this Resolution.

Article 2.- The new Regulation shall enter into force from the day of its approval.

Article 3.- Board Resolution No. 021/2005 of February 1, 2005, which approves the Regulation on Credit to the Public Sector, is hereby repealed.

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

La Paz, November 7, 2006

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Raúl Garrón Claure

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Enrique Ackermann Arguedas Hugo Dorado Aranibar

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Jorge Casso Echart Hugo Argote Argote Gustavo Blacutt Alcalá

ANNEX REGULATION ON CREDIT TO THE PUBLIC SECTOR

CHAPTER I OBJECT, TERMINOLOGY, AND ABBREVIATIONS

Article 1 (Object). This instrument aims to regulate Articles 22, 23, and 25 of Law No. 1670, establishing 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 commotion, 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 guaranteed by 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 this regulation, 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, 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, public papers issued by the MH, or dematerialized public securities represented by book entries.

EDV: Securities Depository Entity SIRTEX: Over-the-Counter Transfer Registration System

CHAPTER II CREDITS FOR PUBLIC CALAMITIES, INTERNAL OR INTERNATIONAL COMMOTION

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, as stated in Article 1 of this Regulation.

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 shall follow 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, this Regulation, 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 to the BCB Board, 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 public securities market. In the absence of such references, the financial conditions will be established by the BCB Board.

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 of the TGN specifying the issuance dates in favor of the BCB, and the physical delivery or book entry 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) Public security (LTs) backing the operation e) Payment plan

8.2 Monthly cash flow projections, incorporating repayments to the BCB according to the payment plan, and ensuring these flows are consistent with the financial program agreed upon between the BCB and the Ministry of Finance.

Article 9 (Procedure). The public credit application shall follow 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, this Regulation, 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 to the BCB Board, 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 shall 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 public security (LT) by the TGN. Credits with terms shorter than the maximum may be renewed, prior to the approval of the BCB Board and the issuance of a new security by the TGN. The term of the renewal shall 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 of the public security (LT) and its physical delivery by the TGN, 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. In the case of dematerialized securities, the BCB must verify in the SIRTEX that the EDV has made the respective book entry. -- or --