Resolution 099/99 Approving the New Internal Regulation for Operations under the ALADI Reciprocal Payments and Credits Convention

BOARD RESOLUTION NO. 099/99
SUBJECT: INTERNATIONAL OPERATIONS MANAGEMENT – APPROVES NEW INTERNAL REGULATION FOR OPERATIONS THROUGH THE ALADI RECIPROCAL PAYMENTS AND CREDITS CONVENTION.

HAVING VIEWED
Law No. 1670 of October 31, 1995.
The Reciprocal Payments and Credits Convention currently in force between the Central Banks of the member countries of ALADI and that of the Dominican Republic, as well as its Regulation.
Board Resolution No. 165/97 of November 25, 1997, which approves the Internal Regulation currently in force.
Board Resolutions No. 117/97 of June 10, 1997, and No. 056/99 of July 6, 1999, which approve the Regulation for the Authorization of Banks as "Accredited Financial Entities" (AFE).
The Report from the International Operations Management SCP No. 024/99 of November 17, 1999.
The Report from the Legal Affairs Management No. 056/99 of November 18, 1999.

CONSIDERING:
That Article 38 subsection b) of Law 1670 empowers the Central Bank of Bolivia to create and administer credit lines within the framework of international payment compensation systems.

That the Reciprocal Payments and Credits Convention of the Latin American Integration Association (ALADI) offers significant opportunities to promote Bolivian foreign trade with the member countries of this Association. That the reports from the International Operations and Legal Affairs Managements recommend approving the new Internal Regulation of the ALADI Reciprocal Payments and Credits Convention.

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

Article 1.- Approve the new Internal Regulation for Operations through the ALADI Reciprocal Payments and Credits Convention, which is attached and forms part of this Resolution.

Article 2.- Repeal Board Resolution 165/97 of November 25, 1997.

Article 3.- The new Regulation will enter into force on January 3, 2000.

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

La Paz, November 23, 1999

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G. Juan Medinaceli ____________________ ___________________ Fernando Campero P. Armando Méndez M.

INTERNAL REGULATION FOR
OPERATIONS THROUGH THE ALADI RECIPROCAL PAYMENTS AND CREDITS CONVENTION

CHAPTER ONE
OBJECT AND DEFINITIONS

Article 1 (Object)

This Regulation aims to standardize the procedures for channeling payments by banking entities authorized as Accredited Financial Entities (AFE), through the ALADI Reciprocal Payments and Credits Convention.

Article 2 (Definitions)

For the purposes of this Regulation, the following definitions are established:

Bank: Central Bank of Bolivia.
Central Bank(s): Central banks signatories to the Convention.
Convention: Provisions contained in the Reciprocal Payments and Credits Convention, its Regulation, and the Resolutions of the ALADI Council.
Authorized Institution(s): Institutions expressly empowered by the Bank to channel payments through the Convention.
Foreign Authorized Institutions: Financial institutions resident in each of the countries of the central banks, which are expressly empowered by them to channel payments through the Convention. Instruments: Payment modalities designated as admissible to be channeled through the Convention in this Internal Regulation. Accounting Equity: Accounting equity reported by the Superintendence of Banks and Financial Entities.

CHAPTER TWO
USE OF THE ALADI RECIPROCAL PAYMENTS AND CREDITS CONVENTION

Article 3 (Voluntary Nature)
The use of the Convention mechanism for foreign trade operations with member countries is voluntary.

Article 4 (Direct Channeling)
Authorized Institutions, in accordance with this Regulation and adhering to internationally accepted banking practices, may issue, endorse, and receive the Instruments indicated in Article 7 and channel them directly through the Convention via Foreign Authorized Institutions.

Reimbursements and/or payments made by the Bank to Authorized Institutions may be made in Bolivianos or United States Dollars.

CHAPTER THREE
PAYMENTS

Article 5 (Admissible Payments)
Payments corresponding to goods trade operations and their related services (freight, insurance, and banking services) may be channeled through the Convention, provided that the origin of the traded goods corresponds to member countries of the Convention.

Article 6 (Prohibited Payments)
Payments for operations corresponding to services other than those indicated in Article 5, capital movements, and other purely financial operations involving fund transfers not related to a trade operation shall not be channeled through the Convention. Additionally, Authorized Institutions are prohibited from making the following payments for operations:

a) Triangular trade, understood as exports of goods originating from a member country of the Convention destined for another country of the Convention, by a seller resident in a third country also member of the Convention. b) Discounting of payment Instruments derived from commercial operations.

CHAPTER FOUR
INSTRUMENTS

Article 7 (Admissible Instruments)
The following Instruments will be admitted for channeling under the Convention, which must correspond to goods trade operations with Bolivia and be limited to the characteristics, conditions, and other requirements contemplated in this Regulation:

a) Letters of Credit and/or Documentary Credits. b) Payment Orders for goods trade operations. c) Bills of Exchange corresponding to endorsed commercial operations. d) Promissory Notes issued or endorsed, derived from commercial operations.

Beneficiary exporters of Letters of Credit and/or Documentary Credits may discount the corresponding Instrument with an Authorized Institution before its maturity.

Article 8 (Prohibited Instruments)
Letters of Credit and/or Documentary Credits with red clauses, revolving, standby, or those that contemplate financing for the importer for a period longer than that established for payment to the exporter, may not be channeled through the Convention.

Article 9 (Underlying Commercial Operation)
It is the responsibility of Authorized Institutions to verify, prior to the issuance of an admissible Instrument, that it originates from the commercial transaction indicated in said document.

CHAPTER FIVE
RESPONSIBILITY OF AUTHORIZED INSTITUTIONS

Article 10 (Authorization as Authorized Institution)
Banking system entities that are authorized as AFEs, according to the provisions of BCB Board Resolutions No. 117/97 of June 10, 1997, and No. 056/99 of July 6, 1999, must request express authorization from the Bank, through the International Operations Management, to be incorporated into the list of institutions authorized to channel operations through the Convention.

Article 11 (Prohibition of Re-shipping and Re-export of Goods)
Goods channeled through the Convention that enter Customs Deposits and/or Free Zones may not be re-shipped or re-exported to third countries under the responsibility of the Authorized Institution.

Article 12 (Payment of Issued and/or Endorsed Instruments)
Authorized Institutions that are suspended or lose such status will continue to be responsible for payment to the Bank of Instruments issued and/or endorsed prior to the date of suspension.

Article 13 (Disputes)
Disputes that may arise between Authorized Institutions and Foreign Authorized Institutions regarding the issuance, endorsement, and notification of instruments will be resolved directly between them. Therefore, the Bank assumes no responsibility for any dispute that may arise between them, their clients, or third parties, or between Authorized Institutions and a foreign central bank.

Article 14 (Debit Conformity)
Reimbursements and/or payments made by the Bank to Authorized Institutions are conditioned upon compliance with this Regulation, the submission of information for registration in the System of Assumed Future Commitments (SICOF), and the conformity of the corresponding debit by other central banks, with the Authorized Institution assuming full responsibility in case such conformity does not occur.

CHAPTER SIX
COMMITMENT OF AUTHORIZED INSTITUTIONS

Article 15 (Authorization to the Bank)
Authorized Institutions, by signing the Operation Contract, will irrevocably and generally instruct and authorize the Bank to automatically debit from the accounts they maintain with it the amounts intended to cover obligations for the concepts detailed in the following articles.

Article 16 (Debit for Payment of Instruments)
The Bank will debit the amount of payment for the instruments that Authorized Institutions issue and/or endorse through the Convention, on the value date of the debit notice sent by the foreign Central Bank to the Bank.

Article 17 (Debit for SICAP/ALADI Commissions)
The Bank will debit the SICAP/ALADI commissions for import and export operations, plus related expenses, determined annually in the Table of Commissions and Other Income of the Bank.

Article 18 (Debit for Interest on Insufficient Funds)
The Authorized Institution that does not cover its obligations with the Bank will pay interest calculated on the basis of the unpaid amount at the LIBOR rate for 90 days plus 4 percentage points, in effect on the date of regularization, for the time that such obligation remains unpaid.

Article 19 (Debit for Inadmissible Operations)
When operations are channeled through the Convention in violation of the provisions of Articles 5, 6, 7, and 8, the Bank will debit from the Authorized Institution's accounts one hundred percent (100%) of their amount.

Article 20 (Debit for Excess in Debt Limit)
When Authorized Institutions issue and/or endorse instruments that represent obligations exceeding the limit established by the Bank in accordance with Article 22, it will debit the amount exceeding said limit.

Article 21 (Debit for Non-existence of Commercial Operation)
If, in the Bank's opinion, operations issued by Authorized Institutions are not backed by international trade transactions or appropriate documents, it will debit from the Authorized Institution's Accounts one hundred percent (100%) of the operation.

CHAPTER SEVEN
LIMITS ON ISSUANCE AND/OR ENDORSEMENT OF INSTRUMENTS

Article 22 (Maximum Debt Limit)
The maximum limit of the value of payment Instruments issued and pending payment by Authorized Institutions may not exceed sixty percent (60%) of their Accounting Equity reported monthly to the Bank by the Superintendence of Banks and Financial Entities.

Article 23 (Maximum Term)
The maximum term of Instruments issued and/or endorsed by Authorized Institutions may not exceed five (5) years.

CHAPTER EIGHT
SANCTIONS FOR NON-COMPLIANCE WITH THE REGULATION

Article 24 (Sanctions)
Non-compliance by an Authorized Institution with any provision of this Regulation in an annual period will result in the following sanctions:

a) For the first time, a written warning. b) The second time, temporary suspension for one month. c) The third time, suspension for 3 months. d) In case of recidivism, the suspension will be for 1 year, and the Bank reserves the right to reconsider the future readmission of the entity. e) Definitive suspension if it recidivates in non-compliance with this Regulation.

Article 25 (Loss of Right to Reimbursement)
If an Instrument is channeled through the Convention without having been issued in accordance with this Regulation, both the issuing entity and the receiving or paying entity will be responsible for the non-compliance and will have no right to reimbursement, leaving the resolution of their dispute to them, without prejudice to the sanctions imposed by the Bank on the Authorized Institution.

Article 26 (Prohibition to Issue and/or Endorse Payment Instruments)
The Authorized Institution, from the date of communication and for the duration of the suspension by the Bank, is suspended from the status of authorized institution, and is therefore prohibited from issuing and/or endorsing payment Instruments, as well as from requesting the Bank for reimbursements of payment Instruments that have been issued within the term of the suspension or revocation.

Article 27 (Re-shipping or Re-export of Goods)
If the Bank verifies that goods, whose payments are channeled through the Convention, have been re-shipped and/or re-exported to third countries, the Authorized Institution will be suspended from the Convention for one month. In case of recidivism, the provisions of subsections c) and following of Article 24 will apply.

Article 28 (Portfolio Transfer)
In the case of definitive suspension of an Authorized Institution, it must transfer the total pending portfolio to another Authorized Institution within the timeframes and conditions fixed by the Board of Directors of the Bank through an express Resolution.

CHAPTER NINE
OPERATIONAL PROCEDURES

Article 29 (Operational Procedures)
The General Management of the Bank, through an express Circular, will regulate the following operational procedures:

a) Timeframe for submission of documentation for issued and/or endorsed instruments. b) Timeframe for submission of documentation on negotiation, cancellation, and amendments of instruments. c) Timeframe for submission of Debt Statements and their Reconciliation. d) Timeframe for registration of operations in the Future Commitments Information System (SICOF). e) Schedule for payment requests for exports. f) Report on inclusion and exclusion of Foreign Authorized Institutions. g) Reversal of Operations. h) Debits for delay in submission of information. i) Procedure for payment of Bolivian imports. j) Any other information required by the Bank.

CHAPTER TEN
SIGNING OF THE OPERATION CONTRACT

Article 30 (Operation Contract)
Each Authorized Institution must sign, before December 31, 1999, an Operation Contract within the ALADI Reciprocal Payments and Credits Convention in the format of Annex I, which will represent the unconditional adherence of the Authorized Institution to the norms of this Regulation.

ANNEX I
OPERATION CONTRACT WITHIN THE ALADI RECIPROCAL PAYMENTS AND CREDITS CONVENTION

Let this Private Contract for the Opening of a Credit Line, signed between the Central Bank of Bolivia, hereinafter BCB, and, the Bank……………., hereinafter BANK, be subject to the following clauses and conditions:

FIRST.- INTERVENING PARTIES.- Intervene in this contract:
1.1. The BCB, legally represented by Dr. Juan Antonio Morales Anaya, in his capacity as President, based on the power conferred in Article 59 subsection e) of Law 1670 and as evidenced by his designation via R.S. 216914 of December 20, 1996.

1.2. The BANK, represented by
……………………………………………………………………………………
…………………………………………...legal representatives of the entity.

SECOND.- BACKGROUND.- The background of this contract is:
2.1. The Board Resolution of the Central Bank of Bolivia No. 099/99 of November 23, 1999, through which the Internal Regulation for channeling operations through the ALADI Reciprocal Payments and Credits Convention is approved.

2.2. The Board Resolutions of the Central Bank of Bolivia Nos. 117/97 of June 10, 1997, and 056/99 of July 6, 1999, through which the Regulation for the authorization of Banks as Accredited Financial Entities (AFE) is approved.

THIRD.- OBJECT.- The object of this contract is the Opening of a Credit Line that the BCB grants in favor of the BANK, authorized as an Accredited Financial Entity according to the BCB Board Resolutions Nos. 117/97 of June 10, 1997, and 056/99 of July 6, 1999, with the purpose that the accredited party may issue or endorse the instruments or operations admissible for channeling through the Reciprocal Payments and Credits Convention, subject to the requirements, procedures, and other conditions established in the BCB Board Resolution No. 099/99 of November 23, 1999, which approves the Internal Regulation for operations through the ALADI Reciprocal Payments and Credits Convention, hereinafter simply the Regulation.

FOURTH.- AMOUNT AND USE OF LINE RESOURCES.- The amount of the Credit Line may not be greater than sixty percent (60%) of the Accounting Equity of the BANK, according to information received from the Superintendence of Banks and Financial Entities. Under this amount, the BCB authorizes the BANK to issue and/or endorse directly the instruments or operations determined as admissible by the Regulation, for a maximum term of five (5) years.

FIFTH.- TERM.- The term of this contract is indefinite. However, by mutual agreement, the BCB is granted the power to terminate it at any time upon written notification to the BANK.
The BCB is authorized to rescind the contract automatically and without the need for written communication to the BANK, when it fails to comply with any of the requirements required to maintain its status as a BCB AFE or when it fails to comply with the provisions of the Regulation for this effect.

SIXTH.- PAYMENT METHOD.- The BCB, on the date it receives the debit notice from the Foreign Central Bank, will charge the BANK the amount of the instruments or operations that it has issued or endorsed subject to the Regulation. This charge will be made automatically and without prior requirement, by debiting the accounts that the BANK maintains with the BCB. In the same way, in application of Article 39 of Law 1670, the BCB is empowered to perform the automatic debit of the accounts that the BANK maintains for non-compliance with Articles 16 to 21 of the Regulation.

SEVENTH.- BANK'S RESPONSIBILITY.- The BANK assumes total and exclusive responsibility for the execution of the operations it channels under the Convention in the manner and with the scope established in Chapter FIVE of the Regulation.

EIGHTH.- PROHIBITIONS.- In addition to payments for operations expressly prohibited in Article 6 of the Regulation, the BANK within the Convention may not carry out operations that do not strictly adhere to the modality established in the Regulation, under the responsibility of the BANK.

NINTH.- GUARANTEES.- The BANK guarantees the obligations undertaken by virtue of this contract, with all its assets present and future, especially with the automatic debit in its accounts that it maintains with the BCB. In the event that it loses its status as an authorized entity due to definitive suspension, the BANK commits to continue payment to the BCB on their maturity dates, of pending payment instruments issued and/or endorsed prior to the date of suspension or revocation. Likewise, in the case of definitive suspension, the BANK commits to transfer the total pending portfolio to another banking entity, within the timeframes and conditions fixed by the BCB Board of Directors.

TENTH.- CURRENCY OF THE CONTRACT.- The issuance and/or endorsement of instruments charged to the Credit Line must be in United States Dollars.

ELEVENTH.- VALIDITY OF THE CONTRACT.- This contract will remain in force until the total fulfillment of the BANK's financial obligations with the BCB.

TWELFTH.- CONTRACT EXPENSES.- All expenses required for the instrumentality of this contract will be borne by the BANK.

THIRTEENTH.- EXECUTIVE FORCE.- It is agreed that this contract will have executive force without the need for signature recognition, nor any other prior legal requirement, subject to the provisions of Art. 1316 of the Commercial Code.

FOURTEENTH.- JURISDICTION.- The parties agree to submit for any matter regarding the execution, compliance, or non-compliance of this contract to the jurisdiction of the Courts and Tribunals of the Judicial District of the city of La Paz.

FIFTEENTH.- ADHESION.- The BANK accepts to know the entire content of the Regulation, which forms part of this Contract, for which it accepts and adheres to its stipulations, expressly declaring that in the channeling of its operations it will strictly comply with the norms and procedures established therein.

SIXTEENTH.- ACCEPTANCE.- On the one hand, Dr. Juan Antonio Morales, representing the CENTRAL BANK OF BOLIVIA; and on the other hand …………………………………………………………………………………… …………………………………………………… representing the Bank ……………………………………………………………………………….. ……………………………………………………………………………….. declare our absolute conformity with all and each of the preceding clauses, obligating ourselves to their faithful and strict compliance.

La Paz,………………………………………………..of 1999.
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