Resolution 118/2001 Approving the New Internal Regulation for Operations under the ALADI Payments and Reciprocal Credits Agreement

BOARD RESOLUTION NO. 118/2001 SUBJECT: INTERNATIONAL OPERATIONS MANAGEMENT – APPROVES NEW INTERNAL REGULATION FOR OPERATIONS THROUGH THE ALADI PAYMENTS AND RECIPROCAL CREDITS AGREEMENT.

HAVING VIEWED: Law 1670 of October 31, 1995. The current Reciprocal Payments and Credits Agreement between the Central Banks of the member countries of ALADI and that of the Dominican Republic, as well as its Regulation. Board Resolution No. 099/99 of November 23, 1999, which approves the currently in force Internal Regulation. Board Resolution No. 038/2000 of June 20, 2000, which approves the Regulation for the Authorization of Banks as Accredited Financial Entities (AFE). Board Resolutions 018/2000 of March 21, 2000, 078/2000 of October 24, 2000, and 034/2001 of April 24, 2001. The Report from the International Operations Management (GOI) No. 014/2001 of October 24, 2001. The Report from the Legal Affairs Management (SANO) No. 223/2001 of October 26, 2001.

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 Agreement of the Latin American Integration Association (ALADI) promotes Bolivian foreign trade with the member countries of this Association.

//2. B.R. No. 118/2001 That the reports from the International Operations and Legal Affairs Managements recommend approving the new Internal Regulation of the ALADI Reciprocal Payments and Credits Agreement.

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 Agreement, which is attached and forms part of this Resolution.

Article 2.- The new Regulation will enter into force on January 2, 2002.

Article 3.- Repeal Board Resolutions 099/99 of November 23, 1999, 018/2000 of March 21, 2000, 078/2000 of October 24, 2000, and 034/2001 of April 24, 2001, from the entry into force of the new Regulation.

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

La Paz, November 20, 2001

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Juan Antonio Morales A.

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Armando Pinell S. Juan Medinaceli V.

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Roberto Camacho S. Javier Comboni S.

//3. B.R. No. 118/2001 ANNEX INTERNAL REGULATION FOR OPERATIONS THROUGH THE ALADI PAYMENTS AND RECIPROCAL CREDITS AGREEMENT

CHAPTER I 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 Reciprocal Payments and Credits Agreement of the Latin American Integration Association (ALADI).

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

//4. B.R. No. 118/2001

CHAPTER II USE OF THE RECIPROCAL PAYMENTS AND CREDITS AGREEMENT - ALADI

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

Article 4.- (Direct Channeling) Authorized Institutions, in accordance with this Regulation and considering internationally accepted banking practices, may issue, endorse, and receive the Instruments indicated in Article 7 and channel them directly through the Agreement 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 III PAYMENTS

Article 5.- (Admissible Payments) Payments corresponding to trade in goods and related services (freight, insurance, and banking services) may be channeled through the Agreement, provided that the origin of the traded merchandise corresponds to countries that are members of the Agreement.

Article 6.- (Prohibited Payments) The channeling through the Agreement of payments for operations corresponding to services other than those indicated in Article 5, capital movements, and other pure financial operations, which imply fund transfers not related to a trade operation, will not be admitted. Additionally, Authorized Institutions are prohibited from making the following payments for operations: a) Triangular trade, understood as exports of merchandise originating from a member country of the Agreement destined for another country of the Agreement, by a seller resident in a third country also member of the Agreement.

//5. B.R. No. 118/2001 b) Discounting of Payment Instruments derived from commercial operations.

CHAPTER IV INSTRUMENTS

Article 7.- (Admissible Instruments) The following Instruments will be admitted for channeling under the Agreement, which must correspond to trade in goods 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 trade in goods 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 processed through the Agreement.

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 V RESPONSIBILITY OF AUTHORIZED INSTITUTIONS

Article 10.- (Authorization as Authorized Institution) Entities of the banking system that are authorized as AFE, in accordance with the provisions of Board Resolution of the BCB No. 038/2000 of June 20, 2000, must request the express authorization of the Bank, through the International Operations Management, in order to be incorporated into the list of institutions authorized to channel operations through the Agreement.

//6. B.R. No. 118/2001 Article 11.- (Prohibition of Re-embarkation and Re-expedition of Merchandise) Merchandise channeled through the Agreement that enters Customs Warehouse and/or Free Zone may not be re-embarked or re-expedited 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 the Instruments issued and/or endorsed prior to the date of suspension.

Article 13.- (Controversies) Controversies 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 controversy that may arise between them, their clients, or third parties, or between Authorized Institutions and a foreign central bank.

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

CHAPTER VI OBLIGATIONS OF AUTHORIZED INSTITUTIONS

Article 15.- (Authorization to the Bank) Authorized Institutions, by signing the Operation Contract, will instruct and irrevocably authorize the Bank in a general manner to automatically debit from the current and reserve accounts they maintain with it the amounts intended to cover obligations for the concepts detailed in articles 18, 19, 20, and 21.

//7. B.R. No. 118/2001 Article 16.- (Payment of Instruments) Authorized Institutions will pay the Bank the amount of the instruments they issue and/or endorse through the Agreement, on the value date of the debit notice sent by the foreign Central Bank to the Bank.

Article 17.- (Payment of SICAP/ALADI Commissions and Other Expenses) Authorized Institutions will pay the Bank the SICAP/ALADI commissions, for import and export operations, plus related expenses, determined annually in the Bank's Table of Commissions and Other Income.

Article 18.- (Insufficiency of Funds) When an Authorized Institution does not cover its obligations arising from this Regulation within the times defined for this purpose through a General Management Circular, the Bank will proceed on the day to effect the debit of the obligation plus a fixed commission of 0.05% on the value of the unpaid obligation. In case the Authorized Institution does not have sufficient resources, the Bank will grant it an overnight credit as provided in Chapter VI of the Regulation of the High Value Payment System approved by Board Resolution No. 070/2001 of July 24, 2001.

Article 19.- (Debit for Inadmissible Operations) When operations are processed through the Agreement in violation of the provisions of articles 5, 6, 7, and 8, the Bank will debit the total amount of the same from the current and reserve account of the Authorized Institution.

Article 20.- (Debit for Excess in Debt and Maturity Limits) When Authorized Institutions issue and/or endorse instruments that represent obligations exceeding the limits established in articles 22 and 23, the Bank will debit the amount exceeding said limits.

Article 21.- (Debit for Non-existence of Commercial Operation) If, in the opinion of the Bank, the operations issued by Authorized Institutions are not backed by international trade transactions or appropriate documents, it will debit the total amount of the operation from the current and reserve account of the Authorized Institution.

//8. B.R. No. 118/2001 CHAPTER VII 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 thirty percent (30%) 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 one (1) year.

CHAPTER VIII 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 management period, will give rise to 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 recurrence, the suspension will be for 1 year and the Bank reserves the right to reconsider the future readmission of the entity. e) Definitive suspension when it recurs in non-compliance with this Regulation.

Article 25.- (Loss of Right to Reimbursement) If an Instrument is processed through the Agreement 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 controversy to them, without prejudice to what is provided in Article 24 of this Regulation.

//9. B.R. No. 118/2001 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, has its status as Authorized Institution suspended, so it is 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 temporary or definitive suspension, as indicated in Article 24.

Article 27.- (Re-embarkation or Re-expedition of Merchandise) If the Bank verifies that the merchandise, whose payments are channeled through the Agreement, has been re-embarked and/or re-expedited to third countries, the Authorized Institution will be suspended from the Agreement for one month. In case of recurrence, 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 originated in operations through the Agreement to another Authorized Institution within the timeframes and conditions fixed by the Board of Directors of the Bank through express Resolution.

CHAPTER IX 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 presentation of documentation of issued and/or endorsed instruments. b) Timeframe for presentation of documentation on negotiation, cancellation, and amendments of instruments. c) Timeframe for presentation of Debt Statements and their Reconciliation. d) Timeframe for registration of operations in the Information System of Assumed Future Commitments (SICOF).

//10. B.R. No. 118/2001 e) Schedule for payment of obligations of Authorized Institutions. f) Schedule for payment requests for exports. g) Report of inclusion and exclusion of Foreign Authorized Institutions. h) Reversal of Operations. i) Debits for delay in presentation of information. j) Procedure for payment of imports to Bolivia. k) Other information required by the Bank.

CHAPTER X SIGNING OF THE OPERATION CONTRACT

Article 30.- (Operation Contract) To operate within the Agreement, each Authorized Institution must sign the Operation Contract within the ALADI Reciprocal Payments and Credits Agreement, prepared by the Bank, which will represent the unconditional adherence of the Authorized Institution to the norms of this Regulation.

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