Resolution 123/97

BOARD RESOLUTION NO. 123/97 SUBJECT: FINANCIAL SYSTEM - FINANCING FOR FONDESIF UP TO US$32,000,000.- WITH RESOURCES FROM THE IDA-1925-BO CREDIT LINE

HAVING SEEN: The Development Credit Agreement IDA-1925-BO, signed on June 24, 1988 between the Republic of Bolivia, the Central Bank of Bolivia (BCB) and the International Development Association. The Loan Contract signed between the Andean Development Corporation (CAF) and the Republic of Bolivia on September 28, 1995. Law 1670 of October 31, 1995. Supreme Decrees 24110 of September 1, 1995 and 24436 of December 13, 1996. Board Resolution of the BCB No. 107/97 of April 30, 1997. Letter WB/BV/0580/97 from the World Bank Representation in Bolivia dated June 27, 1997. Resolution of the Superior Council of the Financial System Fund and Support to the Productive Sector (FONDESIF) No. 22/97 dated July 3, 1997. Note from the Executive Secretary of FONDESIF F.S. EXT. No. 359/97 of July 8, 1997. Report from the Financial System Management No. 020/97 of April 29, 1997. Legal Advisory Report AL 18/97 of April 30, 1997. Report No. 95/97 from the Economic Policy Advisory of July 7, 1997.

//2. B.R. No. 123/97

CONSIDERING: That the Development Credit Agreement IDA-1925-BO for the purpose of Financial Sector Adjustment, signed between the Republic of Bolivia, the BCB and the International Development Association on June 24, 1988, designated the BCB as Representative of the borrower and executive body for the adoption of any measure that must or may be undertaken pursuant to said Agreement. That said Credit Line has as its main objective the strengthening of the financial situation of the banks, provided that the use of resources is compatible with the macroeconomic policies of the Republic of Bolivia, including its fiscal, monetary and exchange rate policies. That in its capacity as Financial Agent of the Government and in its capacity as Representative of the Republic in the execution of the Development Credit Agreement IDA-1925- BO, the BCB has had and has the authority to regulate the use of the resources of this credit, which is administered under a trust regime in a separate account of the BCB, subject to annual external audits. The BCB, on behalf of the Republic, must fulfill the obligation to pay principal and interest to the financier. That Supreme Decrees 24110 and 24436, issued by the Government with the purpose of strengthening the financial system and supporting the national productive sector, have objectives similar to those of the Development Credit Agreement IDA-1925-BO. That the Loan Contract for US$100,000,000.- to finance FONDESIF, approved by CAF Resolution P.E. No. 1202/95 and Supreme Decree 24150, signed on September 28, 1995 between the Republic of Bolivia and the Andean Development Corporation, has been granted at an interest rate equivalent to Libor plus 2.5 points. That the Superior Council of FONDESIF, of which the Minister of Finance and the National Secretary of that Portfolio are members, has authorized its Executive Secretary via Resolution No. 22/97, to incur a credit with the BCB with resources coming from the IDA-1925-BO Agreement to partially replace the

obligations of that organism with the CAF. //3. B.R. No. 123/97 That the Executive Secretary of FONDESIF, via note F.S.F. EXT. No. 359/97, has requested from the BCB a credit of up to US$32,000,000.- for the aforementioned purpose. That the report from the Financial System Management, recommends the use of resources from the Line IDA-1925-BO in the strengthening of the financial system through FONDESIF. Likewise, that the report from Legal Advisory supports that the BCB, in its capacity as Financial Agent of the Government, Representative of the Republic and executive body of the IDA-1925-BO Line, has broad authority to dispose of the use and destination of these resources, provided that they do not deviate from the objectives established in the Development Credit Agreement. That according to the report from the Economic Policy Advisory of the BCB, it is more convenient to the interests of the Republic to use the resources of the IDA-1925-BO Line in substitution of the credit from the Andean Development Corporation, since those are granted on concessional terms and that the operation would be within the limits established by the Monetary Program for the current management. That via Board Resolution of the BCB No. 107/97, the Presidency was tasked with requesting the no objection of the World Bank for the use of resources from the IDA-1925-BO Line, having received in response the letter WB/BV/0580/97 from the Representation of the World Bank in Bolivia, to the effect that any decision on the use of resources related to said Line does not require prior approval from the World Bank. Therefore, THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES: Article 1.- Approve the financing request of the Fund for the Development of the Financial System and Support to the Productive Sector (FONDESIF) with resources from the Development Credit Agreement IDA-1925- BO. //4. B.R. No. 123/97 Article 2.- The financing will have the purpose of replacing obligations incurred by the FONDESIF with the Andean Development Corporation. The Central Bank of Bolivia, as settlor, will assume the payment of said obligations directly to the CAF, subject to authorization from the Ministry of Finance. Article 3.- The financing will be granted under the following terms and conditions: Amount: Up to the sum of US$32,000,000.- Interest Rate: The interest rate and commissions of this loan will be the same as those charged by the IDA to the Republic for the IDA- 1925-BO Line. Additionally, the cost of the exchange rate risk coverage premium will be charged to FONDESIF for outstanding balances in SDRs during the validity of the contract. Term: The term will be 15 years including a one-year grace period, calculable from the signing of the contract with the BCB. Payment Method: Semiannual payments to principal and interest, with installments equal to principal.

//5. B.R. No. 123/97 Disbursement: Via accounting transfer to the account maintained by the Financial System Fund and Support to the Productive Sector at the issuing entity, so that the BCB concludes the payment of obligations with the CAF subject to authorization from the Ministry of Finance. Guarantee: Automatic debit of the accounts and assets in trust, constituted by the FONDESIF at the BCB, in the amounts that are necessary to honor the obligations of the BCB with the IDA, resulting from the use of resources from the IDA-1925-BO Line. These debits will be made with preference over any other obligation incurred by the FONDESIF. Article 4.- Authorize the President of the BCB to sign the financing contract with FONDESIF. Article 5.- The Presidency and the General Management are responsible for the execution and compliance of this Resolution.

8.VII.97 ____________________ Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G. ________________ Fernando Campero P.