Resolution 129/2003 Approving the Regulation of Operations for Monetary Regulation Purposes with Securities Issued by the General Treasury of the Nation or the Central Bank of Bolivia

BOARD RESOLUTION NO. 129/2003 SUBJECT: MONETARY OPERATIONS MANAGEMENT – APPROVES REGULATION OF OPERATIONS FOR MONETARY REGULATION PURPOSES WITH SECURITIES ISSUED BY THE GENERAL TREASURY OF THE NATION OR THE CENTRAL BANK OF BOLIVIA.

VIEWED: The Law of the Central Bank of Bolivia No. 1670, of October 31, 1995. The Securities Market Law No. 1834, of March 31, 1998. The Statute of the Central Bank of Bolivia, approved by Board Resolution No. 128/2001, of December 13, 2001. The Regulation of Operations for Monetary Regulation Purposes with Securities Issued by the General Treasury of the Nation or by the Central Bank of Bolivia, approved by Board Resolution No. 029/2001, of April 10, 2001. Board Resolution No. 018/2002 of February 26, 2002, which modifies the Regulation of Operations for Monetary Regulation Purposes with Securities Issued by the General Treasury of the Nation or by the Central Bank of Bolivia. The Open Market Operations Regulation (OMA), approved by Board Resolution No. 127/2003, of November 11, 2003. The Inter-institutional Agreement signed on January 6, 1999, between the Central Bank of Bolivia and the Ministry of Finance, the First Addendum to the Inter-institutional Agreement of January 6, 1999, signed on February 4, 1999, and the Second Addendum to the Inter-institutional Agreement of January 6, 1999, signed on October 24, 2003. The Technical Report of the Monetary Operations Management SOMA No. 012/2003, of September 29, 2003.

//2. B.D. No. 129/2003 The Report of the Legal Affairs Management SANO No. 199/2003, of October 31, 2003.

CONSIDERING: That Article 6 of Law No. 1670 authorizes the Central Bank of Bolivia to regulate the money supply and credit volume in accordance with its monetary program, through the execution of open market operations. That Article 54, paragraph d) of Law No. 1670 and numeral 4) of Article 11 of the BCB Statute, empower the BCB Board to issue norms for Open Market Operations. That Article 87 of Law No. 1670 establishes that within the scope of its functions as monetary authority and payments system authority, and in its capacity as the government's financial agent, the BCB may perform, under the conditions determined by its Board, the deposit, custody, registration, administration, transaction, clearing, and settlement of securities issued, guaranteed, or administered by the BCB and by the General Treasury of the Nation. That Article 56 of Law No. 1834 establishes that the securities specified therein may be represented by book entries held by the deposit entity. That Clause Eighth of the Inter-institutional Agreement signed on January 6, 1999, between the BCB and the Ministry of Finance, establishes the conditions for the issuance of public securities for monetary regulation purposes. That the Second Addendum to the Inter-institutional Agreement signed on January 6, 1999, between the BCB and the Ministry of Finance determines the guidelines for the dematerialized issuance of securities and for the dematerialization of public securities issued under this Inter-institutional Agreement, through the Bolivian Securities Deposit Entity S.A. That the Technical Report of the Monetary Operations Management No. 012/2003, recommends the modification of the current Regulation of Operations for Monetary Regulation Purposes with Securities Issued by the General Treasury of the Nation or by the Central Bank of Bolivia, so that these operations can also be carried out with public securities represented by book entries. That in the opinion of the Legal Affairs Management, there is no legal impediment for the Board to approve the modifications to the aforementioned Regulation.

//3. B.D. No. 129/2003 THEREFORE, THE BOARD OF DIRECTORS OF THE CENTRAL BANK OF BOLIVIA RESOLVES: Article 1.- Approve the Regulation of Operations for Monetary Regulation Purposes with Securities, issued by the General Treasury of the Nation or by the Central Bank of Bolivia, in its 6 chapters and 36 articles, which, as an annex, forms part of this Resolution, with effect from November 11, 2003. Article 2.- Repeal with effect from the approval of this Resolution, the Regulation of Operations for Monetary Regulation Purposes with Securities Issued by the General Treasury of the Nation or by the Central Bank of Bolivia, approved by Board Resolution No. 029/2001 of April 10, 2001, as well as its modification, approved by Board Resolution No. 018/2002 of February 26, 2002. Article 3.- The Presidency and the General Management are charged with the execution and compliance of this Resolution. La Paz, November 11, 2003.

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Juan Antonio Morales A.

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Juan Medinaceli V. Enrique Ackermann A.

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José Luis Evia V. Fernando Paz B

//4. B.D. No. 129/2003 ANNEX REGULATION OF OPERATIONS FOR MONETARY REGULATION PURPOSES WITH SECURITIES, ISSUED BY THE GENERAL TREASURY OF THE NATION OR BY THE CENTRAL BANK OF BOLIVIA

CHAPTER I GENERAL PROVISIONS Article 1.- (Object) This Regulation aims to determine the conditions for the auction, allocation, redemption, administration, and control of operations with securities issued by the General Treasury of the Nation (TGN) or by the Central Bank of Bolivia (BCB), and placed by the latter with monetary policy objectives. Article 2.- (Characteristics of Securities) The securities covered by this regulation are Treasury Bills (LTs) D, Treasury Bonds (BTs) D, and other securities authorized by the TGN, whose characteristics will be determined jointly by the TGN and the BCB, as well as Certificates of Deposit (CDs) and other securities approved by the BCB. These securities will be allocated by the BCB through Public Auction, Money Desk, or other mechanism authorized by the BCB Board. This body may authorize the contracting of a Securities Deposit Entity to carry out operations with securities represented by book entries. Article 3.- (Issuance Currency) The securities, which may be indexed, will be issued in national currency or in United States dollars. Article 4.- (Registration) For public offering, the securities will be registered in the Securities Market Registry of the Superintendence of Pensions, Securities, and Insurance.

CHAPTER II OPEN MARKET OPERATIONS COMMITTEE (COMA) Article 5.- (Object of COMA) The Open Market Operations Committee (COMA) is responsible for the management and administration of Open Market Operations (OMAs), within the framework of the BCB Statute and the OMA Regulation. Article 6.- (Organization) The COMA is composed of the following BCB authorities:

//5. B.D. No. 129/2003 • The President, who presides over meetings or, by delegation, a Director or the General Manager. • The General Manager. • The Monetary Operations Manager. • The Principal Advisor for Economic Policy. • The BCB Directors may participate in the COMA in an informational capacity. • The Deputy Manager of Open Market Operations, who acts as Secretary, with the right to speak but without voting rights. Article 7.- (Powers) The powers of the COMA, in addition to those established in Article 53 of the BCB Statutes and in the OMA Regulation, are: a) Design and propose to the Board the application of monetary policy instruments through OMAs. b) Apply the quarterly guidelines concerning OMAs, defined by the BCB Board, as well as the recommendations of the Monetary and Exchange Policy Committee. c) Define the form of issuance, cut-off rates, offered quantities, terms, currencies, and the characteristics of the securities for operations authorized by the Board. d) Determine the autonomous trading ranges of the Executive Body defined in Article 13, for authorized operations, when applicable. e) Publicly summon the securities auction session at least one day in advance. f) Declare the auction totally or partially void in the following cases:

• When no bids are submitted.
• When the submitted bids have been rejected due to the causes defined in Article 20. g) Ensure compliance with this Regulation, propose amendments to the Board, and resolve situations not contemplated therein. h) Recommend to the Board the necessary actions for the development and control of OMAs.

//6. B.D. No. 129/2003 i) Authorize the Executive Body established in Article 13, when applicable, to send information on the dematerialized issuance of securities to the competent entity, for registration in the book entry system. Article 8.- (Sessions) Ordinary sessions of the COMA will be held at least once a week. The President may summon extraordinary sessions when deemed necessary. Article 9.- (Quorum) The number required to establish a quorum will be at least three of its members, two of whom must necessarily be the President, or their representative, and the Monetary Operations Manager. Article 10.- (Resolutions) COMA resolutions will be taken by a simple majority of votes of the members present at the session. In case of a tie, the President will have the casting vote. Article 11.- (Minutes) The Secretary will draft Minutes of each of the COMA sessions, which will be approved in the following session. Article 12.- (Activity Report) The COMA, through its President, will keep the Board informed about the progress of its activities. Article 13.- (Executive Body) The Monetary Operations Management of the BCB (GOM) will be responsible for carrying out all operations related to the Public Auction process, at the Money Desk, and other operations with securities authorized by the COMA. The GOM, when applicable, is responsible for carrying out the control and supervision of operations carried out through the EDV.

CHAPTER III PUBLIC AUCTION Article 14.- (Call for Bids) The public auction will be held at the BCB prior to a call, which will be published at least one business day before its realization. The publication will be made in at least one written communication medium, without prejudice to the use of other means authorized by the COMA. Article 15.- (Authorized Agents) All financial entities with a license of operation granted by the Superintendence of Banks and Financial Entities or by the Superintendence of Pensions, Securities, and Insurance may participate in the auctions, prior authorization by the COMA, and that comply with the requirements of the Open Market Operations Regulation and //7. B.D. No. 129/2003 with those defined in this Regulation. Private individuals and non-financial entities in the private sector may participate in securities auctions through the financial entities authorized by the COMA. Article 16.- (Application) For participation requests in the auction to be considered valid, financial agents must specify the legal name of the bidder, number of bids, and for each of them, as applicable, rate or price, quantity of securities, currency, payment method, term of the security, as well as other additional data according to the call. The application will be presented at the BCB up to 15 minutes before the time fixed for the opening of the auction session, in one of the following forms: a) In a closed envelope, with signatures of their legal representatives duly registered in the Deputy Manager of Open Market Operations (SOMA). b) Through electronic means authorized by the COMA. c) Any other means accepted by the COMA. The SOMA will certify the time of receipt of the applications, without this implying any order of precedence. Article 17.- (Provision of Funds) To participate in the auction, authorized entities must effect the provision of funds in one of the following forms: a) Through written or electronic communication to the BCB authorizing the debit of their current and reserve accounts, for their own operations or in favor of other authorized financial entities. This authorization may have indefinite character. b) Through a deposit equivalent to 2% of the nominal value of the demanded securities into the "Diverse Creditors - Open Market" account, authorized for this effect at the BCB. Article 18.- (Acceptance of Terms and Conditions) With the written or electronic presentation of the application, the bidder submits to the terms of this Regulation and to those of the call, and may not withdraw their application after the deadline mentioned in Article 16. Article 19.- (Reading of Bids) In the public auction session, the number of applications and bids received, as well as their characteristics, will be announced, without specifying the legal name of the bidders. //8. B.D. No. 129/2003 Article 20.- (Causes for Rejection) The following are causes for rejection of applications: a) Lack of provision of funds. b) If the application contains incomplete or incorrect information regarding what is established in this Regulation and the conditions defined in the public call. c) Delivery of the application outside the established schedule.

CHAPTER IV ALLOCATION AND PURCHASE MODALITIES Article 21.- (Allocation) The allocation of securities in public auction may be carried out: a) on explicit prices or rates proposed by the participants and b) through proposals adhering to the prices or rates resulting from the auction. a) In the first modality, the COMA will allocate the Securities to the best proposals, in descending order of price or ascending in terms of discount rate or yield. At the time of making the allocation, the COMA may reject bids with prices lower or rates higher than their reference levels. If at the margin there is equality of prices, discount rates, or yields between bids, the securities will be allocated by the pro-rata system when applicable. If at the margin the quantity demanded in a single bid is higher than the available remaining supply under this modality, only that remaining amount will be allocated. b) In the second modality, the COMA will define the maximum supply and will carry out the allocation of the Securities to participating entities at the average price or rate obtained in the modality described in paragraph a) of this Article. The amount offered through this modality will be at most 50% of the total amount in each currency and term. If the total demand for securities in this modality is higher than the available supply, the COMA will carry out the allocation by pro-rata, up to the limit of the available amount. //9. B.D. No. 129/2003 The amount requested under this modality by each participating entity may not be higher than US$1,000,000 for securities in foreign currency and Bs1,000,000 for securities in national currency, in each term. These amounts may be modified by the COMA. The COMA will not carry out allocation of securities under this second modality if there are no allocations in the first modality, as it is not possible to determine an average allocation price or rate. Article 22.- (Other Purchase and Sale Modalities in Auction) The purchase and sale of Public Securities may be carried out under other modalities defined by the COMA with the approval of the Monetary and Exchange Policy Committee. Article 23.- (Effective Sale) The sale will become effective 48 hours after the auction allocation or in another term defined by the COMA. Within this term, the awardee must ensure the existence of sufficient funds in one of the accounts mentioned in Article 17. Article 24.- (Sanctions) If on the day of the sale the awardee does not have sufficient resources to effect the payment of the securities issued for monetary policy purposes, the BCB will consolidate in its favor, as a fine, 2% of the nominal value thereof, without prejudice to other sanctions that the COMA may determine. Article 25.- (Publication) The Monetary Operations Management of the BCB will publish the results of the auction, without specifying the legal name of the awardees. Article 26.- (Commercial Year) The calculation of rates will be carried out taking as a base the commercial year of 360 days.

CHAPTER V ISSUANCE, REGISTRATION, AND CUSTODY Article 27.- (Issuance of Securities) The BCB will issue a security for each sale carried out through Auction, Money Desk, and other mechanism authorized by the COMA, with the characteristics and security requirements that back the issuance. The buyer, in the case of physical issuances, must pay the replacement cost of forms and custody that are established in the Table of Commissions and Other Incomes of the BCB. //10. B.D. No. 129/2003 Article 28.- (Registration and Custody) The BCB will electronically register the name of the buyer of the securities and all definitive purchase and sale operations of the same, independently of the records of securities represented by book entries held by the EDV, whose ownership information, for the pertinent legal effects, will prevail over that recorded in the BCB registry. Communication to the SOMA, in writing or by another means authorized by the COMA, of the definitive purchase and sale operations of the securities in the secondary market is mandatory. In case this communication does not exist, the transfer of ownership of physical securities cannot be registered at the BCB and will lack validity for its holder until the omission of registration is remedied. Additionally, the BCB may be custodian, in physical or electronic register, of the issued securities. The BCB may also register repo operations carried out between agents. Article 29.- (Accounting Registration) The Treasury Securities placed by and on behalf of the BCB for monetary policy purposes will be registered in the BCB accounting as determined by the Inter-institutional Agreement and this Regulation, the TGN not being authorized to credit or debit the accounts that the BCB enables in its name and for this purpose. The resources resulting from the sale of these securities will be credited to the Monetary Regulation Account opened at the BCB in the name of the TGN, in the corresponding currencies. The BCB will account for operations carried out according to the following guidelines: a) Operations between the BCB and the TGN. The securities that the BCB acquires from the TGN on behalf of third parties will be recorded in the BCB account called "Monetary Regulation Securities". Simultaneously, the BCB will credit the corresponding amount for the acquired securities in the "Monetary Regulation Account" opened by the BCB in the name of the TGN. Monthly, or with the periodicity decided by the BCB Administration, the accrued interest on the valid securities in the aforementioned "Monetary Regulation Account" will be credited. Upon maturity of the securities, or in case of early redemption, the BCB will debit the corresponding amount from the TGN's "Monetary Regulation Account". b) Operations between the BCB and system agents. Simultaneously with the operation between the TGN and the BCB, the latter will carry out the placement to third parties by crediting the BCB's "Monetary Regulation Securities" account and debiting at the same time the accounts indicated by the agents for the //11. B.D. No. 129/2003 amount of the mentioned securities. Upon maturity of the securities, or in case of early redemption, the amount of the matured securities will be credited to the agents from the "Monetary Regulation Account". c) Cost of operations. The BCB will cover all costs related to operations with securities issued by the TGN for monetary policy purposes. Article 30.- (Exchange Rate) Operations in national currency indexed to the United States dollar will be carried out at the BCB's purchase exchange rate in effect on the date. Article 31.- (Fractionation of Physical Securities) Securities issued by the TGN may be fractionated according to the modalities defined by the COMA and the costs stipulated in the Table of Commissions and Other Incomes of the BCB, respecting the characteristics and conditions of the original issuance.

CHAPTER VI REPLACEMENT, REVERSION, REDEMPTION, AND PRESCRIPTION Article 32.- (Replacement of Physical Securities) In case of loss or misplacement of the allocated securities, their replacement will proceed according to the norms established in the Commercial Code. Article 33.- (Reversion of Securities) Securities represented by book entries allocated are subject to reversion to their physical expression, solely to enable their negotiation in international markets, according to the applicable current regulation for this effect. Article 34.- (Redemption) Public securities and, when applicable, their respective coupons, will be redeemed by the BCB on the maturity dates, prior verification of the holder's ownership with the BCB records or with those of the EDV and, if necessary, prior presentation of the security. The COMA may determine the modalities and conditions for early redemption and conversion of valid securities. Interest will not be recognized after the maturity date, nor will automatic renewal of securities be accepted. If the maturity of the physical security or coupon coincides with a non-working day, they may be redeemed on the previous business day at the curve price at the request of the holder. Dematerialized securities and coupons may be redeemed at the average curve price of the corresponding series. //12. B.D. No. 129/2003 Article 35.- (Prescription) Actions to collect securities prescribe in favor of the State within a period of ten years from the date of their enforceability. Article 36.- (Transitory Provision) Securities issued by the TGN or the BCB, and placed by the latter for monetary regulation purposes prior to this Regulation, are subject to the provisions that gave them origin, until their maturity. --o--