Resolution 140/2011 Approving the New Internal Regulation for Operations under the ALADI Reciprocal Payments and Credits Convention

BOARD RESOLUTION NO. 140/2011 SUBJECT: INTERNATIONAL OPERATIONS MANAGEMENT – APPROVES NEW INTERNAL REGULATION FOR OPERATIONS THROUGH THE ALADI RECIPROCAL PAYMENTS AND CREDITS CONVENTION.

HAVING REVIEWED:

Law No. 1670 of October 31, 1995. The Statute of the BCB approved by Board Resolution No. 128/2005 of October 21, 2005. 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. 145/2007 of November 27, 2007, which approves the Internal Regulation for operations through the ALADI Reciprocal Payments and Credits Convention. The Report from the International Operations Management BCB-GOI-SOEXT-DOCC-INF-2011-17 of October 20, 2011. The Report from the Legal Affairs Management BCB-GAL-SANO-INF-2011-381 of October 21, 2011.

CONSIDERING:

That pursuant to Article 54, subsection o) of Law No. 1670 and Article 11, numeral 29) of the BCB Statute, the Board is empowered to approve, interpret, and modify the Statute and Regulations of the Institution by a two-thirds vote of all its members, without the need for any additional administrative act.

That the Report BCB-GOI-SOEXT-DOCC-INF-2011-17 from the International Operations Management conducts an evaluation of the Internal Regulation for operations through the ALADI Reciprocal Credits and Payments Convention, recommending the approval of a new Regulation.

That the Report BCB-GAL-SANO-INF-2011-381 from the Legal Affairs Management states that there is no legal impediment for the Board to authorize the approval of the new Internal Regulation for operations through the ALADI Reciprocal Credits and Payments 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 Credits and Payments Convention, which is attached as an annex to this Resolution.

Article 2.- Repeal Board Resolution No. 145/2007 and all provisions contrary to this norm.

Article 3.- The Presidency and the General Management are charged with the execution and compliance of this Resolution.

La Paz, October 25, 2011

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Marcelo Zabalaga Estrada

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Hugo Dorado Araníbar Rolando Marín Ibáñez

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Gustavo Blacutt Alcalá Rafael Boyán Téllez

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

CHAPTER I OBJECT AND DEFINITIONS

Article 1.- (Object)

This Regulation aims to standardize the procedures for channeling payments through the Reciprocal Payments and Credits Convention of the Latin American Integration Association (ALADI), by financial entities authorized as Authorized Institutions.

Article 2.- (Definitions)

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

ASFI: Financial System Supervision Authority. BCB: 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 Resolutions of the ALADI Council. Authorized Institution(s): Financial entities expressly authorized 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 authorized 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 Financial System Supervision Authority.

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CHAPTER II UTILIZATION OF THE RECIPROCAL PAYMENTS AND CREDITS CONVENTION - ALADI

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 considering 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.

The reimbursements and/or payments made by the BCB to Authorized Institutions may be made in Bolivianos or in United States Dollars.

CHAPTER III PAYMENTS

Article 5.- (Admissible payments) Payments corresponding to goods trade operations and their related 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) The channeling through the Convention 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) Commercial triangulation, 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.

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CHAPTER IV 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 their related services: a) Letters of Credit and/or Documentary Credits. b) Payment Orders. c) Bills of Exchange. d) Promissory Notes issued or endorsed.

Article 8.- (Prohibited Instruments) Letters of credit and/or documentary credits with red clauses, revolving, stand-by, 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 Convention.

Article 9.- (Underlying commercial transaction) 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) Financial entities to be authorized as Authorized Institutions must meet the following requirements: a) Maintain the patrimonial sufficiency required by Law. b) Be up to date with obligations to the BCB. c) Not have incurred fines from the ASFI for deficiencies in legal reserves for two consecutive biweekly periods in the last two months. d) Not have a liquidity credit from the BCB, in accordance with Article 36 of Law 1670. e) Have an age as a financial entity of at least 12 months. f) Not have been intervened by the ASFI for forced sale.

//5. B.D. No. 140/2011 g) Sign the Operation Contract within the ALADI Reciprocal Payments and Credits Convention, which will represent the unconditional adherence of the Authorized Institution to the norms of this Regulation.

Article 11.- (Prohibition of re-embarkation and re-expedition of goods) Goods channeled through the Convention that enter Customs Warehouse and/or Free Zone may not be re-embarked or re-expedited to third countries.

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 BCB of 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, notification, and payment of instruments, will be resolved directly between them. Therefore, the BCB 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) The reimbursements and/or payments made by the BCB to Authorized Institutions are conditioned upon compliance with this Regulation and registration in the Convention System.

CHAPTER VI OBLIGATIONS OF AUTHORIZED INSTITUTIONS

Article 15.- (Authorization to the BCB) Authorized Institutions, by signing the Operation Contract, will instruct and authorize irrevocably and generally for the automatic debit from the current and reserve accounts they maintain at the BCB of the amounts intended to cover all their obligations, in case they do not make the payment within the established deadlines.

Article 16.- (Payment of instruments)

//6. B.D. No. 140/2011 Authorized Institutions will pay the BCB the amount of the instruments they issue and/or endorse through the Convention, on the date of the debit that the foreign Central Bank sends to the BCB.

Article 17.- (Payment of commissions) Authorized Institutions will pay the BCB the commissions established annually in the Commission Table for Services.

Article 18.- (Insufficiency of funds) The Authorized Institution that does not cover its obligations with the BCB will pay interest calculated on the basis of the unpaid amount, at the interest rate of the Convention for ALADI operations plus four percentage points (400 basis points), calculated from the date of the debit until the date of payment.

Article 19.- (Debit for inadmissible operations) When operations are processed through the Convention in violation of the provisions of Articles 5, 6, 7, and 8, the BCB will debit the total amount of the same from the current and reserve account of the Authorized Institution, which will be restored when the violation is regularized, without prejudice to what is established in Article 24.

Article 20.- (Debit for excess in debt and term limits) When Authorized Institutions issue and/or endorse instruments that represent obligations exceeding the limits established in Articles 22 and 23, the BCB will debit the amount exceeding said limits, replenishing these funds when the limit is regularized, without prejudice to what is established in Article 24.

Article 21.- (Debit for non-existence of commercial operation) Operations issued by Authorized Institutions must be backed by the documents detailed in the General Management Circular. Also, upon request of the BCB, Authorized Institutions must provide additional documentation proving the existence of a commercial operation. Otherwise, the total amount of the operation will be debited from the current and reserve account of the Authorized Institution.

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 ten percent (10%) of their Accounting Equity reported monthly to the BCB by the ASFI.

Article 23.- (Maximum term) The maximum term of Instruments issued and/or endorsed by Authorized Institutions will adjust to the following table:

When an Authorized Institution has ratings from more than one Rating Agency, the lower rating will be considered. Credit risk ratings will be updated at the BCB whenever the Rating Agencies issue the rating for each of the Authorized Institutions.

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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, will result in the following sanctions:

a) For the first time, a written warning. b) The second time, temporary suspension for 3 months. c) The third time, definitive suspension when it re-incurs in non-compliance with this Regulation.

Article 25.- (Loss of right to reimbursement) If an export Instrument is processed through the Convention in violation of the provisions of this Regulation, the Authorized Institution will not have the right to request its reimbursement.

Article 26.- (Prohibition to issue and/or endorse or receive instruments) Moody's Latin America (In foreign currency) Fitch Ratings Maximum term of instruments Aaa, Aa1, Aa2, Aa3 AAA, AA+, AA, AA- 5 years A1 A+ 3 years A2 A 2 years A3 A- 1 year Baa1, Baa2, Baa3 BBB+, BBB, BBB- 6 months Long-Term Credit Risk Rating

An Authorized Institution is prohibited from issuing or endorsing Import Instruments and receiving Export Instruments in the following cases: a) When it is suspended according to subsections b) and c) of Article 24 of this Regulation. b) When the Board of Directors of the BCB through an express Resolution defines its suspension to operate in the Convention.

Article 27.- (Portfolio Transfer) In the case of definitive suspension according to subsection c) of Article 24 or subsection b) of Article 26 of this Regulation, the Authorized Institution must transfer to the BCB the total of the pending collection portfolio originated in operations through the Convention, within the deadlines and conditions fixed by the Board of Directors of the BCB through an express Resolution.

CHAPTER IX OPERATIONAL PROCEDURES

Article 28.- (Operational Procedures) The General Management of the BCB through an express Circular will regulate the operational procedures of operations under the ALADI Reciprocal Payments and Credits Convention.

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