Resolution 165/97 Approving Internal Regulations for ALADI Payment and Credit Reciprocity Convention Operations

RESOLUTION OF THE BOARD OF DIRECTORS NO. 165/97 SUBJECT: INTERNATIONAL AFFAIRS - APPROVES NEW INTERNAL REGULATION FOR CHANNELING OPERATIONS THROUGH THE ALADI PAYMENT AND CREDIT RECIPROCITY CONVENTION.

SEEING: Law No. 1670 of October 31, 1995. The current Reciprocal Payments and Credits Convention between the Central Banks of the member countries of ALADI and the Central Bank of the Dominican Republic, as well as its Regulation. Board of Directors Resolution No. 159/95, which approves the currently in force Internal Regulation. Board of Directors Resolution No. 034/96, which approves the credit line margins for Authorized Institutions. Board of Directors Resolution No. 117/97, which approves the Regulation for the accreditation of banks as "Accredited Financial Entities" (AFE). The Report from the International Affairs Management SOPIN No. 040/97 of October 22, 1997. The Report from the Legal Advisory Office No. 179/97 of October 27, 1997.

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 ALADI Reciprocal Payments and Credits Convention offers significant possibilities to promote Bolivian foreign trade with the member countries of this Association. That the reports from the International Affairs Management and the Legal Advisory Office 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 channeling operations through the ALADI Reciprocal Payments and Credits Convention, which is attached as an annex and forms part of this Resolution.

Article 2.- Repeal Board of Directors Resolutions 159/95 of December 12, 1995, and 034/96 of February 22, 1996.

Article 3.- The new Internal Regulation of the ALADI Reciprocal Payments and Credits Convention shall enter into force as of January 2, 1998.

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

25.XI.97

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Juan Antonio Morales A.

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Armando Pinell S. Jaime Ponce G.

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Juan Medinacelli V. Fernando Campero P.

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Juan Pablo Zegarra A.

INTERNAL REGULATION FOR CHANNELING OPERATIONS THROUGH THE ALADI PAYMENT AND CREDIT RECIPROCITY CONVENTION

CHAPTER ONE ON OBJECT AND DEFINITIONS

Article 1 (Object). This Regulation aims to standardize the procedures for channeling payments by banking entities accredited 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): The central banks that are signatories to the Convention. Reimbursement Code SICAP/ALADI: The set of fields and their respective numerical digits, intended to identify each of the instruments channelable through the Convention, issued or guaranteed by Authorized Institutions, as well as their origin. Convention: The current reciprocal credit conventions between the Central Bank of Bolivia and the Central Banks of Argentina, Brazil, Colombia, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela, and the Central Bank of the Dominican Republic.

Authorized Institution(s): Institutions expressly authorized by the Bank to issue and/or guarantee instruments reimbursable through the Convention.

Foreign Authorized Institutions: Financial institutions resident in each of the countries of the member central banks, that are expressly authorized by them to channel payments through the Convention of instruments issued or guaranteed by them, or to reimburse those received.

Instruments: Payment orders corresponding to commercial operations, letters of credit and/or documentary credits, bills of exchange corresponding to commercial operations guaranteed by Authorized Institutions or Foreign Authorized Institutions, and promissory notes derived from commercial operations issued or guaranteed by Authorized Institutions or Foreign Authorized Institutions, which meet the requirements to effect payments through the Convention and are expressed in United States dollars.

Limits of issuance and/or guarantee of Instruments: Maximum indebtedness limit to which the obligations contracted by Authorized Institutions may reach, in accordance with this Regulation. Net Worth: Net worth defined by SBEF Resolution No. 127/96 of December 20, 1996, and/or subsequent modifications.

System of Commitments Assumed in the Future by Authorized Institutions (SICOF): The system by which automated information is registered and exchanged between Central Banks, prior to the reimbursement request, regarding instruments received by authorized institutions of a country for settlement through the Convention.

CHAPTER TWO ON THE USE OF THE ALADI PAYMENT AND CREDIT RECIPROCITY CONVENTION

Article 3 (Voluntary Nature). The channeling through the Convention of payments derived from 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, guarantee, and receive the Instruments specified in Article 8 directly, and proceed in the same manner to channel them through the Convention via Foreign Authorized Institutions.

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

CHAPTER THREE ON ADMISSIBLE OPERATIONS

Article 5 (Admissible Operations). 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 (Other Operations). The channeling through the Convention of operations corresponding to services other than those indicated in Article 5, capital movements, and other pure financial transfers, i.e., those involving fund transfers not related to a trade operation, will not be admitted.

Article 7 (Prohibited Operations). Additionally, Authorized Institutions are prohibited from carrying out the following 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 or applying discounts to payment Instruments derived from commercial operations. c) Channeling, through the Convention, payments corresponding to operations carried out through Free Zones established in the country.

CHAPTER FOUR ON INSTRUMENTS CHANNELABLE THROUGH THE CONVENTION

Article 8 (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) Payment orders for goods trade operations. b) Letters of Credit and/or Documentary Credits. c) Bills of exchange corresponding to guaranteed commercial operations. d) Promissory notes issued or guaranteed, derived from commercial operations.

Article 9 (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 Convention. This is without prejudice to the fact that beneficiary exporters of the letter of credit and/or documentary credit may discount the corresponding Instrument with an Authorized Institution before its maturity.

CHAPTER FIVE ON THE RESPONSIBILITY OF AUTHORIZED INSTITUTIONS

Article 10 (Accreditation as Authorized Institution). Banking entities that are accredited as AFE, in accordance with the provisions of Board of Directors Resolution No. 117/97 of June 10, 1997, must request the express authorization of the Bank, through the International Affairs Management, according to the model attached in Annex I, in order to be incorporated into the list of authorized institutions to channel operations through the Convention.

Article 11 (Loss of right to reimbursement). If an Instrument is processed 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 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 its Authorized Institution.

Article 12 (Disputes). Disputes that may arise between Authorized Institutions and Foreign Authorized Institutions regarding the execution of operations will be resolved directly between them. Therefore, the Bank assumes no responsibility for any difference that may arise between them, their clients, or third parties, or between Authorized Institutions and a foreign central bank.

Article 13 (Debit Agreement). Reimbursements and/or payments made by the Bank to Authorized Institutions are conditioned upon full compliance with this Regulation, the submission of the information referred to in Article 17 for registration in the System of Commitments Assumed in the Future (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 SIX ON THE REQUIREMENTS THAT AUTHORIZED INSTITUTIONS MUST MEET

Article 14 (Deadline for submission of documentation). Authorized Institutions will have a maximum deadline of 2 business days for the La Paz Offices and 3 business days for the Offices in the Interior, counted from the date on which they have issued or guaranteed any Instrument, to submit in writing to the Bank a copy of the respective Instrument and the supporting documentation in the form described in Annex II.

Article 15 (Deadline on cancellation and amendments). Authorized Institutions must inform the Bank in writing about the cancellation of the aforementioned Instruments or modifications regarding the term or maturity date, amount, payment method, and description of the merchandise, or transfers of letters of credit, attaching the respective documentation, within a maximum deadline of 2 business days for the La Paz Offices and 3 business days for the Offices in the Interior, counted from the date on which these are made.

Article 16 (Deadline for submission of Statements). Authorized Institutions must submit their Statements monthly, in the format shown in Annex III, until the fifth business day of the following month, detailing the maturities of all Instruments specified in Article 8 and the respective interest, including those calculated approximately. Likewise, monthly, until the tenth business day of the following month and according to the calendar established by the Bank, they must send an official to reconcile balances with the Bank, which must be concluded by the fifteenth business day of that month. Possible differences arising from the reconciliation must be regularized within five business days following the date of conclusion of the reconciliation, and the Authorized Institution must send its final and completely reconciled Statements to the Central Bank of Bolivia, no later than the twentieth business day of the following month.

Article 17 (Deadline for registration in SICOF). Authorized Institutions must inform the Bank in writing about all Instruments issued by Foreign Authorized Institutions that they have received or that have been modified or canceled, including a copy of the respective Instrument. This information must be sent within a maximum deadline of 2 business days for the La Paz Offices and 3 business days for the Offices in the Interior, counted from the date on which they receive the notification. The sending of this information is an indispensable condition for Authorized Institutions to have the right to reimbursement.

In the case of divisible letters of credit and/or documentary credits and payment orders, they must inform the Bank of the date on which they will request partial reimbursement of the Instrument. This date must be within the validity period of the Instrument.

Article 18 (Reimbursement request schedule). The reimbursement request will be presented to the Bank on a business day until 11:30 a.m., for processing on the day, by delivering the Reimbursement Request Form for Operations paid under the ALADI Payment and Credit Reciprocity Convention (Annex IV), which must be filled out according to the instructions in Annex V.

Article 19 (Underlying commercial operation). It is the responsibility of Authorized Institutions to verify, prior to the issuance of an Instrument, that it originates from the commercial transaction indicated in said document.

Article 20 (Other information). Without prejudice to the foregoing, Authorized Institutions must provide the Bank with any other information that it requests regarding their operations with Instruments processed under the Convention, within the deadline set by the Bank for this purpose.

Article 21 (Inclusions and exclusions). It is the responsibility of Authorized Institutions to stay informed about the inclusions and exclusions of entities communicated by the Bank and to verify, at the time of carrying out any operation, that the foreign entity has the status of an authorized institution in its respective country.

Article 22 (Cancellation of reimbursement requests). Authorized Institutions that have erroneously made reimbursement requests to the Bank must request their cancellation in writing within 2 business days following the day they detect the error, including all data of the original operation and the reason for its cancellation.

If, after reimbursement, it is determined that the amount must be adjusted, this will be done only for the difference. Under no circumstances can payment orders or other Instruments be issued to compensate for the error or effect the adjustment.

Article 23 (Cancellation of debits). For any cancellation of debits incorrectly made in export operations, it will be necessary to present a written request from the Authorized Institution to the Bank, asking it to consider authorizing the cancellation of the operation and attaching the supporting documentation. a) If the cancellation of the charge corresponding to a debit made within the same compensation period is authorized, the reversal will affect the accounts of the Authorized Institution, applying an interest calculated at 90 percent of the Prime Rate published by the Bank on the day the cancellation operation is registered. b) If the cancellation of a debit corresponding to a past compensation period is authorized, the cancellation will be charged to the accounts of the Authorized Institution, applying the interest rate fixed for that quarter by ALADI.

Article 24 (Cancellation procedure). Any cancellation of debits incorrectly made by Foreign Authorized Institutions, originating in Bolivian import operations, must be claimed and processed by the Authorized Institution. Upon receipt of the fund reversal for the improper charge, the Bank will credit the accounts of the Authorized Institution, including the interest received between the date of the improper debit and the day of the operation reversal.

CHAPTER SEVEN ON THE COMMITMENT OF AUTHORIZED INSTITUTIONS

Article 25 (Authorization to the Bank). Bolivian banking entities that obtain the express authorization of the Bank to channel operations through the Convention, irrevocably authorize and instruct the Bank generally to automatically debit from the accounts they maintain at the Bank for the concepts detailed in the following articles.

Article 26 (Debit for payment of Instruments). The Bank will debit the amount of payment of the instruments issued and/or guaranteed by Authorized Institutions through the Convention, on the date the Bank receives the debit notice from the foreign Central Bank.

Article 27 (Debit for SICAP/ALADI commissions). The Bank will debit SICAP/ALADI commissions of two per thousand (2/1000) and one per thousand (1/1000), on the value in United States dollars, liquidated in Bolivianos at the official exchange rate, for import and export operations, plus related expenses, respectively.

Article 28 (Debit for interest on insufficient funds). The Authorized Institution that does not cover its obligations with the Bank will pay an interest calculated on the basis of the unpaid amount at the LIBOR interest rate plus 4 percent at 90 days, in effect on the date of regularization, for the time that such obligation remains unpaid.

Article 29 (Debit for inadmissible operations). The Bank will debit from the accounts of the Authorized Institution one hundred percent of the amount of the operations, when they are processed through the Convention in violation of the provisions of Articles 5 and 8.

Article 30 (Debit for uncancelled payment orders). The Bank will debit the amount in Bolivianos, equivalent to 100 United States dollars, when the Authorized Institution has issued a payment order not previously canceled to the Bank.

Article 31 (Debits for delays in information). The Bank will debit the amount in Bolivianos, equivalent to 50 United States dollars, for each day of delay in the submission of the information that the Bank requests regarding its operations with instruments processed under the Convention, within the deadline indicated in Articles 14, 15, 16, and 17.

Article 32 (Debit for excess in the indebtedness limit). When Authorized Institutions issue and/or guarantee instruments that represent obligations exceeding the limit that the Bank had established for them according to Chapter Eight, the Bank will debit the amount that exceeds said limit.

Article 33 (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 suitable documents, the Bank will debit in the Accounts of the Authorized Institution one hundred percent of the operation.

CHAPTER EIGHT ON THE LIMITS OF ISSUANCE AND/OR GUARANTEE OF INSTRUMENTS

Article 34 (Maximum indebtedness limit). The maximum limit of the value of payment Instruments issued and pending payment by Authorized Institutions may not exceed seventy percent (70%) of their Net Worth, reported monthly to the Bank by the Superintendence of Banks and Financial Entities.

Article 35 (Maximum deferral period). The maximum term of Instruments issued and/or guaranteed by Authorized Institutions may not exceed five (5) years.

CHAPTER NINE ON PAYMENT FOR IMPORTS FROM BOLIVIA

Article 36 (Reimbursement procedure). The Instruments issued and/or guaranteed by Authorized Institutions must have progressive numbering according to the nature of the Instrument and be identified by the SICAP/ALADI Reimbursement Code, the details of which are indicated in Annex VI.

Article 37 (Channeling of Instruments). All instruments must be sent by Authorized Institutions directly to Foreign Authorized Institutions.

Article 38 (Requirements for Payment Orders). Authorized Institutions must request the debit in their accounts from the Bank prior to the issuance of payment orders. The issuer must expressly indicate whether the payment can or cannot be made to the beneficiary in installments, noting, as appropriate, the word divisible or indivisible. In the absence of indication, it will be understood that the payment order is indivisible.

Payment orders will have a validity period not exceeding 90 calendar days, counted from the date of their issuance, within which they can be made effective. Only with express authorization of the Bank and on a case-by-case basis, the validity of the Instrument may be extended by up to 30 more days, for which Authorized Institutions must send their written request to the Bank, 3 days before its expiration. Any payment order that has not been collected during the 90-day validity period loses this status, and the Authorized Institution must request authorization from the Bank for its cancellation and refund, prior to commitment to assume full responsibility for the eventual collection of the payment order whose cancellation is authorized.

CHAPTER TEN ON SANCTIONS FOR NON-COMPLIANCE WITH THE REGULATION

Article 39 (Sanctions). Any non-compliance by an Authorized Institution with this Regulation will give rise to the following sanctions: a) For the first time, a written reprimand. b) The second time, temporary suspension for 1 month. c) 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.