Chapter

Explanatory Note on Coverage of Part Two

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
August 1986
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Part Two gives a detailed description of the exchange and trade system of individual member countries, including a nonmetropolitan territory (Hong Kong), for which the United Kingdom has accepted the Fund’s Articles of Agreement, and the Netherlands Antilles, which is a part of the Kingdom of the Netherlands. The exchange and trade system of one other country, which is not a member of the Fund, is also described.

In general, the description relates to the exchange and trade systems as at the end of 1985, but in appropriate cases reference is made to significant developments that took place early in 1986.

A standardized approach has been followed, under which the description of each system is broken down into similar headings, and the coverage for each country includes a final section that lists chronologically the more significant changes during 1985.

The description of the restrictive system is not necessarily confined to those aspects involving exchange restrictions or exchange controls. As in previous Reports, questions of definition and jurisdiction have not been raised, and an attempt has been made to describe restrictive systems in their entirety, except for the tariff structure and, in most cases, direct taxes on exports and imports. Thus, the coverage extends to such features as import licensing, advance deposit requirements, import surcharges, travel taxes, export licensing, and export incentive schemes. Similarly, the section “Changes During 1985” includes references to certain developments that may have a direct impact on international transactions but are not necessarily reflected in the body of the country descriptions, such as major revisions of import tariffs or developments in regional cooperation.

The description given in the section Exchange Arrangement is in line with the notification of exchange arrangements that member countries have furnished to the Fund under Article IV, Section 2(a). The structure of exchange markets is described, and the official exchange rate is given. The rates quoted are those effective on December 31, 1985, unless stated otherwise.

Under Administration of Control, some indication is given of the authorities responsible for policy and administration of the controls and of the extent to which their powers are delegated for working purposes.

The section on Prescription of Currency describes the requirements affecting the selection of the currency and method of settlement for transactions with other countries. Where a country has concluded payments agreements with other countries, the terms of these agreements often lead to prescription of the currency for specified categories of payments to and from the countries concerned. The countries with which bilateral payments agreements are in force are listed either in the text or in a footnote.

Under Nonresident Accounts, a description is given of the manner in which the country treats accounts, if any, maintained in its currency by account holders who are not regarded as resident in that country, and the facilities and limitations attached to such accounts. Where there is more than one type of nonresident account, the nature and operation of the various types are also described.

In the section on Imports and Import Payments, import licensing requirements are described briefly, and details are given of other requirements imposed on payments for imports and of any advance deposit requirements. The term “open general license” indicates arrangements whereby certain imports or other international transactions are exempt from the restrictive application of licensing requirements, in contrast to an “individual license,” which may be given either freely, or restrictively, according to administrative decisions.

Under Payments for Invisibles, the procedures for permitting payments abroad for current transactions in invisibles are described briefly, together with any limitations on the export of foreign and domestic bank notes. For some countries that do not impose limitations on payments for invisibles, this section is combined with the section on Proceeds from Invisibles (see below).

Export licensing requirements and procedures are described under Exports and Export Proceeds, with an outline of the requirements that may be imposed on the handling of proceeds from exports. The expression “exchange receipts must be surrendered” indicates that the recipient is required by the regulations to sell any foreign exchange proceeds in return for local currency, usually at the official rate, to the central bank or to a commercial bank or exchange dealer authorized for this purpose. In some countries there is a requirement that such exchange or part thereof be sold in a free market.

Under Proceeds from Invisibles, any regulations governing exchange derived from transactions in invisibles are given, and any limitations on the import of foreign and domestic bank notes are described.

The coverage under Capital describes the special arrangements or limitations attached to international capital movements. Where regulations on foreign capital also cover the income thereon, they are usually dealt with in this section rather than in the sections on Payments for Invisibles and Proceeds from Invisibles.

The section on Gold gives a summary of the principal regulations that govern the holding, negotiation, import, and export of gold coin and gold in other forms.

In this Report, references to “Taiwan” are to the Taiwan Province of China.

Afghanistan

(Position on December 31, 1985)

Exchange Arrangement

The currency of Afghanistan is the Afghani. Da Afghanistan Bank (the central bank) maintains an official rate applied to (a) foreign exchange proceeds from exports of cotton; (b) transactions for the Central Government; (c) certain foreign currency income earned in Afghanistan (see Proceeds from Invisibles, below); and (d) all transactions in accounting units specified under bilateral payments agreements. The official exchange rate is defined in terms of the U.S. dollar and is flexible. On December 31, 1985, the official exchange rate was Af 50.0 = US$1 buying and Af 51.2 = US$1 selling. Certain other exchange rates have been established to provide incentives for particular exports; for these products a portion of export proceeds can be surrendered at a rate more depreciated than the official rate but generally less advantageous than the legal bazaar rate. All karakul export proceeds must be surrendered and are eligible for conversion at a rate of Af 150 = £ 1 ; 70 percent of wool export proceeds must be surrendered and are eligible for conversion at a rate of Af 120 = US$1; and 18 percent of the proceeds from raisin exports to bilateral countries, which are required to be received in convertible currencies and surrendered, are eligible for exchange at Af 130 = US$1. In addition, the convertible foreign exchange purchased by Da Afghanistan Bank from enterprises and from raisin exports is sold to public enterprises at a rate that is Af 1 less than the rates applicable to purchases; if the central bank is unable to provide foreign currency to the public enterprises at these favorable rates, the enterprise may, as a last resort, purchase the required exchange from the bazaar. Transactions that are not required to be effected with the banks may take place at the legal bazaar rate. Exports other than those mentioned above can be sold to the banks at rates near the bazaar rate. There is also a legal bazaar rate in which workers’ remittances are sold and various capital flows are transacted; on December 31, 1985 the bazaar rate was Af 136.88 = US$1.

Da Afghanistan Bank posts rates for deutsche marks, French francs, Indian rupees, Pakistan rupees, pounds sterling, and Swiss francs. Da Afghanistan Bank charges commissions ranging from 0.10 percent to 0.375 percent on exchange transactions.

Administration of Control

Foreign exchange transactions are controlled by the Government through Da Afghanistan Bank. The control is facilitated by the existence of relatively large companies specializing in the export of such commodities as karakul, cotton, wool, and carpets. However, these companies do not exercise a monopoly over the export of such commodities, except for cotton, whose export is reserved for four authorized companies.

Prescription of Currency

Settlements with countries with which Afghanistan has bilateral payments agreements1 must be made in bilateral accounting dollars in accordance with the procedures set forth in those agreements. The proceeds from exports of wool and karakul to all countries must be obtained in convertible currencies. There are no other prescription of currency requirements.

Imports and Import Payments

Imports are not subject to license, but import transactions must be registered before orders are placed abroad. Imports of a few items (e.g., some drugs, liquor, arms, and ammunition) are prohibited on grounds of public policy or for security reasons; in some instances, however, special permission to import these goods may be granted. The importation of certain other goods (e.g., a few textiles and selected nonessential consumer goods) also is prohibited. There are no quantitative restrictions on other imports. Most bilateral agreements, however, specify quantities (and sometimes prices) for commodities to be traded. An annual import program is drawn up by the Ministry of Commerce, covering imports of both the public and private sectors. Adjustments in the public sector import plan are made in the light of changing circumstances. The import plan for the private sector, drawn up on the basis of proposals submitted by the Chamber of Commerce, is indicative. Importation of petroleum products and sugar is a state monopoly.

The present customs tariff structure was promulgated in June 1974 and has since then been modified in the annual budgets. Actual tariff rates, ad valorem and specific, vary considerably. Ad valorem duties usually range between 20 percent and 35 percent.

Payments for imports through the banking system to payments agreement countries may usually be made only under letters of credit. Payments to other countries may be made under letters of credit, against bills for collection, or against an undertaking by the importer to import goods at least equivalent to the payment made through the banking system. With the exception of certain public sector imports, a deposit of up to 40 percent of the c.i.f. value is required by banks upon opening of a letter of credit. Foreign exchange for payments for imports by the private sector has to be acquired in the bazaar market.

Payments for Invisibles

Tourists are permitted to take out up to US$2,000 or the equivalent in other foreign currencies, and traders can take out up to US$15,000 for imports of goods. When foreign travel is for other purposes, the permissible amounts are determined by the appropriate authorities in each case. Permission from the central bank or one of the commercial banks is necessary for taking out foreign currency. Exchange for private travel, as for other private purposes, has to be acquired in the bazaar market. The fee for a passport valid for one year is Af 20,000 for tourist travel and Af 1,000 to Af 2,500 for other types of travel. Export of foreign currency notes up to US$2,000 or its equivalent by travelers is permitted only if the foreign exchange has been bought from the banking system. Travelers are not allowed to take out more than Af 2,000 in domestic bank notes and Af 50 in coins.

Exports and Export Proceeds

Exports (other than gold) are not subject to license, but export transactions must be registered. Exports of a few commodities (e.g., opium and museum pieces) are prohibited. Otherwise, control is exercised only over exports to bilateral agreement countries (see section on Imports and Import Payments, above). Proceeds from exports of karakul and wool to all countries, including payments agreement countries, are received in convertible currencies. Receipts from exports of natural gas, karakul, cotton, and wool are subject to surrender requirements at the official rate. Other exports to the convertible currency area may be: (a) sold at rates near the market rate to other importers for the import of 33 permitted products; (b) retained abroad by the exporter for 8, 10, or 12 months, depending on the destination of the exports, and used for the imports of goods not on the prohibited list; and (c) transferred to a foreign currency account with a bank in Afghanistan and used by the exporter, or sold to another importer only for importation of 33 specified items. Da Afghanistan Bank buys foreign exchange from exports to bilateral payments agreement countries, but there is no obligation to surrender foreign exchange to the banks. Eighteen percent of proceeds from exports of raisins to the U.S.S.R. under contracts signed in 1984 are receivable in convertible currency.

Proceeds from Invisibles

Sixty percent of the foreign currency salaries of foreign employees working in the Afghan public and private sectors must be converted into Afghanis at the official rate. Travelers entering Afghanistan are required to spend a minimum of the equivalent of US$26 per day in foreign exchange. They may bring in any amount of foreign currency but must declare it when entering the country if they intend to take out any residue when leaving the country, subject to the above minimum conversion requirement. Travelers may bring in no more than Af 2,000 in Afghan banknotes and Af 50 in Afghan coins.

Capital

Foreign investment in Afghanistan requires prior approval and is administered by an Investment Committee. The Foreign and Domestic Private Investment Law of 1353 (issued on July 4, 1974) provides for a number of benefits, which include (1) income tax exemption for four years (six years outside Kabul province), beginning from the date of the first sales of products resulting from the new investment; (2) exemption from import duties on essential imports (mainly of capital goods); (3) exemption from taxes on dividends for four years after the first distribution of dividends, but not more than seven years after the approval of the investment; (4) exemption from personal income and corporate taxes on interest on foreign loans that constitute part of an approved investment; (5) exemption from export duties, provided that the products are permitted to be exported; and (6) mandatory purchases by government agencies and departments of their requirements from enterprises established under the law where prices of such products are not more than 15 percent higher than prices of foreign supplies. The law provides that foreign investment in Afghanistan can only take place through joint ventures, with foreign participation not exceeding 49 percent. It also establishes that an investment approved by the Investment Committee shall require no further license in order to operate in Afghanistan.

Payments of principal and interest on loans from abroad may be remitted freely to the extent of the legal obligation involved. Profits may be repatriated freely, and capital may be repatriated after five years at an annual rate not exceeding 20 percent of the total registered capital.

Gold

Residents may freely purchase, hold, and sell domestically gold in any form. Imports of gold are restricted. Exports of gold bullion and silver, as well as of jewelry, require permission of Da Afghanistan Bank and the Ministry of Finance. Commercial exports of gold and silver jewelry and of other articles containing minor quantities of gold or silver do not require a license and may be made freely. Customs duties are payable on imports and exports of silver in any form unless the import or export is made by or on behalf of the monetary authorities.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Algeria

(Position on December 31, 1985)

Exchange Arrangement

The currency of Algeria is the Algerian Dinar. Daily buying and selling rates for the U.S. dollar, the intervention currency, and other specified currencies1 are established by the Central Bank of Algeria on the basis of a fixed relationship between the dinar and a composite of currencies. The currencies included in the composite and their weights take into account the relative importance of payments, including capital transactions, that are made in these currencies. A margin of DA 0.015 has been established between the buying and selling rates of the dinar in terms of the U.S. dollar. An encouragement premium is granted on the conversion of convertible currencies repatriated by Algerians working abroad. Up to February 1983, the premium was adjusted so as to ensure that the exchange rate for such remittances was DA 1 = F 1; thereafter, the amount of the premium has been determined periodically by a decree of the Ministry of Finance. On each trip to Algeria, Algerians gainfully employed abroad are required to exchange an amount of convertible currency equivalent to DA 700 at the exchange rate operative on the day the transaction takes place. They receive the incentive premium only on those conversions or transfers that are not required of them by law or regulation. On December 31, 1985 the buying and selling rates for the U.S. dollar were DA 4.7653 = US$1 and DA 4.7803 = US$1, respectively.

The foreign exchange reserves are centralized in the Central Bank; authorized banks must clear their foreign currency position with their foreign correspondents at the end of each day but, under certain conditions, they are permitted to hold cover for documentary credits outside Algeria. There are no forward exchange facilities.

Administration of Control

The Ministry of Finance and the Central Bank have general jurisdiction over exchange control. The Central Bank assists in the formulation of the exchange legislation and regulations and is responsible for their application by the authorized banks. Authority over many exchange control procedures has been delegated to five commercial banks and the Postal Administration. Import and export licenses and global import quotas are issued by the Ministry of Commerce within the limits of a general import program. Import and export licenses require the visa of the Central Bank. Investment of foreign capital in excess of DA 500,000 in Algeria requires approval by a National Investment Committee in order to obtain the benefits of the Investment Code.

Prescription of Currency

Settlements with countries with which no payments agreements are in force are made in convertible currencies.2 Payments under foreign supply contracts (contrats de fournitures) can be made in either the currency in use at the headquarters of the supplier or that of the country of origin of the merchandise. Foreign holders of servicing contracts are required to open local nonresident accounts to which payments are made by the Algerian contracting party; such accounts must be closed within six months from the end of the contract, beyond which date outward transfers of the funds or their use for purposes unrelated to the contracts are not permitted.

Nonresident Accounts

Most nonresident accounts are Foreign Accounts in Convertible Dinars or Internal Nonresident Accounts. There are at present four types of accounts, as follows:

1. Individual Suspense Accounts may be opened without authorization and may be credited with payments from any country. Balances in such accounts opened prior to January 1, 1975 by nonresident physical persons of foreign nationality have been released for transfer abroad.

2. Foreign Accounts in Convertible Dinars (Cedac accounts) may be opened by individuals or juridical persons of foreign nationality, including those under supply or servicing contract arrangements. Such accounts may be credited only with deposits that, under the regulations applicable when the deposit is made, are free from any restrictions on transfer. They may not be credited with amounts that are transferable to the bilateral area. They may be debited for payments to any foreign country, for payments in Algeria, or for the provision of foreign bank notes that the account holder intends to export when he travels abroad. These accounts bear interest and may not show a net debt position.

3. Final Departure Accounts may be opened, without prior authorization, in the name of any physical person residing in Algeria, not of Algerian nationality, who intends to leave Algeria to return to the country of origin. These accounts may be credited freely with an amount equivalent to the holdings on October 20, 1963 in the account of the person concerned; with the proceeds from sales of real estate of the account holder, provided that the funds are paid directly by a notary public; with the proceeds of the sale of securities through a bank; and with any other payments, up to DA 2,000. These accounts may be debited without prior approval for certain payments in Algeria on behalf of the account holder. Outward transfers require individual approval.

Emigrant workers may maintain certain accounts in Algeria that are credited with the proceeds from the conversion of convertible currencies (comptes épargne-devises). Depositors receive an incentive premium equivalent to 40 percent of the buying exchange rate on the conversion date of such foreign exchange.

4. Foreign Currency Accounts are held by physical or juridical Algerian nationals, who may be either nonresidents or persons who have resided for more than six months in a foreign country. Such accounts may be freely credited with (a) book transfers from abroad using either postal or banking facilities, (b) imported convertible foreign currencies which have been declared at the account holder’s entry in the country, and (c) domestic bank-to-bank book transfers. The accounts may be freely debited for book transfers abroad but only through the banking system; they may also be debited for purchases of dinars, for book transfers in dinars, and for purchases of convertible foreign currencies to be physically exported by the account holder. A conversion premium is received on any amount drawn and used for payment of expenses in the country, with the exception of legal payment obligations. The interest rate payable on deposits in these accounts is fixed annually by the Minister of Finance.

Imports and Import Payments

Imports from Israel and South Africa are prohibited. Certain imports are prohibited regardless of origin. Law No. 78–02 of February 11, 1978 gives the Government a monopoly over foreign trade. All imports are permitted, in principle, in accordance with an annual import program. This is implemented mainly through global import authorizations (autorisations globales d’importation, or AGI) granted to public enterprises. There are five types of import authorizations: (1) AGI Monopole, issued to enterprises holding monopoly rights to import specified commodities; (2) AGI de fonctionnement interne, issued to individual enterprises for import requirements relating to their production activity; (3) AGI objectif planifié, issued to enterprises for imports relating to their investment program; (4) AGI (sans paiement), under which exemption from all exchange control formalities is granted to transactions not involving use of official foreign exchange or local currency or any other counterparts; and (5) AGI (sans transfer), issued to enterprises for specified import products (classified as consumable products—matières consommables) utilized in public works contracts; simplified exchange and trade control formalities applied to such transactions. In addition, Algerian nationals may import by postal parcel and against reimbursement, free of trade and exchange control formalities, a number of specified goods, provided the value does not exceed DA 1,000 in each case.

Special regulations apply to imports of a noncommercial character, and for imports without payment of new equipment not destined for resale, as well as to automobiles for personal use. Imports not destined for resale may be made free of exchange and trade controls up to a value of DA 10,000. New equipment goods can also be imported without use of official exchange and free of exchange and trade control formalities, provided that (a) the value in each case does not exceed DA 200,000, and (b) the goods are not for resale; the list of goods that can be thus imported is established from time to time by ministerial decree. Domestic residents can obtain an authorization to import, without use of official exchange and free of exchange and trade control formalities, an automobile for personal use.

All imports must be domiciled with an authorized bank, to which the necessary import documents must be presented and through which all payments related to the transaction must be made. Without a waiver from the exchange control authority (the Ministry of Finance or the Central Bank), advance payments may not exceed 15 percent of the import value. In accordance with Law No. 80–07 of August 3, 1980, imports must be insured domestically. In the case of urgent or exceptional import expenditures by public agencies, public enterprises, and ministerial departments, the domiciliary banks for the import payments may effect payment before completion of the trade and exchange control formalities.

Payments for Invisibles

All payments for invisibles to all countries require the approval of the Central Bank. When supporting documents are presented, however, approval may be granted by authorized banks, or sometimes by the Postal Administration, either freely or up to specified limits for certain payments, such as (1) those relating to approved trade transactions and maritime contracts, (2) travel expenses, (3) transfers of salaries and wages, (4) educational expenses, and (5) advertising expenses. For payments for which the approval authority has not been delegated, the granting of exchange must be authorized by either the Central Bank or the Ministry of Finance. Certain public enterprises, which receive special exchange allocations (budget devises), may use these freely for payments for specified invisibles, including transportation and other services contracted abroad. The transfer of family remittances is suspended. Insurance on all risks arranged in Algeria by Algerian residents must be purchased in Algeria. Private national exporters may open ED AC accounts (i.e., exporters convertible dirham accounts) denominated in convertible dinars, which can be credited by up to 4 percent of repatriated proceeds and be used for any of the following payments: business travel allowances; air travel expenditures; salaries and expenditures of foreign technicians; imports of essential spare parts and capital goods amounting to less than DA 200,000; representations at overseas trade fairs and exhibitions; and legal and administrative expenses.

Residents of other countries working in Algeria under the programs for technical cooperation or for public enterprises and agencies or for certain mixed companies may transfer abroad a percentage of their net salaries, as follows: 50 percent for single persons and married persons whose families are in Algeria; and 70 percent for persons whose families are abroad. For other workers who have contracts with other employers and hold the necessary employment documents, the amounts that may be transferred are 35 percent for single persons and married persons whose families are in Algeria and 55 percent for persons whose families are abroad. The payments must be transferred once a month on the basis of the remuneration for the previous month. Persons making such transfers are not entitled to allocations for other personal transfers.

For resident nationals and individuals of foreign nationality in resident status (excluding those having an entitlement to make transfers) traveling by air or sea to foreign countries, including countries in the French Franc Area, other than for medical reasons, the foreign exchange allocation is equivalent to DA 1,000 a person a calendar year (DA 500 for children under 15 years) and is delivered on presentation of a valid passport and travel vouchers; for overland travel, the allocation is DA 1,000 a person a calendar year for adults and DA 500 for children under 15 years. Residents requiring medical treatment abroad receive a foreign exchange allowance equal to DA 800 if the patient is over 15 years and DA 400 if the patient is under 15 years. On each trip to Algeria, Algerians gainfully employed abroad are required to exchange an amount of convertible currency equivalent to DA 700 at the exchange rate operative on the day the transaction takes place. They receive the incentive premium only on those conversions or transfers that are not required of them by law or regulation. Emigrant Algerian workers who take their vacations in Algeria may, when returning abroad, re-export foreign exchange freely imported and duly declared on their arrival in Algeria.

Pilgrims traveling to Saudi Arabia receive an allocation in Saudi Arabian riyals; the amount of this allowance is fixed for each pilgrimage and may be furnished in the form of checks that may be cashed on arrival for those traveling by sea or by air. Resident travelers may take out Algerian dinar bank notes up to DA 50 a person. Foreign nonresident travelers may also re-export any foreign currency declared upon entry. However, on their arrival in Algeria, foreign nonresidents must convert foreign exchange equivalent to a minimum of DA 1,000. Travel tickets that are bought by nonresidents for traveling abroad must be paid for with imported foreign exchange.

Exports and Export Proceeds

All exports to Israel and South Africa are prohibited. Certain exports, including used equipment and machinery, livestock, firearms, ammunition, explosives, and certain radio equipment, are prohibited regardless of destination. All other exports require a license, except those undertaken by state enterprises having a monopoly right to export. Some commodities may be exported, subject to individual prior approval, on the basis of linked transactions (transactions liées) involving at the same time an authorized import transaction. Since the promulgation of Law No. 78–02 of February 11, 1978, which conferred upon the Government a monopoly over foreign trade, exports may only be effected by public sector entities, unless a waiver is granted for a transitional period on a case-by-case basis.

Exports must be domiciled with an authorized bank. Sales on consignment are subject to authorization by the Ministry of Finance, and registration must take place prior to customs clearance. Export proceeds must be repatriated immediately after collection. Unless a waiver is granted by the Ministry of Finance or the Central Bank of Algeria, the time limit for repatriation of export proceeds is 120 days from the date of shipment. However, for exports of hydrocarbons, the time limit is a maximum of 30 days after the completion of loading. Those petroleum companies that hold mineral rights must repatriate to Algeria the proceeds from their exports of hydrocarbons, calculated on the basis of a contractual price a barrel that is fixed by agreement with the companies concerned. For one petroleum company holding mineral rights, however, there are different repatriation requirements.

Proceeds from Invisibles

Proceeds from invisibles must be repatriated and surrendered. Savings repatriated in the form of convertible currencies by Algerians working abroad are eligible for an encouragement premium. There are no restrictions on the import of foreign bank notes, coin (except gold coin), checks, and letters of credit, but nonresidents, including those of Algerian nationality, must declare such holdings when they enter Algeria. Resident travelers may reimport Algerian dinar bank notes up to DA 50 a person. Nonresident travelers are not permitted to bring in Algerian bank notes.

Capital

Residents are obliged to repatriate and surrender capital assets (or the sales proceeds thereof) held or acquired outside Algeria. Capital transfers to any destination are subject to individual license; residents are not normally permitted to acquire capital assets outside Algeria. All borrowing abroad or from nonresidents is subject to prior approval by the Minister of Finance or the Central Bank.

The Investment Code of September 15, 1966 provides for state guarantees in respect of foreign investments of more than DA 500,000 in the industrial and tourist sectors and for a retransfer guarantee in respect of the sale or liquidation proceeds of invested foreign capital. It also establishes that profit remittances on such investments will be permitted up to 15 percent annually of the foreign capital originally invested. Tax facilities may also be granted, and investments of more than DA 5 million may be given exclusive rights in a specified geographic area and may be accorded tariff protection. Remittances of profits and retransfers of capital are permitted only in respect of investments approved under the code. The law on joint ventures with foreign companies, which came into effect in April 1982, provides foreign partners with a guarantee of fair return on investment, tax exemptions of up to five years on industrial and commercial profits, reduced taxes on reinvestment profits, and the repatriation of earnings and royalties in respect of transfers of technology.

Gold

Residents may purchase, hold, and sell gold coins in Algeria for numismatic purposes. Under Ordinance No. 70–6 of January 16, 1970, unworked gold for industrial and professional use is distributed by the Agence Nationale pour la Distribution et la Transformation de l’Or et des Autres Métaux Précieux (Agenor). This agency is also authorized to purchase in Algeria, and to hold, process, and distribute any other precious metal, and, within the exchange control regulations, to import and export any precious metal, including gold. Imports of gold for use by dentists and goldsmiths are made by Agenor, under import licenses issued by the Ministry of Finance and the Central Bank.

Changes During 1985

Imports and Import Payments

January 1. Under the Budget Law (No. 84–21) of January 24, 1984, with effect from January 1, 1985, the maximum value of equipment goods that could be imported without use of official exchange and free of exchange and trade control formalities was raised from DA 100,000 to DA 200,000.

Antigua and Barbuda

(Position on December 31, 1985)

Exchange Arrangement

The currency of Antigua and Barbuda is the Eastern Caribbean Dollar,1 which is issued by the Eastern Caribbean Central Bank (ECCB). The Eastern Caribbean dollar is pegged to the U.S. dollar, the intervention currency, at EC$2.70 per US$1. On December 31, 1985 the buying and selling rates for the U.S. dollar quoted by the ECCB in its transactions with commercial banks were EC$2.6949 and EC$2.7084, respectively, per US$1. The ECCB also quotes daily rates for the Canadian dollar and the pound sterling. All foreign exchange transactions are subject to a levy of 1 percent; the minimum levy is EC$1 a transaction.

Antigua and Barbuda formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement as from November 22, 1983.

Administration of Control

Exchange control is administered by the Ministry of Finance and applies to all currencies. Export licensing is required for a range of products, particularly those subject to export duties. Import licenses are issued by the Collector of Customs in the Ministry of Finance and by the Ministry of Economic Development, depending on the type of commodity.

Prescription of Currency

Settlements with residents of member countries of the Caribbean Common Market (Caricom)2 must be made either in the currency of the Caricom country concerned or in Eastern Caribbean dollars. Settlements with residents of other countries may be made either in any foreign currency or in Eastern Caribbean dollars. Settlements involving South African currency are not permitted.

Nonresident Accounts

External accounts may be opened for nonresidents with the approval of the Ministry of Finance and may be maintained in any currency. With the approval of the Ministry of Finance, such accounts may also be opened by resident individuals or firms in tourist-oriented industries or in export trades where most receipts are in foreign currency and a large portion of inputs are imported or are financed in foreign currency. External accounts can be credited with receipts from sales of merchandise (whether from export-oriented or local production) or from remittances. Commercial banks are required to report external accounts operations to the Ministry of Finance on a monthly basis.

Imports and Import Payments

All imports from South Africa are prohibited. Most goods may be freely imported under open general license granted by the Ministry of Finance. Certain other commodities require individual licenses, unless imported from Caricom countries. Antigua and Barbuda follows the Caricom rules of origin adopted in June 1981. Payments for authorized imports are permitted upon application and submission of documentary evidence. Authority is delegated to commercial banks to approve application forms for import licenses after confirming sight of documents. The approved forms must be submitted to the Ministry of Finance on a weekly basis.

Imports that are exempt from import duties include basic foods and agricultural imports. All other exemptions, for machinery, equipment, and raw materials, are granted on a case-by-case basis and generally under the Fiscal Incentives Law and the Hotel Incentives Act. Import duties are levied at the rate of 35 percent in line with the Caricom common external tariff.

Payments for Invisibles

Upon presentation of supporting documents, and with the authorization of the Ministry of Finance, residents may purchase foreign exchange up to the equivalent of US$750 a trip outside the ECCB area; however, this limit may be exceeded with permission from the Ministry of Finance. In terms of Caricom traveler’s checks (which are denominated in Trinidad and Tobago currency), the basic allowance is TT$500 a trip for holiday travel, TT$2,500 a trip for business, and TT$3,000 a trip for medical expenses. Official authorization is required beyond these limits. There are no limits on the amount of local currency that may be taken out of the country. Profits may be remitted in full, subject to confirmation by the Commission of Inland Revenue of registration for corporate income tax purposes. Student remittances are usually exempted from the foreign exchange levy.

Exports and Export Proceeds

No export licenses are required for certain commodities to any destination. No surrender of export proceeds is required, and re-exports are not subject to any tax if they take place within the bonded area.

Proceeds from Invisibles

Travelers to Antigua and Barbuda may bring in freely notes and coins denominated in Eastern Caribbean dollars or in any foreign currency. Foreign currency coin is not normally exchanged. Checks and drafts in U.S. and Canadian currency can be tendered up to US$1,000 without restriction; for amounts over US$1,000, Ministry of Finance approval must be obtained. Levy exemptions for transfers, especially for charity purposes, are usually granted.

Capital

There are no legislated restrictions on capital movements. Foreign investment is granted the same incentives as domestic investment under the Fiscal Incentives Law and the Hotel Incentives Act. Large transfers abroad for investment purposes can be phased over time by the Financial Secretary.

Gold

There are no restrictions on imports of gold.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Argentina

(Position on December 31, 1985)

Exchange Arrangement

The currency of Argentina is the Austral (plural Australes). The exchange rate for the austral in terms of U.S. dollars is announced on a daily basis by the Central Bank. On December 31, 1985 the closing rate for the austral in terms of the U.S. dollar was ₳ 0.801 = US$1 (selling). Transactions are allowed in certain other currencies,1 with daily quotations based on the buying and selling rates for the U.S. dollar on markets abroad. Purchases and sales of foreign exchange are subject to a tax of 0.6 percent. Forward exchange operations are permitted in the private sector with maturities of up to 180 days and at rates agreed by buyers and sellers; such operations must be related to trade transactions, financial loans, or other transactions for which direct sale of foreign currency is permitted.

Argentina formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement as from May 14, 1968.

Administration of Control

All exchange transactions must be carried out through entities authorized expressly for this purpose. These authorized entities include banks, exchange agencies, exchange houses, and exchange offices; each of these types of institution may be subject to separate regulation.

Prescription of Currency

Virtually all payments between Argentina and Bolivia, Brazil, Chile, Colombia, the Dominican Republic, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela are made through accounts maintained by the Central Bank of Argentina and the central banks concerned, under reciprocal credit agreements within the framework of the multilateral clearing system of the Latin American Integration Association (LAIA). Argentina maintains reciprocal credit arrangements with Cuba, Poland, and the U.S.S.R. by means of special accounts in each central bank through which transactions are settled. Transactions with other countries must be settled in freely usable currencies.

Nonresident Accounts

Authorized banks may open accounts in australes and in foreign exchange in the name of any nonresident, provided that the accounts are credited with remittances of convertible currencies only. Balances on nonresident accounts may be used freely for any purpose, in Argentina or abroad. Transfers between accounts may be effected freely, except in payment for exports.

Imports and Import Payments

Import payments may be effected in convertible currencies, except as otherwise specified in the regulations on prescription of currency. Settlement of payments for imports by the private sector may be freely effected by authorized financial entities, provided that the financing conforms to terms established by the Central Bank and that payment is effected not earlier than one or two days prior to the due date; otherwise, if payment is not effected on the due date, it must be postponed for a minimum period as defined in the prevailing regulation for such an operation. Imports and related payments by the public sector require the prior approval of the Central Bank. In addition to customs duties, imports are subject to a stamp duty of 0.6 percent and selective internal taxes ranging from 5 percent to 22 percent.

Most public and private sector imports require an import license (Certificate of Sworn Declaration of Need to Import) issued by the National Import Directorate of the Commerce Secretariat. An exception is made for imports of up to US$500 per month in any single customs classification by any single importer (subject to an annual limit of US$6,000 per importer for each category of goods), which can be processed directly by the intervening bank without the prior issuance of an import license by the Commerce Secretariat. Certain public enterprises are also permitted to import under foreign treaties without the issuance of an import license.

Import licenses are issued only after the importer has placed with a bank a deposit equal to either the estimated duty payable on the import, or 5 percent of the import value, in cases of lower or equivalent value. The deposits are blocked until the import duty is paid or for a period of 90 days, whichever is earlier; they are indexed in terms of the U.S. dollar.

The following set of procedures apply to the acquisition of an import license for all imports that require licensing. While the import of goods classified as “nonessential” (List I) is technically prohibited, all goods on List I have been transferred to List II (see below) on a temporary basis. The goods temporarily on List II include consumer goods and industrial inputs for which close substitutes are amply available in Argentina. The prohibition on the importation of goods on List I, when it applies, does not apply to temporary imports, goods included in the border traffic scheme, or samples and prototypes. The Secretary of Commerce is empowered to grant import licenses for goods on List I when the item is considered necessary for scientific or technical reasons, or in light of the quantity or quality of domestic production.

Most capital goods, certain industrial inputs, and goods temporarily transferred from the list of prohibited goods are included in List II. For goods on this list, the Commerce Secretariat issues import licenses upon approval by the Industry Secretariat and by an Honorary Import Advisory Committee on which both government institutions and competent commercial and industrial organizations are represented. When the Industry Secretariat does not approve an import license request, the Commerce Secretariat is empowered to study the individual case and make a determination. Import licenses for certain raw materials and inputs for the pharmaceutical industry and for medical and health services (List III) require the prior approval of the Ministry of Health and Social Action, and licenses for imports intended for national defense and for the security and police forces require the prior approval of the Ministries of Defense or Interior.

Import licenses are granted automatically for all goods not specifically covered by the foregoing provisions. Goods imported under concessions granted by any instrument of the LAIA agreement are exempt from the prohibition applicable to goods on List I and the review requirement for goods on List II. Import licenses are issued automatically for goods covered under the Argentine-Uruguayan Economic Cooperation Agreement.

Once granted, an import license retains its validity for 120 days. The actual import value (f.o.b.) must be no more than 10 percent above the stated value of the sworn declaration submitted in application for an import license.

Countertrade is permitted for firms engaging in the exportation of promoted exports. In such cases import payment can take the form of the exportation of promoted goods.

Most imports are subject to minimum financing terms of at least 180 days, calculated from the date of shipment. However, imports of goods on the negotiated lists from the LAIA have a minimum financing term of 90 days. Most other imports from Latin America, including those from the Central American Common Market (CACM), Cuba, the Dominican Republic, Haiti, and Panama, are subject to minimum financing terms of 120 days from shipment. Payment against shipping documents is permitted in the following cases: goods imported from Brazil (“negotiated goods”); Chile (“negotiated goods”); Ecuador (“negotiated goods”); Mexico (goods under trade compensation programs); Paraguay (certain specified goods); Peru (goods negotiated under LAIA Agreement No. 6); Uruguay (goods negotiated under the Partial Scope Agreement on Economic Complementation No. 1); and goods imported by Antarctica and the Islands of the South Atlantic and destined for the Special Customs Area established by Law No. 19640;2 also fresh fruit received on consignment basis; and periodicals.

Special minimum financing terms apply for imports of capital goods valued at more than US$50,000. Not more than 5 percent of the f.o.b. value may be settled prior to shipment and an additional 10 percent may be paid upon the submission of shipping documents. The balance of 85 percent is to be paid in equal installments beginning not earlier than six months after shipment, according to the following schedule:

Value of Import
f.o.b.
(In thousands of U.S. dollars)Minimum Financing Term
50– 2501 year
250– 5002 years
500–1,0003 years
1,000–1,5004 years
1,500–2,0005 years
More than 2,000To be determined upon
consultation with the
Central Bank

Imports of capital goods for which financing amounting to 85 percent of the f.o.b. value is provided by international organizations or official creditors are exempt from these minimum terms, as are imports by firms located in the National Territories of Tierra del Fuego, Antarctica, and the Islands of the South Atlantic.

Payments for Invisibles

Certain payments for invisibles require prior approval by the Central Bank. In general, the sale of foreign exchange at the official rate is not permitted for travel abroad; however, in exceptional cases, the Central Bank may approve the sale of foreign exchange for travel abroad for medical treatment or for participation in trade fairs. Authorized entities may carry out the following transactions without consulting the Central Bank: (a) sale of foreign exchange for payment of banking fees, commissions, and interest in connection with import operations authorized individually or by general provisions; (b) at the request of Argentine exporters, sale of foreign exchange for the purchase of specifications for international competitive bidding; (c) freight charges for Argentine export and import operations; (d) remittances of funds received in australes by foreign shipping companies in Argentina, in connection with the above-mentioned freight operations, after deducting local costs, which, when appropriate, must be covered with funds received from abroad and negotiated in the foreign exchange market; (e) settlement of expenditures incurred abroad by Argentine shipping companies, excluding costs relating to passenger services; (f) insurance of merchandise imports and exports, capital goods for the amount unpaid abroad, insurance of hulls of ships and airplanes, or supplementary insurance of Argentine shipping companies, reinsurance and losses related to these operations; (g) consular receipts, lease of ships by Argentine shipping companies for international shipment of merchandise, scholarships and educational expenses, family assistance, retirement and pensions, and purchase of medicine by private citizens.

Exports and Export Proceeds

Minimum export prices (reference prices) are established for many agricultural and livestock exports as a basis for the payment of duties and the surrender of export proceeds. The full f.o.b. proceeds from all exports must be repatriated and surrendered; the proceeds must not be less than the reference price, or if there is no reference price, the f.o.b. value declared on the shipping permit. Proceeds may be received in any convertible currency. Proceeds from traditional exports must be received before shipment, by means of advance payments or irrevocable letters of credit payable against shipping documents in Argentina. Proceeds from promoted exports must be repatriated within 180 days from the date of shipment. In both cases, export proceeds must be surrendered within 15 working days from the respective time limits.

Traditional exports are subject to export taxes. The applicable tax rates on December 31, 1985 were 15 percent for wheat, 29 percent for corn, 28 percent for sorghum, 32.5 percent for soybeans, 15–24 percent for edible oils, 6–15 percent for beef, and 20 percent for processed hides.

Certain nontraditional exports are eligible for rebates, and most others are subject to a small export tax. On December 31, 1985 rebates on certain steel products amounted to 10 percent of export value and the export taxes ranged from zero to 32.5 percent of export value, depending on the type of product. Exports shipped through certain ports were eligible for additional rebates ranging from 7 to 12 percent.

Many exports, particularly nontraditional exports, are eligible for other export incentives of various kinds. The Central Bank has established a number of special financing regimes to be granted to Argentine exporters through banks, with a view to promoting exports of certain goods and services. Also, the Argentine Export Credit Insurance Company provides credit insurance against commercial and ordinary risks and also coverage for extraordinary risks (on the account of the Central Government) for exports of capital goods and other specified consumer goods. Certain products, mostly nontraditional exports, may be shipped “on consignment” for 360 days; if not sold within that period, the goods must be returned to Argentina.

Various export incentives are provided for promoted exports in accordance with the Export Promotion Laws of December 16, 1984. These include: (i) a deduction against taxable profits, up to 10 percent of the value of certain exports; (ii) the creation of export consortia and cooperatives and the granting of an incentive equal to 4 percent of the f.o.b. value of exports over a period of five years; (iii) the establishment of international trading companies; (iv) permission for firms to engage in countertrade when marketing promoted exports; (v) a tax-drawback scheme under which rebates would be allowed for taxes of imported inputs and other taxes; (vi) the elimination of the 0.5 percent stamp tax for exports from the Federal Capital Area; and (vii) the funding of an Export Promotion Fund to finance participation in trade fairs and exhibitions.

For traditional exports, the maximum terms for anticipated payments and foreign currency export prefinance are 120 days for processed goods, such as edible oils and processed meats, and 90 days for grains and other unprocessed agricultural products. For nontraditional exports, the maximum term for anticipated payments and foreign currency export prefinance is 180 days.

Proceeds from Invisibles

Foreign currency receipts obtained in the country or abroad by Argentine shipping companies, airlines, or surface transportation companies from freight and fares and foreign currency receipts from insurance, reinsurance or losses, lease of ships, airplanes or other surface means, and space or storage in Argentine ports must be surrendered within 30 days of receipt. Exchange derived from other invisibles need not be surrendered. Travelers may bring in freely any amount in domestic or foreign bank notes and coin, as well as gold coin and “good delivery” gold bars.

Capital

Proceeds from financial loans must be sold in the foreign exchange market as an eligibility condition for subsequent sales of foreign exchange to amortize such loans. Financial credits must have maturities of at least 360 days and in all cases must have fixed maturity dates. Principal and interest payments for loans received after November 28, 1984 may be effected directly through authorized entities on the maturity date without prior Central Bank authorization. All amortization payments for loans received prior to November 28, 1984 and not related to import operations carried out in accordance with the minimum conditions specified for such payments may be settled through the subscription of U.S. dollar bonds of the Central Bank of the Argentine Republic, payable in 15 semiannual installments, with a grace period of three years.

All loans outstanding and covered by a swap agreement with the Central Bank as of December 4, 1982 and all loans for which the domestic borrower has obtained an exchange rate guarantee from the Central Bank and which fell due through the end of 1985 have been extended under minimum terms established by the Central Bank. Loans covered by swap agreements that fell due in 1985 were either to be rescheduled by means of the issuance of U.S. dollar-denominated obligations of the Central Bank (BCRA Notes) with a ten-year maturity, or by a direct refinancing between debtor and creditor for up to five years followed by the issuance of a BCRA Note for the remainder of a ten-year period. No guidelines have been issued for the treatment of swaps falling due in 1986 and beyond. Loans covered by exchange rate guarantees that fell due in 1985 were rescheduled by means of the issuance of U.S. dollar-denominated obligations of the Government of Argentina (Notes) with a ten-year maturity.

Pursuant to the rescheduling of obligations due to commercial banks, which was signed in August 1985, private sector obligations due to commercial banks have been refinanced. These include (i) principal obligations that fell due during the period April 1982 through 1985 that were not covered by exchange rate guarantees granted by the Republic of Argentina, and (ii) principal obligations that fell due during 1984 and 1985 that were covered by exchange rate guarantees granted by the Republic of Argentina. The former were rescheduled by means of the issuance of U.S. dollar-denominated obligations of the BCRA (or BCRA Notes) with a ten-year maturity; the latter were rescheduled by means of the issuance of Notes as described above. There were also provisions for the regularization of unpaid interest over the period until the end of September 1985.

The inflow of financial loans undertaken by local foreign-owned enterprises and originating from foreign enterprises that either directly or indirectly control the borrowing enterprises or are their subsidiaries requires the prior approval of the Central Bank. Loans endorsed or guaranteed by the State also require prior authorization from the Central Bank. Banks may accept foreign currency sight or term deposits; in the latter case, deposits must be for the account and to the order of the Central Bank, with maturities of 60–360 days. Foreign borrowing by the public sector is regulated by Decree-Law No. 19328 of October 29, 1971 and Decree No. 3532 of November 25, 1975. Outward capital transfers are subject to prior authorization by the Central Bank.

The foreign investment regime is governed by the Foreign Investment Law (codified text of 1980), which incorporates the amendments made under Law No. 22208 to Law No. 21382. Promulgated by Decree No. 1062 of June 30, 1980, the Foreign Investment Law is regulated by Decree No. 103 of January 19, 1981. Investments may be made in freely convertible foreign currency in the form of new or used capital goods and their spare parts and accessories; profits and capital in Argentine currency belonging to foreign investors (provided that they are legally transferable abroad); capitalization of external credits received in freely convertible foreign currency; intangible assets; and any other form acceptable to the implementing authority or covered by a special regime or a promotion regime.

For approval purposes, investments are classified into three categories, as follows:

(1) Subject to prior approval by the National Executive are (a) investments in the defense and national security sectors, in public service sectors including the postal system, electricity, gas, telecommunications, computers, electronic equipment, and in radio transmitters, television stations, newspapers, periodicals and magazines, energy, education, and financial and insurance institutions; (b) transfers of capital and the acquisition of shares (the latter being permissible only in exceptional cases when it is manifestly beneficial to the national economy) that involve changing the national ownership structure of a local firm belonging to national investors and having net assets exceeding US$10 million; (c) new transfers of freely convertible foreign currency not exceeding US$5 million and not involving a change in the national ownership structure of an existing local firm; (d) investment in any of Argentina’s stock markets, provided that the amount does not exceed US$2 million for each foreign investor and so long as total foreign investment does not exceed 2 percent of the capital of the company involved; (e) investments where the investor is a juridical person under public law; and (f) investments where special or promotional benefits are requested that can only be granted by the National Executive and the proposed investment is contingent on them.

(2) No prior approval is required for (a) total or partial reinvestment of a registered foreign investor’s profits (even in the sectors referred to in item (1) above), provided that they do not involve changing the national ownership structure of the receiving firm and are intended to foster the activities for which the original investment was approved or in which the firm was engaged when the law entered into force; (b) new investments in freely convertible foreign currency made for the same purposes as mentioned in item (1) above, and not exceeding 30 percent of the registered capital in the receiving firm and which do not involve converting it into a “domestic firm with foreign capital,” or new investments that are made pursuant to a preferential right and in order to maintain an interest equal to or lower than what was held up to that time; (c) new transfers of freely convertible foreign currency not exceeding US$5 million and not involving a change in the national ownership structure of an existing local firm; and (d) investment in any of Argentina’s stock markets, provided that the amount does not exceed US$2 million for each foreign investor and so long as total foreign investment does not exceed 2 percent of the capital of the company involved.

(3) All other foreign investments are subject to prior approval by the implementing authority, which must give its decision within 120 days from the date on which the investment proposal is submitted.

Foreign investments existing prior to the entry into force of the Foreign Investment Law are governed by its provisions, which include a special regime for their inscription and recognition. Existing and new foreign investments, as well as all capital movements relating thereto, may be recorded in the Register of Foreign Investments, which is kept by the Ministry of Economy.

Since September 1984, the Central Bank has entertained applications for the capitalization into foreign direct investment of principal falling due with an exchange rate guarantee. From February to September 1985, many such applications were approved, but since then approval has not been forthcoming. In addition, although no Central Bank circular has provided formal authorization, certain requests for the capitalization into foreign direct investment of swaps falling due were approved in 1985.

Registered foreign investments may generally be repatriated three years after entry into Argentina, unless a longer period was fixed when the investment was approved. The right to transfer profits and to repatriate capital related to properly registered investments can be suspended only by the National Executive. In that event, registered foreign investors are entitled to receive, for the remittance of profits abroad, the equivalent of the sum to be tranferred in external public debt securities denominated in foreign currency at the rate of interest prevailing in the international market, against provision of the equivalent in Argentine currency; this regulation is applied under Decree No. 1506/84, which also prohibits the repatriation of capital.

Profits on registered foreign capital are subject to a special tax on after-tax profit when they exceed 12 percent of registered capital on an annual basis. This tax is 15 percent on profits of more than 12 percent and up to 15 percent of registered capital, 20 percent for those of more than 15 percent and up to 20 percent of registered capital, and 25 percent for those of more than 20 percent of registered capital.

The extension of domestic credit to “domestic firms with foreign capital” is subject to special provisions, as set forth in Law No. 21382 (Article 17) and Decree No. 283/77 (Article 71, as amended in 1980).

Gold

Residents may hold gold coin and gold in any other form in Argentina or abroad. Financial institutions, exchange houses, and exchange agencies may buy or sell gold in the form of coin or “good delivery” bars among themselves or buy such gold from their clients. Gold exports must be paid for in convertible currencies. Imports of gold by industrial users are subject to a statistical duty of 0.6 percent, and those by other users are subject in addition to a sales tax. Institutions may carry out arbitrage operations on coined gold or “good delivery” gold with their clients, against foreign bank notes.

Changes During 1985

Imports and Import Payments

January 2. The Central Bank announced the signing of a reciprocal credit agreement with Poland, covering certain specified Argentine and Polish export products (Communication A 575).

January 11. Import payments for goods originating in Chile and negotiated under the LAIA were exempted from minimum financing requirements and were permitted to be settled in full or in part against shipping documents or on credit (Communication A 577).

March 25. Imports from Uruguay under the CAUCE agreement (Resolution SCE 141) were exempted from the prior deposit requirement.

March 28. A list of import goods was excluded from the prior consultation list, thereby qualifying for automatic import licensing (Resolution SCE 154).

April 9. Imports of fishing and factory ships were exempted from the prior deposit scheme (Resolution SCE 169).

May 24. Fertilizer in the form of urea was removed from the prior consultation list, thus qualifying for automatic import licensing (Resolution SCE 255).

June 6. Import payments for certain goods originating in Paraguay were exempted from minimum financing requirements and were permitted to be settled in full or in part against shipping documents or on credit (Communication A 668).

June 11. Import tariffs were raised by 10 percentage points.

June 28. The list of prohibited imports (List I) was suspended for a period of 30 days, and for this period the goods that had been prohibited were incorporated into the list of goods for which only prior consultation was required (List II) (Resolution SCE 347).

July 26. The Central Bank announced that the term of import finance would be automatically extended when import payments were not made by the originally agreed maturity date. In the case of general merchandise imports, the extension would be equal to the original term of the import finance, but in no case less than 90 days. In the case of capital goods imports, the extension would be for at least 180 days. Import payments could then only be effected once the period of extension was complete (Communication A 727).

July 26. The temporary transfer of prohibited imports to the prior consultation list (List II), which took place on June 28, 1985, was extended through August 31, 1985 (Resolution SCE 407).

July 29. A large number of import goods, primarily consisting of machinery and electrical equipment, were excluded from the list of goods for which prior consultation was required (Annex II), and, as a result, the automatic import licensing of these goods was permitted (Resolution SCE 413).

August 27. The temporary transfer of prohibited imports to the prior consultation list (Annex II), which had been extended on July 26, was extended again through December 31, 1985 (Resolution SCE 483).

August 30. It was announced that, under the auspices of the agreement on economic complementarity between Argentina and Uruguay, industrial imports from Uruguay would be free of all taxes, including import tariffs (Resolutions ME 809 and MREC 799).

September 30. Preferential tariff treatment was granted for certain chemical imports from Bolivia, Brazil, Chile, Ecuador, Mexico, Paraguay, Uruguay, and Venezuela (Resolution ME 969).

October 11. Minimum prices were established for exports of wine to EC countries (Resolution INV 326).

October 11. The agreement for the supply of machinery and capital equipment from the U.S.S.R. to Argentina was extended through February 13, 1988 (Communication B 1834).

October 14. The tariff on imports of cotton was lowered from 21 percent to zero on a temporary basis as an anti-inflationary measure (Resolution SCI 385).

October 15. Import payments for goods originating in Ecuador and negotiated under the LAIA were exempted from minimum import financing requirements and were permitted to be settled in full or in part against shipping demands or on credit (Communication A 785).

October 17. Preferential tariff treatment was granted for certain medical product imports from Bolivia, Brazil, Ecuador, Mexico, and Paraguay (Resolution MS 1053).

October 30. The tariff on imports of certain meat products was raised by 10 percentage points (Resolution ME 1107).

November 12. Preferential tariff treatment was granted to LAIA countries for goods on the Negotiated List, with the exception of a specified set of products. Preferences granted were 10 percent for imports from Bolivia, Ecuador, and Paraguay; 7 percent for imports from Chile, Colombia, Peru, Uruguay, and Venezuela; and 5 percent for imports from Brazil and Mexico (Resolution ANA 3101).

December 9. The temporary 10 percentage-point increase in import tariffs (see entry for June 11, 1985) was extended until March 31, 1986.

Payments for Invisibles

January 10. In accordance with the terms of the 1984–85 financing plan with commercial banks, the Central Bank announced a scheme for the liquidation of interest obligations not covered by exchange rate guarantee that arose or would arise from principal payments due to foreign banks up through May 31, 1985. The scheme covered those interest payments without exchange guarantee that arose from both principal obligations covered and not covered by exchange guarantee. For principal payments covered by exchange rate guarantee, the scheme pertained to interest accrued up to the maturity date of the principal. For principal payments not covered by exchange guarantee, the scheme pertained to interest accrued both before and after the maturity date of the principal. For interest payments that were covered, private sector entities were permitted to purchase foreign currency equivalent to 10 percent of the interest obligation and transfer this amount directly to the creditor to liquidate the obligation. For the remaining 90 percent of interest, private sector entities were to pay the local currency counterpart of the obligation and to designate a local commercial bank to submit a U.S. dollar-denominated 120-day certificate of deposit for an equivalent amount made out to the foreign creditor. A schedule was established under which interest payments on principal falling due in the periods October 3, 1983 to December 31, 1983, in the first half of 1984, in the second half of 1984, and in the first five months of 1985 could be liquidated according to the above described terms during the periods up through February 28, 1985, March 1985, April 1985, and May 1985, respectively (Communication A 576).

January 24. It was announced that institutions authorized to carry out foreign exchange operations could effect direct sales of foreign currency for payment of freight and insurance for imports and exports, insurance of hulls of ships and airplanes or supplementary insurance of Argentine shipping companies, reinsurance and losses related to these operations, banking costs, charges and interest, consular receipts, lease of ships by Argentine shipping companies for international shipment of merchandise; scholarships and educational expenses; family assistance; retirement and pensions, and purchase of medicine by private citizens.

February 27. In a clarification of the regulations issued on January 10, 1985 (Communication A 576) concerning the liquidation of interest payments not covered by exchange guarantee, the Central Bank announced that direct obligations of the private sector to foreign official banks and direct obligations of the public sector to foreign private banks were excluded from these regulations, since neither were included in the commercial bank refinancing agreement governing private sector obligations (Communication A 597).

April 8. The Central Bank issued a list of debt service obligations being refinanced under the Paris Club accord and announced that, as a consequence, these obligations would not be paid upon maturity (Communication A 621).

June 3. The period specified in Communication A 576 for the sale of foreign currency to cover payments falling due between January and May 1985 was extended to June 14, 1985 (see entry for January 10, 1985).

June 28. The minimum permissible period for financial loans was extended to 360 days.

July 1. The Central Bank issued regulations governing the refinancing of foreign currency principal obligations of the private sector not covered by exchange guarantee that had matured or would mature through December 31, 1985 and the liquidation of accrued interest on these obligations. Principal obligations due through this date would be refinanced, following the deposit by the Argentine debtor of the local currency amount required to cancel the obligation, by means of the issuance of obligations of the Central Bank (BCRA Notes) denominated in U.S. dollars. The BCRA Notes would be repaid in 15 semiannual installments beginning three years after the date of issuance. Each foreign creditor would be permitted to elect the use of LIBOR or a certificate of deposit rate for interest charges, with the LIBOR option carrying a spread of 1⅜ percentage points. The interest accrued through October 31, 1985 on obligations to be refinanced by BCRA Notes would be liquidated by the transfer of foreign exchange equal to 10 percent of the accrued interest and by the submission of a 120-day certificate of deposit made out to the foreign creditor for the remaining 90 percent of the accrued interest. When the certificate of deposit matured, foreign exchange equal to its value would be transferred. The certificates of deposit would carry an interest charge equal to the three-month LIBOR rate plus a spread of one percentage point on an annual basis. The regulation provided that for obligations falling due through July 1, 1985, applications for the issuance of BCRA Notes and the liquidation of accrued interest would be submitted by August 30, 1985 and that for later obligations, applications would be submitted within 30 days of the maturity date. Obligations covered by the commercial bank refinancing of public sector debt and by the Paris Club accord were excluded from these regulations (Communication A 696).

At the same time, the Central Bank issued regulations governing the refinancing of foreign currency principal obligations covered by exchange guarantee that matured in 1984 and 1985 or would mature in 1985 and the liquidation of accrued interest on these obligations. Principal obligations due in this period would be refinanced, following the deposit by the Argentine debtor of the local currency amount required to cancel the obligation, by means of the issuance of obligations of the Government of Argentina (Notes) denominated in U.S. dollars. The notes would be repaid in 15 semiannual installments beginning three years after the date of issuance. Each foreign creditor would be permitted to elect the use of LIBOR or the prime rate for interest charges, with the LIBOR option carrying a spread of 1⅜ percentage points. The interest accrued on principal obligations that matured through December 31, 1984 and that were to be refinanced by Notes would be liquidated by the transfer of foreign exchange equal to 10 percent of the accrued interest and by the submission of a 120-day certificate of deposit made out to the foreign creditor for the remaining 90 percent of accrued interest. When the certificate of deposit matured, foreign exchange equal to its value would be transferred. The certificates of deposit would carry an interest charge equal to the three-month LIBOR rate plus a spread of one percentage point on an annual basis. The interest accrued on principal obligations that matured in 1985 would be paid in foreign exchange when the corresponding Note was issued. The regulations provided that for obligations falling due through July 1, 1985, applications for the issuance of Notes and the liquidation of accrued interest should be submitted by August 30, 1985 and that for later obligations, applications would be submitted within 30 days of the maturity date. Obligations covered by the commercial bank refinancing of public debt and by the Paris Club accord were excluded from these regulations (Communication A 697).

July 8. The Central Bank instituted a deposit scheme under which persons with debt service obligations not covered by exchange guarantee that matured before July 1, 1985 were instructed to constitute a deposit in local currency at the Central Bank before July 27, 1985 equivalent to the debt service obligation. These deposits and the corresponding debt service obligations would be discharged according to the norms established under Communication A 696 (see entry for July 1, 1985) (Communication A 704).

July 8. The Central Bank instituted a deposit scheme under which persons with debt service and nonfactor service payments obligations, including arrears, to be discharged by means of the transfer of foreign exchange or the subscription of U.S. dollar-denominated bonds, were instructed to constitute at the Central Bank a deposit in local currency equivalent to the obligations. The Central Bank explained that it would make a determination of the validity of each operation within 45 days of the deposit (Communication A 703).

July 8. The Central Bank extended the scheme for the liquidation of interest obligations due to commercial banks that were not covered by exchange guarantee (see entry for January 10, 1985), which had covered obligations due through May 31, 1985, so as to cover obligations due through October 31, 1985 (Communication A 705). Interest on bonds without exchange guarantee, for amounts falling due by December 31, 1985, were exempted, as such obligations were regulated by Communication A 696. The period of sale of foreign exchange for payments falling due up to the regulation date was extended to July 26, 1985; and for those subsequently falling due, payment should be made not later than 30 days from the maturity date.

July 26. The Central Bank announced that obligations for which settlement was subject to Central Bank approval on Form 4008-G and 3687, requiring deposits in accordance with Communication A 703, maturing and payable as of July 15, 1985, and for which requests were not submitted by July 30, 1985, inclusive, should be considered refinanced for a minimum period of one year from July 15, 1985 (Communication A 729).

July 29. The Central Bank announced a schedule for the constitution of local currency deposits against debt service obligations that had been called for in Communication A 704 (see entry for July 8, 1985). For obligations falling due through July 1 and July 31, deposits were to be constituted by July 31 and August 5, respectively; for those falling due between August 1 and October 31, deposits were to be constituted within five days of maturity, but no later than October 31. In the event that the required deposits were not made by the indicated dates, the obligations would be considered refinanced for an additional 90 days with respect to the preceding schedule (Communication A 731). In addition, the Central Bank announced a schedule for the liquidation of interest obligations not covered by exchange guarantee under the scheme that had been established by Communication A 705 (see entry for July 8, 1985). For obligations falling due through July 8 and July 31, liquidation was to take place by July 31 and August 5, respectively, while for obligations falling due between August 1 and October 31, liquidation was to take place within five days of maturity, but not later than October 31. In the absence of liquidation by the indicated dates, the obligations would be considered refinanced for an additional 90 days with respect to the preceding schedule (Communication A 732).

Exports and Export Proceeds

January 2. The Central Bank announced the signing of a reciprocal credit agreement with Poland covering certain specified Argentine and Polish export products (Communication A 575).

January 24. The export prefinancing regime for promoted exports was amended to treat technical services provided in connection with the export of “turnkey” plants as a capital export. Consequently, such exports became eligible for prefinancing of up to 80 percent of their value, with a term of one year. In addition, for exports of consumer goods, inputs, and foodstuffs, the fraction of export value for which prefinancing could be obtained was raised to 65 percent (Communication A 582).

January 25. In accordance with export promotion legislation (Law 23101), the Government introduced new measures in a series of decrees. First, a list of promoted export goods was published for which exporters could claim an income tax credit equal to 10 percent of export value. Second, export firms were permitted to join together to form export consortia or cooperatives, and provisions were made to enable small- and medium-sized firms entering into these consortia to receive an incentive equal to 4 percent of the f.o.b. value of exports over a period of five years. The annual incentive could not exceed 80 percent of operating expenses, and firms would have to meet certain export growth targets to retain eligibility. In addition, export finance was made available for up to 70 percent of various costs incurred by small- and medium-sized firms entering into consortia. Third, the establishment of international trading companies as a means to facilitate better penetration of foreign markets was permitted. These firms were obliged to engage in a minimum of trade in promoted exports and to maintain a positive trade position. Provision was made for Central Bank financing for the opening of foreign offices. Fourth, firms were permitted to engage in countertrade when marketing promoted exports. Fifth, exporters of finished goods were permitted a tax “drawback,” whereby exporters could apply for rebates of duties on imported inputs and other taxes. Sixth, exporters of promoted goods were exempted from the stamp duty. Seventh, a 0.5 percent tax on imports of consumption goods was imposed with revenues to be channeled into the Export Promotion Fund; the resources of the Fund would be used to support the participation of Argentine exporters in trade fairs and expositions, for commercial missions abroad, and for trade promotion publicity (Presidential Decrees Nos. 173–179).

January 30. For the fishing sector, certain export taxes were reduced to zero, and export rebates of up to 10 percent were instituted for certain products (Resolution ME 103).

January 31. The special refinancing regime established on November 18, 1983 for meat-packing firms exporting more than 30 percent of their output was extended through March 27, 1985 (Communication A 586). In addition, export taxes for tobacco were lowered from 31 percent to 15 percent (Resolution ME 115).

February 4. Those export taxes on principal agricultural products that had been increased by 6 percentage points on a temporary basis on October 29, 1984 were reduced (with the exception of the tax on wheat, which had been reduced on December 7, 1984). The decreases averaged around 6 percentage points but differed by product (Resolution ME 129).

February 7. The special export rebate for exports to new markets was extended to include exports of a range of additional products to a number of countries over the period of one year (Resolution ME 151).

February 26. The credit line granted by the Central Bank for financing exports from Argentina to the People’s Republic of China, which had expired on December 4, 1984, was renewed through December 4, 1985 (Communication B 1500).

March 11. The Central Bank announced the opening of a US$10 million credit line for financing exports from Argentina to Guinea over a period of two years (Communication B 1516).

March 15. A special export rebate equal to 10 percent of export value was instituted for the export of “turnkey” projects meeting certain minimum standards for the content of national origin (Presidential Decree No. 525).

March 15. An export compensation adjustment scheme was announced under which exporters would be compensated for variation in the real price of exports, including changes in export taxes and rebates, that might occur between the date on which exports were contracted and shipped. The scheme was to be implemented after the designation by the Ministry of Economy of the products to be eligible for such compensation and the periods for eligibility (Presidential Decree No. 526).

March 29. Export taxes on certain meat and meat products were reduced and an export rebate of 4 percent was provided for a range of meat exports that had previously been subject to a 6 percent tax (Resolution SCE 139).

April 12. The special refinancing regime established on November 18, 1983 (see entry for January 31, 1986) for meat packing firms exporting more than 30 percent of their output was extended through June 28, 1985 (Communication A 623).

April 22. Export rebates for a range of steel products were raised from 4 percent to 10 percent, with the exception of products destined for the United States and the European Economic Community (Resolution ME 249).

May 3. Regulations were issued governing the use of the Export Promotion Fund instituted under Decree No. 179 (see entry for January 25, 1986), and it was announced that the Central Bank would provide loans at 7 percent interest to exporters for such promotional activities (Resolution SCE 248).

May 13. Regulations were issued governing the formation of export consortia and cooperatives, pursuant to Decree 174 (see entry for January 25, 1985). The consortia and cooperatives would be eligible for an incentive equal to 4 percent of the f.o.b. value of exports, subject to a limit of 80 percent of operating revenues (Resolution SCE 256).

May 15. The Central Bank established a rediscount facility to be used by commercial banks for the prefinancing of exports. Commercial banks were permitted to use the facility after designated funds from dollar-indexed deposits had been fully lent for export prefinance. A limit of 50 percent of bank capital was placed on access to the facility (Communication A 651). In addition, the export tax on soybeans was reduced from 25 percent to 23 percent (Resolution ME 357).

May 28. The reduction in the export tax on soybeans announced on May 15, 1985 was rescinded, and the previous tax rate of 25 percent was restored (Resolution ME 414).

June 4. The credit line granted by the Central Bank for financing exports from Argentina to Senegal, which had expired on December 31, 1984, was renewed through June 30, 1985 (Communication B 1635).

June 11. In light of the depreciation of the official exchange rate, export taxes were increased by 7 percent to 10 percent, with the largest increases applying to goods with existing taxes in the range of zero to 4 percent, the smallest increases applying to goods with existing taxes in the range of 30 percent to 34 percent, and intermediate increases applying to goods with existing taxes in intermediate ranges. The export taxes on principal agricultural exports were increased as follows: wheat from 18 percent to 26.5 percent, corn from 21 percent to 29 percent, sorghum from 20 percent to 28 percent, soybeans from 25 percent to 32.5 percent, and soyoil from 10 percent to 19 percent. Export rebates were eliminated for products with existing rebates of up to 10 percent, and export taxes of 4 percent, 5 percent, and 6 percent were imposed on products with existing rebates of 6 percent, 5 percent, and 4 percent, respectively (Resolution ME 475).

June 14. The Central Bank announced the opening of a US$30 million credit line to finance certain Argentine exports to Panama over a period of two years (Communication B 1649).

June 28. For exports of grains and principal agricultural products, the maximum permissible terms for prepayment and for foreign currency export prefinance were shortened from 180 days to 30 days; for most other exports, the maximum term was set at 360 days (Communication A 690). In addition, regulations were issued in respect of countertrade operations, as provided for under Decree No. 176, and exporters of goods and services were permitted to accept imports of goods or services of equivalent value as payment (Resolution ME 551).

July 19. For exports of grains and principal agricultural products, the maximum permissible terms for payments and foreign currency export prefinance (which had been shortened to 30 days on June 28, 1985) were lengthened. For processed agricultural goods, such as oils and meal, the maximum term was set at 120 days, and for other goods the maximum term was set at 90 days (Communication A 722).

July 20. For nontraditional exports, the maximum permissible terms for prepayment or foreign currency export prefinance, which were set at 360 days on June 28, 1985, were shortened to 180 days (Communication A 728).

August 1. The financing system for exports to new markets was extended to include various meat exports. Under the extension, finance was made available for up to 80 percent of the f.o.b. value of these exports for a term of up to 180 days (Communication A 739).

August 5. Regulations were issued governing the special rebate pertaining to the export of “turnkey” projects, which had been provided for by Decree 525 (Resolution SCE 437). In addition, export taxes for many industrial products were reduced by up to 18.5 percentage points, with the biggest reductions being for products that had been subject to the highest rates of tax, and the smaller being for products that had been subject to lower rates of tax (Resolution ME 678). Regulations were also issued governing the formation of trading companies as provided for by Decree No. 175 (see entry for January 25, 1985), and minimum requirements on net worth and annual exports were established for such enterprises (Resolution ME 680).

August 20. The export of cotton was temporarily suspended (Resolution JNG 3635).

August 26. The credit line of US$120 million granted by the Central Bank for financing exports from Argentina to Uruguay was extended through June 4, 1986, and the interest rate on the applicable credit line was lowered from 7.5 percent to 6.5 percent (Communication B 1812).

August 27. The temporary suspension of cotton exports, imposed on August 20, 1985, was lifted for certain grades of cotton (Resolution JNG 3644).

August 29. The exceptions from the special rebate for exports of certain steel products to the United States and the European Economic Community were eliminated. (The special rebate had been set at 10 percent and the rebate for excepted cases had been 4 percent—see entry for April 22, 1985. The changes in rebates associated with compensation for exchange rate depreciation had reduced the former to zero and converted the latter to a 6 percent export tax—see entry for June 11, 1985. The elimination of the exception reduced this tax to zero (Resolution ME 785).)

September 12. The export of unfinished or semifinished leather was suspended (Resolution SCI 321).

September 16. The credit line granted by the Central Bank for financing exports from Argentina to El Salvador, which had expired on May 16, 1985, was renewed through May 16, 1986 (Communication B 1791).

September 27. Export taxes on tea products were lowered by 10–15 percent, depending on the grade of tea, resulting in new tax rates ranging from 0–15.5 percent (Resolution ME 952).

September 30. Export taxes for wool products were reduced, resulting in new rates ranging from 14 percent to 28 percent. The rate applicable to unwashed wool was lowered from 32 percent to 28 percent and that applicable to washed wool was lowered from 26.5 percent to 20.5 percent (Resolution ME 966).

October 4. The tax on exports of wheat was lowered from 26.5 percent to 15 percent (Resolution ME 998).

October 11. The credit line granted by the Central Bank for financing exports from Argentina to Costa Rica, which had expired on May 17, 1985, was renewed through May 17, 1986, and the interest rate on the use of the line of credit was lowered from 7.5 percent to 6.5 percent (Communication B 1832). In addition, the credit line granted by the Central Bank for financing exports from Argentina to Honduras, which had expired on April 12, 1985, was renewed through April 12, 1987 (Communication B 1833).

October 14. The credit line granted by the Central Bank for financing exports from Argentina to Bolivia was raised to US$150 million and extended through March 18, 1986, and the interest rate on the credit line was lowered from 7.5 percent to 6.5 percent (Communication B 1836).

October 17. The tax on exports of linseed was reduced from 31 percent to 21 percent (Resolution ME 1017), and a temporary export rebate of 10 percent was introduced for a large number of steel products through December 31, 1985, but an exception was made for exports of these products destined for the United States and the European Economic Community, in which case the rebate was set at 4 percent (Resolution ME 1021).

November 1. The taxes on the export of linseed oil and other linseed products were reduced by 3-4 percent, depending on the product, resulting in new taxes ranging from 13.5 percent to 27 percent (Resolution ME 1128).

November 8. The Central Bank announced a decrease from 7.5 percent to 6.5 percent in the interest rate charged on drawings on lines of credit to promote Argentine exports (Communication B 1864).

November 11. The Government of Argentina announced the opening of a credit line of US$10 million to finance certain Argentine exports to Benin over a period of two years (Communication B 1865). In addition, the Government announced the opening of a credit line of US$10 million to finance specified Argentine exports to the Central African Republic over a period of two years (Communication B 1866).

December 30. Regulations were issued by the Central Bank concerning countertrade operations pursuant to Decree No. 176 (see January 25, above), and a maximum period of 180 days was established for the completion of the two sides of countertrade operations (Communication A 825).

Capital

April 1. The Central Bank extended until May 31 the deadline for the expiration of the scheme for the capitalization of loans with exchange guarantee into foreign direct investment. (The Central Bank had explained in September 1984 that it was willing to consider such requests (Communication A 532), and it began to approve requests in early 1985 (Communication C 2016).)

April 4. The Central Bank issued a list of debt service obligations being refinanced under the Paris Club accord and announced that, as a consequence, these obligations would not be paid upon maturity (Communication A 621).

May 6. A financial support system was established for banks and savings institutions to help them in servicing deposits in foreign currency. In addition, the Central Bank fixed a reserve requirement of 100 percent on the growth of foreign currency-denominated deposits in the commercial banking system after April 30, 1985. Deposits existing before that date were to have been deposited at the Central Bank or lent for the purpose of export finance (Communication A 643).

May 17. The Central Bank, citing prudential concerns, suspended for 120 days deposits into and withdrawals from foreign currency-denominated accounts, with the exception of deposits of foreign delegations and international organizations. In addition, the Central Bank established that depositors could request BONEX bonds (at 93 percent of par) for term deposits as they matured (Communication A 652).

May 27. The Central Bank again extended until August 31 the expiration of the scheme for the capitalization of loans with exchange guarantee into foreign direct investment (see entry for April 1, 1985) (Communication C 2112).

May 31. The Central Bank issued regulations governing the suspension of deposits into, or withdrawals from, foreign currency deposits (see entry for May 17, 1985), including a schedule for the extension of the maturity of deposits falling due during the period of the suspension (Communication A 663).

June 28. The Central Bank raised from 180 days to one year the minimum maturity on inflows of foreign financial capital negotiated in the official exchange market (Communication A 688). In addition, for exports of grains and principal agricultural products, the maximum permissible terms for payment and for foreign currency export prefinance were shortened from 180 days to 30 days, while for most other exports, the maximum term was set at 360 days (Communication A 690).

July 1. The Central Bank issued regulations governing the refinancing of foreign currency principal obligations of the private sector not covered by exchange guarantee that had matured or would mature through December 31, 1985 and the liquidation of accrued interest on these obligations. Principal obligations due through this date would be refinanced, following the deposit by the Argentine debtor of the local currency amount required to cancel the obligation, by means of the issuance of obligations of the Central Bank (BCRA Notes) denominated in U.S. dollars. BCRA Notes would be repaid in 15 semiannual installments beginning three years after the date of issuance. Each foreign creditor would be permitted to elect the use of LIBOR or a certificate of deposit rate for interest charges, with the LIBOR option carrying a spread of 1⅜ percentage points. The interest accrued through October 31, 1985 on obligations to be refinanced by BCRA Notes would be liquidated by the transfer of foreign exchange equal to 10 percent of the accrued interest and by the submission of a 120-day certificate of deposit made out to the foreign creditor for the remaining 90 percent of the accrued interest. When the certificate of deposit matured, foreign exchange equal to its value would be transferred. The certificates of deposit would carry an interest charge equal to the three-month LIBOR rate plus a spread of 1 percent on an annual basis. The regulation provided that for obligations falling due through July 1, 1985, applications for the issuance of BCRA Notes and the liquidation of accrued interest would be submitted by August 30, 1985 and that for later obligations, applications would be submitted within 30 days of the maturity date. Obligations covered by the commercial bank refinancing of public sector debt and by the Paris Club accord were excluded from these regulations (Communication A 696).

At the same time, the Central Bank issued regulations governing the refinancing of foreign currency principal obligations covered by exchange guarantee which matured in 1984 and 1985 or would mature in 1985 and the liquidation of accrued interest on these obligations. Principal obligations due in this period would be refinanced, following the deposit by the Argentine debtor of the local currency amount required to cancel the obligation, by means of the issuance of obligations of the Government of Argentina (Notes) denominated in U.S. dollars. The Notes would be repaid in 15 semiannual installments beginning three years after the date of issuance. Each foreign creditor would be permitted to elect the use of LIBOR or the prime rate for interest charges, with the LIBOR option carrying a spread of 1⅜ percentage points. The interest accrued on principal obligations that matured through December 31, 1984 and that were to be refinanced by Notes would be liquidated by the transfer of foreign exchange equal to 10 percent of the accrued interest and by the submission of a 120-day certificate of deposit made out to the foreign creditor for the remaining 90 percent of accrued interest. When the certificate of deposit matured, foreign exchange equal to its value would be transferred. The certificates of deposit would carry an interest charge equal to the three-month LIBOR rate plus a spread of 1 percent on an annual basis. The interest accrued on principal obligations that matured in 1985 would be paid in foreign exchange when the corresponding Note was issued. The regulations provided that for obligations falling due through July 1, 1985, applications for the issuance of Notes and the liquidation of accrued interest should be submitted by August 30, 1985 and that for later obligations, applications would be submitted within 30 days of the maturity date. Obligations covered by the commercial bank refinancing of public debt and by the Paris Club accord were excluded from these regulations (Communication A 697). In addition, the Central Bank issued regulations governing the refinancing of swap operations falling due in 1985, including amounts due in 1985 as a result of rollovers mandated by the Central Bank in earlier years. The regulations called for a 180-day extension of maturities falling due in the period February 22, 1985 to July 3, 1985, and established two options for the refinancing of obligations falling due as of July 4, 1985: a refinancing via bonds of the Central Bank (BCRA Notes) denominated in U.S. dollars, and a direct refinancing between creditors and debtors. Under both options, debtors were first obliged to carry out procedures for the liquidation of exchange guarantees, which involved constituting a frozen deposit equal to part of the value of the exchange rate guarantee. Under the first option, BCRA Notes would be issued to the creditor refinancing the obligation for ten years, while under the second option, creditors and debtors would agree to refinance the swap for a period of five years, at which time a BCRA Note with a five-year maturity would be issued. The interest charges and amortization schedules for the direct refinancing and for the five-year BCRA Notes were established so as to match those of the first option (Communication A 695).

July 5. The Central Bank updated the list of obligations to be refinanced under the Paris Club (Communication A 621), and announced that these obligations could not be settled on their due dates (Communication A 700).

July 8. The Central Bank instituted a deposit scheme under which persons with debt service obligations not covered by exchange guarantee that matured before July 1, 1985 were instructed to constitute a deposit in local currency at the Central Bank before July 27, 1985 equivalent to the debt service obligation. These deposits and the corresponding debt service obligations would be discharged according to the norms established under Communication A 696 (see entry for July 1, 1985) (Communication A 704).

July 19. The Central Bank partially lifted the suspension of the withdrawal of funds from accounts in foreign currencies; beginning from August 1, 1985, depositors were permitted to withdraw up to the equivalent of US$1,500 from each account or certificate of deposit upon or after its maturity (Communication A 724). In addition, for exports of grains and principal agricultural products, the maximum terms for prepayments and foreign currency export prefinance (which had been shortened to 30 days on June 28, 1985) were lengthened. For processed agricultural goods, such as oils and meal, the maximum term was set at 120 days and for other goods the maximum term was set at 90 days (Communication A 722).

July 25. In a revision of regulations governing foreign currency deposits in the banking system, the Central Bank required banks to maintain a 100 percent reserve deposit on foreign currency demand deposits. Foreign currency time deposits were to be accepted for the account and to the order of the Central Bank for a specified period of 60–360 days. The Central Bank would provide rediscounts to commercial banks for up to 40 percent of their fixed-term foreign currency deposits to be used by banks for foreign trade finance (Communication A 725).

July 29. The Central Bank announced a schedule for the constitution of local currency deposits against debt service obligations that had been called for in Communication A 704 (see entry for July 8, 1985). For obligations falling due through July 1 and July 31, deposits were to be constituted by July 31 and August 5, respectively; for those falling due between August 1 and October 31, deposits were to be constituted within five days of maturity, but no later than October 31. In the event that the required deposits were not made by the indicated dates, the obligations would be considered refinanced for an additional 90 days with respect to the preceding schedule (Communication A 731).

August 22. It was announced that, prior to the presentation of requests (Form 4008H) for payments abroad in the form of interest and for which the creditor was a foreign commercial bank, the institutions involved and the debtors should check to find out whether the payments were related to transactions to be refinanced through the Paris Club and should refrain from presenting payment requests for transactions included in the lists of Circular SEPEX-1–4 (Communication A 700 of July 5, 1985). Payment requests bearing only one or neither of these characteristics should be subjected to such checking after authorization but prior to payment. Request forms submitted after August 30, 1985 would be considered, subject to the above-mentioned checking. The checks should be updated in the case of additions to the list of transactions attached to Communication A 700 of July 7, 1985.

August 29. It was decided that foreign direct investment in the importation, production, and marketing of computers, telecommunications, and electronic equipment would be subject to prior approval of the Secretariat of Industry and the Secretariat of Science and Technology (Presidential Decree No. 1622).

September 3. The Central Bank announced regulations governing the lifting of the 120-day suspension of withdrawal of funds from accounts in foreign currency (see entry for July 19, 1985). Depositors were permitted, beginning from September 10, 1985, to withdraw up to the equivalent of US$8,500 of principal and accrued interest on such principal from each account or certificate of deposit upon its maturity. For any amount that matured up through the end of the 120-day suspension on September 16, 1985, but was in excess of the withdrawal provisions, withdrawal would be permitted in October 1985 on the same day of the month of the original maturity. Amounts maturing after September 16, 1985 would be available upon their maturity dates (Communication A 764).

October 23. The Central Bank issued regulations governing the refinancing of debt owed by public enterprises and official banks and used by private sector entities with government guarantee or by means of official banks’ utilization of external lines of credit. These regulations clarified the procedures that had been set out in Communications A 696 and A 697 (see entry for July 1, 1985). In the case of such debts with exchange guarantee, refinancing would be by means of the issuance of promissory notes of the Government of Argentina denominated in U.S. dollars. For obligations that fell due in 1982 and 1983, the notes would be repaid in 15 backloaded semiannual installments beginning on March 1, 1988; for obligations falling due in 1984 and 1985, the notes would be repaid in 19 backloaded semiannual installments beginning on March 1, 1988. For loans that carried LIBOR interest rates, a spread of 2⅛ percent could be paid for the period through the end of 1984, and a spread of 1⅜ percent would be paid thereafter; for loans at the prime interest rate, a spread of 2 percent would be paid for the period through the end of 1984, and a spread of 1 percent would be paid thereafter. In the case of debts without exchange guarantee, the refinancing would be part of the general refinancing of public sector debt (Communication A 790).

November 5. The Central Bank announced provisions for the settlement of private sector obligations, included in the refinancing through the Paris Club, of debts owed to France (Communication A 798).

November 11. In a clarification of the regulations issued by the Central Bank concerning the refinancing of swap obligations (as described in Communication A 695), the maximum period for direct rescheduling between creditor and debtor was set at five years, but allowance was made for shorter periods. In cases of shorter direct refinancings, the maturity of the BCRA notes would be adjusted so as to maintain a total refinancing period of ten years (Communication A 799).

Australia

(Position on December 31, 1985)

Exchange Arrangement

The currency of Australia is the Australian Dollar.1 The Australian authorities do not maintain margins in respect of exchange transactions; exchange rates are determined on the basis of demand and supply conditions in the exchange market, but the Reserve Bank of Australia retains discretionary power to intervene in the foreign exchange market. On December 31, 1985 the closing buying and selling rates in terms of the U.S. dollar were $A 1.468 = US$1 and $A 1.469 = US$1, respectively. There are no taxes or subsidies on purchases or sales of foreign exchange.

Trading banks and authorized nonbank financial institutions are allowed to engage in foreign exchange transactions and may deal among themselves and with their customers at mutually negotiated rates. Dealers may hold foreign currency balances (spot and forward) or incur foreign currency liabilities (spot and forward) within limits established by the Reserve Bank for each dealer. In addition, there is a foreign currency hedge market in which dealers match the currency hedge requirements of their customers at market-determined rates. Nonresidents may transact business in this market, although it is a nondelivery market with all settlements effected in Australian dollars.

As part of Australia’s current foreign exchange arrangements, a range of outward foreign exchange transactions are subject to procedural requirements in order to meet the Government’s taxation screening policies. A taxation clearance certificate issued by the Australian Taxation Office must be sighted by authorized foreign exchange dealers before foreign exchange or other means of payment is made available for certain transactions with residents of designated countries and areas2 and for emigrants’ remittances in excess of $A 50,000 or its foreign currency equivalent to all countries. In respect of countries that are not designated for taxation screening purposes, foreign exchange dealers are obliged to require that their customers complete declaration forms for outflows of more than $A 50,000 or its foreign currency equivalent and which relate to investments, gifts, sustenance and trust distributions, loans or loan repayments, travel expenditure, remittances connected with futures operations overseas and payments of interest, dividends, service fees, or royalties.

Australia formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from July 1, 1965.

Administration of Control

The Reserve Bank is responsible for administering the remaining exchange control restrictions under Australia’s current foreign exchange arrangements. (Most exchange controls were abolished on December 12, 1983.) Import and export controls are imposed on certain commodities pursuant to the Customs Act. These controls are administered by the relevant ministers and departments according to regulations under that Act.

Prescription of Currency

Both outward and inward payments may be settled in Australian currency or in any foreign currency,3 but purchases and sales of foreign currency by residents in exchange for Australian currency must be undertaken with an authorized foreign exchange dealer in Australia.

Nonresident Accounts

Financial institutions in Australia are permitted to offer accounts denominated in foreign currencies, but purchases and sales of foreign currency must be handled through authorized foreign exchange dealers in Australia. However, special rules apply to central banks, foreign governments, and foreign government agencies not similar to private sector commercial entities; basically, they may hold essential working balances and are not permitted to invest at interest. Nonresidents may withdraw their balances without restriction.

Imports and Import Payments

Nearly all goods may be imported without import licenses, and no restrictions are imposed on payments for imports. Import restrictions, including quotas, are imposed on a small range of goods, although not for exchange control purposes; the restrictions are maintained mainly for reasons of industry assistance, health, community protection, or security, or to sustain quality standards.

There is provision in the Customs Tariff Antidumping Act 1975 for action to be taken when dumped imports have caused, are causing, or are threatening material injury to Australian industries. Dumping duties may be imposed unless the exporters voluntarily raise their export prices to the level necessary to remove injury. During 1983 a total of 101 complaints of alleged dumping were received, of which 51 were pursued. A total of 67 cases were completed during the year, of which 23 resulted in the imposition of dumping duties or the acceptance of price undertakings by the overseas exporter.

Payments for Invisibles

Payments for invisibles are not restricted, subject to the Government’s taxation screening requirements being met. (See section on Exchange Arrangement, above.)

Travelers may take out of Australia up to $A 5,000 in Australian notes and coins in any combination. Travelers who are not residents of Australia may take out without formality any amount in foreign currency or Australian currency instruments (other than Australian currency notes and coins), provided that they brought them into Australia.

Exports and Export Proceeds

Export permits or licenses are not required except in respect of goods covered by the Export Control Act, Customs (Prohibited Exports) Regulations, and the Wildlife Protection Regulation of Exports and Imports Act. There are no formalities covering the disposal of export proceeds.

Under the Customs (Prohibited Exports) Regulations, the export of certain minerals and metals and of hydrocarbons and nuclear-sensitive material is prohibited unless permission is granted by the Minister for Trade or an authorized person.

Exports are controlled for different objectives for individual mineral commodities, principally to ensure that:

(a) pricing and other contractual conditions are fair in relation to the market, consistent with maximizing the trade benefits for Australia;

(b) exports are in compliance with Australia’s international obligations and bilateral agreements where applicable, e.g., the Treaty of the Non-Proliferation of Nuclear Weapons, as well as bilateral agreements between Australia and each of its nuclear customer countries;

(c) supplies are adequate for domestic requirements; and

(d) the provisions of the Environment Protection (Impact of Proposals) Act and the Australian Heritage Commission Act are met.

There are active controls in respect of alumina, bauxite, coal, iron ore, crude oil, liquefied natural gas, primary tin, and uranium and other materials of nuclear significance. Exporters are required to consult with the relevant government department prior to negotiations for sales of alumina, bauxite, and coal. Determinations are made in relation to the negotiation of contracts for the sale of uranium. Exporters of ores, concentrates, matte and oxides of copper, lead, manganese, nickel, tungsten and zinc, blister and refined copper, lead bullion, salt, petroleum products, liquefied petroleum gas and condensate are, on application, given automatic approval to export expected shipments over designated periods. Approvals to export minerals sands are freely issued, except when the Government considers there are environmental reasons that would make such exports undesirable. With respect to exports of monazite and xenotime, additional requirements must be met in relation to the Government’s nuclear safeguards policy before export approval can be given. Exports of copper scrap and copper alloy scrap are embargoed, and quotas apply to secondary copper ingots and other basic shapes made from scrap material.

Export of petroleum and petroleum products to South Africa is prohibited.

No other minerals are subject to control. Export control arrangements for coal, bauxite, alumina, and tin are under review.

With respect to rural commodities, the Government follows the general principle that exporters should be the main negotiators for export contracts and that the market should determine prices. Generally, the export control power is not used but is held in reserve to be used if and when the need arises, consistent with the need to protect the national interest and to meet market access limitations imposed by importing countries.

There are also provisions for government control over the export of defense material.

Proceeds from Invisibles

Earnings of invisibles in foreign currencies may be retained or sold for Australian dollars. Travelers may bring in any amount in foreign or domestic bank notes.

Capital

Borrowings in Australia by foreign governments, their agencies not similar to private sector commercial entities, and international organizations are not permitted. Investment at interest in Australia is not permitted to foreign governments, their agencies not similar to private sector commercial entities, and central banks. Apart from these provisions and subject to the procedural requirements of the Government’s taxation screening arrangements being met, transfers of capital from Australia and nonresident investments at interest in Australia may be undertaken without formality.

Direct investment in Australia by nonresidents is governed by the Government’s foreign investment policy. The Australian Government’s foreign investment policy is based on a recognition of the significant contribution that foreign capital can make to the development of Australia’s industries and resources and the scope it provides for higher rates of growth in economic activity and employment than would otherwise be the case. The Government’s policy is to encourage foreign investment, provided that such investment is consistent with Australia’s national interests and meets the needs of the Australian community. Australia’s foreign investment policy is concerned primarily with direct foreign investment that has significant implications for the levels of foreign ownership and foreign control of Australian industries and resources. Portfolio debt and equity investment is not subject to the policy.

Certain types of investment proposals are subject to examination by the Foreign Investment Review Board, which is the advisory body to the Government on foreign investment matters. Proposals subject to review include those falling within the scope of the Foreign Takeovers Act, those involving the establishment of a new business or project, irrespective of size, in industries subject to special restrictions (the media and civil aviation), or in other sectors where the total amount of the investment is $A 10 million or more (including diversification into activities not previously undertaken directly in Australia and new projects in mining and primary industries), those involving direct investment by foreign governments or their agencies (excluding investments related to their official representation), and those to acquire real estate and undertake real estate development projects.

The Foreign Takeovers Act is concerned with the acquisition of companies or businesses operating in Australia by foreign interests. The Act requires nonresidents, nonresident-controlled corporations or businesses, and Australian companies in which nonresidents have a substantial shareholding to notify the Government of proposals to acquire, or alter, a substantial interest in a company. A substantial foreign interest is an interest of 15 percent or more in the ownership or voting power of a corporation or business by a single foreign interest, either alone or together with associates, or an interest of 40 percent or more in aggregate in the ownership or voting power of a corporation or business by two or more foreign interests and their associates.

Foreign investment proposals are examined by the Government to ensure that they are consistent with Australia’s interests. In particular, the examination process is directed toward ensuring that proposed investments offer economic benefits sufficient to offset any loss of Australian ownership and control. The economic benefits are assessed in very broad terms covering such factors as employment-creating effects, more efficient use of resources, introduction of new technology, industry rationalization, and price or cost effects.

Specific guidelines for Australian participation (generally 50 percent Australian equity and control) apply to proposals for new mining and primary industry projects and, in certain circumstances, to the acquisition of real estate. These guidelines are applied flexibly. In considering proposals for investment in sectors of the economy not subject to the equity guidelines, due credit is given to those that provide for participation by Australian interests in the ownership, control, and management of the business venture, although such participation may not be a necessary condition for approval.

Proposed new businesses in the nonbank finance sector and in the insurance sector involving investment of $A 10 million or more and takeovers of existing businesses in these sectors are subject to examination. Proposals involving nonbank financial intermediaries (such as merchant banks and finance and leasing companies) are approved unless they are considered to be contrary to the national interest. Proposals involving insurance companies are subject to the general foreign investment policy criteria, including the requirement for net economic benefits. New business proposals in both the nonbank finance sector and the insurance sector involving investment of less than $A 10 million are exempt from foreign investment screening.

After inviting applications for banking licenses, the Government selected 16 foreign banks to establish banking operations in Australia. It is not envisaged that further invitations will be issued to foreign interests to establish banking operations in Australia.

Australia’s foreign investment policy provides an incentive for the “naturalization” of predominantly foreign-owned companies. The naturalization process is an entirely voluntary one for those companies that choose to increase the level of Australian participation in their Australian operations. Companies that elect to participate in the naturalization arrangements are entitled to certain benefits while they are naturalizing. In particular, they are accorded prior credit for achieving majority Australian ownership, thereby facilitating their participation in mining projects and ventures that are subject to the Australian equity participation guidelines.

In the administration of foreign investment policy, every effort is made to avoid unnecessary interference in normal commercial processes. Recognition is given to the special characteristics and circumstances that may arise in individual cases, and the policy is nondiscriminatory as to the country of origin of investors.

Foreign-controlled companies incorporated in Australia, or operating in Australia as locally registered foreign companies, may raise funds for their local requirements in the Australian capital market. Such foreign companies proposing to borrow locally are invited to consider alternative sources of financing, including the raising of local equity by means of new share issues or other placements.4

Gold

There are no restrictions on residents owning, buying, or selling gold and gold coin in Australia. Residents may export and import gold other than Krugerrands, subject to normal customs procedures. However, the export of Australian gold coin in excess of five of the $A 200 denomination requires Reserve Bank approval.

Changes During 1985

Capital

January 15. It was announced that while foreign banks (other than central banks) and foreign government agencies similar to private sector commercial entities could undertake interest-bearing investments in Australia, the general restriction on such investments by foreign governments and their agencies not similar to private sector entities would continue.

August 19. A range of economic sanctions against South Africa was announced, including the prohibition of direct investment in Australia by the South African Government and its agencies.

October 29. The following modifications to foreign investment policy were announced: (a) the requirement that foreign parties to intended acquisitions of significant Australian businesses, rural properties, and real estate should demonstrate that sufficient opportunities to purchase such assets had been provided for Australians (such as by public announcement) would be discontinued; (b) the administrative threshold for acquisition proposals, below which approval was still required but readily given in the absence of special circumstances, would be raised from $A 2 million to $A 5 million; (c) the threshold below which proposals to establish new businesses were exempted from the need for approval (other than the media and civil aviation) would be increased from $A 5 million to $A 10 million; (d) the total value of real estate that could be acquired without the need for approval would be raised from $A 350,000 to $A 600,000 and would apply on a cumulative basis; (e) all new business proposals involving nonbank financial intermediaries and insurance companies of less than $A 10 million would be exempt from foreign investment screening, and a liberalized stance in relation to foreign investment in merchant banking would continue and would be extended to other nonbank financial intermediaries; (f) the 50 percent Australian equity guideline for the acquisition of real estate for development and subsequent resale to Australians would only apply to development ventures costing $A 10 million or more and/or taking more than five years to complete (the 50 percent Australian equity guideline for real estate acquisitions for development and subsequent retention by foreign interests would remain); and (g) acquisitions by foreign investors of existing mining exploration rights and offshore takeovers in which the Australian assets are worth $A 20 million or less would be exempted from the need to be notified under the Foreign Takeovers Act.

Gold

August 19. A range of economic sanctions against South Africa was announced, including the prohibition of dealings in Krugerrand.

Austria

(Position on December 31, 1985)

Exchange Arrangement

The currency of Austria is the Austrian Schilling. Without assuming any formal obligations, the authorities aim at maintaining a stable relation with the currencies participating in the European Monetary System (EMS). Forward premiums and discounts are, in principle, left to the interplay of market forces. On December 31, 1985 the authorized banks’ buying and selling rates for the U.S. dollar were S 17.19 and S 17.20, respectively, per US$1. There are no exchange taxes or subsidies.

Austria formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from August 1, 1962.

Administration of Control

The Austrian National Bank administers exchange control and issues exchange licenses where required. Most exchange transactions are effected through Austrian banks authorized to implement the exchange control regulations.

The customs authorities issue freely and without delay licenses required for imports of liberalized goods. Licenses, if required, for other imports and for exports have to be obtained from the relevant ministry, namely, the Federal Ministry of Trade, Commerce, and Industry (Licensing Office) for industrial products or the Federal Ministry of Agriculture and Forestry for agricultural products. For products falling under monopoly, licenses are issued by the Ministry of Finance.

Prescription of Currency

Settlements with all countries may be made either in convertible currencies or through Free Schilling Accounts. The exchange control regulations generally are based on the distinction between member countries of the IMF or the OECD with which settlements take place in convertible currencies and other countries with which settlements are made in convertible currencies.

Nonresident Accounts

There are three categories of nonresident accounts in schillings: Free Schilling Accounts, Interim Accounts for nonresidents residing in member countries of the IMF or the OECD, and Blocked Accounts for nonresidents residing in other countries.

Free Schilling Accounts may be freely opened by Austrian credit institutions on behalf of nonresidents without any formality other than a check by the credit institution of the nonresident status of the beneficiary when the schilling funds are obtained from the selling of freely convertible foreign currencies at a domestic credit institution. Such accounts may be freely credited with proceeds from the sale of convertible currencies by a nonresident to the Austrian National Bank, or to an authorized bank, as well as with payments permitted by the National Bank on the basis of a general or individual authorization. The accounts may be freely debited for payments to Austrian residents, who must, however, apply for individual licenses if they are to receive loans from nonresidents. Balances may be freely converted into any foreign currency. Transfers between these accounts are free.

Interim Accounts and Blocked Accounts consist of funds that are due to nonresidents. General licenses permit their use for payments for many current and some capital transactions. The transfer abroad of funds in Interim Accounts and Blocked Accounts is subject to an individual license. Usually, licenses are granted freely if the funds belong to residents of countries that are members of the IMF or the OECD.

Nonresidents may also maintain nonresident accounts in convertible foreign currencies. These accounts may be debited for the same purposes as Free Schilling Accounts and are subject to the same conditions.

Imports and Import Payments

All commodities not included in the Annexes to the Foreign Trade Law are free of import licensing and may be imported from any country without quantitative restriction. All goods included in the Annexes require licenses, but most are free of quantitative restriction. For many goods licenses are granted by the customs, at the time of clearance, irrespective of the country they are imported from.1 Nearly all imports from GATT countries, their associated territories, and some other countries2 are liberalized. Austria’s GATT liberalization is applied worldwide, except in respect of certain textiles and clothing as defined in Article XII, Section 1, of the Arrangement Regarding International Trade in Textiles. The importation of coffee and sugar is governed by the international agreements for these commodities. Non-liberalized imports may be obtained under various procedures: namely, state trading, global quotas, bilateral quotas, and discretionary licensing. State trading covers tobacco in any form, ethyl alcohol, and salt. Global quotas apply to specified imports from GATT countries; such quotas apply only to potatoes, wheat, and cornstarch, preserved meat, wine, and certain medicaments. Discretionary individual licensing is applicable to all other private imports not covered by the procedures listed above, including imports of certain textiles from specified countries. Licenses are usually granted if the imports concerned do not adversely affect domestic industries.

Grains, milk and butter, and cattle, pigs, sheep, goats, and horses for slaughter and products from these animals for human consumption are imported in accordance with a special system of controls and regulations maintained under the Agricultural Marketing Law and the law governing livestock farming and trading, and the marketing of livestock produce (Viehwirtschaftsgesetz). Certain agricultural products are subject to import levies.

In some cases, import licenses are issued only to importers who have received export certificates from the countries of their trading partners. Import licenses are not transferable and are valid for six months, but this period may be extended for periods of three months at a time. Payments for imports from, and originating in, countries with which Austria makes settlements in convertible currencies do not require exchange licenses. Under the 1982 Customs Preference Act, which covers the second ten-year period of the Austrian Scheme of Generalized Preferences, special treatment is provided for imports from the 31 least developed countries as defined by the UN General Assembly; the list of products eligible for preferential treatment has also been extended under the Act.

Payments for Invisibles

With few exceptions, residents are permitted to conclude transactions involving current invisibles with residents of countries that are members of the IMF or the OECD. Exceptions comprise certain transactions concerning transport and insurance. Most transactions in current invisibles that involve payments to residents of other countries (e.g., freight, commissions, and the cost of assembly and repairs) are covered by general licenses; for the remaining transactions, individual licenses are required.

Payments on account of generally authorized invisibles to nonresidents may be made freely, provided that no capital transfer is involved. Other payments abroad up to S 2,000 may be made freely and at any time. The remaining payments on account of invisibles to countries other than members of the IMF and the OECD with which settlements are made in convertible currencies require special licenses.

Residents traveling to countries with which Austria makes settlements in convertible currencies may buy exchange from authorized banks or may obtain, as short-term advances from nonresidents in multilateral countries, up to the equivalent of S 26,000 for each trip. Should a resident require more foreign exchange for traveling, additional amounts may be authorized by the National Bank. In addition, Austrian residents may arrange for trips abroad through travel agents and pay in schillings to cover expenditures for accommodation and food, as well as transportation. Persons leaving Austria may take with them S 15,000 in Austrian notes and coin and any amount in foreign notes and coin.

Exports and Export Proceeds

Licenses for exports regulated under the Foreign Trade Law have to be obtained from the relevant ministry or, at the time of clearance, from the customs authorities. For most exports, licenses are not required. Export licenses are issued with due consideration for the provisions of relevant bilateral trade agreements and the fulfillment of quotas established in accordance with such agreements, and for the needs of the Austrian economy.

Export claims exceeding the equivalent of S 50,000 must be declared. Export proceeds may either be surrendered or be deposited in accounts with authorized banks. Such deposits in convertible currencies may be used freely for authorized payments abroad.

Proceeds from Invisibles

Exchange receipts from invisibles must be declared within eight days from the date of collection. They may either be surrendered or be deposited with an authorized bank and subsequently are used in the same way as proceeds accruing from exports. Persons entering Austria may bring in Austrian or foreign bank notes and coin without limit.

Capital

The acquisition by nonresidents of Austrian securities, shares and participations in Austrian companies, and Austrian real estate is covered by a general license. In certain provinces, the acquisition of real estate is subject to the approval of the local authorities. Direct investments by nonresidents are also permitted by general authorization, if made with convertible currencies or from free or originally owned blocked schilling balances; for investments financed in other ways, authorization is granted on the merits of each case.

Loans and credits extended by nonresidents to residents, including those in schillings from Free Schilling Accounts, at present require prior approval by the National Bank and, in many cases, are restricted. Approvals are granted generally, but not exclusively, for (1) investment credits for productive enterprises, (2) import and export finance, and (3) loans from nonresident relatives to residents. Import credit with a maturity customary in the trade concerned is licensed freely.

The short-term foreign assets and liabilities of authorized banks in convertible currencies are not subject to limitation. The National Bank licenses financial loans with maturities of more than one year to nonresidents only to the extent of funds made available through the redemption of such loans outstanding at the end of December of the previous year, plus 15 percent. A number of authorized banks are permitted to accept convertible currencies from abroad for interbank on-lending abroad at maturities of up to five years. Mortgage loans, export finance credits, and loans to Austrian subsidiaries abroad are not subject to this limit.

Transactions and operations mentioned in the following three paragraphs are licensed upon documentation, provided that they are concluded with residents of countries that are members of the IMF or the OECD.

The National Bank permits the transfer abroad of (1) proceeds from the liquidation of various foreign investments in Austria (shares or participations in Austrian enterprises, Austrian securities, and real estate in Austria) and (2) repayments by residents of foreign loans and credits.

The transfer of funds owned by emigrants and payments due to nonresidents on account of dowries, inheritances, and settlements under certain agreements between heirs is permitted. Residents may also grant loans to nonresident relatives, provided that the lender draws on his own resources.

Residents are allowed, for purposes of direct investment, to acquire participation rights in foreign companies, associations, and other enterprises, and to establish, acquire, or extend foreign agencies or individually owned firms; earnings accruing from such investment usually may be reinvested. Residents also are permitted to acquire real estate abroad for the purpose of establishing a secondary residence, that is, intended for the personal use of the buyer within one year, to grant commercial or investment credits (provided that, in the latter case, the proceeds of the credit are used within Austria), to grant direct investment loans (provided that the resident can actually exert influence on the management of the nonresident enterprise), and to grant credits secured by mortgages in Austria or abroad. Domestic insurance companies may conclude life insurance contracts in Austria with nonresidents.

Residents are allowed to purchase from nonresidents, without restriction, foreign securities that are (a) issued in member countries of the IMF or the OECD with which settlements take place in convertible currencies and (b) registered on stock exchanges3 and Austrian securities; for foreign securities and Austrian external bonds, the transactions must be carried out on a spot basis through authorized banks and, with certain exceptions (e.g., in the case of securities listed on the Vienna Stock Exchange), the securities purchased must be kept with such banks. Payments for these purchases to nonresidents may be made in convertible currencies. Residents may sell foreign securities and Austrian external bonds to nonresidents only on a spot basis against payment in convertible currencies and, for securities deposited with Austrian authorized banks, only through such banks.

Gold

Transactions in gold (excluding jewelry and medallions, which are considered jewelry) are governed by the Foreign Exchange Law. The National Bank is authorized by this law to deal in gold as defined therein; the Bank has granted a number of general permissions widely liberalizing the domestic gold trade, but does not itself buy or sell gold or gold coin, except in transactions with monetary authorities of other countries or with international financial institutions. The Bank has authorized credit institutions, exchange offices, and coin dealers to buy or sell in Austria on their own behalf or on behalf of their customers (including nonresidents) gold coin that is not legal tender; the prices are based on those for coin and unmanufactured gold in free markets abroad. A general license also permits other residents to purchase and sell among themselves, in Austria and against payment in schillings, gold coin that is not legal tender.

The Mint releases certain types of gold coin (restrikes) to authorized credit institutions for resale to the public. It has also issued a commemorative gold coin with a face value of S 1,000, which is legal tender. Residents may hold gold in any form, including bars, in Austria, and they may acquire in Austria any gold coin that is not legal tender and any gold medals or medallions; furthermore, domestic trading between residents in gold with a fineness of less than 0.585 is unrestricted. With the exception of coin, medals, and gold with a fineness of less than 0.585, the acquisition from residents of gold subject to the Foreign Exchange Law is reserved for the monetary authorities, authorized industrial users, dentists, and jewelers; the Mint, gold refiners, and jewelers are permitted to trade or exchange gold in any form among themselves. Domestic sales of gold coins that are not legal tender (and thus tax free) are subject to value-added tax, which is at the general rate of 32 percent; as an exception, sales of all “Dukaten” coins are subject to value-added tax at the rate of 20 percent.

Where the Foreign Trade Law prescribes import licenses for gold imports (e.g., for gold sheets), the license is issued either by the Ministry of Trade, Commerce, and Industry to industrial users or by the customs office concerned, which issues licenses automatically for certain gold imports within its jurisdiction. Where this law does not require an import license (e.g., for the import of gold bars), the Foreign Exchange Law prescribes a license issued by the National Bank covering the purchase of gold. Exports of gold in any form other than jewelry require authorization by the National Bank; the Bank has issued a general license permitting nonresident travelers to take out coin that is not legal tender up to a weight of 200 grams a person a trip and allowing resident travelers to specified member countries to export such coin up to a value of S 2,000 a person a trip. The National Bank’s imports and exports do not require import, exchange, or export licenses. Commercial imports of jewelry and of articles containing a minor amount of gold, such as watches, are liberalized, licenses being issued automatically by the customs authorities; commercial exports of a number of such articles, however, must be licensed by the Ministry of Trade, Commerce, and Industry.

Changes During 1985

Imports and Import Payments

January 1. The sixth and seventh stages of the Tokyo Round of tariff reductions were put in place. In the case of the seventh stage of the tariff cut, the implementation was one year ahead of schedule.

The Bahamas1

(Position on December 31, 1985)

Exchange Arrangement

The currency of The Bahamas is the Bahamian Dollar, which is pegged to the U.S. dollar, the intervention currency, at B$1 = US$1. The U.S. dollar circulates concurrently with the Bahamian dollar. The official buying and selling rates for the U.S. dollar are B$1.0025 and B$1.0040, respectively, per US$1. Buying and selling rates for the pound sterling are also officially quoted, the buying rate being based on the New York market mid-rate, and the selling rate 0.5 percent above the buying rate. The Central Bank of The Bahamas deals only with commercial banks. For transactions with the public, commercial banks are authorized to charge a commission of 0.50 percent buying and 0.75 percent selling, per US$1, and 0.50 percent buying or selling per £ stg. 1. These charges are additional to the Central Bank’s charges. A stamp tax of B$0.10 is applied to all outward remittances where the amount is B$30 or less. A further tax of B$0.10 is levied on every additional B$30 or fraction thereof.

There is also a market in which “investment currency”2 may be negotiated between residents through an investment currency dealer at freely determined rates, usually attracting a premium over the official market rate. On December 31, 1985 the bid and offer rates reflecting this premium were 15 percent and 20 percent, respectively.

The Bahamas formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from December 5, 1973.

Administration of Control

Exchange control is administered by the Central Bank, which delegates to authorized dealers the authority to approve allocations of foreign exchange for certain current payments; the approval authority for import payments, travel exchange, and cash gifts is not delegated, except in Grand Bahama and the Family Islands. Import and export licenses are not required except for crawfish, conch, arms and ammunition, and, in certain cases, industrial gold. The Department of Agriculture and Fisheries issues export licenses for crawfish and conch, and the Police Department issues import and export licenses for arms and ammunition.

Prescription of Currency

The exchange control system of The Bahamas makes no distinction between foreign territories. Settlements with residents of foreign countries may be made in any foreign currency3 or in Bahamian dollars through an External Account.

Nonresident Accounts

Authorized banks may freely open External Accounts denominated in Bahamian dollars for winter residents and for persons with residency permits who are not gainfully employed in The Bahamas. With the prior approval of the Central Bank, authorized banks may also open External Accounts in Bahamian dollars for nonresident companies that have local expenses in The Bahamas and for nonresident investors. External Accounts in Bahamian dollars are normally funded entirely from foreign currency originating outside The Bahamas, but income on registered investments may also be credited to these accounts with the Central Bank’s approval. Balances may be converted freely into foreign currency and transferred abroad.4

Accounts which are credited with funds that may not be placed at the free disposal of nonresidents are designated Blocked Accounts. These are held mainly by emigrants. Where the value of an emigrant’s assets exceeds B$25,000, the excess is credited to a Blocked Account. Balances on Blocked Accounts are transferable through the official exchange market after four years or through the investment currency market at any time; they may also be invested, with the Central Bank’s approval, in certain resident-held assets or be spent locally for any other purpose.

Imports and Import Payments

The importation of certain commodities is prohibited or controlled because of health, social, or humanitarian reasons. All other goods may be imported without a license. The prior approval of the Central Bank is required for making payments for imports, irrespective of origin;5 this approval is normally given automatically upon submission of pro forma invoices or other relevant documents proving the existence of a purchase contract. Import duties vary from 0 to 200 percent, depending on the type of goods. Customs entries are subject to a stamp tax at a rate of 1½ percent.

Payments for Invisibles

There are no restrictions on current payments. Authorized dealers can make payments to nonresidents on behalf of residents for certain services and other invisibles within specified limits. Such payments include freight, ships’ disbursements, commissions, royalties, and insurance payments. Residents are entitled, on application to the Central Bank, to a foreign currency travel allowance of the equivalent of B$1,000 a person a year for tourist travel and of B$5,000 a person a year for genuine business or professional travel. The allowance of B$ 1,000 for tourist travel excludes the cost of fares and travel services, which are normally obtained against payment in Bahamian dollars to a travel agent in The Bahamas. Applications for foreign exchange in excess of these amounts must be referred to the Central Bank, which approves bona fide applications. Foreign exchange facilities obtained for travel may not be retained abroad or be used abroad for purposes other than travel; any unused balance must be surrendered within a week of issue or, if the traveler is still abroad, within one week of his return to The Bahamas. Subject to adequate documentary evidence, an education allowance of up to B$6,000 a person an academic year is normally granted upon application. Applications for facilities in excess of this amount are referred to the Central Bank. Temporary residents may, with the approval of the Central Bank, remit up to 50 percent of their wages and salaries, but where commitments outside The Bahamas are larger than 50 percent of wages and salaries, additional amounts may be remitted.

A traveler may take out Bahamian banknotes not exceeding B$70 in value; Bahamian travelers may take out notes of any other country not exceeding US$1,000 in value.

Exports and Export Proceeds

Export licenses are not required except for crawfish, conch, and arms and ammunition. The proceeds of exports must be offered for sale to an authorized dealer as soon as the goods have reached their destination or within six months of shipment; alternatively, export proceeds may be used in any manner acceptable to the Central Bank.

Proceeds from Invisibles

Residents are obliged to collect without delay all amounts due to them from nonresidents and to offer the foreign currency proceeds for sale to an authorized dealer without delay, but these requirements are seldom enforced. There are no restrictions on the import of foreign bank notes. The import of domestic bank notes is subject to the approval of the Central Bank.

Capital

All capital transfers to countries outside The Bahamas require exchange control approval, and outflows of resident-owned capital are restricted. Inward transfers do not require exchange control approval, although the subsequent utilization of the funds in The Bahamas may require authorization. The permission of the Central Bank is required in respect of any action whereby nonresidents acquire control of or participate in an incorporated company controlled by residents. Resident individuals and companies require the specific permission of the Central Bank to maintain bank accounts outside The Bahamas.6

The use of official exchange for direct investment abroad is limited to B$100,000 or 30 percent of the total cost of the investment, whichever is greater, for investments from which the additional benefits expected to accrue to the balance of payments from export receipts, profits, or other earnings within 18 months of the investment will at least equal the total amount of investment and will continue thereafter. Investments abroad that do not meet the above criteria may be financed by foreign currency borrowed on suitable terms subject to individual approval by the Central Bank, the purchase of foreign currency in the investment currency market, or the use of retained profits of foreign subsidiary companies. Permission is not given for investments that are likely to have adverse effects on the balance of payments.

In principle, inward investment by nonresidents is unrestricted. However, the consent of the Central Bank is required for the issue or transfer of shares in a Bahamian company to a nonresident and for the transfer of control of a Bahamian company to a nonresident. Special procedures apply to investments in the form of purchase of real property, as specified under the Immovable Property (Acquisition by Foreign Persons) Act, 1981, which came into effect on November 1, 1983: foreigners intending to purchase land must make application to the Foreign Investments Board, a group of designated ministers of the Government. If such application is approved, payment for the purchase may be made either in Bahamian dollars from an External Account or in foreign currency.

For all investments with approved status, permission is given upon application for the transfer of profits and dividends, representing earned trading profits and investment income. In the event of a sale or liquidation, nonresident investors are permitted to repatriate the proceeds, including any capital appreciation, through the official foreign exchange market.

Residents require the specific approval of the Central Bank to buy property outside The Bahamas; such purchases, if for personal use, can be made only with investment currency, and approval is limited to one property for each family. Any incidental expenses connected with the purchase of property for personal use may normally be met with investment currency; expenditures necessary for the maintenance of the property or arising directly from its ownership may, with permission, be met with foreign currency bought at the current market rate in the official foreign exchange market.

The transfer of legacies and inheritances due to nonresident beneficiaries under wills or intestacies of persons who were Bahamian residents at the time of their death is permitted. However, permission is not normally given for Bahamian residents to settle any property, other than by will, for the benefit of nonresidents, in line with the provisions of the Immovable Property (Acquisition by Foreign Persons) Act 1981.

A resident may make cash gifts to nonresidents not exceeding a total of B$ 1,000 a donor each year. This amount may be exceeded, with permission, in special circumstances.

Foreign nationals domiciled in The Bahamas, even if considered resident for exchange control purposes, may be eligible for a measure of exemption from certain exchange control obligations, notably with respect to the mandatory deposit of foreign currency securities and the surrender of certain other foreign capital assets.

Nonresident buyers of Bahamian securities must pay for such purchases in Bahamian dollars from an External Account, in funds eligible for credit to an External Account, or in Bahamian dollars arising from the sale of foreign currency in the official foreign exchange market; interest, dividends, and capital payments on such securities may not be remitted outside The Bahamas unless the holdings have been properly acquired by nonresidents. Bahamian residents are not permitted to purchase foreign currency securities with official exchange or out of export proceeds or other current earnings; payment must be made with investment currency. All purchases, sales, and switches of foreign currency securities in The Bahamas and all switches in foreign currency securities by Bahamian residents, wherever the switch takes place, require permission from the Central Bank, and all transactions must take place through authorized agents.7 All foreign securities purchased by residents of The Bahamas must be held to the order of an authorized agent. Securities of other former Sterling Area countries are considered foreign currency securities, and sales proceeds of such securities held by residents, if registered at the Central Bank by December 31, 1972, are eligible for sale in the investment currency market; securities not so registered may be offered for sale at the official rate of exchange.

Residents leaving the country with the intention of residing permanently outside The Bahamas are redesignated upon departure as nonresidents. Under normal rules persons leaving The Bahamas to take up residence elsewhere may transfer, at the current market rate in the official foreign exchange market, up to B$25,000 of their Bahamian dollar assets to the new country of residence, and may also take normal household and personal effects with them. When the total value of their Bahamian dollar assets is over B$25,000, the excess is transferable through the official exchange market after four years, or through the investment currency market at any time. After a person’s redesignation as a nonresident, income accruing from his assets remaining in The Bahamas is normally remittable at the current market rate in the official foreign exchange market.

Residents other than authorized banks require permission to borrow foreign currency from nonresidents, and authorized dealers are subject to exchange control directions with regard to their lending of foreign currency to residents. Residents also require permission to pay interest on, and to repay the principal of, foreign currency loans by conversion of Bahamian dollars. When permission is granted for residents to accept foreign currency loans, such permission is normally conditional upon the currency being offered for sale without delay to an authorized dealer, unless the funds are required to meet payments to nonresidents for which permission has been specifically given.

A resident company that is wholly owned by nonresidents is not normally allowed to raise working capital in Bahamian dollars unless such funds are a small proportion of the total investment. If the company is partly owned by residents, the amount of such local currency borrowing is normally determined in relation to the resident interest in the equity of the company. Banks and other lenders resident in The Bahamas require permission before they extend loans in domestic currency to any corporate body (other than a bank), which is resident in The Bahamas and is by any means controlled, whether directly or indirectly, by nonresidents. However, companies that are set up by nonresidents primarily to import and distribute products manufactured outside The Bahamas are not normally allowed to borrow Bahamian dollars from residents either for fixed or working capital but must provide all their finance in foreign currency; borrowings in a foreign currency normally are permitted on application.

Gold

Residents of The Bahamas other than authorized dealers are not permitted to hold or deal in gold bullion. Those residents, however, who are known users of gold for industrial purposes may, with the approval of the Central Bank, meet their current industrial requirements. Authorized dealers are not required to obtain licenses for bullion or coin. Commercial imports of gold jewelry do not require a license. There is no import duty on gold bullion or gold coin; however, an import duty of 35 percent is imposed on imports of gold jewelry from all sources. A 1.5 percent stamp tax payable to the customs is also payable on commercial shipments of gold jewelry from any source. There is no restriction on the acquisition or retention by residents of gold coin. The Bahamas has issued commemorative coins in denominations of B$10, B$20, B$50, B$100, B$150, B$200, B$250, B$1,000, and B$2,500 in gold, and B$10 and B$25 in silver; these are legal tender but do not circulate.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Bahrain

(Position on December 31, 1985)

Exchange Arrangement

The currency of Bahrain is the Bahrain Dinar, which is pegged to the SDR at the rate of BD 0.476190 = SDR 1. Bahrain sets exchange rates for the Bahrain dinar within margins of plus or minus 7.25 percent of the fixed relationship between the Bahrain dinar and the SDR; in practice, the Bahrain dinar maintains a relatively stable relationship with the U.S. dollar, the intervention currency. Since December 1980, the exchange rate has remained unchanged at BD 1 = US$2.6596. With the appreciation of the U.S. dollar against other major currencies, the exchange rate of the dinar in terms of the SDR has been outside the 7.25 percent margin since May 1981. The middle rate of the Bahrain dinar for the U.S. dollar quoted by the Bahrain Monetary Agency (BMA) is adjusted from time to time. The Agency also quotes daily rates for the pound sterling and the deutsche mark based on the latest available rates for the U.S. dollar against those currencies. On December 31, 1985 the Agency’s buying and selling rates for the U.S. dollar were BD 0.375 and BD 0.377, respectively, per US$1. The Agency does not deal with the public. In their dealings with the public, commercial banks are required to use the Agency’s rates for U.S. dollars, pounds sterling, and deutsche mark, but they are authorized to charge an exchange commission of 2 per mill (special rates of commission apply for transactions up to BD 1,000). The banks’ rates for other currencies are based on the Agency’s rates for the U.S. dollar and the New York market rate for the currency concerned against the U.S. dollar. There are no taxes or subsidies on purchases or sales of foreign exchange.

Bahrain formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from March 20, 1973.

Administration of Control

The Agency is the exchange control authority, but there is no exchange control legislation in Bahrain. No import or export licenses are required (except for arms and ammunition, television cameras, and alcoholic beverages). However, importers and exporters must be registered with the commercial registry maintained by the Ministry of Commerce and Agriculture and must be members of the Bahrain Chamber of Commerce and Industry.

Prescription of Currency

All settlements with Israel are prohibited. Otherwise, no requirements are imposed on exchange payments or receipts.

Nonresident Accounts

A distinction is made between accounts held by residents and those held by nonresidents. Offshore banking units are not normally permitted to hold resident accounts.

Imports and Import Payments

All imports from Israel are prohibited, as are products manufactured by foreign companies that are blacklisted by the League of Arab States. Imports of a few commodities are prohibited from all sources for reasons of health, public policy, or security. Imports of cultured pearls also are prohibited. Import licenses are required for arms and ammunition, television cameras, and alcoholic beverages. Rice and sugar are, in practice, imported only by the Bahrain Import-Export Company. Exchange for payments in respect of permitted imports may be obtained freely.

Exports and Export Proceeds

All exports to Israel are prohibited, and exports of certain refined petroleum products to South Africa have been suspended. Otherwise, all commodities may be exported freely. There are no requirements attached to receipts from exports or re-exports; the proceeds need not be repatriated or surrendered, and they may be disposed of freely, regardless of the currency involved.

Payments for and Proceeds from Invisibles

Payments for and proceeds from invisibles are not restricted, except that payments must not be made to or received from Israel. Travelers may bring in or take out of Bahrain any amount in domestic or foreign bank notes.

Capital

No exchange control requirements are imposed on capital receipts or payments by residents or nonresidents, but payments may not be made to or received from Israel. Profits from foreign investments in Bahrain may be transferred abroad freely, with the exception that under Article 72 of the Monetary Agency Law the banks are subject to special rules regarding the payment of dividends and the remittance of their profits. Licensed offshore banking units may freely engage in transactions with nonresidents; transactions with residents are not normally permitted. The Ministry of Commerce and Agriculture operates a center for the dissemination of information on the stock exchange.

Gold

Residents may freely purchase, hold, and sell gold in any form, at home or abroad. Imports and exports of gold in any form are freely permitted and do not require a license. Imports of gold jewelry are subject to a 10 percent customs duty but gold ingots are exempt. Brokerage business in gold (as well as other commodities) requires approval from the Bahrain Monetary Agency before registering with the Ministry of Commerce and Agriculture; such business is subject to a minimum deposit requirement equivalent in the case of gold to BD 3,000 or 10 percent of the contract value, whichever is higher.

Changes During 1985

Capital

June 1. The Bahrain Monetary Agency (BMA) reduced by 0.5 percentage point its recommended maximum rate of interest on deposits in Bahrain dinar, while increasing by 0.5 percent over the Bahrain dinar deposit rate, its recommended rate for certificates of deposit of BD 30,000 and above for periods up to one year.

August 1. It was announced that all money changers should obtain approval from the BMA before registering with the Ministry of Commerce and Agriculture.

Bangladesh

(Position on December 31, 1985)

Exchange Arrangement

The currency of Bangladesh is the Bangladesh Taka. The value of the taka in terms of the U.S. dollar, the intervention currency, is determined on the basis of a weighted basket of currencies. Changes in the exchange rate for the U.S. dollar are generally made when fluctuations in the exchange rates between the U.S. dollar and the currencies in the basket exceed 1 percent in either direction. On December 31, 1985 the official (spot) middle rate of the taka in terms of the U.S. dollar was Tk 31.00 = US$1. On December 31, 1985 the spot buying and selling rates of the Bangladesh Bank (the central bank) for authorized dealers were Tk 30.97 and Tk 31.03, respectively, per US$1. On the same date the spot buying and selling rates (telegraphic transfers) of authorized dealers were Tk 30.9387 and Tk 31.0613, respectively, per US$1. Exchange rates for currencies other than the U.S. dollar are based on the U.S. dollar daily closing rates in New York for the currencies concerned. Different effective exchange rates arise through the operation of the Wage Earners’ Scheme and the Export Performance Benefit Scheme. Under the former scheme, exchange earnings remitted by workers abroad are auctioned or sold by the wage earners or their representatives to eligible users or banks on a bilateral basis at rates established by a Wage Earners’ Rates Committee constituted by the Bangladesh Bank; foreign exchange purchased under this scheme may be used for specified imports, expenditure on foreign travel, and other approved purposes. Under the Export Performance Benefit Scheme, export receipts from about 45 (mainly nontraditional) products are sold in the secondary market, together with workers’ remittances and tourist receipts. All other nontraditional export items receive a “secondary market sale” coefficient of either 70 percent or 40 percent, depending on domestic value added; the corresponding percentage of export receipts from these items are also sold in the secondary market. Following introduction of the scheme, about 42 percent of export receipts are transacted at the secondary market rate. Receipts from consultancy and technical fees are also eligible to be sold in the secondary market. On December 31, 1985 the middle exchange rate in the secondary market was Tk 33.4750 per US$1 and Tk 48.3950 per £ stg.

Forward transactions of the Bangladesh Bank are confined to purchases and sales of deutsche mark, French francs, Japanese yen, pounds sterling, U.S. dollars, and all currencies of the member countries of the Asian Clearing Union.1 Forward facilities at authorized banks covering periods of up to six months are available in all approved foreign currencies for export proceeds and for import payments. Forward exchange facilities for three months are available for remittances of surplus collection of foreign shipping companies and foreign airlines. For settlement of transactions under the Asian Clearing Union, the Bangladesh Bank also purchases, both spot and forward, the Asian Monetary Unit (AMU);2 it also sells the AMU for spot delivery.

Upon payment of an annual premium of 2.5 percent, the exchange risk on public or private foreign currency loans that will be fully or partly disbursed by June 30, 1988 may be given forward exchange cover by the Bangladesh Bank under the Exchange Rate Fluctuation Burden Absorption Scheme. The full amount of the exchange risk may be covered in respect of loans disbursed after July 1, 1983, but the scheme applies to only a specified proportion of loans fully disbursed prior to that date. The scheme also permits lending institutions to convert into preferred shares or debentures a part of exchange losses on foreign currency loans outstanding on June 30, 1983 and on which there are overdue payments.

Administration of Control

Exchange control is administered by the Bangladesh Bank in accordance with general policy formulated in consultation with the Ministry of Finance. The seven foreign and ten domestic commercial banks (of which four are nationalized), together with two joint-venture banks and three specialized financial institutions, have been appointed authorized dealers (authorized banks) in foreign exchange. The Chief Controller of Imports and Exports of the Ministry of Commerce is responsible for the issuance of import licenses. Certain trade transactions are conducted through state-trading agencies, including the Trading Corporation of Bangladesh (TCB).

Prescription of Currency

Settlements with all countries are subject to exchange control. Settlements with countries with which Bangladesh has commodity exchange agreements3 normally must be effected through nonconvertible U.S. dollar or pound sterling accounts for goods and services specified in the agreements and up to agreed value limits; settlement with these countries can be made in convertible currencies for goods and services not specified in the agreements or beyond the value ceilings specified in the agreements. Payments to, and receipts from, the other member countries of the Asian Clearing Union in respect of current transactions must be effected in Asian Monetary Units through the Clearing Union.4 Settlements with other countries normally take place in sterling and other convertible currencies, and in few cases, through Nonresident Taka Accounts. Payments for imports may be made to the country of origin of the goods or to any other country (with the exception of those countries from which importation is prohibited); they may be made (1) in taka for credit to a nonresident bank account in Bangladesh of the country concerned; (2) in the currency of the country concerned; or (3) in any freely convertible currency. Export proceeds must be received in freely convertible foreign exchange or in taka from a Nonresident Taka Account. All settlements with Israel and South Africa are prohibited.

Nonresident Accounts

The accounts of individuals, firms, or companies resident in countries outside Bangladesh are designated Nonresident Accounts. All such accounts are regarded for exchange control purposes as accounts related to the country in which the account holder is a permanent resident.5 Nonresident Accounts may be opened only with the prior approval of the Bangladesh Bank. Specified debits and credits to Nonresident Accounts may be made by authorized dealers without the prior approval of the Bangladesh Bank during the absence of the account holder from Bangladesh. Certain other debits and credits may be made without the prior approval of the Bangladesh Bank but are subject to reporting ex post.

Convertible Taka Accounts. All diplomatic missions operating in Bangladesh, their diplomatic officers, home-based members of the mission staffs, international nonprofit humanitarian organizations functioning in Bangladesh and their expatriate employees, foreign contractors and consultants engaged in specific projects, and foreign nationals residing in Bangladesh regardless of their status are allowed to maintain Convertible Taka Accounts. These accounts may be credited freely with the proceeds of inward remittances in convertible foreign exchange and may be debited freely and at any time for local disbursements in taka, as well as for remittances abroad in convertible currencies. Transfers between Convertible Taka Accounts are freely permitted. Foreign missions and embassies may open interest-bearing accounts, but the interest earned thereon can be disbursed only in local currency.

Wage Earners’ Scheme. Under the Wage Earners’ Scheme, Bangladesh nationals and persons of Bangladesh origin who are working abroad are permitted to open Foreign Currency Accounts denominated in pounds sterling or U.S. dollars. These accounts may be credited with (1) remittances in convertible currencies received from abroad through normal banking and postal channels; (2) proceeds of convertible currencies (currency notes, traveler’s checks, drafts, etc.) brought into Bangladesh by the account holders, provided they were declared to the customs upon arrival in Bangladesh; (3) transfers from other Foreign Currency Accounts opened under the Wage Earners’ Scheme; and (4) transfers from nonresident foreign currency deposit accounts. The accounts may be debited, without restriction, but subject to reporting to the Bangladesh Bank, for the following purposes: (1) all local disbursements; (2) transfers to other Foreign Currency Accounts opened under the Wage Earners’ Scheme; (3) payment for imports of specified goods against letters of credit; (4) payment of bank commissions and other bank charges connected with the handling of the accounts; and (5) travel expenditures abroad for business or private purposes up to the equivalent of US$200 a year (regardless of the number of visits annually) for travel by air to Burma, India, Nepal, Pakistan, and Sri Lanka, up to an overall annual travel allocation of US$1,800 a person and a maximum of US$1,000 a trip for travel to other countries, and up to US$150 a year for overland travel to India.

Nonresident Foreign Currency Deposit Accounts. Bangladesh nationals and persons of Bangladesh origin may also open Nonresident Foreign Currency Deposit Accounts, denominated in pounds sterling or U.S. dollars. These accounts, which range in term from one month to one year, may be credited, in initial minimum amounts of US$1,000 or £ stg. 500, with (1) remittances in convertible currencies, and (2) transfers from existing Foreign Currency Accounts maintained under the Wage Earners’ Scheme. The banks pay interest on balances in these accounts at Eurocurrency deposit rates. The balance, including interest earned, may be transferred in foreign exchange by the account holder to his country of residence or anywhere he chooses; the account holder, if he is not otherwise ineligible under the Wage Earners’ Scheme, may also transfer the balance to any Foreign Currency Account maintained under the Wage Earners’ Scheme. The balances in the accounts, which are freely convertible into taka at the official rate, must be reported monthly to the Bangladesh Bank and the accounts must be closed within six months or on maturity of the deposit, whichever is later, upon the taking up of permanent residence by the account holder in Bangladesh.

Imports and Import Payments

Imports are financed either from Bangladesh’s own resources or with foreign aid, loans, and barter arrangements. Imports other than foodgrains, fertilizers, and items financed by project aid are licensed within the framework of an annual import policy (import budget). The Import Policy Order (IPO) for the fiscal year 1985/86 (July to June) is based on two lists, the Negative List and the Restricted List. The Negative List includes some 200 items for which importation is totally banned either for social or religious reasons or because similar items are locally produced. The Restricted List includes items that may be imported only if certain conditions relating mainly to quality and nature of end users are met. Items not on these lists are freely importable through the secondary market, provided that the importer has a valid import registration certificate, which is readily obtainable. Imports at the official exchange rate are subject to allocation on the basis of foreign exchange availability. Cash allocations are granted for the importation at the official exchange rate of, inter alia, books, technology, certain spare parts and machinery, and special materials and equipment for certain export-oriented sectors. The IPO also stipulates that (i) imports under any financing arrangement other than tied credits are not permitted unless existing facilities under barter arrangements have been fully utilized; and (ii) importation of 26 items through the secondary market is permissible only to registered commercial importers. All importers are issued with passbooks containing information on their business and service, as well as a record of restrictions or exemptions affecting their ability to import. The Import Policy Order prohibits or restricts imports of some raw materials or inputs, certain textiles, factory rejects, goods of substandard quality, used items, and materials inimical to public order or religious beliefs.

With the exception of imports by government departments, letter of credit authorization forms (LCAFs) are required of all registered importers for all imports. Under the authority of the Import Policy Order issued by the Chief Controller, registered commercial importers are allowed to effect imports against LCAFs issued by authorized dealer banks without the need for an import license. For imports under the Wage Earners’ Scheme, an importer is required to have a valid import registration certificate either as a commercial importer or industrial consumer or under the Wage Earners’ Scheme. These documents are issued by a licensing office of the Chief Controller of Imports and Exports. Single country LCAFs are issued for imports under bilateral trade or payments agreements and for imports under tied aid programs. LCAFs are valid worldwide, except that imports from Israel and South Africa and imports transported on the flag vessels of Taiwan, Israel, and South Africa are prohibited. For shipment of imports under cash and the secondary exchange market scheme, the validity of LCAFs is as follows: (1) 11 months from the date of registration of a LCAF for commercial items and industrial raw and packing materials; and (2) 17 months from the date of registration of a LCAF for the importation of capital machinery and spare parts. If these documents lapse for reasons beyond the control of the importer they may be revalidated by the licensing authority. Authorized dealers may, subsequent to the month of registration of the above documents, allow remittances within a period of 12 months for the importation of commercial items and industrial raw materials and packing materials and up to 18 months for the importation of capital machinery and spare parts. If the importers require further time to make remittances, then authorized dealers may allow such remittances only under the Wage Earners’ Scheme.

Payment against imports is generally permissible only under cover of irrevocable letters of credit. Under the Wage Earners’ Scheme a provision exists for the importation of machinery and equipment against letters of credit opened on a deferred payment basis for up to 360 days. Firms dealing in recognized export-oriented ready-made garments and specialized textile and hosiery units operating under the bonded warehouse system may effect imports of their raw and packing materials by opening letters of credit of up to 180 days deferred-payment term against export letters of credit received by them. Opening of letters of credit for industrial imports and specified essential commercial imports in the private sector is subject to margin requirements ranging from 5 percent to 25 percent; for nonessential commercial imports, the minimum margin requirements range from 25 percent to 50 percent. There is no minimum margin requirement for opening of import letters of credit for raw and packaging materials against export letters of credit received by export-oriented ready-made garment units. For public sector importers, the minimum margin requirement for opening of letters of credit is 5 percent. Imports of books and periodicals up to specified limits are permissible on a consignment basis. Public sector importers, however, may import on a cash-against-documents basis.

Imports of specified raw materials and packing materials by industrial consumers is, subject to the availability of funds, governed by an entitlement system, based on the requirements for various industries during each import program period as established by the Director-General of Industries. Firms in the industrial sector are given an entitlement for importation of specified raw materials and packing materials, and letter of credit authorization forms are issued on the basis of the entitlement. The entitlement system does not apply, however, to raw materials and packing materials that are imported under the Wage Earners’ Scheme. Separately, industrial consumers may be issued with LCAFs for parts and accessories of machinery. Goods imported against LCAFs issued to industrial consumers must be used in the industry concerned and must not be sold or transferred without prior approval.

Foreign exchange for authorized imports is provided automatically by authorized dealers when payments are due. Advance payments for imports require approval by the Bangladesh Bank, which normally is given only for specialized or capital goods.

Payments for Invisibles

Payments for invisibles connected with authorized trade transactions generally are not restricted. Payments for most other invisibles require prior approval and are restricted. Applications for foreign exchange for business travel, medical treatment, and education abroad are considered on an individual basis. As a rule, for business travel exporters with export earnings of Tk 5 million or more during the preceding year are entitled to a maximum of US$10,000 a year. Exporters with export earnings of Tk 2.5 million to Tk 5 million in the preceding year are entitled to a quota equivalent to 1 percent of the f.o.b. value of their exports, subject to a minimum of US$4,000 and a maximum of US$10,000. Those with export earnings of less than Tk 2.5 million (i.e., newcomers) during the preceding year are allowed 1 percent of the f.o.b. value of exports, subject to a maximum of US$4,000. New exporters are entitled to an allowance of US$80 a day for a maximum of 30 days a year. For medical treatment the amount granted is US$1,000 at the official rate, and additional actual requirements under the Wage Earners’ Scheme, subject to the consent of the Bangladesh Bank. A Bangladesh national proceeding abroad by air is allowed to purchase foreign exchange from a Foreign Currency Account under the Wage Earners’ Scheme, subject to certain limits (see section on Nonresident Accounts, above). Foreign nationals working in Bangladesh must obtain approval before making remittances abroad for family maintenance; such approval is usually granted for up to 50 percent of wages or salaries, subject to a maximum of £ stg. 200 a month (net of tax) for nationals of countries other than India, and up to Tk 1,500 for Indian nationals, if the terms of employment have been approved by the Government.

Nonresident travelers may take out the foreign currency and traveler’s checks they declared on entry less the amount sold to authorized dealers or money changers; they may also, without obtaining the approval of the Bangladesh Bank, reconvert taka notes up to Tk 6,000 into convertible foreign currencies at the time of their exit. Resident travelers may take out foreign currency and traveler’s checks up to the amount of any travel allocation they have been granted. Bangladesh nationals may take out Tk 100 in domestic currency; otherwise, the export of Bangladesh currency notes and coin is prohibited.

Exports and Export Proceeds

Exports to Israel and South Africa and exports transported on the flag vessels of Taiwan are prohibited. The proceeds from exports must be received within four months of shipment. Exports of jute and jute goods must be registered with the Bangladesh Bank.

Proceeds from Invisibles

All proceeds from invisibles must be surrendered, but Bangladesh nationals working abroad may retain their earnings in Foreign Currency Accounts or in Nonresident Foreign Currency Deposit Accounts. Unless specifically exempted by the Bangladesh Bank, all Bangladesh nationals who are resident in Bangladesh must surrender any foreign exchange coming into their possession, whether held in Bangladesh or abroad, to an authorized dealer within one month of the date of acquisition. Foreign nationals residing in Bangladesh continuously for more than six months are required to surrender any foreign exchange representing their earnings in respect of business conducted in Bangladesh or services rendered while in Bangladesh, within one month of the date of acquisition. Foreign exchange held abroad or in Bangladesh by foreign diplomats and by foreign nationals employed in embassies and missions of foreign countries in Bangladesh is, however, exempt from this requirement. The import of Bangladesh currency notes and coin exceeding Tk 100 is prohibited. Foreign currency traveler’s checks and foreign currency notes may be brought in by nonresident travelers without limit, provided that the total amount brought in is declared to the customs authorities upon arrival. Foreign currency notes may be brought in without limit by any person, provided that the total amount brought in is declared upon arrival. No declaration is required for import of foreign exchange not exceeding US$1,000 by nonresidents or US$750 by residents.

Capital

All outward transfers of capital require approval; such approval is not normally granted in respect of resident-owned capital. Inward capital transfers also require approval. Movable and immovable assets, including foreign exchange, owned in any country other than Bangladesh have to be declared to the Bangladesh Bank by resident Bangladesh nationals. There is no restriction on the importation of securities into Bangladesh, but the transfer of securities in favor of a person resident outside Bangladesh requires approval. This requirement applies to all Bangladesh securities, whether held by residents or not, and to all foreign securities held by residents.

Authorized dealers may obtain short-term loans and overdrafts from overseas branches and correspondents for a period not exceeding seven days at a time. Borrowing abroad by resident nonbank firms of Bangladesh origin requires approval. Borrowing by nonresident-owned or nonresident-controlled enterprises from commercial banks in Bangladesh beyond specified ceilings, as well as any borrowing from abroad, requires approval, and loans by authorized dealers in local currency against overseas guarantees or collateral outside Bangladesh also require approval. Authorized dealers may, however, approve loans, overdrafts, or credit facilities against goods intended for export from Bangladesh to companies controlled by persons resident outside Bangladesh. Authorized dealers must obtain approval before making any loans in foreign currencies to residents or nonresidents, whether secured or unsecured. They are not normally permitted to hold short-term foreign assets other than small working balances.

The permission of the Bangladesh Bank is required for nonresidents other than banks to establish or continue a business in Bangladesh. Foreign private investment is governed by the Foreign Private Investment (Promotion and Protection) Act of 1980 and is permitted in collaboration with both the Government and private entrepreneurs. The Act provides, inter alia, for protection and equitable treatment of foreign private investment, indemnification, protection against expropriation and nationalization, and guarantee for repatriation of investment. In the private sector, however, foreign participation is limited to those industries where technical know-how is not locally available, where the technology involved is very complicated, or where capital outlay is high, and to industries that are either based on local raw materials or that are wholly export oriented. For a new investment, foreign investors generally are required to provide as equity capital the entire amount of the project’s foreign exchange component. There is no ceiling on private investment, but any investments above Tk 100 million need special approval. Tax holidays are granted for periods of up to nine years, depending on location. All foreign investments require approval by the Investment Board. Dividends on foreign capital may be remitted freely after payment of taxes, except that 10 percent of the annual remittable profits must be held in Bangladesh by sterling tea companies until the total amount held is equal to 200 percent of paid-up capital.

Gold

The import and export of gold or silver in any form are prohibited without special permission, which is not normally granted. There are no restrictions on the internal sale, purchase, or possession of gold or silver ornaments (including coin) and jewelry, but there is a prohibition on the holding of gold and silver in all other forms except by licensed industrialists or dentists.

Changes During 1985

Exchange Arrangement

The official exchange rate for the taka was adjusted on 14 different occasions during the year, from Tk 26 = US$1 at the end of 1984 to Tk 31 = US$1 at the end of 1985, involving a depreciation of 16.13 percent.

July 1. The secondary exchange market again became a free interbank market, with the Bangladesh Bank no longer undertaking net sales in the market on a quarterly basis. In addition, under the newly established Export Performance Benefit Scheme (XPB), about 42 percent of all export receipts were made eligible for conversion at the secondary market exchange rate, and the conversion of receipts from exports of consulting and technical services was transferred to the secondary market.

Prescription of Currency

May 5. To facilitate the exchange of goods between the two countries, Hungary and Bangladesh established Special Account No. 9, to be in effect from March 25, 1985 until June 30, 1986.

May 5. The Fifth Barter Protocol between Bangladesh and the German Democratic Republic came into effect, to be valid from March 28, 1985 through June 30, 1986.

June 6. Bangladesh and the U.S.S.R. established Protocol No. 14, valid from April 28, 1985 through December 31, 1985.

September 1. The Fourth Barter Protocol between Bangladesh and the Democratic People’s Republic of Korea came into effect from September 1, 1985 for one year.

September 3. A facility called the Education Foreign Currency Account (EFCA) was instituted, from which funds could be used to meet the educational expenses of resident immediate family members of nonresident Bangladesh nationals. Eligibility conditions and terms for the EFCA are similar to those of the other foreign currency accounts.

November 18. A Barter Protocol was signed between Bangladesh and Bulgaria, to be in effect from November 18, 1985 through December 31, 1986.

Imports and Import Payments

July 1. In a major modification of the import regime, the Import Order for 1985 introduced two lists of import items, namely the Negative List and the Restricted List. The former included some 200 items that were banned, either for social and religious reasons or because similar items were locally produced; and the latter included items importable only on specified conditions, relating mainly to quality and nature of end users. Items not on these two lists were made freely importable through the secondary market, provided that the importer had a valid import registration certificate. Imports at the official exchange rate continued to be subject to allocation on the basis of foreign exchange availability; cash allocations would be granted for importation, inter alia, of books, technology, certain spares and machinery, and special raw materials and equipment for certain export-oriented sectors. In addition, the Import Order stipulated that (i) imports under any financing arrangement other than tied credits would not be permitted unless existing facilities under barter arrangements had been fully utilized; and (ii) importation of some 26 items through the secondary market would be allowed only by registered commercial importers. All importers were also to be issued with passbooks containing information on their business and service, as well as a record of restrictions or exemptions affecting their ability to import.

Payments for Invisibles

January 10. The maximum permissible amount of membership fees that could be remitted to foreign professional organizations under the Wage Earners’ Scheme was raised from the equivalent of US$50 to US$100 a person a year.

Exports and Export Proceeds

March 12. Raw jute exporters who had fulfilled at least half their 1984/85 contract delivery commitments were allowed to apply for the new registration of export sales.

July 1. Under the Export Policy Order for 1985/86, the XPL facility was eliminated and replaced with the Export Performance Benefit Scheme (XPB), under which foreign exchange receipts from exports of some 45 (mainly nontraditional) items were made fully eligible for conversion at the secondary market. Proceeds from raw jute, loose tea, and wet blue leather would be converted at the official exchange rate; all other export items received a “secondary market sale” coefficient of either 70 percent or 40 percent, depending on domestic value added. The Export Policy Order authorized the drawback on duty paid in excess of 2.5 percent on a reasonable quantity of imports of spare parts by actual export-oriented industries; it further prohibited the export of wheat bran, extended the export ban on oil cakes, molasses, and de-oiled rice bran to June 30, 1986, and partially relaxed the ban on exports of maps and charts.

December 1. The following changes were made in export regulations, resulting in an increase in the proportion of foreign exchange receipts eligible for conversion through the secondary foreign exchange market: (a) permissible secondary market sales of foreign exchange proceeds were increased from 70 percent to 100 percent for exports of twine and yarn, and from 40 percent to 70 percent for hessian and sacking; and (b) commission receipts by “indenters” (i.e., agents of foreign suppliers) were made eligible for conversion through the secondary market.

Barbados

(Position on December 31, 1985)

Exchange Arrangement

The currency of Barbados is the Barbados Dollar, which is pegged to the U.S. dollar, the intervention currency, at BDS$2 = US$1. On December 31, 1985 the official buying and selling rates for the U.S. dollar were BDS$1.9975 and BDS$2.0350, respectively, per US$1. Buying and selling rates for the Canadian dollar, the deutsche mark, and the pound sterling are also officially quoted. These rates include commission charges of 0.1875 percent buying and 1.8125 percent selling. On December 31, 1985 the buying and selling rates of the Central Bank of Barbados for the Canadian dollar were BDS$1.4266 and BDS$1.4553, respectively, per Can$1; those for the deutsche mark were BDS$0.8100 and BDS$0.8263, respectively, per DM 1; and those for sterling were BDS$2.8731 and BDS$2.9307, respectively, per £ stg. 1.

Under clearing arrangements with regional monetary authorities, the Central Bank sells currencies of the Caribbean Common Market (Caricom) countries1 at fixed rates (including a commission of 0.125 percent) but purchases only East Caribbean and Trinidad and Tobago dollar notes. The rate applied mutually for the purchase of currency notes is the parity rate between each pair of currencies determined on the basis of the U.S. dollar rate. The Central Bank regulates the commission that may be charged by the commercial banks in dealings with their customers in Caricom currencies. Purchases of foreign exchange for private sector remittances abroad (except for remittances for payment of imports, travel allowances, education, and nontrade payments up to BDS$500 and certain other specified items) are subject to a levy collected in the approval process by the Central Bank at the rate of 1 percent of the value of the transaction.

Administration of Control

Exchange control applies to all countries and is administered by the Central Bank. The Central Bank delegates to authorized dealers the authority to approve normal import payments and the allocation of foreign exchange for certain other current payments and for cash gifts. The exchange control system provides that foreign exchange should normally be surrendered to an authorized dealer. The normal exchange control directives do not apply to transactions between residents and persons resident in South Africa. Trade controls are administered by the Ministry of Commerce, Industry, and Consumer Affairs.

Prescription of Currency

Settlements with residents of countries outside the Caricom area other than South Africa may be made in any foreign currency, 2 or through an External Account in Barbados dollars. Settlements with residents of Caricom countries must be made either through External Accounts (in Barbados dollars) or in the currency of the Caricom country concerned, except that commercial banks may issue Caricom traveler’s checks denominated in Trinidad and Tobago dollars to Barbadian residents traveling to other Caricom countries, within the approved limits for travel allowances.

Nonresident Accounts

With the permission of the Central Bank, authorized dealers may maintain in foreign currencies Foreign Currency Accounts in the names of residents of Barbados and of other countries. Approval for opening these accounts is given on the basis of the anticipated frequency of receipts and payments in foreign currency. Certain receipts and payments may be credited and debited to Foreign Currency Accounts, under the conditions of approval established at the time the account was opened. Other credits and debits require individual approval.

External Accounts may be opened for nonresidents by authorized dealers without reference to the Central Bank. These accounts are maintained in Barbados dollars. They may be credited with proceeds from the sale of foreign currencies, with transfers from other External Accounts, with bank interest (payable on External Accounts or Blocked Accounts), and with payments by residents for which general or specific permission has been given by the Central Bank. They may be debited for payments to residents of Barbados, for the cost of foreign exchange required for travel or business purposes, and for any other payments covered by delegated authority to authorized dealers. Other debits and any overdrafts require individual approval.

The Exchange Control Act of 1967 (as amended) empowers the Central Bank to require certain payments in favor of nonresidents that are ineligible for transfer to be credited to Blocked Accounts. Balances in Blocked Accounts may not be withdrawn without approval, other than for the purchase of approved securities.

Imports and Import Payments

All imports from South Africa are prohibited, and certain imports originating in non-Caricom countries require individual licenses. The use of import licensing requirements and quantitative restrictions are the chief tools of Barbadian external commercial policy, since tariff policy is pre-empted by the Caricom. The list of products subject to licensing is extensive. However, not all goods that are subject to import licensing are subject to quantitative restriction. Some items on the import licensing list may be freely imported throughout the year, while some others are subject to temporary restriction (particularly agricultural products, which tend to be subject to seasonal restriction). Certain imports are prohibited; these include various foodstuffs, blue jeans, and beer not produced within the Caricom area. There is also a “Negative List” for certain garments, the importation of which is totally prohibited if the product is below a minimum c.i.f. value. Individual licenses are also required for imports of commodities that are subject to the provisions of the Oils and Fats Agreement between the Governments of Barbados, Dominica, Grenada, Guyana, St. Lucia, St. Vincent and the Grenadines, and Trinidad and Tobago, whether the goods are being imported from Caricom countries or from elsewhere. Special licensing arrangements have been made for the regulation of trade between Barbados and other Caricom countries in 22 agricultural commodities.

Payments for authorized imports are permitted upon application and submission of documentary evidence (invoices and customs warrants) to authorized dealers; payments for imports of crude oil and derivatives are subject to the prior approval of the Central Bank. Advance payments for imports require prior approval by the Central Bank.

Payments for Invisibles

Payments for invisibles require exchange control approval. Except for transactions involving residents of South Africa, payments for all commercial transactions are permitted freely when the application is supported by appropriate documentary evidence. Authority has been delegated to authorized dealers to provide basic allocations of foreign exchange for certain payments of a personal nature and for sundry payments. These include foreign travel (for which up to BDS$ 1,500 a person a calendar year may be allocated for private travel within or outside the Caricom area; and BDS$200 a day, up to BDS$4,000 a person a calendar year, for business travel within the Caricom area, and BDS$6,000 outside the Caricom area), expenses of education abroad (BDS$5,000 a person a year), remittances of cash gifts not exceeding BDS$100 a donor a year, subscriptions to newspapers and magazines, income tax refunds, official payments, and life insurance premiums. Applications for additional amounts or for purposes for which there is no basic allocation are approved by the authorities, provided that no unauthorized transfer of capital appears to be involved. The cost of transportation to any destination may be settled in domestic currency and is not deducted from the travel allocation. Outward remittances of funds to overseas insurers or other pension fund administrators are subject to a tax of 6 percent.

Residents traveling to any destination outside Barbados may take out foreign currency notes and coin up to the value of BDS$500 and Barbados notes up to BDS$200. Nonresident visitors are not permitted to take out any Barbados currency but may freely export any foreign currency they had previously brought in.

Exports and Export Proceeds

Exports to South Africa are prohibited. Specific licenses are required for the export of certain goods to any country; these include rice, cane sugar, rum, molasses, and certain other food products, sewing machines, portland cement, and petroleum products. All other goods may be exported without license. The collection of export proceeds is supervised by the Central Bank to ensure that proceeds in foreign currencies are surrendered within six months from the date of shipment. Exports of sugar to the United Kingdom and the United States are subject to bilateral export quotas, as are exports of rum to the European Community.

Proceeds from Invisibles

Foreign currency proceeds from invisibles must be sold to an authorized dealer. Travelers to Barbados may bring in freely notes and coins denominated in Barbados dollars or in any foreign currency. Residents are required to sell their holdings of foreign currencies to an authorized dealer upon return to Barbados.

Capital

All outward capital transfers, including direct investments by residents and the purchase by residents of foreign currency securities and of real estate situated abroad, require exchange control approval. Certificates of title to foreign currency securities held by residents must be lodged with an authorized depository in Barbados, and earnings on these securities must be repatriated and surrendered to an authorized dealer.

Personal capital transfers, such as inheritances due to nonresidents, require exchange control approval. Transfers in respect of inheritances are restricted to BDS$20,000 annually for each nonresident beneficiary. Dowries in the form of settlements and cash gifts may be transferred to nonresidents with exchange control approval, normally up to BDS$500 a donor a year. Emigrating Barbadian nationals are granted settling-in allowances from their declared assets at the rate of BDS$20,000 a family unit a year. The Central Bank also considers applications from foreign nationals who have resided in Barbados and are proceeding to take up permanent residence abroad, provided that they declare their assets held in Barbados.

Direct investment by nonresidents may be made with exchange control approval. The remittance of earnings on, and liquidation proceeds from, such investment is permitted, subject to the submission of documentary evidence as to the validity of the remittance, the discharge of any liabilities related to the investment, and the registration of the original investment with the Central Bank.

The issuance and transfer to nonresidents of securities registered in Barbados require exchange control approval, which is freely given on condition that an adequate amount of foreign currency is brought in for their purchase. Proceeds from the realization of these securities may be remitted when it is established that the original investment was financed from foreign currency sources. Nonresidents may acquire real estate in Barbados for private purposes with funds from foreign currency sources; local currency financing is not ordinarily permitted. Proceeds from the realization of such investments equivalent to the amount of foreign currency brought in may be repatriated freely. Capital sums realized in excess of this amount may be repatriated freely on the basis of a calculated rate of return on the original foreign investment, as follows: for the last five years at 8 percent a year; for the five years immediately preceding the last five years at 5 percent; and for any period preceding the last ten years at 4 percent. Amounts in excess of the sum so derived are restricted to the remittance of BDS$24,000 a year.

The approval of the Central Bank is required for residents to borrow abroad or for nonresidents to borrow in Barbados. Authorized dealers may assume short-term liability positions in foreign currencies for the financing of approved transfers in respect of both trade and nontrade transactions. They may also freely accept deposits from nonresidents. Any borrowing abroad by authorized dealers to finance their domestic operations requires the approval of the Central Bank.

Gold

Gold coins with face values of BDS$100, BDS$150, and BDS$200 are legal tender and are in limited circulation. Residents who are private persons are permitted to acquire and hold gold coins for numismatic purposes only. Otherwise, any gold acquired in Barbados must be surrendered to an authorized dealer unless exchange control approval is obtained for its retention. Residents other than the monetary authorities, authorized dealers, and industrial users are not permitted to hold or acquire gold in any form other than jewelry or coins for numismatic purposes. Imports of gold by residents are permitted for industrial purposes and are subject to customs duties and charges. Licenses to import gold are issued by the Ministry of Agriculture, Food, and Consumer Affairs; no license is required to export gold, but exchange control permission is required to do so.

Changes During 1985

Imports and Import Payments

January 7. Various types of unworked P.V.C. pipe were added to the list of items requiring import licenses.

March 11. Oil, air, and fuel filters for use with internal combustion engines were added to the list of items requiring import licenses.

July 29. Dry seasoned coating mixes, mosquito coils, and mosquito mats were added to the list of items requiring import licenses.

October 10. The list of items requiring import licenses was expanded to include the following items: other polishes and creams (from regional and extra-regional sources); knitted stockings of other fibers (from regional and extra-regional sources); chocolate confectionery (from regional sources); sweetened biscuits (from regional sources); other paints (from regional sources), thinners (from regional sources); and envelopes (from regional sources).

November 4. Chassis fitted with engines for motor vehicles and those without engines for motor vehicles were added to the list of items requiring import licenses.

November 11. Taxi meters and parts for taxi meters (from regional and extra-regional sources) were added to the list of items requiring import licenses.

Payments for Invisibles

April 1. The tax on outward remittances of pension funds to overseas insurers was reduced from 15 percent to 6 percent, and coverage of the tax was widened to include all overseas pension fund administrators.

Gold

February 12. The Central Bank of Barbados issued a BDS$100 gold coin.

October 14. The Central Bank of Barbados issued a BDS$500 gold coin to commemorate the visit to Barbados of Queen Elizabeth II.

Belgium and Luxembourg

(Position on December 31, 1985)

Exchange Arrangement

The currency of Belgium is the Belgian Franc. The currency of Luxembourg is the Luxembourg Franc. Luxembourg is linked to Belgium in a monetary association within which the Luxembourg franc is at par with the Belgian franc. Belgium and Luxembourg participate with Denmark, France, the Federal Republic of Germany, Ireland, Italy, and the Netherlands in the exchange rate and intervention mechanism of the European Monetary System (EMS). In accordance with this agreement, Belgium and Luxembourg maintain the spot exchange rates between their currencies and the currencies of the other participants within margins of 2.25 percent (in the case of the Italian lira, 6 percent) above or below the bilateral central rates.

The agreement implies that the National Bank of Belgium stands ready to buy or sell the currencies of the other participating states in unlimited amounts at specified intervention rates. On December 31, 1985 these rates were as follows:

Belgian Francs or
Specified InterventionLuxembourg Francs
Rates Per:Upper limitLower limit
100 Danish kroner564.1000539.300
100 French francs668.0000638.600
100 deutsche mark2,048.35001,958.500
1 Irish pound63.281060.4965
100 Italian lire3.13052.7765
100 Netherlands guilders1,818.00001,738.0000

The participants in the EMS do not maintain the exchange rates for other currencies within fixed limits. However, in order to ensure a proper functioning of the system, they intervene in concert to smooth out fluctuations in exchange rates, the intervention currencies being each other’s and the U.S. dollar.

In Belgium-Luxembourg there are two spot exchange markets, the official (réglementé, or regulated) market and the free market. Most current transactions are settled in the official market; and only authorized banks may carry out exchange transactions permitted in that market. Most capital transactions take place in the free market. In a few cases, however, there is freedom of choice as to the exchange market in which conversion is to be effected. Authorized banks may sell on the official market currencies acquired on the free market.

In the official market most convertible currencies are dealt.1 However, although Zaïrian currency (the zaïre) is officially quoted, the Belgian-Luxembourg Economic Union (BLEU) does not permit the use of the zaïre in settlements with countries other than Zaïre, or the exchange of the zaïre for convertible Belgian or Luxembourg francs or other convertible currencies. There are no taxes or subsidies on purchases or sales of foreign exchange.

Nonbank residents may not acquire or surrender convertible currencies in the official spot market until a foreign payment is due. Nonbank residents may make forward purchases and sales of convertible currencies in the official market through authorized banks, provided that any foreign currency purchased is used for the authorized settlement of obligations within 15 working days from delivery (on the delivery date itself if the maturity of the forward contract is less than 15 days); exchange not used within that period must be resold in the official market. Profits resulting from forward contracts not used to cover authorized inward or outward payments through the official market must be surrendered to the Treasury. On December 31, 1985 the buying and selling rates for the U.S. dollar in the official market were BF 50.25 and BF 50.47, respectively, per US$1.

In the free exchange market, all currencies (including domestic and foreign bank notes) may be bought and sold at freely fluctuating rates. On December 31, 1985 the free market rates between banks for the U.S. dollar were BF 50.73 buying and BF 50.83 selling, per US$1.

Any resident or nonresident, including banks, may deal in the free market. Forward transactions, whether by banks or nonbanks, are uncontrolled and do not require a permitted underlying transaction. There is normally no intervention in forward exchange in either exchange market.

Belgium and Luxembourg formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from February 15, 1961.

Exchange Control Territory

There is no exchange control between Belgium and Luxembourg; the two countries constitute a single exchange control territory in relation to other countries. Banks in Luxembourg may not accept deposits in Luxembourg francs from nonresidents in Luxembourg or term deposits in excess of Lux F 1 million for 12 months or less from residents in Luxembourg.

Administration of Control

The ultimate responsibility for the administration of exchange control in the Belgian-Luxembourg Economic Union is exercised by the Belgo-Luxembourg Exchange Institute (IBLC). Exchange control powers for most payments and transfers are delegated to authorized banks. The Belgo-Luxembourg Administrative Commission has authority to license trade transactions; it determines import and export policy, but has delegated the issuance of import and export licenses to the licensing offices of the BLEU, one of which is located in each country. Bank supervision in Belgium is exercised by the Bank Commission, and in Luxembourg by the Luxembourg Monetary Institute.

Prescription of Currency

The prescription of currency requirements operate mainly to ensure that settlements with foreign countries are made through the appropriate exchange market or, where payments in Belgian or Luxembourg francs are involved, through the appropriate category of nonresident account. Foreign countries are divided into two groups: the bilateral countries (comprising Burundi, Rwanda, and Zaïre, although the BLEU is not a party to any bilateral payments agreement) and the convertible area (all other countries).

Summary of Permissible Methods of Settlement for Foreign Payments
Transaction

List
Country

Group
Foreign

Currency
Exchange

Market
Nonresident

Account

in Francs
Outward Payments
A,BConvertibleConvertibleOfficialConvertible
CConvertibleAnyOfficial or FreeConvertible or Financial
DConvertibleAnyFreeFinancial
A,B,C,DBilateralBilateral*
Inward Payments
A,BConvertibleConvertibleOfficialConvertible
CConvertibleConvertible

Other
Official or Free

Free }
Convertible

or Financial
DConvertibleAnyFreeFinancial or

Convertible
A,BBilateralConvertibleOfficialBilateral or

Convertible*
CBilateralConvertible OtherOfficial or Free

Free }
Bilateral or

Convertible*
DBilateralAnyFree or OfficialBilateral or

Convertible*

Bilateral Account of the country concerned. Settlements with Zaïre may alternatively be made by debit or credit to Convertible Accounts in zaïres held with banks in Zaïre.

Bilateral Account of the country concerned. Settlements with Zaïre may alternatively be made by debit or credit to Convertible Accounts in zaïres held with banks in Zaïre.

All inward and outward transactions are classified in four groups, which may be summarized as follows: List A covers merchandise, transport expenses, industrial expenses (e.g., costs of processing), and other commercial expenses, including insurance, administrative expenses of sales agencies, and sharing in administrative expenses of central offices by branches and affiliates. List B covers settlements of travel agencies, salaries, pensions, fees, subscriptions, taxes, and public administration payments. It also includes family support payments by emigrant workers of foreign nationality. List C covers (1) income on securities, loans, etc., rents, and operating profits; and (2) repatriation of certain foreign long-term investments. List D covers gifts, life insurance payments, family maintenance payments, capital investments, liquidation of long-term investments and transfers by emigrants of foreign nationality, dealings in gold, transfers by emigrants of Belgian or Luxembourg nationality, transfers by immigrants, inheritances, forward covering of merchandise, private travel expenses (except when settled through travel agencies), and all transactions not in any of the other three lists.

The permissible methods of settlement for foreign payments are as summarized in the table below.

In addition to the general methods of settlement described above, individual licenses are granted in order to allow transfers through the official market for some of the transactions mentioned in List D. These cover essentially direct investment by enterprises and some capital transfers by individuals. Conversely, imports and exports of diamonds, including related costs, may only be paid for in foreign currencies through the free market, or in Belgian or Luxembourg francs by means of nonresident Financial Accounts, or in domestic or foreign bank notes. Payments for goods of Egyptian origin (other than rice, raw cotton, and crude petroleum) are subject to special rules.

Nonresident Accounts

Belgian or Luxembourg franc accounts of nonresidents are classified as follows:

1. Convertible Accounts. Balances on these accounts are equivalent to currencies negotiated on the official market, and accounts may be opened freely in the name of any nonresident.2 They are not related to any country or monetary area. They may be used freely for settlements with residents that either must or may be made through the official market and for retransfer abroad through the official market, and they may be credited freely with proceeds from the sale by a nonresident of convertible currencies in the official market to authorized banks in Belgium and Luxembourg. Balances on Convertible Accounts may be transferred freely to other Convertible Accounts or be converted into any currency in the official market. Advances on Convertible Accounts other than mail-credit advances are subject to authorization by the IBLC. A minimum debtor interest rate may be prescribed during certain periods for mail-credit advances in Convertible Accounts of banks, with the exception of those for developing countries. Convertible Accounts may be held in the form of sight accounts (demand deposits), prior notice accounts, and time deposits.

2. Financial Accounts. These accounts may be opened only for residents in convertible area countries.3 They may be used freely for settlements that either must or may be made through the free market and for retransfer abroad through the free market, and they may be credited with proceeds from the sale by a nonresident of gold or any currency in the free market. Domestic bank notes and proceeds from the sale in the free market of foreign bank notes, when deposited with authorized banks by foreign travelers in Belgium and Luxembourg or by persons residing abroad, may be credited to Financial Accounts. Transfers between Financial Accounts are free. Balances on these accounts may be used to purchase gold or any currency negotiated in the free market.

3. Bilateral Accounts. These accounts may be opened for residents of bilateral countries. They are used for settlements with bilateral countries and may be credited with proceeds from the sale of convertible currencies by a nonresident in the official market. Balances on Bilateral Accounts may be transferred to other Bilateral Accounts related to the same country. Transfers may also be made freely between Bilateral Accounts related to Burundi, Rwanda, and Zaïre. In practice, the authorities permit the conversion of balances on Bilateral Accounts of the central banks of these three countries into foreign currencies in the official market.

Interest, charges, and commissions relating to any nonresident account must be credited or debited either to the account in question or to another of the same category.

Imports and Import Payments

Individual licenses are required for (1) all imports from Albania, Bulgaria, the People’s Republic of China, Czechoslovakia, the German Democratic Republic, Hong Kong, Hungary, Japan, the Democratic People’s Republic of Korea, Mongolia, Poland, Romania, the U.S.S.R., and Viet Nam,4 and (2) a number of imports from all other countries outside the BLEU.5 The commodities for which individual licenses are required include many textile and steel products, certain agricultural products and foodstuffs, coal and petroleum products, diamonds, and weapons. All other commodities are free of license; the sole requirement is a form completed by the importer giving notification of the payment (payment declaration—model A), which must be presented to an authorized bank. No exchange control documentation is required for imports not exceeding BF 100,000 in value. Many commodities subject to individual licensing are also admitted without quantitative restriction. Along with other EC countries, the BLEU applies quotas on a number of textile products from non-EC countries; the BLEU also applies a system of minimum import prices to foreign steel products.

Imports from non-EC countries of most products covered by the Common Agricultural Policy of the EC are subject to import levies, which have replaced all previous barriers to imports; common EC regulations are also applied to imports from non-EC countries of most other agricultural and livestock products.

An authorized bank is required to make certain that payment is made by one of the methods laid down in the regulations (see section on Prescription of Currency, above) and that foreign exchange is not acquired until the import payment is due. Exchange control approval is required for payments for imports more than three months before or six months after the date of customs clearance; prior examination of supporting documents by the IBLC is required for payments exceeding BF 25 million and for payments made more than 30 days before the date of customs clearance. However, in the latter case, prior examination is not required if payment takes place either under a documentary credit or on a documentary collection basis, provided that documents are submitted to the authorized bank showing that the goods have already been shipped to the BLEU. Payments for transit transactions must be made not later than three months from the date of any advance payment collected from the foreign buyer, and may not be made earlier than three months before the date on which such payment is expected to be received.

Payments for Invisibles

Payments to convertible area countries for transactions included in Lists A and B must be made through the official exchange market or by crediting Belgian or Luxembourg francs to a Convertible Account. For payments exceeding BF 25 million and in other exceptional cases, prior examination of supporting documents by the IBLC is required. Payments to convertible area countries for items in List C may be made through either the official market (alternatively, by crediting Belgian or Luxembourg francs to a Convertible Account) or the free market (alternatively, by crediting Belgian or Luxembourg francs to a Financial Account, or in foreign or domestic bank notes); payments for items in List D must be made through the free market (alternatively, by crediting Belgian or Luxembourg francs to a Financial Account, or in foreign or domestic bank notes); payments to bilateral countries must be made by crediting Belgian or Luxembourg francs to a Bilateral Account related to the country concerned; payments to Zaïre, however, may also be made in zaïres through a convertible account in Zaïre. Foreign and domestic bank notes may be exported freely.

Exports and Export Proceeds

Individual licenses are required for exports of specified commodities to all countries outside the BLEU, such as weapons, strategic products, and agricultural products. Individual licenses are also required for steel products exported to the United States.6 All other exports are free of license; only a form (notice of export—model B) completed by the exporter and giving notification of the export must be presented to an authorized bank.

Exchange control documentation is not required for exports of less than BF 100,000 in value. The authorized bank is required to verify that export proceeds are received in accordance with the regulations (see section on Prescription of Currency, above). Special authorization is required to collect export proceeds more than six months after the date of exportation. Export proceeds in convertible currencies must be surrendered to an authorized bank (i.e., sold in the official exchange market) within eight days of receipt or, alternatively, they may be deposited in a Regulated Resident Account in Foreign Currency with an authorized bank if they are to be used later for current payments authorized to be made in these currencies. A holder of a Regulated Account is required to use holdings in these accounts by priority whenever an authorized payment through the official exchange market is made. The IBLC may order the holder to sell part or all of the holdings in the official exchange market, to abstain temporarily from making new deposits, and to surrender to the Treasury all gains from exchange rate appreciation. Advance collection of export proceeds more than three months before the expected date of exportation requires prior authorization by the IBLC. Proceeds from transit transactions must be collected within three months from the date of payment to the foreign supplier.

Proceeds from Invisibles

Receipts in convertible currencies from invisibles connected with commercial transactions (Lists A and B—see section on Prescription of Currency, above) must be surrendered (i.e., sold in the official exchange market) within eight days of receipt or, alternatively, be credited to a Regulated Resident Account in Foreign Currency with an authorized bank if they are to be used later for authorized current payments. A holder of a Regulated Account is required to use holdings in these accounts by priority whenever an authorized payment through the official exchange market is made. The IBLC may order the holder to sell part or all of the holdings in the official market, to abstain temporarily from making new deposits, and to surrender to the Treasury all gains from exchange rate appreciation. Receipts in convertible currencies from transactions included in List C may be retained or sold in the official or the free market. Receipts from other transactions (List D) and receipts in all other currencies may be retained or sold in the free market. Proceeds from transactions included in Lists C and D may also be collected in domestic or foreign bank notes. Foreign and domestic bank notes may be imported freely.

Capital

All capital transactions with convertible area countries may be carried out through the free market, by settlement in Belgian or Luxembourg francs through the Financial Account of a nonresident, or in domestic or foreign bank notes. Direct investments by enterprises and some capital transfers by individuals, including gifts, family maintenance payments, remittances by emigrants of Belgian or Luxembourg nationality, and inheritances, may also be made through the official market, subject to individual license. The exchange control authorities may guarantee the repatriation of approved foreign investments made in Belgium and Luxembourg. In that case, capital brought in through the official market (under special license and as an exception to the standard prescription of currency set out above) may be repatriated through that market.

Also eligible for outward transfer through the official market are the amortization and redemption proceeds of bonds denominated in Belgian or Luxembourg francs, quoted on a stock exchange in the BLEU, and owned by residents of convertible area countries, provided that such securities have been held at least 18 months prior to the maturity date. All transactions in securities by residents or nonresidents are free, but the financial settlement of such transactions must conform to the general regulations for capital transactions. The prior approval of the Ministry of Finance is required for issues of securities on the Belgian capital market by nonresidents; most of the Belgian franc bond issues on the domestic capital market have, in practice, been made by international organizations, while issues of Eurobonds denominated in Belgian francs are not normally permitted.

The Luxembourg Monetary Institute (LMI) regulates the issue of franc-denominated bonds on the Luxembourg capital market: for public bond issues, an official calendar is established and priority is given to domestic public sector borrowing and to enterprises utilizing the funds for domestic investment; for private bond issues, no official calendar exists, but the LMI monitors the overall volume and frequency of issues. Public bids by foreign companies or individuals for the purchase or exchange of shares issued by Belgian companies require the prior approval of the Ministry of Finance. Outward payments for capital transactions with bilateral countries may be made only in Belgian or Luxembourg francs through Bilateral Accounts or, in the case of Zaïre, in zaïres; inward payments for capital transactions with bilateral countries may be made in Belgian or Luxembourg francs through Bilateral Accounts, in any currency through the free market or, in the case of Zaïre, in zaïres.

Gold

Residents may freely purchase, hold, and sell gold in coins or bars, at home or abroad. Imports and exports of gold in these forms by residents and nonresidents are unrestricted and free of license; settlements in respect of gold transactions in coins or bars with convertible area countries may be made only through the free market, through Financial Accounts in Belgian or Luxembourg francs, or in domestic or foreign bank notes. Imports and transactions in monetary gold are subject to a value-added tax in Belgium at a rate of 1 percent. Licenses are required for imports of semiprocessed gold. Imports of gold for industrial, artistic, or medical use may be paid through the official market.

Changes During 1985

Exchange Arrangement

July 22. The intervention limits of the Belgian and Luxembourg francs within the EMS were redefined as follows, with respect to the Italian lira:

Belgian Francs or
Specified InterventionLuxembourg Francs
Rates Per:Upper limitLower limit
100 Italian lire3.13052.7765

Imports and Import Payments

May 23. Belgium and Kenya signed a five-year agreement on technical and economic cooperation, under which the two governments undertook, inter alia, to promote, facilitate, and encourage cooperation in the economic and technical fields, including agriculture, industry, mining, energy, transport and communications, and exchange of experts.

Belize

(Position on December 31, 1985)

Exchange Arrangement

The currency of Belize is the Belize Dollar, which is pegged to the U.S. dollar, the intervention currency, at a rate of BZ$1 = US$0.50. The buying and selling rates for transactions between the Central Bank and the commercial banks are BZ$1.9937 and BZ$2.0063 per US$1, respectively. On December 31, 1985 the buying and selling rates in transactions between the banks and members of the public were BZ$1.9825 and BZ$2.0175 per US$1, respectively. The Central Bank quotes daily rates for the pound sterling, the Canadian dollar, and a number of currencies of member countries of the Caricom.1 A stamp duty of 1.25 percent is levied on all conversions from the Belize dollar to foreign currency.

Belize acccepted the obligations of Article VIII, Sections 2, 3, and 4 of the Fund Agreement on June 14, 1983.

Administration of Control

The Central Bank is responsible for the administration of exchange control, which is applicable to all countries. Authority covering a wide range of operations is delegated to the commercial banks in their capacity as authorized dealers. Only in exceptional cases or in applications involving substantial amounts is reference made directly to the Central Bank. However, all applications for foreign exchange processed by authorized dealers are regularly forwarded to the Central Bank for audit and record keeping. Trade controls are administered by the Ministry of Commerce and Industry.

Prescription of Currency

The only prescription of currency requirement relates to a specified list of currencies2 in which authorized intermediaries are permitted to deal with the public. Payments to a Caricom member country must be made in the currency of that country.

Nonresident Accounts

Permission of the Central Bank is needed for banks to open external or foreign currency accounts. The Central Bank may direct also that sums to be credited or paid to foreign residents be credited to a blocked account.

Imports and Import Payments

Payments for imports require authorization by the Central Bank; in most cases such authorization is delegated to the commercial banks. For reasons of health, standardization, and protection of domestic industries, import licenses from the Ministry of Commerce and Industry are required for a number of goods, mostly food and agricultural products, and certain household and construction products; such licenses are liberally administered. There are no quota limits nor other quantitative restrictions for balance of payments reasons. Goods imported into the country are subject to import duties, ad valorem, in many cases, and specific, in others. Imports by most of the public sector and certain nonprofit entities, imports of an emergency or humanitarian nature, and goods for re-export are exempt from import duties; goods originating from the Caricom area are also exempt. All imports are subject to a stamp duty of 10 percent of the c.i.f. value.

Payments for Invisibles

There are no restrictions on payments for invisibles. Authorized dealers have the power to provide foreign exchange for such payments below certain limits. The following limits are applied to purchases of foreign exchange: (a) nonbusiness travel by residents, up to BZ$1,500 a person a calendar year; (b) business travel by residents, BZ$200 a day a person, up to BZ$6,000 a year; (c) business or nonbusiness travel by nonresidents, BZ$500 a person a year, except where payment is made from an external account or from proceeds of foreign currency; (d) educational allowance, BZ$500 a course a year (apart from a once-only allowance of BZ$1,000 for educational expenses and maintenance); and (e) gifts, BZ$100 a donor. Requests in excess of these amounts are referred to the Central Bank; all bona fide requests are granted.

Exports of foreign and domestic bank notes and currency are subject to limits as follows: each traveler may carry domestic bank notes up to BZ$100 and the equivalent of BZ$400 in foreign currency, except that a visitor may take out such notes up to the amount imported. Amounts beyond these limits require approval of the Central Bank, which is liberally granted when justified.

Exports and Export Proceeds

Export licenses are required for most of the export products. Export proceeds must be surrendered to authorized dealers not later than six months after the date of shipment, unless determined otherwise by the Central Bank. A small number of items3 are subject to an ad valorem export duty of 5 percent. Re-exports and transshipments are subject to a 3 percent customs administration fee.

Proceeds from Invisibles

Foreign currency proceeds from invisibles must be sold to an authorized dealer. Travelers to Belize are free to bring in notes and coins denominated in Belize dollars up to BZ$100 a person, but there are no restrictions on imports of foreign currency. Resident travelers are required to sell their excess holdings of foreign currencies to an authorized dealer upon return to Belize.

Capital

All capital transfers require approval of the Central Bank but control is liberally administered.

Gold

Residents may not hold gold except by specific authorization from the Central Bank. Gold may neither be imported nor exported without the approval of the Central Bank.

Changes During 1985

Imports and Import Payments

March 30. The stamp duty rate on imports was increased from 8 percent to 10 percent, and the customs administration fee on entrepôt trade was raised from 2 percent to 3 percent.

Benin

(Position on December 31, 1985)

Exchange Arrangement

The currency of Benin is the CFA Franc,1 which is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 = F 0.02. The official buying and selling rates are CFAF 50 = F 1. Exchange rates for other currencies are derived from the rate for the currency concerned in the Paris exchange market and the fixed rate between the French franc and the CFA franc. They include a bank commission. The BCEAO levies a commission of 0.10 per mill for transfers from countries outside the West African Monetary Union and one of 2.50 per mill for transfers to such countries.2 Banks levy a commission on transfers to all countries outside the West African Monetary Union, part of which must be surrendered to the Treasury. There are no taxes or subsidies on purchases or sales of foreign exchange.

With the exception of those relating to gold and the repatriation of export proceeds, Benin’s exchange control measures do not apply to (1) France (and its Overseas Departments and Territories) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Burkina Faso, Cameroon, the Central African Republic, Chad, the Comoros, the Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Mali, Niger, Senegal, and Togo). Hence, all payments to these countries may be made freely. All other countries are considered foreign countries but, for purposes of certain controls relating to the repatriation of export proceeds and to capital flows, the countries specified in this paragraph are also regarded as foreign countries.

Administration of Control

Exchange control is administered by the Directorate of Currency and Credit in the Ministry of Finance, in conjunction with the Directorate of External Commerce in the Ministry of Commerce. The Ministry of Finance, however, has the main responsibility for drawing up the exchange control regulations, in collaboration with the BCEAO. The BCEAO is authorized to collect, either directly or through banks, financial institutions, the Postal Administration, and notaries public, any information necessary to compile balance of payments statistics. All exchange transactions relating to foreign countries must be carried out by authorized intermediaries. Import licenses are issued by the Directorate of External Commerce. Exports of diamonds and other precious or semiprecious materials require prior approval in the form of a decree issued by the Council of Ministers.

Prescription of Currency

Since Benin is linked to the French Treasury through an Operations Account, settlements with France (as defined above), Monaco, and other countries linked to the French Treasury through an Operations Account are made in CFA francs, French francs, or the currency of any other Operations Account country. Current payments to or from The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mauritania, Nigeria, and Sierra Leone are normally made through the West African Clearing House. Settlements with all other countries are usually effected through correspondent banks in France, in any of the currencies of those countries, or in French francs through Foreign Accounts in Francs. Certain settlements with the People’s Republic of China and specified socialist countries, however, are made through special accounts.3 All settlements with South Africa are prohibited.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. The crediting to nonresident accounts of CFA bank notes, French bank notes, or bank notes issued by any other institute of issue that maintains an Operations Account with the French Treasury is not permitted, except for BCEAO bank notes mailed direct to the BCEAO agency in Cotonou by an authorized bank’s foreign correspondent for credit to a Foreign Account in Francs opened by the latter with an authorized bank. Foreign Accounts in Francs may be debited, without prior authorization, with the value of BCEAO bank notes mailed by authorized intermediaries direct to their foreign correspondents.

Imports and Import Payments

All imports originating in or proceeding from South Africa are prohibited. Certain imports, such as narcotics, are prohibited from all sources. The Société de l’Alimentation Générale du Benin (AGB) has a monopoly over the importation of sugar, rice, wheat, wheat flour, condensed milk, alcoholic beverages, and tobacco. Certain other agencies have an import monopoly for other specified commodities. Imports of all other goods originating in countries in the French Franc Area may be made freely without an import license. Imports of all other goods originating in EC countries other than France may also be made freely; these goods require a license, which is issued automatically. Certain imports are liberalized when originating in member countries of the Organization for Economic Cooperation and Development (OECD) other than Japan and require only an import certificate made out by the importer himself. Imports of nonliberalized commodities originating in OECD countries, all imports originating in Japan, and all imports originating in non-OECD countries are subject to licensing; they are admitted in accordance with an annual import program. Under this program, a global quota is established for imports from all countries outside the French Franc Area except EC countries. Certain French textiles processed in foreign countries are licensed separately.

All imports originating in foreign countries, when valued at more than CFAF 500,000, must be domiciled with an authorized bank. The import licenses or import certificates entitle importers to purchase the necessary exchange, but not earlier than eight days before shipment if a documentary credit is opened, or on the due date of payment if the commodities have already been imported.

Payments for Invisibles

Payments to South Africa are prohibited. Payments for invisibles to France (as defined above), Monaco, and countries linked to the French Treasury through an Operations Account are permitted freely; those to other countries are subject to the approval of the Directorate of External Commerce, but for many types of invisibles the approval authority has been delegated to authorized banks. Authorized banks and the Postal Administration have been empowered to make payments abroad freely on behalf of residents, up to CFAF 50,000 a transfer. Payments for invisibles related to trade are permitted freely when the basic trade transaction has been approved or does not require authorization. Transfers of income accruing to nonresidents in the form of profits, dividends, and royalties are also permitted.

For tourist travel, residents traveling to countries other than France (as defined above), Monaco, and the countries linked to the French Treasury through an Operations Account may obtain an exchange allocation of an amount equivalent to CFAF 175,000 a trip for each person (CFAF 87,500 for children under ten) for any number of trips a year; any foreign exchange in excess of the equivalent of CFAF 5,000 remaining after return to Benin must be surrendered. For business travel, there is a special allocation of the equivalent of CFAF 20,000 a day, subject to a maximum of CFAF 400,000 a trip.

The transfer of the entire net salary of a foreigner working in Benin is permitted upon presentation of the appropriate pay voucher, provided that the transfer takes place within three months of the pay period. Travelers to foreign countries may take out up to a maximum of CFAF 25,000 in BCEAO bank notes, French bank notes, and bank notes issued by other countries linked to the French Treasury through an Operations Account. Residents traveling to countries of the French Franc Area may take out any amount in BCEAO bank notes, but if proceeding to a country that is not a member of the West African Monetary Union, they must declare to customs the amount taken out if it exceeds CFAF 150,000.

Nonresident travelers may take out any unutilized foreign bank notes and coin up to the amount declared by them on entry, subject to adjustment for amounts exchanged for CFA francs or obtained by exchange of foreign currency. Nonresident travelers may take out freely the equivalent of CFAF 25,000 in BCEAO bank notes, French bank notes, or bank notes issued by the countries linked to the French Treasury through an Operations Account; a maximum amount equivalent to CFAF 25,000 in foreign bank notes; and any amount in other foreign means of payment (traveler’s checks, etc.) established abroad and in their name.

Exports and Export Proceeds

All exports to South Africa are prohibited. Exports to all foreign countries, including the French Franc Area, must be domiciled with an authorized bank when valued at more than CFAF 500,000. All exports, except gold and diamonds, are free of license but require an export application visaed by the Directorate of External Commerce. The due date of payment for exports to foreign countries may not be later than 180 days after the arrival of the commodities at their destination; the foreign exchange thus received must be sold to an authorized bank within 30 days of payment due date, and its proceeds must be repatriated (as defined) by the latter by transfer via the BCEAO. Irrespective of currency of payment, prior authorization is required for the retention, sale, import, or export of raw diamonds and of precious and semiprecious materials.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and countries maintaining Operations Accounts with the French Treasury may be retained. All amounts due from residents of other countries in respect of services and all income earned in those countries from foreign assets must be collected and surrendered. Resident and nonresident travelers may bring in any amount of bank notes and coin issued by the BCEAO, the Bank of France, or a bank of issue maintaining an Operations Account with the French Treasury, as well as any amount of foreign bank notes and coin (except gold coin) of countries outside the French Franc Area; residents bringing in foreign bank notes and foreign currency traveler’s checks in excess of CFAF 5,000 must declare them to customs upon entry and sell them to an authorized bank within eight days.

Capital

Transfers of capital between Benin and South Africa are prohibited. Capital movements between Benin and France (as defined above), Monaco, and countries linked to the French Treasury through an Operations Account are free of exchange control; most capital transfers to all other countries require prior approval by the Ministry of Finance and are restricted, but capital receipts from such countries are permitted freely.

Special controls (additional to any exchange control requirements that may be applicable) are maintained over borrowing abroad, over inward foreign direct investment and all outward investment in foreign countries, and over the issuing, advertising, or offering for sale of foreign securities in Benin. Such operations require prior authorization by the Minister of Finance. Exempt from authorization, however, are operations in connection with (1) loans backed by a guarantee from the Beninese Government and (2) shares that are similar to or may be substituted for securities whose issuance or sale in Benin has already been authorized. With the exception of controls over foreign securities, these measures do not apply to France (as defined above), Monaco, member countries of the West African Monetary Union, and the countries linked to the French Treasury through an Operations Account. Special controls are maintained also over imports and exports of gold, over the soliciting of funds for deposit or investment with foreign private persons and foreign firms and institutions, and over publicity aimed at placing funds abroad or at subscribing to real estate and building operations abroad; these special controls also apply to France (as defined above), Monaco, and countries maintaining Operations Accounts.

All investments abroad by residents of Benin require prior authorization by the Minister of Finance; at least 75 percent of such investments must be financed from foreign borrowing.4 Foreign direct investments in Benin5 must be declared to the Minister before they are made. The Minister may request the postponement of the operations, within a period of two months. The full or partial liquidation of either type of investment also requires declaration. Both the making and the liquidation of investments, whether these are Beninese investments abroad or foreign investments in Benin, must be reported to the Minister and to the BCEAO within 20 days following each operation. Direct investments are defined as investments implying control of a company or enterprise. Mere participation is not considered as direct investment, provided that it does not exceed 20 percent of the capital of a company whose shares are quoted on a stock exchange.

Borrowing by residents from nonresidents requires prior authorization by the Minister of Finance. The following are, however, exempt from this authorization: (1) loans constituting a direct investment, which are subject to prior declaration, as indicated above; (2) loans taken up by industrial firms to finance operations abroad, by international merchanting and export-import firms (approved by the Minister of Finance) to finance transit trade, or by any type of firm to finance imports and exports; (3) loans contracted by authorized banks; and (4) subject to certain conditions, loans other than those mentioned above, when the total amount outstanding of these loans, including the new borrowing, does not exceed CFAF 50 million for any one borrower. The repayment of loans not constituting a direct investment requires the special authorization of the Minister of Finance if the loan itself was subject to such approval, but is exempt if the loan was exempt from special authorization. Lending abroad is subject to prior authorization by the Minister of Finance.

The Investment Code (Law No. 82–005 of May 20, 1982) provides for preferential status that may be granted to foreign and domestic investments in industry, mining, fisheries, agriculture, and tourism, when such investments are deemed to be of value to national development. Four preferential regimes are established. Plan A is intended for public and mixed enterprises operating at the national and provincial levels and provides, during a period of up to five years, for exemption from import duties and taxes on materials necessary for the production of the proposed item and from certain other taxation. Plan B, for domestic and foreign private enterprises, is granted for a maximum exemption period of five years and provides, in addition to the benefits of Plan A, certain other tax privileges. Plan C is intended for very large enterprises wishing to conclude incorporation agreements with Benin, and is granted for a period of up to ten years. In addition to the benefits of Plan B, Plan C guarantees stability of tax status, free choice of suppliers, and certain other advantages. For Plans A, B, and C up to two years for installation time can be added to the period of the agreement. Plan D provides certain benefits for small and medium-sized domestic enterprises and cooperatives for up to five years. The method of application of the Investment Code is set out in Decree No. 28–254 of July 13, 1983.

Gold

Prior authorization in the form of a decree issued by the Council of Ministers, acting on the advice of the Minister in Charge of Mines, is required to hold, sell, import, export, or deal in, raw diamonds and precious or semiprecious materials. In practice, residents are free to hold, acquire, and dispose of gold in any form in Benin. Imports and exports of gold from or to any other country require prior authorization by the Minister of Commerce, which is seldom granted. Exempt from this requirement are (1) imports and exports by or on behalf of the Treasury or the BCEAO; (2) imports and exports of manufactured articles containing a minor quantity of gold (such as gold-filled or gold-plated articles); and (3) imports and exports by travelers of gold articles up to a maximum weight to be determined by an Order of the Minister. Both licensed and exempt imports of gold are subject to customs declaration.

Changes During 1985

Exports and Export Proceeds

October 23. All claims on foreign countries or on a nonresident arising from merchandise exports were required to be sold to authorized intermediaries; the latter were also required to repatriate such funds to Benin by transfer through the BCEAO (Circular No. 2104 of the Ministry of Finance and Economy).

Bhutan

(Position on December 31, 1985)

Exchange Arrangement

The currency of Bhutan is the Ngultrum. Since its introduction in 1974 it has been pegged to the Indian rupee, which also circulates in Bhutan, at a rate of Nu 1 = Re 1. The rates for currencies other than the Indian rupee are determined daily on the basis of the prevailing quotations by the Reserve Bank of India for those currencies. In the absence of large transactions, exchange rates for other currencies may be determined on the basis of the most recent quotations by the Reserve Bank of India. No other exchange rates apply to international transactions, and there are no subsidies or taxes on exchange transactions. On December 31, 1985 the buying and selling rates of the ngultrum for the U.S. dollar were Nu 12.0700 and Nu 12.1654 per US$1, respectively.

Administration of Control

The Ministry of Finance controls external transactions and provides foreign exchange for most current and capital transactions. Beginning from July 26, 1985, substantial powers are delegated by the Ministry of Finance to the Royal Monetary Authority to release foreign exchange (other than Indian rupees) for current transactions. The Royal Monetary Authority is in charge of implementation of the surrender requirements for proceeds from merchandise exports.

Prescription of Currency

There are no regulations prescribing use of specific currencies in external receipts and payments.

Imports and Import Payments

All import payments other than those made in Indian rupees are subject to prior permission from the Ministry of Finance. The Ministry has discretionary authority to deny foreign exchange for the payment of luxury imports.

Customs duties exist on imports other than those from India.

Exports and Export Proceeds

There are no export taxes or subsidies. Exports of antiques of Bhutanese origin are prohibited. Proceeds of exports in currencies other than the Indian rupee must be surrendered to the Royal Monetary Authority either directly or through the Bank of Bhutan.

Payments for and Proceeds from Invisibles

Most invisible payments other than those made in Indian rupees are subject to approval by the Royal Monetary Authority. All receipts from invisible transactions in currencies other than the Indian rupee must be surrendered to the Royal Monetary Authority.

Capital

All capital transactions are subject to approval by the Ministry of Finance.

Gold

There are no specific regulations on transactions in gold.

Changes During 1985

Administration of Control

July 26. The Ministry of Finance delegated to the Royal Monetary Authority the power to release foreign exchange (other than Indian rupees) for the purpose of medical expenses, foreign travel, and other current payments. (The Royal Monetary Authority also during the year took a number of steps to ensure the surrender of foreign exchange receipts to the banking system.)

Bolivia

(Position on December 31, 1985)

Exchange Arrangement

The currency of Bolivia is the Bolivian Peso. The official buying rate is determined at an auction held daily by the Central Bank of Bolivia. On December 31, 1985 the exchange rate at the auction was $b 1,692,000 = US$1. The official exchange rate applies to all foreign exchange operations in Bolivia. The auctions are conducted by a Committee for Exchange and Reserves (Comité de Cambio y Reservas) in the Central Bank. Prior to each auction the committee decides on the amount of foreign exchange to be auctioned and a floor price, below which the Central Bank will not accept any bids. The Central Bank offers foreign exchange in minimum units of US$5,000; successful bidders are charged the exchange rate specified in their bid.

The sale of foreign exchange to the public is free of all taxes and commissions. Except for the requirement to surrender the net proceeds from the export of goods and services, all banks, exchange houses, companies, and individuals can buy and sell foreign exchange freely. However, banks must maintain a balanced spot position in foreign exchange at all times and sell to the Central Bank any excess international reserves at the end of each day. All public sector institutions, including the public enterprises, must purchase foreign exchange for imports of goods and services through the Central Bank auction market.

There is a parallel exchange market, at which the exchange rate on December 31, 1985 was $b 1,850,000 = US$1 (selling).

Bolivia formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from June 5, 1967.

Administration of Control

The Central Bank of Bolivia is in charge of operating the auction market for foreign exchange. It is also the enforcing agency for export surrender requirements as well as for other exchange control regulations. The Ministry of Finance, together with the Central Bank, is in charge of approving public sector purchases of foreign exchange for debt service payments.

Prescription of Currency

There are no prescription of currency requirements. Settlements are usually made in U.S. dollars or other convertible currencies. Payments between Bolivia and Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela must be made through accounts maintained with each other by the Central Bank of Bolivia and the central bank of the country concerned, within the framework of the multilateral clearing system of the Latin American Integration Association (LAIA).

Imports and Import Payments

All goods may be freely imported with the exception of sugar (temporarily subject to licensing requirements) and those controlled for reasons of public health or national security.

Most private sector imports are subject to a tariff of 10 percent, plus 10 percent of the prevailing tariff rate. Most imports also are subject to a service levy of 2 percent. Merchandise imports in general are subject to a tax of 14 percent.

Payments for Invisibles

There are no restrictions on payments for invisibles. Public sector purchases of foreign exchange for debt service must be approved by the Ministry of Finance and the Central Bank. Residents of Bolivian or foreign nationality must present a certificate of tax settlement (certificado de solvencia tributaria) when leaving the country. The fee for the certificate is $b 500 for air travel to neighboring countries, $b 250 for overland travel to such countries, $b 1,000 for air travel to other Latin American countries, and $b 1,500 for air travel to countries outside Latin America. Outward remittances of profit are governed by the provisions of Decision Nos. 24 and 80 of the Cartagena Agreement.

Exports and Export Proceeds

All goods may be freely exported. All proceeds from exports of the public and private sectors must be sold to the Central Bank at the official exchange rate within three days of receipt, with the exception of reasonable amounts deducted for foreign exchange expenditures undertaken to effect the export. As regards minerals, Comibol and the medium-sized mines export their own production, and the Mining Bank exports the production of the small private mines. All exports of goods and services must be effected through documentary letters of credit drawn on domestic banks.

Proceeds from Invisibles

Banks, exchange houses, hotels, and travel agencies are required to surrender during the first hour of the business day following the transaction, and at the buying rate established by the Central Bank, all their foreign exchange purchases from invisible transactions, including those from tourism.

Capital

Foreign exchange for outward capital transfers by residents or nonresidents can be purchased only from the banks or from the Central Bank. Inward capital transfers may be made freely, but government receipts of transfers and grants and all proceeds of borrowings from foreign public sector agencies must be surrendered to the Central Bank. All foreign credits, including suppliers’ credits, to government agencies and autonomous entities and credits to the private sector with official guarantees are subject to prior authorization by the Ministry of Finance and to control by the Central Bank. All foreign borrowing by the private sector involving use of official foreign exchange for debt servicing requires prior approval by the Exchange Policy Board in cases of individual amounts not exceeding US$100,000, and by the Ministry of Finance for larger amounts. Under Supreme Decree No. 19732 of August 11, 1983 financial institutions in Bolivia may make loans in the form of credits denominated in foreign currency for imports of capital goods and inputs for the external sector with resources from international financial institutions, foreign government agencies, or external lines of credit.

Foreign investments in Bolivia, except those involving petroleum and mining, are governed by the provisions of the Investment Law (Decree Law No. 18751) of December 14, 1981. The law is administered by the National Investment Institute. Investments in petroleum and mining are governed by the General Hydrocarbons Law and the Mining Code. Certain foreign investments are subject to Decision Nos. 24 and 103 of the Cartagena Agreement.

Gold

Imports and exports of gold and domestic trading in gold are regulated by the Central Bank. The Central Bank also purchases, for its use or for export in the form of gold bars, the total national production of gold. Without affecting these powers of the Central Bank, the Mining Bank may purchase at home and sell abroad, in unworked form, the output of gold, silver, and platinum. The Mining Bank also sells gold, silver, and platinum on the domestic market, subject to conditions that it establishes jointly with the Central Bank. The Central Bank is empowered to purchase its full requirements of gold from the Mining Bank. Cooperatives and other producers must sell the gold they produce to the Central Bank. The Mining Bank is authorized to sell a specified quantity of gold annually to domestic jewelers and dentists and is obliged to sell the remainder to the Central Bank. Residents may freely purchase, retain, hold, and sell gold in any form other than bars.

Changes During 1985

Exchange Arrangement

February 11. The official exchange rate of the Bolivian peso was adjusted from $b 8,571 = US$1 to $b 45,000 = US$1 (buying rates), representing a devaluation of 80.95 percent.

May 16. The official exchange rate of the Bolivian peso was adjusted from $b 45,000 per U.S. dollar to $b 67,000 (buying rates), representing a devaluation of 32.83 percent.

August 29. In a major modification of the exchange arrangement, the official exchange rate began to be determined by means of an auction market, initially held twice a week (three times a week from November 1985, and five times a week from January 1986). The first auction established an official exchange rate of $b 1,150,000 = US$1, representing a devaluation of 94.17 percent. In addition, the spread of 11.9 percent between the buying and selling rates was discontinued. Separately, a 10 percent deposit requirement on purchases of foreign exchange, a 10 percent advance deposit by exporters, and a 10 percent exchange reimbursement certificate for sellers of foreign exchange were introduced. (All of these were, however, abolished in October and November 1985.)

Imports and Import Payments

August 29. Under Supreme Decree 21060, the system of import licensing and allocation of foreign exchange for imports was abolished, and it was announced that all goods other than those controlled on grounds of public health and national security could be freely imported. In addition, import tariff rates were lowered to 10 percent plus 10 percent of the previously prevailing tariff rate.

October 20. Under Supreme Decree 21098, imports of sugar were temporarily made subject to import licensing for an undefined period.

Invisibles

August 29. Restrictions on the allocation of foreign exchange for invisible payments were abolished.

Botswana

(Position on December 31, 1985)

Exchange Arrangement1

The currency of Botswana is the Botswana Pula, which is pegged to a basket of currencies consisting of a weight of 75 percent for the South African rand and of 25 percent for the SDR. On December 31, 1985 the official buying and selling rates for the U.S. dollar, the intervention currency, were P 2.0943 and P 2.0996, respectively, per US$1; on the same date, the middle rate for the SDR was P 2.3079 per SDR 1. Exchange rates for certain other currencies2 are quoted on the basis of their rates against the U.S. dollar in international markets. There are no taxes or subsidies on purchases or sales of foreign exchange.

Administration of Control

Exchange control is applicable to transactions with all countries. The Minister of Finance and Development Planning has delegated most of the administration of exchange controls to the Bank of Botswana (the central bank). The latter, in turn, has delegated certain powers to banks appointed as authorized dealers.

Prescription of Currency

Payments to or from residents of foreign countries must normally be made or received in a foreign currency or through a nonresident-held pula account in Botswana. There are no bilateral payments agreements.

Imports and Import Payments

Botswana is a member of a customs union with Lesotho, South Africa, and Swaziland, and there are generally no import restrictions on goods moving between the four countries. Import permits are required, however, for most goods imported directly into Botswana from outside the customs union. Certain imported goods, including firearms, ammunition, fresh meat, and some agricultural and horticultural products, require permits regardless of the country of supply. There are no restrictions or delays on payments for authorized imports. Goods of domestic origin may move freely between Botswana, Malawi, and Zimbabwe by virtue of a customs agreement of 1956, provided they are not intended for re-export.

Exports and Export Proceeds

Certain exports are subject to licensing, mainly for revenue reasons. Proceeds from exports must be received in a foreign currency or from a nonresident pula account. For a few items, such as precious and semiprecious stones, permits are required before export is allowed.

Payments for and Proceeds from Invisibles

Payments to nonresidents for current transactions, while subject to control, are not restricted. Authority to approve a range of current payments within limits is delegated to commercial banks. The basic exchange allowance for tourist travel is the equivalent of P 5,000 a calendar year for an adult (P 2,000 for a child). The allowance for business travel is P 250 a day, up to a maximum of P 10,000 a calendar year. The annual limit on outward remittances by a temporary resident on contract is P 10,000 or 50 percent of eligible salary, whichever is greater; for a self-employed temporary resident, the limit is P 10,000. Separately, travelers may freely bring in any amount of domestic bank notes and coin and take out up to P 200 in such bank notes and coin. The Bank of Botswana may authorize the maintenance by residents of foreign currency accounts with banks abroad in proven cases of commercial need for such a facility.

Capital

Applications to make investments abroad are treated on their merits and in light of possible benefits to Botswana. Foreign inward investment in new or existing businesses is generally encouraged. Local borrowing by nonresident controlled companies is limited to initial facilities of up to P 100,000 without matching nonresident capital; any additional local borrowing must be fully matched by use of nonresident funds. The acceptance of nonresident loans by any Botswana business is subject to the condition of nonrepayment of capital for two years from the receipt of such loans. Departing temporary residents are entitled to a basic remittable terminal allowance of up to P 10,000. Permanent residents are eligible for an emigration allowance of up to P 100,000. The balance of assets is normally permitted to be remitted in equal installments over three years from the date of departure.

Changes During 1985

Exchange Arrangement

January 9. The pula was devalued by 15 percent against the currency basket used for determining its exchange rate, and the weight of the South African rand in the basket was increased from 50 percent to 75 percent, with an offsetting decline (to 25 percent) in the weight of the SDR.

August 3. The pula was revalued by 3 percent against the currency basket used for determining its exchange rate.

August 23. The pula was devalued by 1 percent against the currency basket used for determining its exchange rate.

November 12. The pula was devalued by 1 percent against the currency basket used for determining its exchange rate.

December 4. The pula was devalued by 1 percent against the currency basket used for determining its exchange rate.

Payments for Invisibles

July 8. The terminal allowance for departing temporary residents was raised from P 6,000 to P 10,000.

December 2. The emigration allowance for permanent residents was raised from P 75,000 to P 100,000.

Brazil

(Position on December 31, 1985)

Exchange Arrangement1

The currency of Brazil is the Cruzeiro. Brazil follows a flexible exchange rate policy under which the exchange rate for the cruzeiro is adjusted on a daily basis in terms of its intervention currency, the U.S. dollar.

Exchange transactions are carried out by the Central Bank of Brazil, the Banco do Brasil S.A., and by banks and tourist agencies authorized to deal in foreign exchange; the tourist agencies deal only in bank notes and traveler’s checks in a “manual market.” Uniformity between the rates quoted by the monetary authorities and the effective rates of the authorized banks is ensured by the practice of the monetary authorities of standing ready to purchase exchange from the banks and to sell it to the banks at the official rate for approved transactions. On December 31, 1985 the buying and selling rates quoted by the monetary authorities to the public were Cr$10,440 and Cr$10,490, respectively, per US$1. The same exchange rates are applicable to “agreement dollars” used for settlements with bilateral agreement countries. Rates for other currencies are based on the U.S. dollar rates in Brazil and the rates for the respective currencies in New York and Europe. With specified exceptions, foreign exchange transactions are subject to brokerage fees, calculated on a sliding scale, which result in effective rates of up to 316 of 1 percent on either side of the rates set by the monetary authorities.

A different effective rate arises on the selling side from the application of a financial transactions tax (imposto sobre operações de crédito, câmbio e seguro, e sobre operações relativas a títulos e valores mobiliarios) of 25 percent to purchases of foreign exchange for imports of goods and services, with specified exemptions. Another effective exchange rate arises from the application of a deposit requirement equivalent to 100 percent of the value of the exchange operation in respect of the contracting of exchange for the opening of letters of credit for certain imports (see below).

Global daily limits are fixed for the authorized banks’ bought and sold positions in foreign exchange. The limits are fixed in relation to the registered capital of each bank: a bank having registered capital of up to Cr$500 million may maintain a bought or sold position of up to US$750,000; over and above that financial base, a bank is allowed a bought position of US$1.5 million and a sold position of up to US$7.5 million. Banks that are authorized to operate exclusively in the manual market and tourist agencies are permitted to maintain a bought position of up to US$25,000 for each authorized branch, but may not maintain a sold position. The Central Bank supplies foreign exchange to authorized banks in amounts not exceeding those needed to eliminate an oversold position, and limited to 100 percent of the exchange sold by the bank concerned to its customers during the same day or on the previous day; included in this limit is their manual market position (bank notes and traveler’s checks). The banks are permitted to sell foreign exchange to each other, and transfers between branches of the same bank are allowed, subject to certain conditions; such transactions may be carried out either on a spot basis by cable or on a forward basis, and must be executed within 2 working days for spot transactions or not later than 180 days for forward transactions.

Administration of Control

The National Monetary Council is responsible for the formulation of overall foreign exchange policy. In accordance with the guidelines established by the Council, exchange controls, regulations affecting foreign capital, and the management of international reserves are under the jurisdiction of the Central Bank. Limits on international borrowing by the public sector are applied by the Secretariat for Control of State-Owned Enterprises (Sest) in the Planning Secretariat of the Presidency of the Republic.

The National Council of Foreign Trade (Concex), a board headed by the Minister of Finance, formulates foreign trade policy. The Ministry of Foreign Affairs is the Council’s executive organ for dealing with foreign countries, while the Foreign Trade Department of the Banco do Brasil S.A. (Cacex) implements the Council’s decisions within Brazil. Cacex issues export and import certificates (guias de exportação or declarações de exportação and guias de importação).

Coffee exports are regulated by the Brazilian Coffee Institute (IBC). The Customs Policy Commission (CPA), established within the Ministry of Finance, is responsible for formulating guidelines for tariff policy. The CPA also decides on changes in customs duties under the provisions of existing legislation. The import policy of the public sector is coordinated by the Sest.

Prescription of Currency

In principle, prescription of currency is related to the country of origin of imports or the country of final destination of exports, unless otherwise prescribed or authorized. Settlements with bilateral payments agreement countries2 are made in clearing dollars through the relevant agreement account. Payments between Brazil and Argentina, Bolivia, Chile, Colombia, the Dominican Republic, Ecuador, Mexico, Peru, Uruguay, and Venezuela must be made through accounts maintained with each other by the Central Bank of Brazil and the other central banks concerned, within the framework of the multilateral clearing system of the Latin American Integration Association (LAIA). Settlements with countries with which Brazil has no payments agreements or special payments arrangements are made in U.S. dollars or other freely usable currencies.

Imports and Import Payments

The import of commodities originating in or shipped from Cuba is prohibited. Cacex has suspended the issuance of import licenses for a substantial number of imports for reasons of security, health, or morals; issuance of licenses is also suspended for a number of items for reasons of industrial policy. The importation of a small number of commodities is prohibited. There is also a limitation on the direct import of consumer goods (and on the purchase on the domestic market of any imported consumer goods) by the public and semipublic sector (direct organs of the Government, autonomous agencies, public enterprises, and companies with mixed public and private participation).

All other imports may be grouped into the following two broad categories: (1) imports that are free of any requirement to secure prior administrative documentation, including samples without commercial value and certain educational materials, and (2) imports that require an import certificate, which is issued automatically if it conforms to a previously submitted indicative annual import plan; revisions in the annual import plan are permitted automatically upon request for bona fide import payments. Import certificates are issued on an f.o.b. basis. Cacex is authorized to make a processing charge of up to 0.9 percent on the value of import certificates; as a rule, certificates are valid for 60 days, 90 days, or 180 days, depending on the commodity. For special bonded warehouse importers, Cacex establishes half-yearly foreign currency quotas and issues clearance certificates for certain groups of commodities. For a number of specified imports, the import certificate may be obtained after the commodity has been landed but before customs clearance.

For most imports the prior approval of Cacex is required; these include goods imported by public bodies,3 imports for which tariff concessions are being sought, certain imports without exchange cover, goods for use in fairs and trade exhibitions, certain types of used capital goods, and goods to be brought in with foreign financing on a deferred payment basis. For the last-mentioned category, it is a prior condition for the granting of import certificates for most groups of commodities that importers must arrange external financing with specified minimum maturities in line with normal financing terms in international markets for the type of commodity and the amount of financing involved.4 The specified terms are revised periodically by the Central Bank to ensure that they conform to prevailing conditions in international financial markets. Imports on a cash basis are not approved automatically, but Cacex grants exceptions from the specified financing terms for imports for projects aimed at import substitution or export production, imports with payment terms equivalent to those provided by foreign governments and bilateral or multilateral agencies, and imports by small-or medium-sized firms. All importers must be registered with Cacex, and imports can be effected only by registered firms or persons. Importers are required to submit to Cacex an annual indicative import program as a basis for requesting import licenses; this program is revised automatically upon request for bona fide import payments. The Minister of Finance may, on a temporary basis, and in accordance with the directives of the Economic Development Council (EDC) and without prejudice to commitments under LAIA, authorize Cacex to reject applications for import certificates where: (1) imports are for speculative stockbuilding purposes; (2) imports are causing or are threatening to cause serious damage to the national economy for reasons other than those related to the balance of payments; or (3) imports originate in or are shipped from countries that impede Brazilian exports.

Goods imported into the Manaus free zone are subject to an annual quota. The transfer to other parts of Brazil (as a passenger’s baggage) of foreign goods originally imported into the Manaus free zone is restricted to the equivalent of US$600 free of import taxes.

As a general rule, imports may be cleared through customs before an exchange contract is closed. However, Cacex may approve applications for the payment of imports of any goods at terms of up to 360 days from the date of shipment, provided that no import duty concessions or other tax concessions are involved. External financing at terms in excess of 360 days for imports, regardless of the classification of the importer and the purpose of the merchandise, must be authorized by the Central Bank, which will evaluate them in the light of foreign debt policy. Payment of the amount financed, and the interest thereon, may be made only upon presentation of a certificate of authorization and the related scheme of payments issued by the Department of Foreign Capital Supervision and Registration (Firce). Prior to shipment of the goods, total payments to suppliers for the nonfinanced amount may not exceed 10 percent of the import value.

Spot exchange contracts may be closed if the contract is intended to settle drafts, at sight or on maturity, and the appropriate shipping documents are presented. Spot exchange contracts must be settled on maturity of the draft; settlement may take place two working days in advance of the maturity date. Forward contracts, for up to 360 days, may be closed when a letter of credit is being opened. A noninterest-bearing deposit requirement equivalent to 100 percent of the value of the exchange operation is applied, with some exceptions,5 to the contracting of exchange for the opening of letters of credit. Such deposits must be transferred to the Central Bank as of the working day following the contracting of the exchange operation and are released on the date of settlement or the date of cancellation of the contract. Letters of credit must be opened within five working days from the date of the exchange contract. Letters of credit for more than 360 days may be opened without prior closing of an exchange contract.

Commercial banks ordinarily require a guarantee deposit for their own protection for forward exchange contracts; the amount of the deposit varies with the credit standing of the customer. When the contracts are liquidated, guarantee deposits may be used in payment for the foreign exchange. Special procedures are applicable to certain imports of petroleum and petroleum products and of wheat. For petroleum and specified petroleum by-products, Petrobras concludes for each import transaction an individual foreign exchange contract.

For some commodities, eligibility for exemption from import duties may be precluded by the existence of satisfactory domestic equivalents (similares nacionais); application of such duties may also be affected by the establishment of a minimum import price (pauta de valor mínimo) or of a reference price.

Payments for Invisibles

Payments for current invisibles related to income from foreign capital, royalties, and technical assistance are governed by the provisions of the Foreign Investment Law. In addition to certain restrictions on remittances stipulated in that law, limits are placed on remittances of all royalties and technical assistance fees (see below). Subject to certain conditions, authorized banks may sell foreign exchange up to the equivalent of US$300 a month for Brazilian residents temporarily staying abroad for educational and health purposes. Payments for other current invisibles require the approval of the Central Bank’s Exchange Department (Decam) or Firce, which authorizes remittances freely, subject to the presentation of supporting documents as evidence that a bona fide current transaction is involved.

Sales of foreign exchange without the prior approval of the Central Bank in respect of personal expenses connected with travel abroad are permitted up to US$1,000 a person 12 years of age or older; for trips to or initial stopover in Central or South America, the amount is US$500. In both cases, the total amount can be provided in cash, traveler’s checks, or in the form of payment orders. The basic allowances are one half of the preceding amounts for minors between the age of 2 and 12 years; no allowances are available for infants up to the age of 2 years. A special allowance of US$20,000 a year is available for the travel and representation expenses abroad of firms whose annual exports total at least US$200,000. Applications for purchases of foreign exchange for travel in excess of these limits must be submitted to the Central Bank, which considers each case on its merits.

Remittances abroad of income from foreign direct investments and reinvestments and remittances in respect of royalties and technical assistance are governed by Decree No. 55762 of February 17, 1965, which contains the regulations implementing the Foreign Investment Law. Remittances are allowed only when the foreign capital concerned, including reinvestments, and the contracts for patents and trademarks, and for technical, scientific, and administrative assistance, are registered at Firce in accordance with the established rules (see section on Capital, below). The registration of contracts or deeds for technical assistance or the use of patents or trademarks is subject to approval by the National Institute of Industrial Property. Remittances are normally authorized in the currency of the country of domicile or of the head office of the beneficiaries. Remittances of interest on loans and credits and of related amortization payments are permitted freely in accordance with the terms stipulated in the respective contract and recorded in the certificate of registration; the remittances are subject to withholding tax on income at a rate of 25 percent or other rate determined under agreement between Brazil and other countries for the purpose of avoiding double taxation.

Remittances of royalties by a branch or subsidiary established in Brazil to its head office abroad are not permitted when 50 percent or more of the local firm’s voting capital is directly or indirectly held by the foreign principal firm or when the majority of the firm’s capital in Brazil belongs to the recipients of the royalties abroad. Remittances of technical assistance fees (either with or without the use of trademarks and patents) are not permitted, as a rule, when remuneration for such services exceeds specified percentages, ranging from 1 percent to 5 percent, of net receipts from the sale or manufacture of the products. The percentages are the same as those established in Brazil’s taxation laws for determining the maximum permissible deductions for such expenses.

Purchasers of foreign exchange for a number of current invisibles are subject to the financial transactions tax (IOF) of 25 percent.

Travelers may take out domestic and foreign bank notes freely.

Exports and Export Proceeds

Exports are free of licensing requirements but require an export certificate (guia de exportação or declaraçõoes de exportação) issued by Cacex to ensure compliance with exchange and trade regulations. Some exports are free of controls, but exports of many commodities require prior approval of Cacex, while exports of specified commodities, including certain primary products and raw materials required for domestic consumption, are prohibited or suspended, and exports of certain other commodities are conditional on prior domestic sales. Exports requiring approval include those effected through bilateral accounts, exports without exchange cover, exports on consignment, re-exports, commodities for which minimum export prices are fixed by Cacex, and exports requiring prior authorization by government agencies. Exports of certain commodities are subject to an annual quota. Exports of coffee are subject to authorization by the IBC, the Brazilian Coffee Institute.

The IBC does not grant an authorization to export coffee unless the sales contract is based on a price that is at least equal to the minimum registration price (in U.S. dollars a pound, f.o.b.) fixed periodically by the IBC for the various types of coffee, although discounts are also authorized. During 1985, the IBC continued to make periodic announcements of minimum registration prices for exports of soluble coffee and green, ground-roasted, and decaffeinated coffee, although not necessarily changing them.

The foreign exchange proceeds from all exports are sold at freely negotiated rates within the limits of the official market. Foreign exchange contracts covering such transactions may be closed either prior to the shipment of goods or within ten working days after shipment. The export of hides of wild animals in any form is suspended.

A number of export incentives are in operation, principally for manufactured commodities. Certain exporters of manufactured goods are eligible for a tax credit on indirect federal and state value-added taxes according to the terms of contracts signed prior to July 1982 under the Special Program of Tax Benefits for Exporters (Befiex). Firms signing new Befiex contracts are not eligible for the credits. However, for a number of exports to the United States (primarily textiles, leather-ware, footwear, and certain steel products), export taxes of 0.6–9.8 percent are levied. For exports of ladies’ footwear to all destinations, a tax of 2.2 percent is levied. In 1985, export taxes at different rates were levied on a number of other products, irrespective of destination. Various financing programs for exporters, some at preferential rates of interest, are provided by the Banco do Brasil S.A. and the commercial banks. These financing facilities include both export financing and the financing of production and warehousing for export, particularly for manufactures. In addition, assistance is provided to exporters by way of export credit insurance and guarantees.

Proceeds from Invisibles

Exchange proceeds from current invisibles must be sold through the Banco do Brasil S.A. or the authorized banks at the prevailing market rate. Traveler’s checks and foreign bank notes are sold in the manual market.

Brazilian enterprises rendering services to tourists (e.g., hotels, restaurants, travel agencies) may receive income tax rebates in proportion to their earnings from tourism, provided that the service is paid for in foreign exchange and that the tourist enterprise converts the exchange into cruzeiros at the official rate.6 Travelers may bring in domestic and foreign currency notes freely.

Capital

Capital inflows in the form of financial loans under National Monetary Council Resolution No. 63, as amended, or under the provision of the Foreign Investment Law (Law No. 4131) are subject to ceilings and require the prior approval of the Central Bank. The prior approval of the Central Bank is required for borrowing by the private or public sector when the foreign funds originate from official financial institutions abroad, when the transaction is to be guaranteed by the National Treasury or, on its behalf, by any official credit institution, and for other foreign borrowing by the public and semipublic sector (i.e., direct organs of the Government, autonomous agencies, public enterprises, and companies with mixed public and private participation). Besides, prior approval by the Central Bank is required for borrowing by the private sector when the foreign funds originate from financial institutions abroad. Otherwise, inward transfers are unrestricted and free of control, although the subsequent utilization of the proceeds for the acquisition of certain domestic assets may be subject to control. There is a separate regime for inward portfolio investment. For the purpose of repatriation and the remittance of income, however, inward transfers of foreign capital and the reinvestment of profits on foreign capital must be registered with Firce. Foreign capital is defined for this purpose as (1) goods, machinery, and equipment to be used to produce goods or to render services that have entered the country without an initial corresponding expenditure of foreign exchange; and (2) financial and monetary resources brought into the country for investment in economic pursuits, provided that, in either case, the owner is a person or firm resident or domiciled abroad or with headquarters abroad.

Foreign capital other than capital invested in Brazilian securities is classified, for purposes of registration, as direct investments or loans, whether imported in the form of money or of goods, and it includes reinvested profits from foreign capital. Direct investment is defined as that foreign capital which constitutes part of the corporate capital and participates directly in the risk inherent in an economic undertaking. Foreign capital that is not part of the corporate capital of any enterprise is considered to be a loan. Any loan obtained to purchase capital goods abroad, whether contracted by the manufacturer himself or by a third party, is considered to be financing (mostly suppliers’ credit).

Persons domiciled or resident abroad may make portfolio investments in Brazilian commercial and industrial securities only indirectly by acquiring shares in a Brazilian “investment company” quoted on Brazilian stock exchanges. Such capital is subject to registration with the Central Bank and must remain in the country for at least three months. The minimum participation in portfolio investment companies by foreign firms or individuals is US$1,000. Portfolio investments are exempted from the capital gains tax.

For financial imports and for investments made in the form of goods, the registration is in the currency of the country of domicile of the creditor or investor (or of its head office) or, in special circumstances, in the currency of the country of origin of the goods or of the credit. To register loans that are made in foreign currency, it is necessary to certify that the interest rate corresponds to that prevailing in the original market of the loan, that the amortization schedule is not disproportionately heavy in the early stages of repayment, and, in the case of import financing loans, that the prices of the imported goods correspond to the prices of comparable goods in the country of origin. If the terms of financing are approved, Cacex examines the applications for some foreign borrowing in the light of the price of the proposed import.

Capital entering Brazil is registered in foreign currency. Reinvestments are defined as profits of companies established in Brazil and accruing to persons or companies resident or domiciled abroad. Such profits must have been reinvested in the same companies that produced them or in another sector of the Brazilian economy. The registration of reinvested profits is made simultaneously in Brazilian currency and in the currency of the country to which the profits could have been remitted. The conversion is calculated at the average exchange rate prevailing between the date on which the profits appeared on the balance sheet of a company and the date of their reinvestment. A progressive supplementary income tax is levied on distribution of profits and dividends to nonresidents in excess of 12 percent of registered capital over a three-year period; the tax is applied whether or not the profits are remitted abroad, but reinvested earnings are exempt.

Special regulations govern borrowing abroad. Under National Monetary Council Resolution No. 63, as amended, private commercial, investment, and development banks and the Banco Nacional de Desenvol-vimento Econômico e Social (BNDES) may be authorized to take up foreign currency credits abroad for domestic relending for purposes of financing working capital. Safeguards against excessive use of such credits include limitations on the foreign obligations that each bank may assume (related to the terms of the credit and the size of the bank) and the provision that the ultimate borrower must agree to bear the exchange risk. The Central Bank assumes responsibility for the availability of cover for the repatriation of the loan at maturity. All other financial loans in foreign currency are effected under the general provisions of the Foreign Investment Law (Law No. 4131). Loans under this law also require prior central bank authorization, but the Central Bank does not undertake to provide specific exchange cover for them. Loans under Resolution No. 63, as well as those under Law No. 4131, must have a minimum term of nine years but no maximum term is set. Foreign loans are subject to mandatory deposit at the Central Bank. In the case of private enterprises, the deposit is applicable to 75 percent of the loan proceeds converted into cruzeiros and it is released as follows: one third after 60 days from the deposit date, another one third after 90 days, and the balance after 120 days; for public enterprises, the deposit is applicable to 100 percent of the loan proceeds converted into cruzeiros and is released as follows: 20 percent after 150 days from the deposit date, an additional fraction of 40 percent after 180 days, and the balance after 120 days.

In addition to these mandatory deposit regulations, on June 23, 1977 the Central Bank authorized voluntary deposits at the Central Bank by financial and non-financial institutions of the outstanding balances of their foreign loans; these deposits may be released only on the maturity dates for payment of principal, interest, and commissions. For as long as the deposit remains with the Central Bank, the Central Bank covers all costs on these loans, including the exchange cost. As part of the measures announced on September 12, 1984, these provisions were modified as follows: (1) voluntary deposits at the Central Bank in respect of nonfinancial loans (under Law No. 4131) were frozen for an indefinite period, except for (a) funds required for interest and amortization payments on the deposited loan funds, (b) transformation of such loans into direct investment, or (c) in certain special cases, upon the prior approval of the Central Bank; and (2) 80 percent of the balance of voluntary deposits at the Central Bank in respect of financial loans (under Resolution No. 63), which could be released until December 31, 1984, were frozen for an indefinite period—the balance of 20 percent as well as similar deposits made after this date could be withdrawn within an initial period of 60 days, and subsequently within 180 days from deposit dates; where the funds are for use in the rollover of loans to domestic enterprises, prior notice of 15 days is required.

Under a program for the management of external debt, the National Monetary Council imposes quantitative limits on the amount of financial loans for which authorization may be given by the Central Bank. Loans are authorized only if maturities conform with minimum requirements established from time to time by the Central Bank, which permits the total of loans outstanding to rise only to the extent that the servicing commitments on Brazil’s total external indebtedness do not depart from the guidelines set by the National Monetary Council. At the end of 1985 the Central Bank’s minimum acceptable maturity was set at nine years. However, provided that the full amount of the foreign exchange remains committed to Brazil for the minimum specified maturity, loans to the final borrower in Brazil, as well as loans to banks under Resolution No. 63, may be made at terms shorter than the final maturity of the debt abroad, and these funds may subsequently be relent to the same or a second borrower. Under the provisions of debt rescheduling agreements, a similar mechanism applies to the foreign exchange equivalent of affected principal repayments originally falling due during 1983–85.

Outward capital transfers not mentioned above require authorization by Decam and Firce, which consider applications on their merits. Approved exchange transactions involving outward transfers of private capital are effected through authorized banks at the prevailing official market rate.

Gold

Firms authorized by the Government may freely purchase, hold, and sell gold coin in Brazil under Decree No. 1038 of October 21, 1969. Gold mining is conducted under Law No. 4425 of October 8, 1964. The domestic negotiation of newly mined gold is subject to a mining tax of 1 percent, which may be offset against other tax liabilities if and when the gold is manufactured. The Central Bank is empowered to buy and sell gold on the domestic market at international prices. In practice, purchases of gold in the domestic market are made at current domestic prices; the international price is considered as a price goal. Imports of gold are subject to the issuance of an import certificate by Cacex. Exports of gold are subject to authorization by the Central Bank, which is always the alternative buyer.

Changes During 1985

Exchange Arrangement

The cruzeiro was depreciated on a daily basis during 1985, from a midpoint rate of Cr$3,176 = US$1 on December 31, 1984, to a midpoint rate of Cr$10,465 = US$1 on December 31, 1985, representing a cumulative depreciation of 69.6 percent against the U.S. dollar (in terms of U.S. dollars per unit of local currency).

January 1. The exchange tax on coffee exports was converted to a trade tax. In addition, the rate of the export tax credit was reduced from 7 percent to 5 percent of the value of eligible exports. (Under a previously adopted timetable, the tax credit was further reduced to 4 percent on February 1; 3 percent on March 1; 2 percent on April 1; and it was abolished on May 1, 1985.)

January 8. The financial transactions tax was reduced to zero on sales of foreign exchange for imports of rice from member countries of the Latin American Integration Association, provided that such imports were declared to be consistent with the supply policy of the federal government.

March 21. Under a new method of exchange rate determination introduced with effect from April 1985, the rate of depreciation of the cruzeiro with respect to the U.S. dollar during a given month would be determined as the geometric average of the domestic rate of inflation during the preceding three months; on this basis, the Central Bank would publish at the beginning of each month a table setting out the exchange rate of the cruzeiro in terms of the U.S. dollar for each working day of the month. (This method remained in effect until September 15, 1985; see below.)

June 5. It was decided that when an investment bank was connected to a commercial bank by common control, permission to deal in foreign exchange would be granted to only one of the two institutions.

June 28. The 40 percent rebate on the tax payment by remitters of interest on loans, commissions, and expenses related to foreign transactions was reduced to zero.

August 15. Conditions were defined under which foreign exchange sales to small business would be exempted from the financial transactions tax.

August 15. The list of service imports for which sales of foreign exchange were subject to the financial transactions tax was revised.

August 29. With effect from September 15, 1985, a new method of exchange rate determination was adopted under which the rate of depreciation of the cruzeiro with respect to the U.S. dollar between the fifteenth day of a given month and the fifteenth day of the following month would be equal to the domestic rate of inflation during the month covering the first of the two 15-day periods. On this basis, the Central Bank would announce each week the exchange rates for the cruzeiro in terms of the U.S. dollar that would prevail for each working day of the following week.

August 30. The financial transactions tax was reduced to zero on sales of foreign exchange for imports of salt products during the remainder of 1985.

September 6. The financial transactions tax was reduced to zero on sales of foreign exchange for imports of rice during the remainder of 1985 and for imports of potatoes during the period through November 15, 1985.

December 31. The limit on Central Bank supply of foreign exchange to authorized banks to enable them to eliminate their oversold positions was raised from 90 percent to 100 percent of the sold position on the same day or on the previous day.

Imports and Import Payments

January 28. Materials and equipment imported for the construction and maintenance of shipping vessels were exempted from import duties.

February 25. Materials imported for use in the 1985 census were exempted from import duties, provided that it could be established that there was no satisfactory domestic equivalent.

May 17. Imports of steel products and nonferrous metals were made subject to prior approval by Cacex until April 1, 1988.

August 26. Imports of raw materials, intermediate products, and spare parts required for production of certain capital goods exports were made eligible for exemption from import duties.

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Payments for Invisibles

October 7. Ministries and companies under the direct or indirect control of the federal government were prohibited from leasing residential real estate abroad.

December 20. The maritime agreement reserving approximately 80 percent of Brazilian-U.S. ocean trade to Brazilian and U.S. carriers in equal shares, which was due to expire at the end of 1985, was extended through end-1986.

Exports and Export Proceeds

March 29. As part of a voluntary export restraint agreement, quantitative limits were established on exports of steel products to the United States for the period through September 30, 1989.

May 2. The rate of interest on export prefinancing credits was lowered from the market interest rate less 10 percentage points to the market interest rate less 15 percentage points.

May 6. Export taxes on a number of items, which had been due to expire at the end of April 1985, were reduced from a range of 11–27 percent to a range of 0.6–9.8 percent and were extended indefinitely. (Such taxes had applied irrespective of destination for ladies’ shoes, but had applied only to exports to the United States for the other affected items.)

May 6. A special export tax of 3.51 percent was imposed on exports of concentrated orange juice to the United States.

July 12. Export taxes of 5.63 percent were imposed on exports of certain types of motors to Canada.

July 25. Quantitative limits were established on exports of sisal fiber to the United States and Canada for the period August 1985-July 1986.

August 16. The period for payment of the export tax on coffee was reduced to 15 days from the date of shipment for exports in 1985.

October 15. Export taxes on certain steel products exported to the United States were eliminated.

Receipts from Invisibles

December 20. The maritime agreement reserving approximately 80 percent of Brazilian-U.S. ocean trade to Brazilian and U.S. carriers in equal shares, which was due to expire at the end of 1985, was extended through end-1986.

Burkina Faso

(Position on December 31, 1985)

Exchange Arrangement

The currency of Burkina Faso is the CFA Franc,1 which is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 = F 0.02. The official buying and selling rates are CFAF 50 = F 1. Exchange rates for other currencies are derived from the rate for the currency concerned in the Paris exchange market and the fixed rate between the French franc and the CFA franc. The BCEAO levies a commission of 0.1 per mill for transfers from countries outside the West African Monetary Union and one of 2.5 per mill for transfers to such countries.2 Banks levy a commission of 2.5 per mill on transfers to all countries outside the West African Monetary Union, part of which must be surrendered to the Treasury. There are no taxes or subsidies on purchases or sales of foreign exchange.

With the exception of measures relating to gold and to the repatriation of export proceeds, Burkina Faso’s exchange controls do not apply to (1) France (and its Overseas Departments and Territories) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Benin, Cameroon, the Central African Republic, Chad, the Comoros, the Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Mali, Niger, Senegal, and Togo). Hence, all payments to these countries may be made freely. All other countries are considered foreign countries.

Administration of Control

Exchange control is administered by the Directorate of the Treasury in the Ministry of Financial Resources. The approval authority in respect of exchange control (except for imports and exports of gold, forward exchange cover, opening of external accounts in foreign currency, and business travel allocations in excess of CFAF 400,000) has been delegated to the BCEAO and, within limits specified in the exchange control regulations, to authorized intermediaries. The BCEAO is also authorized to collect, either directly or through banks, financial institutions, the Postal Administration, and judicial agents, any information necessary to compile balance of payments statistics. All exchange transactions relating to foreign countries must be effected through authorized banks, the Postal Administration, or the BCEAO. Import and export licenses are issued by the Directorate-General of Commerce in the Ministry of Commerce and Supply. Import certificates for liberalized commodities and export attestations are made out by the importer or exporter himself and, when settlement takes place with a country outside the French Franc Area, are visaed by the Customs Administration.

Prescription of Currency

Since Burkina Faso is an Operations Account country, settlements with France (as defined above), Monaco, and the other Operations Account countries are made in CFA francs, French francs, or the currency of any Operations Account country. Current transactions with The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mauritania, Nigeria, and Sierra Leone are normally settled through the West African Clearing House. Certain settlements with the People’s Republic of China, the Federal Republic of Germany, and Ghana3 are channeled through special accounts. Settlements with all other countries are usually effected either through correspondent banks in France, or the country concerned, in any of the currencies of those countries, or in French francs (or in other currencies of the French Franc Area) through Foreign Accounts in Francs. All settlements with South Africa are prohibited.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. BCEAO bank notes may be credited to Foreign Accounts in Francs when they have been mailed to the BCEAO agency in Ouagadougou by an authorized bank’s foreign correspondent. Otherwise, the crediting to nonresident accounts of BCEAO bank notes, French bank notes, or bank notes issued by any other institute of issue that maintains an Operations Account with the French Treasury is prohibited. Foreign Accounts in Francs may be debited, without prior authorization, with the value of BCEAO bank notes mailed directly by authorized intermediaries to their foreign correspondents.

Imports and Import Payments

Imports of goods originating in or shipped from any country for commercial purposes and under any customs regulations may be made freely; however, for the purpose of monitoring, prior acquisition of an official import document may be necessary for imports exceeding an amount specified by the Minister of Commerce; an import license is required for those products subject to quota, and a prior import authorization is required for all other products.

For imports subject to quota, a special commission (Commission des Importations) fixes the quotas and allocates them among importers. All other imports may require prior authorization, depending on the circumstances. Noncommercial imports require a special authorization, to be obtained in advance from the Ministry of Commerce. Imports of goods subject to special controls require the prior approval of the competent ministry. On the other hand, imports of certain products, a list of which is established by decree, may be freed from the import document requirement. The Minister of Commerce may, on the basis of criteria established by his Ministry, waive the prescribed formalities for imports from countries with which Burkina Faso has concluded a customs union or free trade area agreement. Most imports are subject to a customs stamp tax of 6 percent, an import surcharge of 6 percent, and a statistical duty of 3 percent.

All import transactions relating to foreign countries must be domiciled with an authorized bank when their value exceeds CFAF 500,000. Import licenses or import certificates entitle importers to purchase the necessary exchange not earlier than eight days before shipment, if a documentary credit is opened, on the due date for payment, if the commodities have already been imported, or at the time of the payment on account, if such a payment has to be made prior to the import.

Payments for Invisibles

All payments to South Africa are prohibited. Payments for invisibles to France (as defined above), Monaco, and other Operations Account countries are permitted freely; those to other countries are subject to exchange control approval, which for many invisibles has been delegated to the authorized intermediaries. Authorized intermediary banks and the Postal Administration are empowered to make payments up to CFAF 50,000 a transfer to foreign countries on behalf of residents without requiring justification. Payments for invisibles related to trade are permitted freely when the basic trade transaction has been approved or does not require authorization. Transfers of income accruing to nonresidents in the form of profits, dividends, and royalties are also permitted.

Residents traveling for tourism to countries other than France (as defined above), Monaco, and other Operations Account countries may purchase exchange equivalent to CFAF 175,000 a person a trip (CFAF 87,500 for children under ten years) for any number of trips a year; any foreign exchange in excess of CFAF 5,000 remaining after return to Burkina Faso must be surrendered. The basic allocation for travel abroad for business purposes is the equivalent of CFAF 20,000 a day, with a maximum of CFAF 400,000 a trip. Residents traveling to foreign countries may take out up to a maximum of CFAF 25,000 in BCEAO bank notes, French bank notes, and bank notes of other Operations Account countries. Residents traveling to other countries of the French Franc Area may take out any amount in BCEAO bank notes, but if proceeding to a country that is not a member of the West African Monetary Union, they must declare to the customs the amount taken out if it exceeds CFAF 150,000.

Nonresident travelers may freely take out foreign bank notes up to the equivalent of CFAF 175,000, or any larger amount, if declared upon entry or acquired by drawing on a Foreign Account in Francs, or an Account in Foreign Currency, or by exchange of foreign traveler’s checks, etc. They may also take out any foreign means of payment other than bank notes acquired in Burkina Faso by debit to a Foreign Account in Francs or an Account in Foreign Currency, subject to submission of documentation. Finally, they may take out freely up to CFAF 25,000 in BCEAO bank notes, French bank notes, and bank notes of other Operations Account countries.

Exports and Export Proceeds

Exports and re-exports from Burkina Faso may be made freely. However, for the purpose of monitoring, exports or re-exports of certain products may require prior official authorization by the relevant services of the Ministry of Commerce, except in the case of certain goods, a list of which is established by decree. In accordance with criteria defined by the Minister of Commerce, exports of certain products may be subject to special regulations. Exports of any product may require prior special authorization from the relevant services of the Ministry of Commerce, depending on circumstances. Exports to Ghana are subject to special regulations. Export proceeds must be surrendered within one month of the date on which the payment falls due (the due date stipulated in the commercial contract, which must not, in principle, be later than 180 days after arrival of the goods at their destination). All export transactions relating to foreign countries, including countries in the French Franc Area, must be domiciled with an authorized bank when their value exceeds CFAF 500,000, and the exporter must sign a foreign exchange commitment and submit an export attestation form. Most exports are subject to a customs stamp tax of 6 percent and a statistical duty of 3 percent.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and the Operations Account countries may be retained. All amounts due from residents of other countries in respect of services and all income earned in those countries from foreign assets must be collected and surrendered within two months of the due date. Such proceeds and earnings may not be received in or from South Africa. Resident and nonresident travelers may bring in any amount of bank notes and coin issued by the BCEAO, the Bank of France, or any bank of issue maintaining an Operations Account with the French Treasury, as well as any amount of foreign bank notes and coin (except gold coin) of countries outside the French Franc Area. Resident travelers must declare to the customs any foreign means of payment in excess of CFAF 5,000 that they bring in and must surrender these to an authorized bank within eight days after return.

Capital

All capital movements between Burkina Faso and South Africa are prohibited. Capital movements between Burkina Faso and France (as defined above), Monaco, and the Operations Account countries are free of exchange control; capital transfers to all other countries require exchange control approval and are restricted, but capital receipts from such countries are permitted freely. Special controls (additional to any exchange control requirements that may be applicable) are maintained over borrowing abroad, over inward direct investment and all outward investment, and over the issuing, advertising, or offering for sale of foreign securities in Burkina Faso. Such operations require prior authorization by the Minister of Financial Resources. Exempt from authorization, however, are operations in connection with (1) loans backed by a guarantee from the Burkinabe Government, and (2) shares that are similar to or may be substituted for securities whose issue, advertising, or sale in Burkina Faso has already been authorized. With the exception of controls over foreign securities, these measures do not apply to France (as defined above), Monaco, member countries of the West African Monetary Union, and the Operations Account countries. Special controls are maintained also over imports and exports of gold, over the soliciting of funds for deposit with foreign private persons and foreign firms and institutions, and over publicity aimed at placing funds abroad or at subscribing to real estate and building operations abroad; these special controls also apply to France, Monaco, and the Operations Account countries. All the special provisions described in this paragraph apply only to transactions and not to the associated payments or collections.

All investments abroad by residents of Burkina Faso require prior authorization by the Minister of Financial Resources4 and unless specifically exempted by the Minister of Financial Resources, 75 percent of such investments must be financed from borrowings abroad. Foreign direct investments in Burkina Faso5 must be declared to the Minister of Financial Resources before they are made. The Minister has a period of two months from receipt of the declaration during which he may request postponement of the project. The full or partial liquidation of either type of investment also requires prior declaration to the Minister. Both the making and the liquidation of investments, whether these are Burkinabe investments abroad or foreign investments in Burkina Faso, must be reported to the Minister of Financial Resources. Direct investments constitute investments implying control of a company or enterprise. Mere participation is not considered as direct investment, provided that it does not exceed 20 percent of the capital of a company whose shares are quoted on a stock exchange. Foreign firms operating in Burkina Faso in vital or priority sectors are required to have Burkinabe participation in their capital of at least 51 percent and of at least 35 percent in all other sectors. The sale to residents of Burkina Faso of securities of foreign companies operating in Burkina Faso requires prior authorization by the Minister of Financial Resources, who establishes the sale value.

Borrowing by residents from nonresidents requires prior authorization by the Minister of Financial Resources. The following are, however, exempt from this authorization: (1) loans constituting a direct investment, which are subject to prior declaration, as indicated above; (2) loans taken up by industrial firms to finance operations abroad, by any type of firm to finance imports into or exports from Burkina Faso, or by international trading houses previously approved by the Minister of Financial Resources to finance international merchanting transactions; (3) loans contracted by authorized banks; and (4) loans other than those mentioned above, when the total amount outstanding of these loans, including the new borrowing, does not exceed CFAF 100 million for any one borrower, provided that the annual interest rate does not exceed the normal market rate and that the proceeds are immediately surrendered by the sale of foreign currency on the exchange market or debited to a Foreign Account in Francs. The repayment of loans not constituting a direct investment requires the special authorization of the Minister if the loan itself was subject to such approval but is exempt if the loan was exempt from special authorization. Lending abroad is subject only to exchange control authorization by the BCEAO, acting on behalf of the Minister of Financial Resources.

The Investment Code provides preferential treatment for foreign investment in Burkina Faso, except for enterprises whose capital stock belongs entirely to foreigners. Three preferential categories (A, B, and C) are established, in accordance with which special guarantees and tax and customs incentives may be granted for up to eight years to any enterprise that undertakes to create or considerably expand activities likely to contribute to the country’s economic and social development. Enterprises that the Government deems to be of a priority nature may also be given privileged treatment.

Gold

Residents are free to hold, acquire, and dispose of gold in any form in Burkina Faso. Imports and exports of gold from or to any other country require prior authorization by the Minister of Financial Resources. Exempt from this requirement are: (1) imports and exports by or on behalf of the Treasury or the BCEAO; (2) imports and exports of manufactured articles containing a minor quantity of gold (such as gold-filled or gold-plated articles); and (3) imports and exports of gold objects up to a combined weight of 500 grams by travelers. Both licensed and exempt imports of gold are subject to customs declaration.

The Société de Recherche et d’Exploitation Minière du Burkina Faso (Soremib) has a monopoly on exports of gold from Burkina Faso.

Changes During 1985

Administration of Control

January 31. Ordinance No. 85–001/CNR/PRES/MRF was issued in regard to settlement of disputes on exchange control violations.

February 21. Ordinance No. 85–010/CNR/PRES/ MRF was issued, revoking Ordinance No. 84–061/CNR/PRES of August 31, 1984 pertaining to disputes on exchange control violations.

Exports and Export Payments

October 18. Circular No. 16/REFU/DT was issued, spelling out the application of Circular No. 24 of May 16, 1980 concerning repatriation and domiciliation of export proceeds.

Burma

(Position on December 31, 1985)

Exchange Arrangement

The currency of Burma is the Burmese Kyat, which is pegged to the SDR at K 8.50847 = SDR 1. Burma applies margins of 2 percent in respect of spot exchange transactions, based on the fixed kyat-SDR rate. The buying and selling rates of the kyat for the deutsche mark, the French franc, the Japanese yen, the pound sterling, the Swiss franc, and the U.S. dollar, quoted by the Myanma Foreign Trade Bank, are determined on the basis of the daily calculations of the value of these currencies against the SDR. On December 31, 1985 the buying and selling rates for the U.S. dollar were K 7.7643 and K 7.9196, respectively, per US$1. Buying and selling rates for the Belgian franc, the Italian lira, and the Netherlands guilder are determined on the basis of appropriate cross rates in the New York market; buying and selling rates for the Hong Kong dollar, the Malaysian ringgit, and the Singapore dollar are determined weekly on the basis of appropriate cross rates in the Hong Kong, Kuala Lumpur, and Singapore markets, respectively; and buying and selling rates for other currencies are based on appropriate cross rates in local markets (e.g., Bombay, for the Indian rupee). There are no taxes or subsidies on purchases or sales of foreign exchange.

Administration of Control

Exchange control is administered by the Exchange Control Board, through the Myanma Foreign Trade Bank, in accordance with instructions from the Ministry of Planning and Finance. A Foreign Exchange Control Committee headed by the Minister of Planning and Finance is in charge of the allocation of foreign exchange.

Prescription of Currency

Burma has no bilateral payments agreements. Certain settlements with Bangladesh are channeled through a nonresident bank account at the Myanma Foreign Trade Bank, and certain settlements with India are channeled through special rupee accounts in that country. Payments to other countries may be made in any foreign currency or by crediting kyats to an External Account in Burma. Receipts must be collected in convertible currencies or to the debit of an External Account in Burma.

Nonresident Accounts

Foreign exchange accounts may be kept with the Myanma Foreign Trade Bank by international organizations, diplomatic personnel, or other foreign residents, subject to approval by the Exchange Control Board. Such accounts are normally held in deutsche mark, Indian rupees, pounds sterling, or U.S. dollars. They may be credited and debited freely, but no interest is payable on them. Foreign nationals temporarily resident in Burma are entitled to hold foreign exchange utilization cards for use in diplomatic shops. Nonresidents may be authorized to hold external accounts in kyats; all debits and credits to such accounts require prior authorization. Burmese nationals working abroad under permission from the Government may open accounts in U.S. dollars with the Myanma Foreign Trade Bank, Rangoon, out of their savings; with exchange control approval, withdrawals from such accounts can be used for payment for personal imports and petty expenses.

Imports and Import Payments

All imports from South Africa are prohibited. Also prohibited are imports of a few commodities from any source—principally opium and other narcotics, monkeys, playing cards, and gold and silver bullion. An import program is prepared annually as part of the foreign exchange budget drawn up by the Ministry of Planning and Finance. All imports involving use of official foreign exchange are made by the public sector through the Ministries. The Myanma Export-Import Corporation (MEIC) imports goods for the use of the private sector, whose requirements are estimated by the Central Trade Council. In general, state economic enterprises and departments import goods for their own use, including imports under loan and aid agreements, partly in their own names and partly in the name of the MEIC. Licenses are not required. A licensing fee of 5 percent of the c.i.f. value is levied on imports which are meant for resale, but imports for departmental use are exempted. Most imports are purchased on an f.o.b. basis, and shipments are made on vessels owned or chartered by the Burma Five Star Shipping Corporation whenever possible. All payments for imports are made through the Myanma Foreign Trade Bank. State economic enterprises obtain foreign exchange directly from the Myanma Foreign Trade Bank within the approved foreign exchange budget on endorsement by the respective ministries. Foreign exchange allocations can be transferred by a ministry from one enterprise to another; transfers among ministries require cabinet approval. Imports not involving use of official foreign exchange do not require exchange control approval. Such imports for personal use generally do not require permits, but imports of certain durable items which are imported for personal use, such as cars, require specific permits. Burmese nationals working abroad as well as Burmese seamen are, however, permitted to import one vehicle every year. Seamen and other travelers may bring in a reasonable amount of personal goods when they enter the country.

Payments for Invisibles

All payments for invisibles outside the public sector are subject to licensing. Since virtually all trade is exclusively handled by the state, there is no licensing for payments connected with foreign trade. Payments for most other purposes, including transfers of profits, interest, and dividends, are considered on a case-by-case basis. Payments for membership fees to educational or technical institutions abroad and payments for subscriptions to certain foreign periodicals are, as a rule, allowed freely. Family remittances are permitted only for foreign technicians employed under contract by the Government, the limit being one half of the net salary if the wife is living abroad, and one third of the net salary if the wife is living in Burma. Outward remittances of insurance premium payments other than for the Myanma Insurance Corporation are not permitted. The remittance of pension payments to retired government employees is permitted only if the persons concerned had been non-nationals throughout their term of service, and are now residing in their native countries. Most personal money order remittances to neighboring countries through post offices are not permitted.

Foreign exchange allocations for tourist travel by residents have been suspended, except for approved religious pilgrimages. However, residents who have been granted an official permit to travel abroad for any other purpose may take out freely the equivalent of K 100 in the currency of the country of destination or, if that currency is not available, in U.S. dollar notes. Travel for medical reasons is authorized on a case-by-case basis. Travel for educational purposes is authorized only in connection with state scholarships. Otherwise, Burmese nationals are not allowed to travel abroad except on official missions or to take up employment offers abroad. On leaving, nonresident travelers who have stayed in the country for less than six months may take out any foreign currency they still hold and may also reconvert the remaining balance of the kyats obtained by conversion of foreign currency. Those who stay longer than six months must surrender all foreign currency in their possession but may be authorized by the Exchange Control Board to keep foreign currencies in foreign exchange accounts. The export of Burmese currency is prohibited.

Exports and Export Proceeds

All exports to South Africa are prohibited. There is also a list of prohibited exports comprising iron and steel, brass, copper, and aluminum and scrap thereof, foreign manufactures, and commodities of domestic origin which need to be conserved for domestic requirements. In practice, state agencies responsible for production may export any product in excess of the need for domestic consumption. Special permits are required for exports of antiques. Exports are generally effected by the MEIC, although timber, rubber, jute, fish and fish products, coffee, hides and skins, minerals, and petroleum and petroleum products may be exported directly by the respective state economic enterprises. Rice is exported by the Agriculture and Farm Produce Trade Corporation in the name of the MEIC. Export proceeds must be obtained in a manner satisfactory to the exchange control authorities, i.e., in approved convertible currencies or debits from the kyat account of banks in the importing country, and surrendered to the Myanma Foreign Trade Bank within six months from the date of shipment. Certain exports are subsidized through the Export Price Equalization Fund Account. When exports are made on an f.o.b. basis, buyers are free to choose the carrier, but exports on a c.i.f. basis are usually shipped by the Burma Five Star Shipping Corporation or on vessels chartered or nominated by it.

Proceeds from Invisibles

Exchange receipts from invisibles must be surrendered unless otherwise specified by special permission from the exchange control authorities, which may grant such permission to foreign nationals residing in Burma in connection with official business. Travelers may bring in, subject to declaration, any amount in foreign currency; foreign nationals who intend to stay for more than six months must surrender all foreign exchange in their possession unless special permission is given to the contrary. The import of Burmese currency is prohibited. Burmese nationals working abroad under permission from the Government are required to repatriate a part of their gross earnings in foreign exchange. In the case of Burmese seamen serving abroad, the repatriation requirement is 50 percent of basic pay, and it is credited to their bank accounts in kyat equivalent. Burmese nationals working abroad in international organizations and not subject to income tax are required to repatriate 10 percent of their gross earnings in foreign exchange; the kyat equivalent is credited to the accounts of such nationals or their families. Burmese nationals working abroad in private organizations are required to remit as tax 10 percent of their gross earnings in foreign exchange through embassies in their country of residence.

Capital

There is no foreign investment code as such; in principle, investment proposals are considered by an Investment Committee to ascertain whether the proposed enterprise will utilize domestic raw materials, increase domestic employment, conserve foreign exchange, and generally conform to the economic plans of the Government. However, permission for foreign private investment in Burma has been granted on only one occasion since 1963.

All outward transfers of capital require prior approval. Residents are not permitted to remit funds abroad for investment. The repatriation of personal assets and the making of family remittances have been suspended, with minor exceptions, for foreign nationals employed in the private sector; those employed in the public sector may remit their personal savings when leaving the service. When the transfer abroad of payments in favor of nonresidents is not permitted, the authorities can allow such payments to be credited to external accounts in kyats. All debits and credits to these accounts require prior permission. Individual licenses are required for the import, export, and transfer of securities involving nonresident interests.

Gold

Residents may hold and trade in gold jewelry, gold coin, and unworked gold in Burma. Licenses for imports and exports of gold are not granted unless they are effected by or on behalf of the monetary authorities. Jewelry for personal wear may be brought into Burma subject to customs declaration at the port of arrival. The export of personal jewelry is permitted under license, subject to the condition that the jewelry will be repatriated. No conditions are attached, however, to the taking out of personal jewelry that was declared to the customs when it was brought into Burma.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Burundi

(Position on December 31, 1985)

Exchange Arrangement

The currency of Burundi is the Burundi Franc, which is pegged to the SDR at FBu 122.70 = SDR 1. The official buying and selling rates for the U.S. dollar on December 31, 1985 were FBu 111.40 and FBu 112.53, respectively, per US$1. Exchange rates for 19 currencies1 are quoted by the Bank of the Republic of Burundi (the central bank) on the basis of its fixed rate for the SDR and the transaction value of these currencies in terms of the SDR. Authorized banks must carry out permitted exchange transactions at the buying and selling rates established by the Bank of the Republic of Burundi for currencies quoted by that Bank. An exchange fee of 2 per mill is collected on purchases or sales of foreign exchange.

Administration of Control

Control over foreign exchange transactions and foreign trade is vested in the Bank of the Republic of Burundi; authority to carry out some transactions is delegated to three authorized banks.

Prescription of Currency

Settlements relating to trade with Rwanda and Zaïre in products specified in the commercial agreements between these countries are effected through convertible currency accounts maintained with the central bank and authorized banks of each signatory country. With these exceptions, outgoing payments may be made and receipts may be obtained in any currency quoted by the Bank of the Republic of Burundi.

Nonresident Accounts

Nonresident Accounts in Burundi francs may be maintained, subject to the approval of the Bank of the Republic of Burundi, by (1) physical persons of foreign nationality, such as diplomats, who are temporarily established in Burundi and are not considered as residents, and (2) juridical persons of foreign nationality with special status, such as foreign embassies and international organizations. These accounts may be credited freely with the proceeds of foreign currencies quoted by the Bank of the Republic of Burundi, and they may be debited freely for withdrawals of Burundi francs for any normal current payments in Burundi and for conversion into foreign exchange (except bank notes). All other debits and credits require the approval of the Bank of the Republic of Burundi. These accounts do not bear interest and must not be overdrawn.

Certain nonresidents may maintain Nonresident Accounts in Foreign Currencies with an authorized bank. The opening of such accounts requires the approval of the Bank of the Republic of Burundi and is restricted to (1) physical persons of foreign nationality who are resident abroad, and (2) juridical persons having branches or subsidiaries abroad. These accounts may be credited freely with any foreign currency quoted by the Bank of the Republic of Burundi that is received from abroad. They may be debited freely for (1) conversion into Burundi francs for any payments in Burundi, and (2) payments abroad for travel and representation or for the purchase of foreign goods. These accounts cannot bear interest and must not be overdrawn; the related bank charges and commissions may be settled in Burundi francs.

Imports and Import Payments

All imports originating in or shipped from South Africa are prohibited. All imports require licenses, except trade samples without commercial value and merchandise not intended for sale whose declared consumer value c. & f. Bujumbura is FBu 50,000 or less. Authorization to import goods for sale using the importer’s own foreign exchange is subject to prior payment of customs duties in foreign exchange. Such authorization is granted to approved importers in the form of licenses not involving purchase of official foreign exchange. Imports of certain pharmaceuticals are suspended, namely: conditioned ampicillin, capsules of 250 and 500 milligrams; bactrim in tablets of 400 and 800 milligrams; meprobamate in tablets of 400 milligrams; and phenobarbital in tablets.

Importers have been instructed not to order abroad certain goods of which domestic stocks are adequate or that are produced locally. Applications for licenses must be submitted to the Bank of the Republic of Burundi through an authorized bank. The approval of such an application constitutes an authorization also to obtain foreign exchange. With specified exceptions, authorized banks approve applications for licenses with a value not exceeding FBu 500,000 f.o.b. for transactions involving surface transportation; applications for amounts in excess of FBu 500,000 require the approval of the Bank of the Republic of Burundi. A license is valid for 12 months starting on the first day of the month following its validation, but extensions may be granted by the Bank of the Republic of Burundi. An administrative tax amounting to 1 percent of the f.o.b. value of the goods is collected at the time of validation of the license. All goods imported into Burundi must be insured by approved Burundi insurers, and premiums must be paid in Burundi francs. All consignments of imports exceeding FBu 500,000 in value are subject to preshipment inspection with regard to quality, quantity, packaging, and price by the Société Générale de Surveillance (SGS) of Geneva acting for the Burundi authorities.

In principle, foreign exchange is made available at the time of shipment of the goods. For goods under global licenses, foreign exchange is not made available until after customs clearance. All imports are subject to a statistical tax of 4 percent ad valorem, in addition to any applicable customs duties and fiscal duties.

Payments for Invisibles

All payments for invisibles require approval. Shipping insurance on coffee exports normally must be taken out in Burundi francs with a Burundi insurer. Upon presentation of evidence of payment of taxes, foreign nationals residing and working in Burundi are permitted to transfer freely up to 30 percent of their net annual income. The permitted annual transfer is 60 percent of income for experts working for the Government under individual employment contracts containing a transfer clause and receiving remuneration entirely in Burundi francs. Private joint-stock companies may freely and immediately transfer a portion of the return on foreign capital and of the share allocated to foreign directors, not exceeding 40 percent of the distributed profits for industrial and agricultural enterprises and 30 percent for commercial and service enterprises, net of corporation tax and the tax on capital income. Up to 30 percent of emoluments paid to foreign directors and auditors are transferable if the recipients are residents and up to 100 percent if they are nonresidents. Transfer of the balance of the profits may be authorized subsequently as follows: 50 percent after three years of saving, 60 percent after four years, and 100 percent after five years. Profits awaiting remittance may be invested or saved at the Treasury, public agencies, public authorities or financial institutions that manage savings; and interest earned on such deposits is eligible for transfer. However, these provisions are without prejudice to any larger transfer guarantees granted by the Investment Code to enterprises that have been accorded special preferential status.

Persons leaving Burundi permanently are authorized to transfer abroad their holdings of Burundi francs that consist of unremitted savings or the sale proceeds of their personal effects. Transfer of rental income from foreign owners of new commercial, industrial, and office buildings is permitted up to 50 percent of net rental income (after payment of taxes and deduction of 20 percent for maintenance expenses); the remainder, plus any accrued interest, may be transferred three years later, provided that the funds have been held on deposit with a domestic financial institution. For old buildings and new residential buildings, transfer of 100 percent of rental income is permitted after placement of such income for at least five years in investment or savings bonds.

Residents may apply for exchange needed for foreign travel. There is no fixed limit on the amount that may be allocated, which depends on the nature of the travel. All travelers may take out up to FBu 2,000 in Burundi bank notes. In addition, residents may freely purchase foreign travel tickets, up to reasonable amounts, against payment in Burundi francs.

Nonresidents staying in a hotel or guest house in Burundi must pay their hotel bills by selling foreign currencies quoted by the Bank of the Republic of Burundi or by using a credit card. Payment in Burundi francs is, however, acceptable in the case of guests for whom a resident company or individual has assumed responsibility and in the case of nationals of Zaïre or Rwanda who produce declarations of means of payment issued under the auspices of the Economic Community of the Great Lake Countries (CEPGL).

Exports and Export Proceeds

All exports to South Africa are prohibited. All exports valued above FBu 10,000 require a prior declaration in each case, which must be presented for certification by the Bank of the Republic of Burundi through an authorized bank. Declarations are valid for 6 months, but extensions may be granted by the Bank of the Republic of Burundi. Payments must be collected within 90 days of the date of export declaration at the customs. All exchange proceeds from exports must be surrendered to an authorized bank within 8 days of their collection. Exports of arabica and robusta coffee from the Rumonge region are the monopoly of the Burundi Coffee Company. Virtually all exports, including coffee in some cases, are subject to export taxes and a statistical tax. Exports of manufactured goods may receive a refund of duties paid, provided that they incorporate raw materials on which import duty has been paid.

Proceeds from Invisibles

Exchange receipts from invisibles must be surrendered to authorized banks. Travelers may bring in any amount of foreign bank notes and up to FBu 2,000 in Burundi bank notes.

Capital

The Investment Code of August 25, 1967 provides tax and other benefits for domestic and foreign private investors. A new Investment Law, adopted on April 4, 1979, revised some of the investment procedures. Under the Investment Code new investments that fulfill specified conditions as to amount and economic importance may be granted priority status to which specified privileges are attached, mainly in the form of exemptions from import duties and from taxes on income from the investment. Import duties and taxes may be reduced or suspended for goods and equipment needed for starting a particular project and, during a period of five years, for other merchandise needed for the manufacturing operation or for the upkeep of the original investment. Taxes on profits and real estate may likewise be reduced or suspended. Enterprises accorded priority status may be granted a degree of protection against foreign competition, priority in the allocation of government contracts, and a guarantee from the Bank of the Republic of Burundi for the free transfer of profits and dividends and the repatriation of the invested capital. In addition to these privileges, companies undertaking investments that are considered to be of prime importance to Burundi’s economic development may be granted, under a separate agreement, a guarantee that direct taxes on their activities will not be increased for 15 years. An investment commission under the Planning Secretariat is responsible for examining requests for priority status and granting the necessary authorization. In addition, under the new law, Burundi guarantees each foreign investor the right to move into the country; foreign investors are also assured an allocation of foreign exchange for the purchase of raw materials abroad as well as for the repayment of loans taken out under the investment agreement.

Capital transfers by residents require individual authorization, as does foreign capital on which a repatriation guarantee has been granted. The guarantee is furnished for foreign exchange imported by resident enterprises to provide working capital in foreign exchange; it applies to any of the currencies quoted by the Bank of the Republic of Burundi and is valid for a one-year period and is renewable. The guarantee provides for the transfer of the original amount surrendered at the official rate ruling on the day of transfer. Under the new law, Burundi also guarantees the repatriation of invested capital in the event of sale or shutdown of the business.

Gold

All physical or juridical persons holding gold mining permits issued by the Ministers responsible for Mining and Customs may open purchasing houses for gold mined by artisans in Burundi. Gold produced by artisans may be sold only to approved houses. Exports of gold must be declared in Burundi francs at the average monthly rates communicated by the Bank of the Republic of Burundi. Gold exports are authorized jointly by the Mining and Customs Departments.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Cameroon

(Position on December 31, 1985)

Exchange Arrangement

The currency of Cameroon is the CFA Franc,1 which is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 = F 0.02. Exchange transactions in French francs between the BEAC and commercial banks take place at the rate of CFAF 50 = F 1. Buying and selling rates for certain other foreign currencies are also officially posted, with quotations based on the fixed rate for the French franc and the rate for the currency concerned in the Paris exchange market. A commission of 0.50 percent is levied on transfers to countries that are not members of the BEAC, except transfers in respect of central and local government operations, payments for imports covered by a duly issued license domiciled with a bank, scheduled repayments on loans properly obtained abroad, travel allowances paid by the Government and its agencies for official missions, and payments of reinsurance premiums. There are no taxes or subsidies on purchases or sales of foreign exchange.

With the exception of those relating to gold, Cameroon’s exchange control measures generally do not apply to (1) France (and its Overseas Departments and Territories) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Benin, Burkina Faso, the Central African Republic, Chad, the Comoros, the Congo, Côte d’Ivoire, Gabon, Mali, Niger, Senegal, and Togo). Hence, all payments to these countries may be made freely, but all financial transfers in excess of CFAF 500,000 to countries of the French Franc Area must be declared to the authorities for statistical purposes. All other countries are considered foreign countries.

Administration of Control

Exchange control is administered by the Directorate of Economic Controls and External Finance in the Ministry of Finance. Exchange transactions relating to all countries must be effected through authorized intermediaries, that is, the Postal Administration and authorized banks. Import licenses are issued by the Ministry of Commerce and Industry, and export licenses are issued by the Ministry of Finance.

Prescription of Currency

Since Cameroon is an Operations Account country, settlements with France (as defined above), Monaco, and the Operations Account countries are made in CFA francs, French francs, or the currency of any other Operations Account country. Settlements with all other countries are usually made through correspondent banks in France in any of the currencies of those countries or in French francs through Foreign Accounts in Francs. All settlements between Cameroon and South Africa are prohibited.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. BEAC bank notes may be credited to Foreign Accounts in Francs when mailed to the National Directorate of the BEAC in Yaoundé by the foreign correspondents of authorized banks.

Imports and Import Payments

Imports from South Africa are prohibited. The import from all sources of certain “controlled” goods requires a special authorization (autorisation spéciale d’importation), in addition to an import license. All other imports, irrespective of origin, are subject to licensing when valued at CFAF 500,000 or more (CFAF 1 million or more in the case of large retail stores), but licenses are issued freely.

All import transactions must be domiciled with an authorized bank when their value exceeds CFAF 50,000. Import transactions by residents involving goods for use outside Cameroon must be domiciled with a bank in the country of final destination. Settlements for imports effected under an import license benefit from the authorization of uninterrupted transfer given to the authorized banks by the Ministry of Finance.

Payments for Invisibles

Payments in excess of CFAF 500,000 for invisibles to France (as defined above), Monaco, and the Operations Account countries require prior declaration but are permitted freely; those to other countries are subject to the approval of the Ministry of Finance. Payments for invisibles related to trade are permitted freely when the basic trade transaction has been approved or does not require authorization. Transfers of income accruing to nonresidents in the form of profits, dividends, and royalties are also permitted freely, subject to declaration, when the basic transaction has been approved. For tourist travel, residents traveling to countries other than France (as defined above), Monaco, and the Operations Account countries may obtain an exchange allocation of an amount equivalent to CFAF 200,000 a person a year; any foreign exchange remaining after return to Cameroon must be surrendered. For business travel, the corresponding allocation is the equivalent of CFAF 15,000 a day, subject to a maximum of CFAF 450,000 a trip. In practice, additional allocations may be allowed.

The transfer of rent from real property owned in Cameroon by foreign nationals is limited, in principle, to 50 percent of the income declared for taxation purposes, net of tax. Remittances for current repair and management of real property abroad are normally limited to the equivalent of CFAF 200,000 every two or three years. Depending on family status, the transfer of 20 percent or 50 percent of the salary of a foreigner working in Cameroon is permitted upon presentation of the appropriate pay voucher, provided that the transfer takes place within one month of the pay period concerned. Except in the case of foreigners working in Cameroon temporarily, payments of insurance premiums to foreign countries are not permitted if the same type of insurance is available in Cameroon. Resident and nonresident travelers to countries outside the French Franc Area may take out up to CFAF 20,000 in BEAC bank notes. Travelers to other countries of the French Franc Area may, subject to prior declaration, take out any amount in BEAC bank notes.

Nonresident travelers may take out foreign bank notes and coin up to the amount declared by them on entry, or up to CFAF 50,000 if no declaration was made.

Exports and Export Proceeds

All exports to South Africa are prohibited. Export transactions valued at CFAF 50,000 or more must be domiciled with an authorized bank. Exports to all countries are subject to domiciliation requirements for the appropriate documents. Proceeds from exports to all countries must be repatriated within 15 days of the payment date stipulated in the sales contract, and proceeds received in currencies, other than those of France or an Operations Account country, must be surrendered within a month after collection. Payments for exports must be made within 30 days from the arrival date of the merchandise at its destination.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and the Operations Account countries may be retained. All amounts due from residents of other countries in respect of services, and all income earned in those countries from foreign assets, must be collected within a month of the due date and surrendered within a month of collection if received in foreign currency. Resident and nonresident travelers may bring in any amount of bank notes and coin issued by the BEAC, the Bank of France, or a bank of issue maintaining an Operations Account with the French Treasury, as well as any amount of foreign bank notes and coin (except gold coin) of countries outside the French Franc Area.

Capital

Capital movements between Cameroon and France (as defined above), Monaco, and the Operations Account countries are free of exchange control. Capital transfers to all other countries require exchange control approval and are restricted, but capital receipts from such countries are permitted freely. Emigrants to countries outside the French Franc Area may transfer abroad their full savings, provided that they have met their tax obligations.

With the exception of controls over the sale or introduction of foreign securities in Cameroon, the controls on capital movements do not apply to relations with France (as defined above), Monaco, and the Operations Account countries. All foreign securities and titles embodying claims on nonresidents must be deposited with an authorized intermediary and be classified as foreign, whether they belong to residents or nonresidents.

Direct investments abroad2 require the prior approval of the Ministry of Finance, unless they take the form of a capital increase resulting from reinvestment of undistributed profits; the full or partial liquidation of such investments requires only a report after the fact to the Minister of Finance, unless the operation involves the relinquishing of a participation that had previously been approved as constituting a direct investment abroad. Foreign direct investments in Cameroon3 require prior declaration to the Minister of Finance, unless they take the form of a capital increase resulting from reinvestment of undistributed profits; the Minister has a period of two months from receipt of the declaration during which he may request postponement. The full or partial liquidation of direct investments in Cameroon requires only reporting to the Minister of Finance, unless the operation involves the relinquishing of a participation that had previously been approved as constituting a direct investment in Cameroon. Both the making and the liquidation of direct investments, whether these are Cameroonian investments abroad or foreign investments in Cameroon, must be reported to the Minister of Finance within 20 days following each operation. Direct investments are defined as investments implying control of a company or enterprise. Mere participation is not considered as direct investment, provided that it does not exceed 20 percent of the capital of a company whose shares are quoted on a stock exchange.

The issuing, advertising, or offering for sale of foreign securities in Cameroon requires prior authorization by the Minister of Finance and must subsequently be reported to him. Exempt from authorization, however, and subject only to a report after the fact are operations in connection with (1) loans backed by a guarantee from the Cameroonian Government, and (2) shares similar to securities whose issue, advertising, or offering for sale in Cameroon has already been authorized.

Borrowing abroad by physical or juridical persons, whether public or private, whose normal residence or registered office is in Cameroon, or by branches or subsidiaries in Cameroon of juridical persons whose registered office is abroad, requires prior authorization by the Minister of Finance, and must subsequently be reported to him. The following are, however, exempt from this authorization, and require only a report: (1) loans directly connected with the rendering of services abroad by the persons or firms mentioned above, or with the financing of commercial transactions either between Cameroon and countries abroad or between foreign countries, in which these persons or firms take part; and (2) loans contracted by registered banks and credit institutions.

Lending abroad by physical and juridical persons, whether public or private, whose normal residence or registered office is in Cameroon, or by branches or subsidiaries in Cameroon of juridical persons whose registered office is abroad, requires prior authorization by the Minister of Finance and must subsequently be reported to him. The following are, however, exempt from prior authorization, and require only a report: (1) loans constituting a direct investment abroad for which prior approval has been obtained, as indicated above; (2) loans directly connected with the rendering of services abroad by the persons or firms mentioned above, or with the financing of commercial transactions either between Cameroon and countries abroad or between foreign countries, in which these persons or firms take part; and (3) loans not exceeding CFAF 500,000, provided the maturity does not exceed two years and the rate of interest does not exceed 6 percent a year.

Under the Investment Code promulgated in July 1984, four categories of fiscal benefits may be granted to foreign and domestic firms undertaking new projects in the agricultural, livestock, forestry, tourism, construction, public works, mining, and industrial equipment maintenance sectors. The Investment Code aims to promote sectors considered strategic in the development plan, to generate employment and foreign exchange, and to geographically diversify economic activity. The type and duration of benefits vary according to, inter alia, the size of the investment, the location of the enterprise, the economic activity undertaken, the factor mix, and the production techniques employed. Category A benefits, to last over a period of ten years, apply to promotional enterprises investing over the period no less than CFAF 500 million, and satisfying a number of prerequisites. The benefits consist of the reduction (to 5 percent) of taxes and duties on imported goods and their exemption on domestic purchases of equipment, spare parts, and raw materials. Category B benefits, which apply to firms in priority sectors investing no less than CFAF 2.5 billion, include, in addition to those under Category A, a number of other fiscal benefits related to property transfers and amortizations for a period of five years. Category C benefits apply to small- and medium-size enterprises with an investment level of CFAF 500 million over a 10-year period. Benefits include exemption from a number of asset and income levies. The duration of the benefits extends to 15 years for firms operating outside the areas of highest industrial concentration. Finally, under Category D, strategic firms investing over CFAF 5 billion in 5 years may enjoy the same benefits as under Category B and are guaranteed the maintenance of the fiscal regime for 15 years. Ordinance No. 73/27 of August 30, 1973 provided that public entities should hold at least one third of the share capital of each banking institution and that the headquarters of each banking institution should be in Cameroon. This ordinance also required banks with foreign majority participation to submit to the monetary authorities information on all their current transactions abroad and to obtain prior approval for any changes in the structure of their equity holdings.

Gold

Residents are free to hold, acquire, and dispose of gold jewelry in Cameroon. They require the approval of the Directorate of Mines to hold gold in any other form. Such approval is normally given only to industrial users, including jewelers. Newly mined gold must be declared to the Directorate of Mines, which authorizes either its exportation or its sale to domestic industrial users; exports are made only to France. Imports and exports of gold require prior authorization by the Directorate of Mines and the Minister of Finance, which is seldom granted for imports. Exempt from this requirement are (1) imports and exports by or on behalf of the monetary authorities, and (2) imports and exports of manufactured articles containing a minor quantity of gold (such as gold-filled or gold-plated articles). Both licensed and exempt imports of gold are subject to customs declaration.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Canada

(Position on December 31, 1985)

Exchange Arrangement

The currency of Canada is the Canadian Dollar. The authorities of Canada do not maintain margins in respect of exchange transactions, and exchange rates are determined on the basis of demand and supply conditions in the exchange market; however, the authorities intervene from time to time to maintain orderly conditions in that market. The principal intervention currency is the U.S. dollar. The closing interbank market rate for the U.S. dollar on December 31, 1985 was Can$1.3983 per US$1. Forward exchange rates are similarly determined in the market, and it is not the practice of the authorities to intervene. There are no taxes or subsidies on purchases or sales of foreign exchange.

On March 25, 1952 Canada notified the Fund that it was prepared to accept the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement.

Prescription of Currency

No prescription of currency requirements are in force.

Imports and Import Payments

Import licenses are required only for certain drugs; a few agricultural items; certain textile products, clothing, and footwear; certain endangered species of fauna and flora; natural gas; and material and equipment for the production or use of atomic energy. For some agricultural items, such as certain dairy products, licenses are generally not being issued. Commercial imports of certain commodities from any source are tightly controlled or prohibited; the main products affected are oleomargarine and used automobiles. Imports of women’s and girls’ nonrubber footwear are subject to a global quota. Imports of clothing and certain textile products from low-cost sources are subject to bilateral agreements. Imports of automobiles from Japan are effected within the framework of a bilateral understanding aimed at ensuring that such imports grow in a manner consistent with the expansion of total demand in the Canadian market.

Exports and Export Proceeds

The surrender of the proceeds from exports is not required, and exchange receipts are freely disposable. For security reasons, there is export control on strategic goods to all destinations except the United States. All exports to Albania, Bulgaria, the People’s Republic of China, Czechoslovakia, the German Democratic Republic and East Berlin, Hungary, the Democratic People’s Republic of Korea, Mongolia, Poland, Romania, the U.S.S.R., and Viet Nam are subject to control, although certain goods of Canadian origin may be exported to these destinations under the authority of a general export permit. All exporters are eligible for certain financial facilities operated by the Export Development Corporation (EDC), including political risk insurance.

Payments for and Proceeds from Invisibles

No exchange control requirements are imposed on exchange payments for, or exchange receipts from, invisibles.

Capital

No exchange control requirements are imposed on capital receipts or payments by residents or nonresidents. Apart from specific restrictions in the financial, broadcasting, and uranium sectors, inward direct investment is governed by the Investment Canada Act, under which new foreign investments in industries other than those deemed to be culturally sensitive are subject to notification but not review, and direct takeovers involving assets of less than Can$5 million (Can$50 million for indirect takeovers) are exempt from review. Takeover bids that are subject to review are required only to pass a test of yielding net benefit to Canada. There are no controls over outward direct investment, nor over inward or outward portfolio investment. Although higher ratios may be authorized on a case-by-case basis, in general the domestic assets of a foreign-owned bank operating in Canada must not exceed 20 times its authorized capital; the total domestic assets of all such banks must not exceed 16 percent of the total domestic assets of all banks operating in Canada.

Gold

Residents may freely purchase, hold, and sell gold in any form, at home or abroad. However, exports of gold and all other products containing gold to countries named in the Area Control List require an export permit from the Minister of Industry, Trade, and Commerce under the authority of the Export and Import Permits Act. Gold of U.S. origin requires a permit when re-exported to all countries except the United States. Commercial imports of articles containing minor quantities of gold, such as watches, are unrestricted and free of license. Legal tender gold coins with a face value of Can$100 have been issued annually since 1976, and Can$50 “bullion” coins, containing one ounce of gold, have also been issued since 1979. Beginning in 1982, Can$10 and Can$5 coins containing ¼ and 110 ounce of gold, respectively, have also been issued.

Changes During 1985

Imports and Import Payments

January 1. In line with GATT obligations, Canada commenced implementation of the International Agreement on Customs Valuation. In addition, more items were brought under the coverage of existing bilateral export restraint arrangements as follows: Sri Lanka (winter outerwear), Thailand (underwear), and Singapore (underwear).

March 18. The Prime Minister of Canada and the President of the United States announced the establishment of a bilateral mechanism to chart all possible ways to reduce and eliminate existing barriers to trade between the two countries.

May 1. The General Preferential Tariff (GPT) rate was withdrawn for three years with respect to imports of rubber inner tubes, excluding bicycle tubes.

May 23. The budget of May 23, 1985 introduced legislation to raise the free General Preferential Tariff rate on motor vehicle parts to two thirds of the Most Favored Nation (MFN) rate and proposed an increase in the GPT tariff on automobiles and other motor vehicles from developing countries to two thirds of the MFN rate, beginning on January 1, 1987. Several amendments were also introduced to provide for lower rates of duty on various goods not made in Canada, as well as provision for duty-free entry for certain imports from developing countries, including field hockey sticks, handrolled cigars, timber, lumber, and wood moldings. The budget also introduced legislation allowing Canadian travelers to import, free of duties and taxes, goods worth up to Can$100 any number of times during the year after an absence of at least 48 hours abroad. (Previous provisions limited such importation to once a calendar year.)

June 1. Under Article 3 of the Multi-Fiber Agreement (MFA), a unilateral restraint was placed on imports of sportswear from Malaysia. (This measure was replaced by a bilateral agreement in October 1985.)

June 11. Global quotas on imports of beef and veal were raised as a result of consultations with suppliers.

July 1. Imports of T-shirts and sweatshirts from Brazil were brought under the special arrangement on control of imports of clothing items from that country.

July 3. Canada and Japan confirmed their understanding with respect to Japanese automobile exports to Canada for the period April 1, 1985 to March 31, 1986, namely, that such Japanese exports would be allowed to grow in a manner consistent with the total growth in the Canadian market. On this basis, it was expected that Japanese exports would amount to about 18 percent of the 1985/86 market, a level in unit terms significantly above 1984/85, in line with the prevailing robust state of automobile sales in Canada.

September 17. An agreement was reached with Indonesia to add eight products (blouses, sportswear, sweaters, sleepwear, underwear, jackets, outer shorts, and winter outerwear) to the coverage of the existing bilateral restraint arrangement on Canadian imports from that country.

September 26. The Prime Minister announced Canada’s interest in negotiating a free trade arrangement with the United States.

October 4. A bilateral restraint agreement was reached with Bangladesh in regard to imports of tailored-collar shirts and jackets from that country.

October 29. Royal assent was given to the legislation implementing, with effect from May 24, 1985, the tariff amendments introduced in the May 23 budget.

November 20. With effect from December 1, 1985, the Government announced a new regime for footwear quotas, providing for the termination of all footwear quotas, with the exception of women’s and girls’ footwear. The remaining quotas were to be phased out over the following three years, with increases in quota levels of 6 percent the first year, 8 percent the second year, and 10 percent the third year.

November 22. The Government announced that Canada would seek enabling authority to join with the United States and Japan in eliminating tariffs on computer parts and semiconductors.

Cape Verde

(Position on December 31, 1985)

Exchange Arrangement

The currency of Cape Verde is the Cape Verde Escudo, which is pegged to a weighted basket of currencies representing nine important trading partners. The exchange rate of the Cape Verde escudo in terms of the U.S. dollar, the intervention currency, is fixed daily on the basis of quotations for the U.S. dollar and the other currencies included in the basket. On December 31, 1985 the buying and selling rates for the U.S. dollar were C.V. Esc 85.07 and C.V. Esc 85.68, respectively, per US$1. There are no taxes or subsidies on purchases or sales of foreign exchange.

Administration of Control

All foreign exchange transactions are under the control of the Directorate of Foreign Relations and Exchange Control (Drecc), which is a department of the Bank of Cape Verde (the central bank). All imports, exports, and re-exports are subject to licensing, except for transactions not exceeding C.V. Esc 2,500. Foreign exchange transactions, including the surrender of foreign exchange proceeds, are effected through the central bank.

Prescription of Currency

The central bank determines the currency in which export proceeds should be repatriated. Cape Verde has bilateral payments agreements with Angola and São Tomé and Principe.

Nonresident Accounts

Nonresidents may open demand deposit accounts in local currency. These accounts may be credited only with the proceeds from the sale or surrender of receipts of convertible currencies and may be debited for payment of any obligations in Cape Verde. Outward transfers of balances from such accounts may be made freely. Embassies and foreign officials of embassies are required to open special accounts in foreign currency and in local currency; such accounts must be replenished exclusively with foreign exchange.

Special Accounts (Emigrants)

Three types of special interest-bearing deposit accounts are available for emigrants: (a) foreign exchange deposit accounts; (b) savings-credit deposit accounts; and (c) special accounts in Cape Verde escudos. These accounts can only be credited with convertible foreign currencies. Holders of savings-credit deposit accounts can benefit from loans on special terms for financing small-scale projects.

Imports and Import Payments

All imports are subject to licensing, except for transactions not exceeding C.V. Esc 2,500. Licenses, which are issued by the General Directorate of Commerce in the State Secretariat for Trade and Tourism, require the visa of the central bank and are generally valid for 90 days, but are renewable. The provision of foreign exchange is guaranteed when the license has been previously certified by the central bank. Licenses are in general granted liberally for imports of medicines, capital goods, and other development-related equipment. Imports of nonessentials are restricted.

Payments for Invisibles

All payments for invisibles require prior authorization. Transfers for tourism are limited to a maximum of C.V. Esc 6,000 a person a year (C.V. Esc 3,000 for children under 15 years). When traveling accompanied by his family, a resident of Cape Verde may take out in foreign currency the equivalent of C.V. Esc 6,000 plus C.V. Esc 4,000 for each family member under 15, but the total transfer for each family may not exceed the equivalent of C.V. Esc 20,000. Cape Verdean nationals emigrating or going on tourist trips abroad are required to buy round-trip tickets in advance and to make a deposit equivalent to a one-way ticket to the country of destination; this deposit is refunded upon return to Cape Verde. Cape Verdean nationals studying abroad are allowed up to a maximum of C.V. Esc 6,000 on leaving the country, and students who do not hold scholarships are, in addition, entitled to C.V. Esc 5,000 a month. The equivalent of C.V. Esc 20,000 is authorized for each business trip and C.V. Esc 15,000 a trip for medical treatment; these latter amounts may be increased upon presentation of evidence of need.

Transfers by foreign technical assistance personnel working in Cape Verde are authorized within the limits specified in the individual contracts. These contracts, as well as other contracts involving foreign exchange expenditures, are subject to prior screening by the central bank. Requests by other foreigners are examined on a case-by-case basis. The export of domestic currency by travelers is prohibited. Foreign travelers may bring in any amount of foreign currency but may re-export only up to the amount of currency declared upon entry.

Exports and Export Proceeds

All exports are subject to licensing and to approval by the central bank, except for transactions not exceeding C.V. Esc 2,500. Export proceeds must be repatriated within three months from the date of issuance of the license, but this period may be extended.

Proceeds from Invisibles

Receipts from invisibles must be surrendered to the central bank. The import of Cape Verdean bank notes is prohibited.

Capital

Any private capital transaction must be approved in advance by the central bank, but legally imported capital may be re-exported without limitation. The export of resident-owned capital is not normally permitted.

Gold

Imports, exports, or re-exports of gold either in coin or bars require prior licensing by the monetary authorities.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Central African Republic

(Position on December 31, 1985)

Exchange Arrangement

The currency of the Central African Republic is the CFA Franc,1 which is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 = F 0.02. Exchange transactions in French francs between the BEAC and commercial banks take place at the rate of CFAF 50 = F 1, free of commission. Buying and selling rates for certain other foreign currencies are also officially posted, with quotations based on the fixed rate for the French franc and the rates for the currencies concerned in the Paris exchange market. A commission of 0.25 percent is levied on all capital transfers to countries that are not members of the BEAC, except those made for the account of the Treasury and for the expenses of students. There are no taxes or subsidies on purchases or sales of foreign exchange.

With the exception of those relating to gold, the exchange control measures of the Central African Republic do not apply to (1) France (and its Overseas Departments and Territories) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Benin, Burkina Faso, Cameroon, Chad, the Comoros, the Congo, Côte d’Ivoire, Gabon, Mali, Niger, Senegal, and Togo). Hence, all payments to these countries may be made freely. All other countries are considered foreign countries.

Administration of Control

All draft legislation, directives, correspondence, and contracts having a direct or indirect bearing on the finances of the State require the prior approval of the Minister of Finance, who has delegated his approval authority to the Director of the Budget. The Autonomous Amortization Fund (CAADE) in the Ministry of Finance supervises borrowing abroad, while the Office of Foreign Financial Relations in the same ministry supervises lending abroad, issuing, advertising, or offering for sale foreign securities in the Central African Republic, and inward and outward direct investment. Exchange control is administered by the Minister of Finance, who has delegated some of his approval authority to the BEAC,2 to the authorized banks, and to the Postal Administration. All exchange transactions relating to foreign countries must be effected through authorized banks. Import and export licenses are issued by the Directorate of Foreign Trade in the Ministry of Commerce and Industry, except those for gold, which are issued by the BEAC.

Prescription of Currency

Since the Central African Republic is an Operations Account country, settlements with France (as defined above), Monaco, and the Operations Account countries are made in CFA francs, French francs, or the currency of any other institute of issue that maintains an Operations Account with the French Treasury. Settlements with all other countries are usually made in any of the currencies of those countries or in French francs through Foreign Accounts in Francs.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. The principal nonresident accounts are Foreign Accounts in Francs. BEAC bank notes received by the foreign correspondents of authorized banks and mailed to the BEAC agency in Bangui by the Bank of France or the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO) may be credited freely to Foreign Accounts in Francs.

Imports and Import Payments

All imports from South Africa are suspended. The import from all countries of a few commodities that are also produced domestically is prohibited. The import of certain foodstuffs is not authorized unless local production of these commodities is inadequate. Imports of certain goods, when not originating in a member country of the Central African Customs and Economic Union (UDEAC), may be made only in given ratios to purchases of the local product. The import of firearms is prohibited irrespective of origin. All other imports from countries in the French Franc Area may be made freely and without an import license. All other imports from EC countries (the original member states) are also free from quantitative restrictions. Imports from all countries outside the French Franc Area are subject to licensing within the framework of an annual import program. All import transactions relating to foreign countries must be domiciled with an authorized bank. The import license entitles importers to purchase the necessary exchange, provided that the shipping documents are submitted to the authorized bank. There has been some accrual of arrears on external payments owing to the imposition of statutory ceilings on central bank credit to the Government and an ensuing shortage of domestic currency with which to purchase foreign exchange.

Payments for Invisibles

Payments for invisibles to France (as defined above), Monaco, and the Operations Account countries are permitted freely; those to other countries are subject to approval. For many types of payment the approval authority has been delegated to authorized banks. Payments for invisibles related to trade are permitted freely when the basic trade transaction has been approved or does not require authorization. Transfers of income accruing to nonresidents in the form of profits, dividends, and royalties are also permitted freely when the basic transaction has been approved.

Residents traveling as tourists to countries other than France (as defined above), Monaco, and the Operations Account countries may obtain an exchange allocation of an amount equivalent to CFAF 50,000 a year for each person; of this allocation, an amount equivalent to CFAF 25,000 may be taken out in foreign bank notes. Any exchange in excess of the equivalent of CFAF 5,000 that remains after return to the Central African Republic must be surrendered. For business travel to foreign countries, there is a special allocation of the equivalent of CFAF 10,000 a person a day, subject to a maximum of CFAF 100,000 a trip, for travel to certain listed countries; the allocation for business travel to any other foreign country is CFAF 15,000 a day, up to CFAF 150,000 a trip; of this allocation, an amount equivalent to CFAF 5,000 may be taken out in foreign bank notes.

The transfer of the entire net salary of a foreigner working in the Central African Republic is permitted upon presentation of the appropriate pay voucher, provided that the transfer takes place within three months of the pay period. Travelers to foreign countries may take out up to a maximum of CFAF 10,000 in BEAC bank notes, French bank notes, and bank notes issued by any other institute of issue maintaining an Operations Account with the French Treasury. Travelers to other countries may take out any amount in BEAC bank notes.

Nonresident travelers may take out foreign currency and other foreign means of payment up to the amount declared by them on entry; they may reconvert up to CFAF 50,000 in BEAC bank notes into foreign currency.

Exports and Export Proceeds

All exports to South Africa are suspended. All exports of cotton, coffee, corn, tobacco, peanuts, palm oil, meat, and diamonds require a license. All other exports to countries in the French Franc Area may be made freely. All exports to countries outside this area require licenses, which are issued freely.

Proceeds from exports to foreign countries must be collected and repatriated within one month from the due date; the latter must not be later than 90 days after the arrival of the goods at their destination, unless special authorization is obtained. Export proceeds received in currencies other than those of France or an Operations Account country must be surrendered. All export transactions must be domiciled with an authorized bank.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and the Operations Account countries may be retained. All amounts due from residents of other countries in respect of services, and all income earned in those countries from foreign assets, must be collected within a month of the due date and, if received in foreign currency, surrendered within a month of the date of receipt. Resident and nonresident travelers may bring in any amount of bank notes and coin issued by the BEAC, the Bank of France, or any other bank of issue maintaining an Operations Account with the French Treasury, as well as any amount of foreign bank notes and coin (except gold coin) of countries outside the French Franc Area.

Capital

Capital movements between the Central African Republic and France (as defined above), Monaco, and the Operations Account countries are free of exchange control; capital transfers to all other countries require exchange control approval and are restricted, but capital receipts from such countries are permitted freely. All foreign borrowing by the Government or its public and semipublic enterprises, as well as all foreign borrowing with a government guarantee, requires the prior approval of the Director of the Budget.

Special controls (additional to any exchange control requirements that may be applicable) are maintained over borrowing and lending abroad, over inward and outward direct investment, and over the issuing, advertising, or offering for sale of foreign securities in the Central African Republic; these controls relate to the transactions themselves, not to payments or receipts. With the exception of those controls over the sale or introduction of foreign securities in the Central African Republic, the measures do not apply to France (as defined above), Monaco, and the Operations Account countries.

Direct investments abroad3 require the prior approval of the Ministry of Finance unless they take the form of a capital increase resulting from reinvestment of undistributed profits; the full or partial liquidation of such investments also requires the prior approval of the Ministry of Finance unless the operation involves the relinquishing of a participation that had previously been approved as constituting a direct investment abroad. Foreign direct investments in the Central African Republic4 must be declared to the Minister of Finance, unless they take the form of a capital increase resulting from reinvestment of undistributed profits; the Minister has a period of two months from receipt of the declaration during which he may request postponement. The full or partial liquidation of direct investments in the Central African Republic must also be declared to the Minister, unless the operation involves the relinquishing of a participation that had previously been approved as constituting a direct investment in the Central African Republic. Both the making and the liquidation of direct investments, whether these are Central African Republic investments abroad or foreign investments in the Central African Republic, must be reported to the Minister within 20 days following each operation. Direct investments are defined as investments implying control of a company or an enterprise. Mere participation is not considered as direct investment, provided that it does not exceed 20 percent of the capital of a company whose shares are quoted on a stock exchange.

The issuing, advertising, or offering for sale of foreign securities in the Central African Republic requires prior authorization by the Minister of Finance. Exempt from authorization, however, are operations in connection with (1) loans backed by a guarantee from the Government, and (2) shares similar to securities whose issuing, advertising, or offering for sale in the Central African Republic has previously been authorized.

Borrowing abroad by physical or juridical persons, whether public or private, whose normal residence or registered office is in the Central African Republic, or by branches or subsidiaries in the Central African Republic of juridical persons whose registered office is abroad, requires prior authorization by the Minister of Finance. The following are, however, exempt from this authorization: (1) loans constituting a direct investment abroad for which prior approval has been obtained, as indicated above; (2) loans directly connected with the rendering of services abroad by the persons or firms mentioned above, or with the financing of commercial transactions either between the Central African Republic and countries abroad or between foreign countries, in which those persons or firms take part; (3) loans contracted by registered banks; and (4) loans other than those mentioned above, when the total amount outstanding of the loans does not exceed CFAF 50 million for any one borrower. The contracting of loans referred to under (4) that are free of authorization, and each repayment thereon, must be reported to the Office of Foreign Financial Relations within 20 days of the operation, unless the total outstanding amount of all loans contracted abroad by the borrower is less than CFAF 500,000.

Lending abroad by physical or juridical persons, whose normal residence or registered office is in the Central African Republic, or by branches or subsidiaries in the Central African Republic of juridical persons whose registered office is abroad, requires prior authorization by the Minister of Finance. The following are, however, exempt from this authorization: (1) loans granted by registered banks, and (2) other loans when the total amount outstanding of the loans does not exceed CFAF 50 million for any one lender. The making of loans that are free of authorization, and each repayment thereon, must be reported to the Office of Foreign Financial Relations within 20 days of the operation, except when the amount of the loan granted abroad by the lender is less than CFAF 500,000.

Under Law No. 62/355 of February 19, 1963 (as amended by Ordinance No. 69/47 of September 2, 1969) and UDEAC Decision No. 18/65 of December 14, 1965, industrial, tourist, agricultural, and mining enterprises (both foreign and domestic) established in the Central African Republic are granted, under certain conditions, a reduction in duties and taxes on the import of specified equipment; in addition, certain enterprises receive exemption from direct taxes on specified income.

The law also provides for three categories of preferential treatment in accordance with which fiscal and other privileges may be accorded to firms investing in new enterprises or in the expansion of existing ones in most sectors of the economy, except the commercial sector. Requests for approval for preferential treatment must be submitted to the Minister of Industry, who is the Chairman of the Investment Commission, which considers the application. If a positive decision is given by the Commission, the proposed authorization is submitted to the Council of Ministers. Preferential treatments A and C are granted by decree issued by the Council of Ministers. Preferential treatment B is granted by an Act of the Board of Directors of the former Equatorial Customs Union upon the recommendation of the Council of Ministers.

Gold

Residents are free to hold, acquire, and dispose of gold in any form in the Central African Republic. Imports and exports of gold from or to any other country require a license, which is seldom granted; in practice, imports and exports are made by an authorized purchasing office. Exempt from prior authorization are (1) imports and exports by or on behalf of the Treasury, and (2) imports and exports of manufactured articles containing a minor quantity of gold (such as gold-filled or gold-plated articles). Both licensed and exempt imports of gold are subject to customs declaration. Certain companies have been officially appointed as Offices for the Purchase, Import, and Export of Gold and Raw Diamonds.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Chad

(Position on December 31, 1985)

Exchange Arrangement

The currency of Chad is the CFA Franc,1 which is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 = F 0.02. Exchange transactions in French francs between the BEAC and commercial banks take place at the rate of CFAF 50 = F 1. Buying and selling rates for certain other foreign currencies are also officially posted, with quotations based on the fixed rate for the French franc and the rates for the currencies concerned in the Paris exchange market. A commission of 0.25 percent is levied on all capital transfers to countries that are not members of the BEAC, except those made for the account of the Treasury and for the expenses of students. There are no taxes or subsidies on purchases or sales of foreign exchange.

With the exception of those relating to gold, Chad’s exchange control measures do not apply to (1) France (and its Overseas Departments and Territories) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Benin, Burkina Faso, Cameroon, the Central African Republic, the Comoros, the Congo, Côte d’Ivoire, Gabon, Mali, Niger, Senegal, and Togo). Hence, all payments to these countries may be made freely. All other countries are considered foreign countries.

Administration of Control

The Office of the Minister of Economy and Commerce supervises borrowing and lending abroad, the issuing, advertising, or offering for sale of foreign securities in Chad, and inward and outward direct investment; it also issues import and export authorizations for gold. Exchange control is also administered by the Minister of Economy and Commerce, who has delegated his approval authority in part to the authorized banks. All exchange transactions relating to foreign countries must be effected through authorized banks. Import and export licenses are issued by the Foreign Trade Office in the Ministry of Economy and Commerce.

Prescription of Currency

Since Chad is an Operations Account country, settlements with France (as defined above), Monaco, and the Operations Account countries are made in CFA francs, French francs, or the currency of any other institute of issue that maintains an Operations Account with the French Treasury. Settlements with all other countries are usually made through correspondent banks in France in any of the currencies of those countries or in French francs through Foreign Accounts in Francs.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. BEAC bank notes may be credited freely to Foreign Accounts in Francs maintained by the foreign correspondent of an authorized bank, provided that the notes are mailed to the BEAC agency in Chad, by the correspondent bank concerned.

Imports and Import Payments

Imports from South Africa are prohibited. Imports of wheat, wheat flour, and sugar from all sources require licenses. All other imports from countries in the French Franc Area and from EC countries (the original member states), other than France, may be made freely. All imports from non-EC countries outside the French Franc Area are subject to licensing in accordance with an annual import program. This program and the amount of foreign exchange required to implement it are determined by the Minister of Economy and Commerce on the basis of proposals drawn up by the Committee on Imports.

The import program contains global quotas for imports from non-EC countries outside the French Franc Area and a special quota for imports of cotton textiles from countries with abnormal competitive advantages. In addition, the program contains global quotas for imports of wheat, wheat flour, and sugar from EC countries, countries in the French Franc Area, as well as other countries. Specified imports from certain neighboring countries not belonging to the French Franc Area up to a value of CFAF 3 million a year in each direction for a single importer may be made through compensation transactions. The issuance of import licenses for sugar and a specified brand of cigarettes has been suspended until further notice.

All import transactions valued at CFAF 100,000 or more and relating to foreign countries must be domiciled with an authorized bank. Import licenses entitle importers to purchase the necessary exchange, provided that the shipping documents are submitted to the authorized bank. Forward cover for imports from foreign countries is permitted only for specified commodities and requires the prior approval of the Office of the Minister of Economy and Commerce. There has been some accumulation of arrears on external payments owing to the imposition of statutory ceilings on central bank credit to the Government and an ensuing shortage of domestic currency with which to purchase foreign exchange.

Payments for Invisibles

Payments for invisibles to France (as defined above), Monaco, and the Operations Account countries are permitted freely; those to other countries are subject to approval. For many types of payment the approval authority has been delegated to authorized banks. Payments for invisibles related to trade are permitted freely when the basic trade transaction has been approved or does not require authorization. Transfers of income accruing to nonresidents in the form of profits, dividends, and royalties are also permitted freely when bona fide. Some current payments, however, may be subject to delay.

For tourist travel, residents traveling to countries other than France (as defined above), Monaco, and the Operations Account countries may obtain an exchange allocation of an amount equivalent to CFAF 200,000 a person a trip, for any number of trips a year. For pilgrimage to Mecca, an additional allocation of the equivalent of CFAF 200,000 may be granted. For business travel to foreign countries, there is a daily allocation of the equivalent of CFAF 60,000, with a maximum allocation of the equivalent of up to CFAF 500,000 a person a trip; the Office of the Minister of Economy and Commerce may approve additional amounts. Travelers to foreign countries may take out up to a maximum of CFAF 30,000 in BEAC bank notes. Travelers to other countries may take out any amount in BEAC bank notes.

Nonresident travelers may take out foreign bank notes and coin up to the amount declared by them on entry, in addition to amounts remitted from foreign bank accounts. If no declaration has been made, they may take out up to the equivalent of CFAF 150,000, in addition to a maximum of CFAF 30,000 in BEAC bank notes.

Exports and Export Proceeds

Exports to South Africa are prohibited. All exports to non-EC countries outside the French Franc Area require licenses. Specified exports to certain neighboring countries, including Nigeria and Sudan, may be made through compensation transactions. Exports of cotton are the monopoly of the Société Cotonnière du Tchad (Cotontchad).

Export transactions relating to foreign countries must be domiciled with an authorized bank when their value exceeds CFAF 50,000. Export proceeds received in currencies other than those of France (as defined above), Monaco or an Operations Account country must be surrendered. Export proceeds normally must be received within 180 days after the arrival of the commodities at their destination. The proceeds must be collected, and be surrendered if received in a foreign currency, within one month of the due date.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and Operations Account countries may be retained. All amounts due from residents of other countries in respect of services, and all income earned in those countries from foreign assets, must be collected and, if received in foreign currency, be surrendered within two months of the due date. Resident and nonresident travelers may bring in any amount of bank notes and coin issued by the BEAC, the Bank of France, or any other bank of issue maintaining an Operations Account with the French Treasury, as well as any amount of foreign bank notes and coin (except gold coin) and other foreign means of payment. Foreign bank notes and coin in excess of the equivalent of CFAF 20,000 brought in by residents must be exchanged for CFA francs within eight days of their return.

Capital

Capital movements between Chad and France (as defined above), Monaco, and the Operations Account countries are free of exchange control; capital transfers to all other countries require exchange control approval and are restricted, but capital receipts from such countries are permitted freely. All foreign securities, foreign currency, and titles embodying claims on foreign countries or nonresidents that are held in Chad by residents or nonresidents must be deposited with authorized banks in Chad.

Special controls (additional to any exchange control requirements that may be applicable or suspended insofar as they would be contrary to the exchange control regulations) are maintained over borrowing and lending abroad, over inward and outward direct investment, and over the issuing, advertising, or offering for sale of foreign securities in Chad; these controls relate to the transactions themselves, not to payments or receipts. With the exception of those controls over the sale or introduction of foreign securities in Chad, the measures do not apply to France (as defined above), Monaco, and the Operations Account countries.

Direct investments abroad2 require the prior approval of the Minister of Economy and Commerce, irrespective of the method of financing; the full or partial liquidation of such investments also requires the prior approval of the Minister. Foreign direct investments in Chad3 require the prior approval of the Minister of Economy and Commerce unless they take the form of a mixed-economy enterprise. The full or partial liquidation of direct investments in Chad must also be declared to the Minister. Both the making and the liquidation of direct investments, whether these are Chadian investments abroad or foreign investments in Chad, must be reported to the Minister within 20 days of each operation. Direct investments are defined as investments implying control of a company or enterprise.

The issuing, advertising, or offering for sale of foreign securities in Chad requires prior authorization by the Minister of Economy and Commerce. Exempt from authorization, however, are operations in connection with (1) loans backed by a guarantee from the Chadian Government, and (2) shares similar to securities whose issue, advertising, or offering for sale in Chad has previously been authorized.

Borrowing abroad by physical or juridical persons, whether public or private persons, whose normal residence or registered office is in Chad, or by branches or subsidiaries in Chad of juridical persons whose registered office is abroad, requires prior authorization by the Minister of Economy and Commerce. The following are, however, exempt from this authorization: (1) loans constituting a direct investment abroad for which prior approval has been obtained, as indicated above; (2) loans directly connected with the rendering of services abroad by the persons or firms mentioned above, or with the financing of commercial transactions either between Chad and countries abroad or between foreign countries in which these persons or firms take part; and (3) loans other than those mentioned above, when the total amount outstanding of the loan does not exceed CFAF 10 million for any one borrower, with an interest rate not higher than 7 percent and a maturity of two years or less. The contracting of loans referred to under (3) that are free of authorization, and each repayment thereon, must be declared to the Minister within 30 days of the operation.

Lending abroad by physical or juridical persons, whether public or private persons, whose normal residence or registered office is in Chad, or by branches or subsidiaries in Chad of juridical persons whose registered office is abroad, requires prior authorization by the Minister of Economy and Commerce. The following are, however, exempt from this authorization: (1) loans directly connected with the rendering of services abroad by the persons or firms mentioned above, or with the financing of commercial transactions either between Chad and countries abroad or between foreign countries in which these persons or firms take part; and (2) other loans, when the total amount outstanding of these loans does not exceed CFAF 5 million for any one lender. The making of loans referred to under (2) that are free of authorization, and each repayment thereon, must be declared to the Minister within 30 days of the operation. Commercial banks must maintain in Chad a specified minimum proportion of their assets.

Under the Investment Code of August 26, 1963, any enterprise established in Chad, whether domestic or foreign, is granted, under certain conditions, reduced duties and taxes on specified imports, as well as exemption from direct taxes on specified income. The code also provides for three categories of preferential treatment, in accordance with which certain fiscal and other privileges may be accorded to firms investing in specified new industries or in the expansion of existing ones. Requests for preferential treatment must be submitted to the Minister of Economy and Commerce, who, after examining the documents, transmits them to the Investment Commission. After an opinion has been given by that Commission, the project is submitted to the Council of Ministers.

Gold

Chad has issued gold coins with face values of CFAF 1,000, 3,000, 5,000, 10,000, and 20,000, which are legal tender. Residents who are not producers of gold may not hold unworked gold unless specifically authorized. Imports and exports of gold, whether unworked or refined, require prior authorization by the Office of the Minister of Economy and Commerce and by the Directorate of Energy, Mines, and Geology as well as the visa of the Foreign Trade Office. Exempt from this requirement are (1) imports and exports by or on behalf of the monetary authorities, and (2) imports and exports of manufactured articles containing a minor quantity of gold (such as gold-filled or gold-plated articles). Exports of unworked gold and of raw diamonds (as well as domestic purchases and sales of both) are the monopoly of the Office for Purchases, Sales, Imports, and Exports (Bavie), which is an approved private company. Unworked gold may be exported only to France. Both licensed and exempt imports of gold are subject to customs declaration.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Chile

(Position on December 31, 1985)

Exchange Arrangement1

The currency of Chile is the Chilean Peso (Ch$). The official exchange rate of the Chilean peso is pegged to the U.S. dollar, at a rate adjusted at daily intervals according to a schedule established on the basis of the domestic rate of inflation during the previous month, less the estimated world rate of inflation. On December 31, 1985 the official exchange rate was Ch$180.22 per US$1. Foreign exchange dealers, the Banco del Estado, commercial banks, exchange houses, and other authorized entities must trade in foreign exchange within a band of 2 percent on either side of the official rate. The Central Bank only enters the foreign exchange market when either end of the band is reached. Direct transactions in foreign exchange among private parties can take place at freely negotiated exchange rates, provided that they are occasional and unpublicized. Commissions on exchange transactions are subject to a 20 percent value-added tax. The exchange rates of the Chilean peso with other currencies are determined on the basis of the peso exchange rate with respect to the U.S. dollar and of the U.S. dollar exchange rate with respect to other currencies quoted in foreign markets.

Beginning from July 1, 1985, in a modification of existing special arrangements, and for a period scheduled to terminate at the end of 1986, the Central Bank applies an exchange subsidy on service payments on external debt contracted before August 6, 1982. The following have access to the subsidy: (1) debtors to Chilean banks or financial companies whose debt is indexed to the official exchange rate; and (2) debtors with direct obligations abroad whose obligations were registered with the Central Bank. The subsidy is paid by means of notes with a maturity of between six and ten years, and bearing a 3 percent rate of interest. On December 31, 1985 the difference between the official rate and the subsidized rate was Ch$47.87 per US$1.

Administration of Control

The Executive Committee of the Central Bank is responsible for carrying out currency exchange policy. The Chilean Copper Commission is responsible for the supervision of copper exports and all imports of the copper industry; this supervision has to be exercised in accordance with general rules enacted by the Central Bank.

Prescription of Currency

Settlements with Argentina, Bolivia, Brazil, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela must be made through accounts maintained with each other by the Central Bank of Chile and the central banks of each of the countries concerned, within the framework of the multilateral clearing system of the Latin American Integration Association (LAIA). Settlements with the Dominican Republic must be made through clearing accounts established under a reciprocal credit agreement. Settlements with other countries take place in specified convertible currencies.

Imports and Import Payments

Most imports are free, with the exception of used motor vehicles. All imports require a document (known as Informe de Importación) issued by the Central Bank, which can be obtained and processed through the intermediary local commercial bank. Payment for visible trade transactions is not permitted unless an Informe de Importación has been issued.

Since March 23, 1983 imports are subject to a 120-day minimum financing requirement. Importers may purchase spot exchange before the payment date and place a deposit in foreign exchange at the Central Bank in anticipation of payment. Imports on deferred payment terms (cobertura diferida), that is, on credit terms exceeding 360 days, require prior authorization of the credit terms by the Central Bank. Virtually all imports are subject to a registration tax of up to 3 percent of value, which is offset against the applicable import duty. Since June 29, 1985 imports are subject to a uniform 20 percent tariff rate with some exceptions. Exceptions include tariffs bound under the GATT and tariffs negotiated with LAIA countries. Specific duties exist on imports of some dairy products, in particular powdered milk. In addition, tariff duties or surcharges are applied on imports of certain products that are subsidized in the country of origin.

Payments for Invisibles

Specified allowances exist for certain transactions; central bank authorization is required for others. The authorization is provided upon presentation of appropriate documentation. The established limit for tourist travel (in addition to the fares) is the equivalent of US$500 a trip for travel to Latin America and Caribbean countries and of US$1,500 a trip to other countries. For travel by land, 20 percent of the allowance is provided in the form of foreign exchange and the rest in money orders. Higher amounts for travel other than tourism may be authorized by the Central Bank of Chile, upon presentation of adequate justification.

Residents may purchase up to US$200 a month for study abroad, subscriptions to magazines, books, and pension payments, subject to presentation of appropriate documents. Higher amounts may be authorized by the Central Bank of Chile, upon presentation of adequate justification. Insurance activities within the country are limited to Chilean companies or to authorized foreign companies.

Exports and Export Proceeds

All commodities may be freely exported. All foreign exchange proceeds from exports in excess of US$1,000 must be surrendered through commercial banks, which are required to advise the Director of Operations of the Central Bank immediately (the Chilean Copper Commission in the case of copper). Commercial banks are authorized to purchase all foreign exchange proceeds spot from exporters. Exporters are allowed to retain up to 5 percent of export proceeds in a special Foreign Exchange Account, but the cumulative deposits in any such account during a 12-month period may not exceed US$500,000. Receipts from exports of the large copper mines must be deposited in a special foreign currency account at the Central Bank.

Export proceeds subject to surrender requirements must be repatriated within 90 days from the date of shipment and surrendered within 10 days from the date of repatriation; for specified goods this period may be extended.

As a means of expediting the operation of the drawback system in respect of small export values, exporters of eligible items (approximately 6 percent of the country’s annual exports), whose average annual exports in 1983 and 1984 were less than US$2.5 million, have an option of taking a subsidy equal to 10 percent of the net export value of their sales (within an overall value not exceeding US$7.5 million), in lieu of benefits under the existing import duty drawback scheme; alternatively, such exporters may avail themselves of the provisions of Decree No. 409 under which they may draw back their payments of duties on imported inputs.

Proceeds from Invisibles

In general, foreign exchange proceeds from invisibles must be surrendered only when required by a legal provision. Such is the case for commissions, proceeds from insurance, and other benefits related to foreign trade. There are no similar rules concerning the proceeds from royalties and copyright fees, family remittances, and the surplus foreign exchange from travel allocations.

Capital

Capital inflows are generally free, but most outflows are restricted. All new foreign borrowing or refinancing of existing credits by commercial banks requires prior approval by the Central Bank, with the exception of the taking up of lines of credit of up to one-year maturity with foreign correspondents and short-term loans for domestic relending up to a limit determined mainly by a bank’s capital and reserves. Foreign capital may enter Chile under one of the following arrangements, depending on the purpose and type of the investment, as follows:

(1) Article 14 of Decree No. 471 of October 17, 1977 stipulates, inter alia, that capital brought into the country in the form of foreign borrowing (créditos externos) must be sold through authorized banks when the investor (individual or corporate, national or foreign) has registered the transaction with the Central Bank. There is no minimum term on the maturity of foreign borrowing. Repatriation normally is allowed only in accordance with the amortization schedule established at the time of registration. Accelerated payments or extensions of payment are subject to special authorization.

(2) Article 15 of the same decree authorizes the Central Bank to make exemptions to the general rules enacted by it concerning the inflow and outflow of capital or credits.

(3) Decree-Law No. 600 of July 7, 1974 (amended by Decree-Law No. 1748 of March 18, 1977), the Foreign Investment Statute, establishes a regime for long-term capital investment. Authorization to make a foreign exchange investment in Chile is granted by the Foreign Investment Committee through a contract containing undertakings regarding the phasing of the investment program that will normally not exceed eight years for mining and three years for other projects. Investments of less than US$5 million may be approved by the Executive Secretary of the Committee, with a few exceptions. There are no limitations on profit remittances. Capital may be repatriated after three years. Foreign investors can opt for a guaranteed 49.5 percent a year total corporation income tax over a period of ten years, or may subject themselves to the tax system applicable to domestic corporations (currently 48.5 percent). Any foreign credits involved must be on terms authorized by the Central Bank. Foreign capital that entered Chile prior to the promulgation of Decree-Law No. 600 and that did not opt to be subject to that law continues to be subject to the regulations prevailing on the date of entry. Contract awards in the oil sector are decided by the Government under Presidential Decree; rights and responsibilities under such a Decree may be vested in the Empresa Nacional de Petróleo (ENAP) by the Ministry of Mines.

(4) Chapters XVIII and XIX of the Chilean Compendium of Rules on International Exchange, as amended in May 1985, regulate the purchase of selected Chilean foreign debt instruments abroad at a discount, as well as their repatriation. Eligible instruments are defined as external debt payable in foreign currency outside Chile with a maturity of more than one year, the debtor of which may be either the Treasury, the Central Bank, a public sector entity, the Development Corporation (CORFO), a financial institution, or a private sector resident having a guarantee from a financial institution. Chapter IX governs the use of Chilean debt instruments by foreign residents for direct investment in Chile with remittance rights. Upon approval of the Central Bank, the foreign currency obligation is exchanged into a domestic currency obligation, the proceeds of which must be used for direct investment purposes, with the intermediation of a financial institution; special regulations apply to repatriation of such capital as well as to dividend payments. Chapter XVIII specifies the regulations for the conversion into peso assets (without remittance rights) by residents and nonresidents, of debt purchased at a discount abroad with foreign exchange not obtained in the official market; such assets may be used to settle direct domestic debt, third-party debt or be exchanged for equity and fixed assets of financial institutions.2 Transactions under Chapter XVIII are also channeled through financial institutions, subject to an overall quota assigned on the basis of an auction system.

Gold

Chile has issued three types of gold coin, which are not legal tender. Monetary gold may be traded only by authorized houses, but ordinary transactions in gold between private individuals may be freely undertaken. Imports and exports of gold are unrestricted, subject to compliance with the normal formalities for import and export transactions, including registration with the Central Bank.

Changes During 1985

Exchange Arrangement

The official exchange rate was changed gradually in 1985 on the basis of the differential between domestic and estimated external inflation. In addition, the peso was depreciated against the dollar in two discrete steps, by 8.2 percent on February 27, and by 7.2 percent on June 29. Altogether, these actions involved an adjustment of the Chilean peso from Ch$127.80 = US$1 on December 31, 1984 to Ch$180.22 = US$1 on December 31, 1985, representing a depreciation of 29.1 percent.

June 29. The intervention points of the Central Bank were changed from 0.5 percent to 2 percent on either side of the official rate.

July 1. A schedule was announced, according to which the preferential dollar subsidy on the service payments in respect of certain foreign currency-denominated debts each amounting to at least US$50,000 would be gradually phased out and eliminated by the end of 1986.

Imports and Import Payments

February 27. The uniform tariff rate was reduced from 35 percent to 30 percent.

June 24. The uniform tariff rate was reduced from 30 percent to 20 percent.

Payments for Invisibles

December 11. The basic travel allowance was increased from US$200 to US$500 a trip for travel to Latin America and Caribbean countries, and from US$800 to US$1,500 a trip for travel to other countries.

Exports and Export Receipts

December 17. With retroactive effect from July 1, 1985, a law was introduced giving exporters of specified export products (sales of which did not exceed US$2.5 million in 1984) an option of a subsidy equal to 10 percent of the net value of their sales not exceeding an overall value of US$7.5 million, in lieu of benefits under the existing import duty drawback scheme.

Capital

May 14. Two schemes were introduced for the purchase of specified Chilean foreign debt instruments in secondary markets abroad and their conversion into domestic peso obligations. Under the first scheme (Article XIX of the Compendium on Rules on International Exchange), nonresidents could use the debt instrument for direct investment in Chile. Upon approval of the Central Bank, the foreign currency obligation would be exchanged into domestic currency, which should be used for direct investment purposes, with the intermediation of a financial institution; special regulations would apply to the repatriation of such capital as well as to dividend payments. Under the second scheme (Chapter XVIII), authorization was granted for residents and nonresidents to purchase selected debt instruments using foreign exchange not obtained in the official foreign exchange market, for conversion into pesos, without remittance rights. The peso assets could be used only to reduce domestic debt or to acquire specified assets owned by domestic banks. Transactions under Chapter XVIII would also be channeled through financial institutions, subject to an overall quota that would be assigned to the different institutions on the basis of an auction system.

People’s Republic of China

(Position on December 31, 1985)

Exchange Arrangement1

The currency of the People’s Republic of China is the Renminbi and its unit is the yuan. The exchange rate of the renminbi is adjusted in accordance with movements in the value of a basket of internationally traded currencies, weighted with reference to their importance in China’s external transactions and the trends in their relative values. The yuan-U.S. dollar rate is calculated directly from the value of the basket, while rates for 19 other currencies2 are determined from the cross rates. The exchange rate is published on a daily basis by the State Administration of Exchange Control; on December 31, 1985 the buying and selling rates were Y 3.1935 and Y 3.2095, respectively, per US$1. Published rates for currencies other than those that are important in China’s international transactions are changed whenever the calculated rate diverges from the previously published rate by 1 percent; for the important currencies, such as the Hong Kong dollar and the Japanese yen, a smaller margin of 0.5 percent is applied. Settlement for all spot transactions is effected at the official exchange rate.

Forward exchange rates are published for 15 currencies.3 China does not apply a system of forward premiums and discounts but instead uses the spot rate plus a forward charge. Forward transactions are only permitted in connection with an underlying trade transaction. When banks sell renminbi forward, a charge is levied; when they buy, no charge is levied except for the Japanese yen and the Swiss franc. Rates are given for one to six months; transactions can be renewed for a further six months, but not for longer than one year. Forward charges reflect interest rates and trends in international markets in the currencies concerned.

Administration of Control

The People’s Bank of China exercises central bank functions and control over foreign exchange; and the State Administration of Exchange Control (SAEC), as a government institution under the leadership of the People’s Bank of China, is responsible for implementing the exchange regulations and controlling all foreign exchange transactions in accordance with state policy. There are sub-bureaus in the provinces, main municipalities, autonomous regions, and special economic zones. Other banks and financial institutions, including affiliates of nonresident banks, may handle designated transactions with the approval of the SAEC. The China International Trust and Investment Corporation (CITIC) is authorized to conduct transactions connected with investments of foreign capital in China. Individuals and financial institutions may hold foreign exchange but may not deal in it or conduct arbitrage operations. Special exchange control measures are applied to special economic zones, the 14 designated coastal cities, and border regions.

Foreign exchange transactions are generally made in accordance with a foreign exchange plan. Those parts of the foreign exchange plan dealing with foreign trade, foreign loans, and China’s external assistance program are prepared by the Ministry of Foreign Economic Relations and Trade (MOFERT); the foreign exchange budgets of other government departments are prepared by the Ministry of Finance. The SAEC draws up the section of the plan covering local and provincial nontrade transactions, receipts from overseas Chinese, and individual receipts. The overall foreign exchange plan is coordinated and balanced by the SAEC; after it has been reviewed and reconciled with other plans by the State Planning Commission, it is submitted to the State Council for approval. Following approval, the plan is sent back to the various localities and ministries for implementation. The SAEC and the Bank of China are responsible for supervising the implementation of the foreign exchange plan.

In principle, the foreign exchange plan covers all transactions, including those with countries with which China maintains bilateral payments agreements.4 The annual plan is divided into quarterly plans, and, at the end of each quarter, the State Planning Commission reviews the implementation of the plan and determines whether corrections are necessary. That part of the foreign exchange plan dealing with trade is broken down by commodity. Unexpected events, such as changes in foreign trade policies, might necessitate a revision of the plan.

Prescription of Currency

Trade transactions with Bulgaria, Czechoslovakia, the German Democratic Republic, Hungary, the Democratic People’s Republic of Korea, Mongolia, Poland, Romania, and the U.S.S.R. are expressed in Swiss francs, and those with Cuba, in pounds sterling at the official exchange rate and settled through bilateral payments arrangements. In normal circumstances, imbalances emerging toward the end of each year are covered by increased deliveries of goods. Noncommercial transactions are settled on a current basis in convertible currencies, except for part of such transactions with the Democratic People’s Republic of Korea and Romania and all the transactions with Cuba, which pass through the clearing account. Payments to and from countries with which China has bilateral payments agreements are made in currencies and in accordance with the procedures set forth in those agreements. In other cases, where there are no specific regulations prescribing the currencies to be used in transactions, they are determined by terms agreed under the respective contracts. Bilateral trade and payments agreements are of two kinds: Type A agreements are designed to ensure balanced trade and include, for each good itemized, quantitative commodity lists or foreign exchange quota lists for those commodities that cannot be expressed in quantitative terms; these lists are binding on both parties. Most arrangements are of this type. Type B agreements (those with the Islamic Republic of Iran and Sierra Leone) provide such binding itemized lists only for the principal goods traded by the parties and also include nonbinding lists of secondary goods.

Nonresident and Foreign Currency Accounts

Nonresidents5 in China for a short period may open nonresident accounts with the Bank of China. Joint ventures may also open foreign exchange accounts and use them to make payments abroad. With the permission of the Bank of China, foreign banks may hold convertible renminbi accounts in connection with commercial or noncommercial transactions. Renminbi may be purchased for such an account only on presentation of documentary evidence that the money will be used in the designated transaction. The Bank of China may check any use made of renminbi in such accounts. Foreign banks in Special Economic Zones may lend in foreign exchange and accept foreign currency deposits from joint venture companies.

Individuals may open resident foreign currency accounts at the Bank of China and may withdraw funds from such accounts in the form of foreign currency.

Imports and Exports

All trade, both direct and indirect, with Israel, the Republic of Korea, and South Africa is prohibited.

The primary responsibility for formulating foreign trade policies and ensuring the implementation of regulations and policy measures rests with the MOFERT, which also issues the licenses required for all imports and a large number of exports; following the reform in the exchange and trade system effected in early 1985, the MOFERT no longer engages in direct foreign trade transactions on a trial basis and is no longer involved in the daily enterprise management of two trading corporations. Foreign trade is conducted by national foreign trade corporations and other entities licensed by the MOFERT to conduct foreign trade; in addition, certain manufacturing companies are permitted to engage directly in foreign trade, and some companies conduct foreign trade as agents on a commission basis. Exporters and importers can freely choose their agents; however, a limited number of essential import commodities continue to be handled by one of the 14 national foreign trade corporations.

All enterprises, other than registered national foreign trade corporations, need a license from the local foreign trade bureau to engage in trade or hold foreign exchange. Part of the proceeds of certain exports may be retained in a foreign exchange quota account with the Bank of China. All other foreign exchange earnings from exports must be repatriated and surrendered to the Bank of China, unless specific exception is granted by the SAEC, and may not be used directly to offset import payments. Before using their holdings of foreign exchange, enterprises other than the national foreign trade corporations must seek the approval of the SAEC. The Bank of China provides foreign exchange for imports on the basis of import licenses and approval by the SAEC. Residents may not pay for imports with local currency.

Foreign trade is based on an annual foreign trade plan drawn up by the MOFERT in conjunction with the State Planning Commission. The former sends directives on the preparation of the plan to all foreign trade corporations and to the foreign trade bureaus in the provinces, municipalities, and autonomous regions, which, in turn, meet with other interested entities and prepare lists of needed imports and goods available for export. The plans prepared at the local level are coordinated and balanced by the MOFERT and the State Planning Commission at national foreign trade planning conferences. The State Council grants final approval to the foreign trade plan.

Goods that can be produced domestically or for which adequate domestic substitutes are available are not included in the import plan. Priority is given in the import plan to goods that cannot be produced domestically in adequate quantities and those that are urgently needed by the State, especially for key projects. In the case of some goods that are not produced in adequate quantities but for which a good foreign market exists, part of the production may be allocated to export.

Importation of goods previously exported from China requires special authorization. The import and export of weapons, ammunition and explosives, radio receivers and transmitters, Chinese currency, manuscripts, printed and recorded materials, and films that are deemed to be detrimental to Chinese political, economic, cultural, and moral interests are prohibited. In addition, imports of poisons, narcotic drugs, diseased animals, and plants are prohibited, as is the export of valuable cultural relics and rare books, rare animals and plants, and precious metals and artifacts made from these metals. All imports and exports require prior inspection before the release by the General Administration of Customs. Exports of specified machine tools require a license from the State Administration for the Inspection of Import and Export Commodities, as a means of quality control.

The customs regulations in force are the Provisional Customs Law of the People’s Republic of China and the Customs Import and Export Tariff of the People’s Republic of China. The import tariff rates fall into two columns: minimum and general. The minimum applies to imports originating from countries with which China has concluded trade agreements containing reciprocal favorable tariff clauses;6 the general tariff applies to imports originating in countries with which China does not have such trade agreements. Import duties are generally levied on the c.i.f. value of goods. Under the general tariff, dutiable imports are subject to one of 17 rates ranging from 8 percent to 180 percent, while those under the minimum tariff are subject to one of 17 rates ranging from 3 percent to 150 percent. In addition to regular import duties, a regulatory import duty is applied to 15 selected products;7 the regulatory duty ranges generally between 40 percent and 80 percent.

Imports into Tibet from abroad are subject to a separate system of customs duties established by the People’s Government of the Tibet Autonomous Region. The tariff, however, only applies to goods imported directly into Tibet for use there. It does not apply to imports of other provinces, municipalities, and autonomous regions through Tibet, or to imports through Tibet by mail or brought in as part of the luggage carried by travelers; such imports are subject to the regular Chinese tariff.

In addition to customs duties, a consolidated industrial and commercial tax (a turnover tax also applied to other commodities) is levied on imports in accordance with the list contained in the Draft Regulations of the Consolidated Industrial and Commercial Tax of the People’s Republic of China. Raw materials imported for further processing are exempted from both customs duties and commercial taxes, provided that the products are all exported within a specified period. Most imports and exports by joint ventures are exempt from customs duties. Currently, 28 different commodities are subject to export duties.

Localities and enterprises may retain part of foreign exchange earned from export (including net foreign exchange earnings in a compensation trade), in accordance with state regulations. The percentage of export earnings that can be retained varies with the enterprise.

Special economic zones have been set up in Shantou, Shenzhen, Xiamen, and Zhuhai. Economic and technology development areas have been established in 14 designated coastal cities. Foreigners, overseas Chinese, and Chinese from the Hong Kong and Macao regions are permitted to invest in and open factories in these zones and areas. Raw materials, equipment, and machinery or parts and components thereof, means of transportation, and other means of production imported by and intended to be used in the production of the enterprises in the zones are exempt from import duties and the consolidated industrial and commercial tax.

Invisibles

Enterprises must sell their foreign exchange earnings from invisibles to the Bank of China, except for the portion they may retain in accordance with specific regulations. Foreign exchange remitted from abroad or from the Hong Kong and Macao regions to Chinese residents may be retained and used to open an account in the Bank of China or an authorized bank. Similarly, foreign exchange owned by immigrants or returning Chinese before becoming residents may be retained. Such retained foreign exchange may be sold to the Bank of China or remitted through the Bank of China, or taken out of China against certification by the Bank of China.

All foreign exchange earned by Chinese residents when working abroad, or in the Hong Kong or Macao regions, or earned from publication fees, copyright fees, awards, subsidies, honoraria, or other premiums, must be repatriated and may not be deposited abroad; but individuals may retain such earnings according to prevailing regulations. All the surrendered portion of foreign exchange remittances is accorded the privileged treatment given to remittances by overseas Chinese.

Foreign staff members and employees of foreign joint ventures, as well as those from the Hong Kong and Macao regions,8 may remit their salaries and other income earned in China, after payment of taxes and deduction of their living expenses in China and approval by the relevant local authorities. Profits of joint ventures may be remitted after taxation, in accordance with foreign exchange regulations; such remittances are subject to the approval of the local branch of the Bank of China and should be paid through the foreign exchange account of the joint venture. Remitted profits are subject to an additional tax of 10 percent, but only if the profits have been generated in areas other than the special economic zones and the economic and technological development areas in the 14 selected coastal cities.

If a Chinese resident wishes to spend money on travel abroad, receive his pension abroad, or remit money abroad, he must apply to the local SAEC bureau for approval. Such factors as the individual’s normal income and expenditure are examined to determine if approval is to be granted for remittances. In cases of serious illness, death, or injury affecting a Chinese resident’s parents, spouse, or children outside China, he may be allocated the necessary foreign exchange on presentation of documentary verification. If permission is granted to travel abroad, a Chinese resident is normally allowed to take a reasonable amount of foreign exchange to cover expenses for transport and subsistence; any surplus must be repatriated and surrendered to the Bank of China. There is no tax on travel. A Chinese resident who retires and emigrates is normally permitted to receive his pension abroad, but he is not normally permitted to remit the proceeds from any assets he may sell in China.

Foreign exchange remitted or brought in by nonresidents may be converted into either Chinese currency or foreign exchange certificates denominated in yuan. Foreign exchange certificates can be used solely by nonresidents in hotels, restaurants, and shops serving nonresidents, for purchasing airline tickets and through train or ship fares to Hong Kong and Macao, and for international telecommunications and parcel post charges. Special regulations apply in Guangdong province. Persons entering China must declare their holdings of foreign currency and may take out of China any unused foreign currency on presentation of the import declaration form issued by the customs. The import and export of Chinese bank notes are prohibited. Foreign exchange certificates may be imported, but their export is subject to the provision of documentation showing that they have been acquired legitimately. Chinese residents must show their authorization to export foreign currency at the border.

Income from royalties, dividends, interest, and rentals earned by foreign businesses without establishments in China is subject to a 20 percent withholding tax; a preferential rate of 10 percent is applied for foreign and overseas Chinese partners in joint ventures set up in the special economic zones and the economic and technological development areas in the old urban areas of the 14 coastal cities.

Joint ventures are required to be insured with Chinese insurance companies.

Capital

All foreign borrowing is subject to prior approval. All units wishing to borrow abroad must prepare a plan showing the kinds of imports for which the loan is intended. Such plans must indicate the total amount of foreign exchange needed and how much of it will be earned and how much will be borrowed from abroad. All such plans are submitted to the State Planning Commission, which reviews them in cooperation with the SAEC and the MOFERT. Loans for vital projects or projects that have a rapid rate of return are given priority approval. If the imports are for new construction, the plans are also reviewed by the State Economic Commission.

Loans from international financial institutions and foreign governments require the sanction of the State Planning Commission and the approval of the State Council. Loans from international development agencies are generally the responsibility of the Ministry of Finance or the China Investment Bank (an organization under the direction of the Ministry); intergovernmental loans are the responsibility of the MOFERT. Government departments, local governments, and enterprises are usually required to borrow through the Bank of China or with its guarantee, rather than borrowing directly abroad themselves. The State Planning Commission sets an annual limit on such borrowing. Foreign borrowing in the form of deferred payments requires the approval of the MOFERT. Resident organizations may not issue securities for foreign exchange unless approved by the People’s Bank of China.

All foreign direct investment projects are in principle subject to the approval of the MOFERT. However, a number of provincial and local authorities have been granted the authority to approve foreign direct investment projects up to specified amounts. The policy with respect to foreign capital is designed both to make up the insufficiency of domestic capital and to facilitate the introduction of modern technology and management. Most foreign exchange earned by joint ventures and other enterprises involving nonresident capital must be deposited with the Bank of China or another bank approved by the SAEC; outward transfers of capital generally require SAEC approval. Enterprises involved in the exploitation of offshore petroleum reserves may also hold foreign exchange abroad or in the Hong Kong or Macao regions. When a joint venture is wound up, the net claims belonging to the foreign investor may be remitted with SAEC approval through the foreign exchange account of the joint venture. Alternatively, the foreign investor may apply for repayment of his paid-in capital.

Profits of joint ventures, with the exception of firms in special economic zones and the 14 coastal cities, and those exploiting petroleum, natural gas, and other specified resources,9 are subject to tax at 33 percent (30 percent basic rate plus a 10 percent surcharge on the assessed tax). As mentioned above, remitted profits are subject to an additional tax of 10 percent, which is waived for joint ventures in the special economic zones and the economic and technological development areas of the 14 coastal cities. A joint venture scheduled to operate for ten years or more may be exempted from income tax in the first one or two profit-making years and be allowed reductions of 50 percent for the following three years. Joint ventures in low-profit operations, such as farming and forestry, or located in areas considered to be economically underdeveloped may, upon the approval of the Ministry of Finance, be allowed a further 15–30 percent reduction in income tax for the following ten years. A participant in a joint venture that reinvests its share of profit in China for a period of not less than five years may obtain a refund of 40 percent of the tax paid on the reinvested profit. Certain joint ventures established before the passing of tax regulations in August 1980 are subject to taxes at different rates.

Foreign companies, enterprises, and other economic organizations that have establishments in China engaged in independent business operations, or cooperative production, or joint business operations with Chinese enterprises are subject to tax on their net income. There are five levels of tax rates, ranging from 20 percent for the first Y 250,000 of profits to 40 percent for profits exceeding Y 1 million. In addition, a local income tax of 10 percent of the same taxable income is levied. Income from interest on deposits of foreign banks in China’s state banks and on loans from foreign banks to China’s state banks with a normal interest rate is subject to a 20 percent withholding tax. Foreign state banks originating in countries in which income from interest on deposits and loans of China’s state banks is exempted from income tax are correspondingly exempt from this Chinese tax. For interest income or leasing fees (less than the value of equipment) earned under credit agreements by foreign business without establishments in China, trade agreements, and leasing agreements signed by them with Chinese companies and enterprises during the period 1983–85, income tax is to be levied at the reduced rate of 10 percent (half of the normal rate) during the validity of the aforesaid agreements; interest earnings from export credits are entitled to income tax exemption. For fees collected by foreign businessmen for the use of special technology provided by them in such fields as agriculture, animal husbandry, research, energy, communications, transport, environmental protection, and the development of important techniques, income tax may, upon the approval of the tax authorities, be levied at the reduced rate of 10 percent, or be waived if the technology is advanced and is provided on favorable terms.

Foreign investment by Chinese enterprises is subject to approval; profits earned thereby must be sold to the Bank of China, except for a portion that may be retained locally as working balance. Chinese diplomatic and commercial organizations abroad, as well as businesses abroad and in the Hong Kong and Macao regions, are required to draw up annual foreign exchange plans.

Gold

The People’s Bank of China buys and sells gold and has central control over dealings in gold and silver. Sales of gold and silver are restricted to pharmaceutical, industrial, and approved uses. Private persons may hold gold but may not trade or deal in it. The amount of gold, gold products, silver, and silver products that may be imported is unlimited but must be declared on entry. When exporting gold or silver, the exporter must present an import document from the customs or a People’s Bank of China export permit. Nonresidents may buy gold and silver and gold and silver products at special stores but must present the invoice when exporting them.

Changes During 1985

Exchange Arrangement

January 1. The internal settlement rate was abolished.

November 20. Authorization was granted for Chinese residents to hold foreign exchange and open foreign exchange accounts and to deposit and withdraw funds in foreign exchange.

Prescription of Currency

January 1. The bilateral payments arrangement with Egypt was terminated.

Imports and Exports

January 22. The Philippines and China signed a US$400 million trade protocol covering a wide range of products expected to be traded in 1985.

January 25. China and Romania signed a protocol providing for a substantial increase in exchange of goods and services between the two countries during 1985.

January 29. A trade agreement for 1985 was signed between China and Hungary, providing for a large increase in the volume of trade between the two countries.

February 1. An agreement on trade and payments for 1985 was signed between Poland and China, providing for more than a doubling in mutual trade, compared to 1984.

February 22. A trade protocol for 1985 was signed between China and Cuba.

March 5. Under newly adopted regulations governing the export and domestic production of four types of textiles, exporters were required to obtain licenses before shipping such products to Hong Kong, Macao, and Japan.

March 11. China and Albania signed a trade and payments agreement for 1985.

May 11. China and the EEC signed a five-year trade and economic cooperation agreement intended to promote commercial relations between the two parties, particularly in new fields of advanced technology.

May 20. China and Ecuador signed a protocol on economic and technological cooperation.

May 24. China and Fiji signed an agreement on the establishment of direct trade, economic, and technical cooperation between the two countries.

July 10. China and the U.S.S.R. signed a goods exchange and payments agreement for 1986–1990. The agreement envisages that the trade volume between the two countries would increase by the equivalent of Sw F 35 billion during the following five years.

July 15. The State Council decided to impose an import regulatory tax on those products with a sharp differential between domestic and external prices, so as to control undue importation.

September 19. China and Ghana signed a trade agreement, essentially a renewal of the agreement for 1984-85.

October 4. A protocol on economic, scientific, and technological cooperation was signed between China and Czechoslovakia.

October 11. China and Romania signed an agreement on the bilateral economic relations during the period 1986–90, including exchange of goods between the two countries.

November 6. China and Libya signed a protocol aimed at consolidating bilateral cooperation between the two countries.

November 14. The first economic, trade, and technical cooperation agreement between China and the United Arab Emirates was signed.

November 15. China and Poland signed a trade agreement calling for an increase in bilateral trade between the two countries.

December 7. China and Albania signed a bilateral trade and payments agreement for 1986.

December 16. A protocol on exchange of goods (and payments) for 1986 was signed between China and Hungary.

December 24. China and the German Democratic Republic signed a bilateral trade and payments agreement.

Payments for Invisibles

March 8. In an easing of restrictions on possession of foreign currency by residents in certain provinces, authorization was granted for them to withdraw funds from banks in the form of foreign exchange. (Previously, Chinese nationals receiving inward foreign remittances had to deposit the funds with the Bank of China (BOC) and withdrawals could be made only in local currency.)

Capital

March 14. Regulations governing the establishment of foreign joint ventures in Shanghai Province were relaxed.

March 15. China and India signed a three-year agreement to develop economic and trade relations; the accord provided for encouraging joint ventures, the creation of consultancy services, the exchange of economic, trade, and technical delegations, and participation in international fairs in the two countries.

March 26. The Foreign Economic Contract Law was adopted.

April 1. The Chinese Patent Law, enacted in 1984, came into effect. In addition, China joined the Paris Convention for the Protection of Industrial Property.

April 1. The Ministry of Petroleum and Industry announced that foreign oil companies would be allowed to participate in exploration and development of oil and gas reserves in nine provinces and one autonomous region.

April 2. The State Council introduced a regulation on the control of foreign banks and joint venture banks in special economic zones.

August 22. China approved establishment of the first foreign branch bank office in the country since 1949. In addition, Hong Kong and Shanghai Banking Corporation (a foreign commercial bank) announced a plan to begin branch operations in Shenzhen, a special economic zone, in October 1985.

November 6. China and Libya signed a protocol aimed at consolidating bilateral cooperation between the two countries.

December 3. A joint venture bank, the first with foreign capital participation, was opened in Xiaman, a special economic zone, with the Panin Group of Hong Kong.

Colombia

(Position on December 31, 1985)

Exchange Arrangement

The currency of Colombia is the Colombian Peso. The Colombian authorities follow a policy of adjusting the peso in small amounts at relatively short intervals, taking into account (1) the movements of prices in Colombia relative to those in its major trading partners; (2) the level of Colombia’s foreign exchange reserves; and (3) Colombia’s overall balance of payments performance. Exchange surrender and foreign payments are generally effected through the medium of exchange certificates, which are traded in the official market at the official rate and in the stock exchange at varying rates of discount. In the case of export proceeds, exporters have the option of either immediate conversion or acquisition of exchange certificates with a maturity of 90 days. On December 31, 1985 the buying and selling rates in the official market for the U.S. dollar, the intervention currency, were Col$172.20 and Col$172.89, respectively, per US$1. Buying and selling rates for certain other currencies1 are also officially quoted, with daily quotations based on the buying and selling rates for the U.S. dollar in markets abroad. All exchange transactions are effected through the Bank of the Republic (the central bank) or authorized banks.

There are other effective exchange rates, which result from (1) a 6.5 percent tax on coffee export proceeds; (2) tax credit certificates granted at five different percentage rates for most export proceeds; (3) the imposition of a remittance tax at two different rates on certain service payments; (4) an advance deposit of Col$65 per US$1 on the purchase of foreign exchange for travel purposes; and (5) a 95 percent advance exchange license deposit for import payments. The peso equivalent of the Government’s exchange receipts from the export tax on coffee is credited to the Treasury’s Special Exchange Account at an accounting rate applied by the Bank of the Republic; the Government purchases exchange for all public debt payments and other expenditures included in the national budget at the same exchange rate.

The Bank of the Republic stands ready to sell exchange warrants (títulos canjeables por certificados de cambio) to government enterprises in the oil sector and to public sector recipients of external loans, against payment in pesos at the certificate market selling rate on the date of issue. These warrants, which are expressed in U.S. dollars and have a maturity of 24 months, are negotiable and may also be exchanged for exchange certificates, provided that the holder presents an exchange license. Within their period of validity, warrants may also be sold to the Bank of the Republic for pesos at the certificate market buying rate on the date of repurchase. Warrants bear interest at 1.5 points above the New York prime rate, if held by government enterprises in the oil sector, or an interest rate equal to that of the external loan, but never higher than 11 percent or lower than 7 percent, if held by public sector recipients of external loans. Warrants held longer than 24 months cannot be converted into exchange certificates but may be resold to the Bank at the certificate market rate on the last day of the twenty-fourth month.

Administration of Control

All imports and exports require prior registration at the Colombian Institute of Foreign Trade (Incomex). Exchange for payments must be purchased through the Bank of the Republic or the commercial banks, with an approved exchange license issued by the Exchange Office of the Bank of the Republic; however, payments for specified current transactions, when made through credit institutions, do not require prior exchange licenses but must be submitted to the Bank of the Republic for ex post authentication. All payments for study purposes require prior authorization by the Colombian Institute for International Education (Icetex). The Monetary Board is authorized periodically to draw up a foreign exchange budget and it did so in 1985. It can also establish priorities within that budget for the delivery of exchange, after setting aside the amounts necessary to cover the obligations of the Bank of the Republic and to service the external debt of the public agencies and the National Federation of Coffee Growers. The Foreign Trade Council (FTC), which includes representatives of the Ministry of Finance, Incomex, and other public entities, determines overall import and export policy and assigns foreign exchange for imports in the following order of priority: (1) raw materials and spare parts; (2) imports of El Cerrejon coal project; (3) public sector imports of agricultural products; (4) fuel imports; (5) capital goods imports for export industries; and (6) other imports. A joint Trade Commission (Comisión Mixta de Comercio Exterior), with representatives from the Ministry of Finance, Incomex, and the private sector, serves as an advisory committee on foreign trade. Incomex, through its Import Board, controls those imports that are subject to prior licensing, administers special import-export arrangements in the form of barter, clearing, and triangular trade operations, and also sets maximum import prices for certain commodities. The National Council for Economic and Social Policy issues directives concerning direct investment in Colombia to the Exchange Office and the National Planning Department. The Exchange Office keeps an accounting record both of foreign investment in Colombia and of debts abroad and controls the movement of foreign capital as well as the transfer of profits, dividends, commissions, and royalties for trademarks, patents, etc. The sale of proceeds from certain current invisibles is also subject to prior registration with the Exchange Office. The Superintendency of Exchange Control, which is an autonomous agency reporting to the Presidency of the Republic, enforces the control and supervision over exchange transactions and is responsible for applying penalties for any violation of the exchange regulations.

Prescription of Currency

The Monetary Board establishes the list of currencies that it accepts for exchange surrender and provides for import payments. Payments and receipts are normally effected in U.S. dollars, but importers and exporters are also free to use quoted currencies (see footnote 1). Settlements for commercial transactions with countries with which Colombia has bilateral payments or reciprocal credit agreements2 must be made through special accounts in accordance with the provisions of the particular bilateral payments agreement. Settlements between Colombia and Argentina, Bolivia, Brazil, Chile, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela are made through accounts maintained within the framework of the multilateral clearing system of the Latin American Integration Association (LAIA). There are also reciprocal credit agreements with Cuba, the Dominican Republic, Spain, the U.S.S.R., and member countries of the Central American Common Market (CACM).

Nonresident Accounts

Credit institutions are authorized to receive short-term deposits in foreign currency from physical or juridical persons not resident in Colombia; these deposits are freely available to the holders, but any foreign currency deposits that they may wish to convert into Colombian currency must be sold to the Bank of the Republic. Before releasing the accounts of nonresidents, banks must obtain authorization from the Exchange Office.

Imports and Import Payments

Imports are subject to one of the following regimes: (1) freely importable goods, requiring only registration with Incomex; (2) goods subject to prior approval and requiring an import license; (3) goods included in the prohibited import list; and (4) goods requiring special import-export arrangements for their importation. In the free-import regime, there is a global free list applicable to all countries, a National List applicable only to member countries of the LAIA, and special lists applicable only to less-developed member countries of the LAIA and to members of the Andean Pact. Operations under special import-export arrangements in the form of barter, clearing, and triangular trade arrangements are required to take place in accordance with the relevant regulations issued by the Monetary Board in the event that they give rise to a request for foreign exchange or to an obligation to surrender foreign exchange. These arrangements involve payments in foreign currency in cases when the Colombian importer and the Colombian exporter are not the same juridical entity and, in addition, the import operation is not followed by the export operation contemplated in the arrangement because of noncompliance on the part of the exporter. In such cases, Incomex designates a “responsible party,” which is requested to provide the value of the import in pesos plus a peso-denominated fine. Similarly, the exporter participating in barter arrangements is requested to surrender the foreign exchange earned in the case when the export operation precedes the import operation and the importer fails to comply with the terms of the arrangement. Incomex encourages special import-export operations as a means to promote, through other foreign trade mechanisms, exports which would not be carried out otherwise.

A distinction is drawn between reimbursable and nonreimbursable imports. The term reimbursable imports covers imports that involve purchase of official foreign exchange, including imports of machinery and equipment, financed by international credit institutions. Nonreimbursable imports consist mainly of aid imports under grants and commodities constituting part of a direct investment.

All import registrations by public sector agencies are screened by Incomex to determine whether local substitutes are available. Import licenses for certain items are normally not issued; these include arms and habit-forming drugs, certain foodstuffs, certain textiles and clothing, and jewelry. Both import licenses and registrations are valid for six months, except for imports of agricultural and livestock products, for which the validity period is three months. Import licenses can be extended for successive three-month periods, whereas registrations of free imports can be extended for only two successive three-month periods. All imports other than those classified as “minor imports” or shipments with an f.o.b. value of less than US$500 are subject to registration with Incomex. Urgently needed spare parts not exceeding US$10,000 are also classified as minor imports and are not subject to registration. The charge for import registration is Col$1,500. An advance exchange license deposit (consignación) has to be lodged at the official rate for exchange certificates at least 20 calendar days prior to an application for an exchange license. The rate of deposit is 95 percent of the value of the exchange license.

Import duties are calculated at the “Ministry of Finance exchange rate” (the average selling rate for exchange certificates for the previous month, as determined by the Ministry of Finance). In addition to customs duties, there is an ad valorem tax on imports equal to 5 percent of the c.i.f. value, the proceeds of which go to the Export Promotion Fund. Exempt from this tax are temporary imports; imports by public entities; goods of LAIA origin; imports under the Vallejo Plan; diplomatic, consular, and similar imports; gifts; and imports destined for Corferias (International Commerce Fair of Bogota), for the free port of San Andrés y Providencia, or effected through the Port of Leticia. With the above exemptions, imports are also subject to a tax of 1.5 percent of the c.i.f. value, the proceeds of which accrue to the ordinary budget of the National Government. All imports (except newsprint) are subject to a stamp tax of 1 percent of the f.o.b. value, as well as to a temporary surcharge of 8 percent.

Payments for Invisibles

Payments for invisibles are made at the exchange certificate rate. To obtain exchange licenses for freight payments, a freight company must, either directly or through agents in Colombia, lodge a deposit amounting to 95 percent of payment value. Payments for more than 80 percent of total import or export freight are allowed only if it can be established that freight costs payable in local currency amounted to less than 20 percent of total cost. Services may be imported through special import-export arrangements in the form of barter, clearing, and triangular trade arrangements.

Most payments for invisibles, including banking commissions, international air travel, and expenses incurred in the export of noncoffee products, are subject to exchange licenses. Banks may transfer without prior approval payments for certain other current invisibles, including interest on suppliers’ credit, medical expenses, support of technical staff abroad, the monthly allowances of students studying abroad with government support, and for the service of registered foreign loans taken up by the private sector. Foreign exchange purchases for foreign travel are limited to the equivalent of US$90 a day, up to US$1,500 a year, for those under 12 years of age; US$180 a day, up to US$3,000 a year, for an adult; and up to US$200 a day, within a limit of US$10,000 a year, for “special” travelers, defined as those traveling for reasons that are of particular usefulness in the economic and social development of the country. In addition, a prior deposit of Col$65 per US$1 must be lodged with the Bank of the Republic, refundable within six months upon submission of evidence of amounts actually spent, together with travel documents.

Remittances abroad for study purposes are subject to the following limits: (1) US$300 for travel; (2) US$400 for books and study material; (3) US$400 to cover thesis fees; (4) up to US$500 monthly for living expenses; (5) up to US$250 monthly for expenses incurred by a spouse if coursework extends beyond six months; and (6) a once-and-for-all US$500 allowance for unforeseen expenditures. Registration fees for courses approved by Icetex, as well as health and accident insurance for students, are not subject to limits. Requests for foreign exchange for study purposes have to be approved by Icetex.

The transfer of profits accruing to foreign investors is limited to 20 percent of the capital base a year. Profits beyond such limit may count toward increasing the capital base up to a yearly maximum of 7 percent of registered capital and only when at least 50 percent of the amount is reinvested in bonds issued by the Industrial Promotion Institute or in new enterprises satisfying the following criteria: (1) at least 80 percent of their production is exported; and (2) at least 40 percent of their financing is in the form of direct foreign investment and/ or foreign medium- and long-term loans. These limitations do not hold for multinational enterprises in which at least 80 percent of the capital is held by investors in the countries of the Andean Pact; in such cases, profits can be reinvested and transferred freely.

Foreign tourists who have stayed in Colombia for a period not exceeding three months may, on leaving the country, purchase foreign currency of up to US$100 on presentation of their passports. A remittance tax of 12 percent is applicable to a number of current payments; for profits transferred by branches of foreign companies, the tax is 20 percent.

Colombian nationals and resident foreigners are required to pay a travel tax of US$15 whenever they leave the country.

Exports and Export Proceeds

Exports of certain commodities are prohibited, and exports of certain foodstuffs are subject to quotas. Exports of certain other items, such as beef, are reserved for the Instituto de Mercado Agropecuario (Idema). No export licenses are required, but prior application for registration is necessary for all exports except samples and Colombian products in noncommercial quantities. When registering an export transaction, exporters must provide Incomex with either a personal guarantee in pesos (but without depositing any funds) or a bank guarantee corresponding to 5 percent of the registered amount, calculated at the Ministry of Finance exchange rate. The periods for surrendering export proceeds are normally as follows: (1) for coffee, within 20 days from the date of registration of the export (180 days for instant coffee); and (2) for other goods, generally within five months of registration. However, longer time periods for the surrender of proceeds are permitted for exports to Chile, Peru, Ecuador, and Venezuela, goods sold on a commission basis; books, magazines, and other printed matter (18 months); capital goods (2 years); and other goods that normally require more extended payment terms.

The Bank of the Republic is empowered in certain cases to retain a portion of the exchange proceeds surrendered by the exporter of any product to repay debts for imports under the Vallejo Plan. All exchange proceeds from exports must be surrendered to the Bank of the Republic, with the exception of export proceeds of the Empresa Colombiana de Petroleo (Ecopetrol) and exports of minerals associated with state enterprises, which are permitted to retain part of their export proceeds abroad for the settlement of their import costs.

On surrendering their export proceeds to the Bank of the Republic, exporters of commodities other than coffee, raw cattle hides, or petroleum and petroleum products receive tax credit certificates (Certificados de Reembolso Tributario, or CERTs) in an amount corresponding to a specified percentage of the total earnings surrendered, converted at the Ministry of Finance exchange rate. This rate ranges from 5 percent to 25 percent depending on the commodity and the country of destination; the rates are calculated on domestic value added for specified assembly operations. These certificates, which are freely negotiable and are quoted on the stock exchange, are accepted at par by tax offices for the payment of income tax, customs duties, and sales taxes. The surrender of foreign currency earned by exporters can, as an option, be effected by exchanging the foreign currency for exchange certificates (of 90 days’ maturity), which are negotiable on the stock exchange.

Minimum surrender prices for coffee, bananas, and a few other exports are set from time to time by the Monetary Board. Exports of coffee are subject to the following regulations: (1) A minimum surrender price (reintegro) is fixed after deduction for freight and insurance at US$206.00 a 70-kilogram bag. (2) Exporters pay a tax in foreign exchange at the rate of 6.5 percent ad valorem. Of this tax, 3.2 percentage points are paid to the National Coffee Fund, and 0.8 percentage point is paid to the Departmental Committees of Coffee Growers; the remainder provides revenue for the Treasury’s Special Exchange Account. (3) Exporters must either surrender without payment (in the form of untreated coffee) the equivalent of 68 percent of the volume of excelso coffee that they wish to export (retención cafetera) or pay the National Federation of Coffee Growers the peso equivalent. (4) Exports of coffee are subject to an additional tax of 6 percent ad valorem (pasilla y ripio tax); the tax must be paid to the Federation either in kind or in pesos. (5) A committee composed of the Ministers of Finance and Agriculture and the Managing Director of the Federation establishes a domestic buying price for export-type coffee, expressed in pesos per carga of 125 kilograms.

Proceeds from Invisibles

All exchange receipts from invisibles must be surrendered; they are converted against exchange certificates, which can be sold on the stock exchange. For surrenders in respect of gifts and the rendering of professional services other than medical, hospital, or educational services, prior authorization from the Exchange Office is required.

Capital

All inward and outward capital transfers are effected at the certificate market rate. There is a 95 percent advance payment deposit on all outflows, which must be lodged prior to an application for an exchange license.

All foreign investment in Colombia, all new foreign loans, direct lines of foreign credit obtained by nonbank residents,3 and the movement of capital previously imported (except loans previously registered under Decree No. 2322 of September 2, 1965) must be registered with the Exchange Office.

Direct foreign investment regulations in Colombia are in accordance with the provisions of Decisions Nos. 24 and 103 of the Cartagena Agreement, which govern foreign investment within the member countries of the Andean Pact. The National Council for Economic and Social Planning (Conpes) can legislate special conditions affecting foreign investment so as to overrule the above-mentioned provisions. Foreign investment is required to become 51 percent Colombian-owned by the fifteenth year after its registration, with the exception of investment in enterprises that satisfy one of the following conditions: (i) at least 25 percent of their production is exported; or (ii) at least 50 percent of their material inputs are of Colombian origin. Member countries of the Andean Pact are treated as Colombian investors for purposes of fulfilling the Colombian ownership requirement, provided that profit and capital remittances remain within the country of origin and shares are not sold outside the area. Capital invested in the petroleum industry is subject to special rules and provisions.

Capital imports require prior approval by the National Planning Department, with the exception of capital for the petroleum industry, which requires approval by the Ministry of Mines and Energy, and capital for mineral exploration other than petroleum, which requires approval by both the National Planning Department and the Ministry of Mines. All foreign banks and their branches must have Colombian majority participation. New foreign direct investment in banks, insurance companies, and other financial institutions is restricted to investors from member countries of the Andean Pact and to national or mixed companies on the basis of reciprocal treatment. The purchase of 10 percent or more of the shares of a Colombian financial institution requires the prior approval of the Banking Superintendent. Capital registration entitles the investor to export profits and to repatriate capital at the certificate market rate on certain conditions specified in Decree No. 1900 of September 15, 1973. The transfer of profits is limited to 20 percent of registered direct investment with certain exceptions (see section on Payments for Invisibles, above); where the profits were earned (and not remitted) prior to the coming into force of Decree Law No. 444 of 1967, the additional remittances must not exceed 3 percent a year.

Special legal regimes exist for direct foreign investment in the nickel, coal, and uranium sectors, which waive the 20 percent limit on the transfer of profits abroad. A special regime also applies to a total of 34 different industrial activities, including fishing, food products, leather products, chemicals, iron and steel, machine tools, engines, specialized machinery, ship-building, automobiles, the aeronautic industry, and photographic equipment, as well as enterprises exporting at least 50 percent of their output. This regime allows remittances in a percentage of dollar-denominated capital determined by adding 20 points to the average New York prime interest rate prevailing in the year of registration of the foreign investment transaction, as estimated by the Bank of the Republic. Other special regimes are applicable to (1) the earthquake-hit area of Popayan, which allow profit remittances on invested capital in a percentage equivalent to 25 percent above the average New York prime interest rate in the year of registration of the capital inflows; and (2) bordering regions, which allow transfer of profits up to 24 percent of the dollar-denominated investment.

Foreign loans contracted by private Colombian individuals or firms are generally subject to a minimum maturity of three years with one year of grace and an interest rate ceiling of 2.5 percent over the New York prime rate or LIBOR. Such loans are normally permitted only for financing working capital or fixed investment. Special regulations govern the periods for which resident banks may provide import financing from foreign currency borrowed abroad. Foreign loans for national or governmental entities in excess of Col$10 million or US$500,000 require prior authorization by the Ministry of Finance and the National Planning Department. For loans to the Government, or guaranteed by the Government, the following are also required: prior authorization by the National Council for Economic and Social Policy and by the Monetary Board, prior consultation with the Interparliamentary Committee on Public Credit, and ex post approval by the President of the Republic.

Contracts involving royalties, commissions, trademarks or patents, and similar arrangements must be registered with the Exchange Office to enable the beneficiary to make transfers abroad; they also require approval by the Royalties Committee before they can be registered.

Colombian nationals who have invested abroad must surrender to the Bank of the Republic, against exchange certificates, not only the interest, profits, commissions, and royalties, but also the proceeds of the sale or liquidation of the investment. Export of capital by residents is restricted, and such export by private individuals is not normally permitted.

Current deposit accounts in foreign currency may be held by insurance companies, export firms, transportation companies, and other specified entities, upon prior authorization of the Bank of the Republic. A ceiling equivalent to 5 percent of their total foreign liabilities is applied on the foreign currency deposits that may be held by domestic financial institutions.

Gold

Natural and juridical persons may trade in Colombia in gold coins for numismatic purposes only. With this exception, only the Bank of the Republic is entitled to purchase, sell, hold, import, or export gold. Imports of nonmonetary gold are not normally undertaken. The Bank of the Republic purchases locally produced gold at the average price prevailing in the London and Zürich markets during the preceding week, plus a subsidy of 30 percent on the indicated average price. The Bank of the Republic levies an ad valorem tax of 2 percent on the total payment received by the miner.

The Bank of the Republic makes domestic sales of gold for industrial use directly at a price equivalent to the average quotation in gold markets abroad during the previous day; this price is converted into pesos at the prevailing selling rate of exchange certificates on the date of sale.

The assay and refining houses and the mining companies producing gold are under the supervision of the Superintendency of Exchange Control. In addition, the mining companies and traders must obtain a license from the Superintendency in order to carry on their operations.

The Bank of the Republic from time to time strikes commemorative gold coins, which are legal tender. Residents and nonresidents may freely buy such coins, but export licenses are not normally granted.

Changes During 1985

Imports and Import Payments

February 27. Exchange licenses for the settlement of foreign liabilities in respect of imports under letters of credit opened by Colombian credit institutions were exempted from the 100 percent advance import deposit requirement. (Decision of the Monetary Board.)

April 9. Import items under 348 customs headings were transferred from the prohibited imports list to the prior licensing list, and other items covered by 498 customs headings were shifted from the prior licensing list to the free imports list.

April 9. In a modification of existing regulations, it was announced that import licenses would be valid for a period of six calendar months, and import registrations for three calendar months, beginning on the fifteenth day of the month for those issued in the first half, and from the last day of the month for those issued in the second half of the month. Import registrations under special import-export systems involving capital goods would be valid for a period of six calendar months.

May 31. Import items under 359 customs headings were shifted from the prohibited list to the prior licensing list, and other items under 218 customs headings were transferred from the prior licensing list to the free imports list.

May 31. It was announced that allocations from the 1985 foreign exchange budget for imports as approved by the Monetary Board would be decided (in terms of registration of import applications) in the ratio of not more than 23 percent for goods on the free imports list, and at least 77 percent for goods on the prior licensing list.

June 5. Changes were made as follows in the permissible terms of import payment: (a) the minimum permissable payment period for imports of equipment and capital goods was reduced from 3 years to 2 years; installment payments could be made as follows: up to 15 percent of import value within the first 6 months, up to 50 percent by the end of the first year, up to 75 percent by the end of the first 18 months, and the remainder by the end of the second year; and (b) the minimum permissible payment period for imports of intermediate goods was reduced from 18 months to 11 months; installment payments could be made as follows: up to 30 percent within the first 6 months, and the balance by the end of 11 months.

July 31. Exchange licenses for all payments made within the framework of clearing agreements were made subject to Exchange Office approval.

September 23. Incomex was asked to observe the following order of priority in registering applications under free import arrangements: (a) raw materials, inputs, and replacement parts required for regular production activity in accordance with the objectives of the National Development Plan; (b) books and publications of a scientific or cultural nature; and (c) other. (Imports for the coal industry and other mining industries that could be effected under semi-annual licensing arrangements were exempted from this requirement.)

October 30. The minimum payment period for imports of specified goods and machinery for the agricultural sector was reduced to six months.

November 26. A total of 19 products, mainly processed vegetables and garden products, was shifted from the prohibited imports list to the prior licensing list, and 243 products, primarily organic chemicals, were transferred from the prior licensing list to the free imports list.

December 20. Prior licensing requirements were introduced for imports of 17 specified items, mainly vegetables and garden products. In addition, it was announced that the 100 percent advance deposit requirement would not apply to imports of products for immediate use.

December 24. A total of 203 products, mainly organic chemicals and mechanical and electrical machinery and devices, was shifted from the prior licensing list to the free imports list.

Payments for Invisibles

December 20. A regulation was introduced, specifying that foreign exchange obligations incurred by credit institutions in the course of doing business (e.g., commissions, interest, etc.), should henceforth be settled within three months of accrual.

Exports and Export Proceeds

January 18. Decree No. 187 was introduced, eliminating tax credit certificates (CERTs) for all export operations commonly called SEIC, namely, barter, clearing, and triangular arrangements.

January 30. The minimum surrender price of coffee was set at US$206.00 per 70–kg. sack, or US$1.43 per lb., ex-wharf New York. (Decision of the Monetary Board.)

February 18. Decree No. 479 was introduced, eliminating CERTs for exports of thermic bituminous coal. In addition, by a decision of the Foreign Trade Council, items under approximately 200 customs headings were transferred from the suspended exports list to the free exports list, and other items under 32 customs headings were shifted from the suspended exports list to the permitted exports lists, subject to prior endorsement by Incomex.

March 15. Under Decree No. 790, CERT benefits for exports under Chapter 18 of the Customs Tariff, namely, cargo and cacao products, were suspended.

March 29. Decree No. 929 was introduced, eliminating marginal CERT benefits of 10 percent for shipments to LAIA countries.

July 3. Changes were made as follows in regulations on surrender of export proceeds: (a) for exports of coal and ferronickel, 90 percent of the value indicated initially in the export registration should be surrendered within five months, and the balance within ten months from the date of approval of registration; and (b) with immediate effect, the time limit for the surrender of proceeds from various exports other than coffee would be calculated from the date of approval of the registration and would be defined as specified in Decision No. 74/84.

July 17. The Bank of the Republic was authorized to process foreign exchange proceeds of Carbocol (the state enterprise for coal) from foreign loans against future exports of coal; and it was announced that exports financed with foreign exchange loans should be effected within five months from the loan receipt date.

September 9. Exports of coffee during the crop year were required to be effected between October 1, 1985 and September 30, 1986; and coffee exports were required to take place within 60 calendar days from the date of registration of the sales contract with Incomex.

Capital

November 13. The Exchange Office was empowered to authorize exchange licenses for settlement of the following financial transactions: (a) interest and commissions charged by credit institutions; (b) interest on supplier loans; (c) interest and commissions on foreign borrowing registered pursuant to Articles 128, 131, and 132 of Decree Law 444 of 1967; and (d) interest and commissions in respect of any other foreign financing operations authorized by the Monetary Board. Transfers on account of these financial costs should not exceed by more than 2.5 points the highest prime rate ceiling of the New York market or the London interbank rate for a given month; calculations of the ceiling for financing in deutsche mark would be based on domestic interest rates in that country.

December 4. The Exchange Office was empowered to register loans to individuals under Article 128 of Decree Law 444 of 1967 if the loans met the following requirements: (a) entire proceeds of loans were used as working capital or for direct investment in enterprises producing exportable goods in the agricultural, industrial, or mining sector; (b) payment did not fall due for five years; and (c) part payment would be made in equal semi-annual installments not before the second year of the credit period.

Comoros

(Position on December 31, 1985)

Exchange Arrangement

The currency of the Comoros is the Comorian Franc, which is pegged to the French franc, the intervention currency, at the fixed rate of CF 1 = F 0.02. The current buying and selling rates for the French franc are CF 50 = F 1. Exchange rates for other currencies1 are also officially quoted on the basis of the fixed rate of the Comorian franc for the French franc and the Paris exchange market rate for the respective currencies in terms of the French franc. There are no taxes or subsidies on purchases or sales of foreign exchange.

With the exception of those relating to gold, the exchange control measures of the Comoros do not apply to (1) France (and its Overseas Departments and Territories) and Monaco; and (2) all other countries whose institute of issue is linked with the French Treasury by an Operations Account (Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, the Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Mali, Niger, Senegal, and Togo). Hence, all payments to these countries may be made freely. All other countries are considered foreign countries.

Administration of Control

Exchange control is administered by the Central Bank of Comoros. The Ministry of Economy and Finance supervises borrowing and lending abroad, inward direct investment, and all outward investments. Part of the approval authority in respect of exchange control has been delegated to an authorized bank—the sole commercial bank—and to the Postal Administration. All exchange transactions relating to foreign countries must be effected through the authorized bank or the Postal Administration. Import and export licenses are issued by the Directorate-General of Economic Affairs in the Ministry of Economy and Finance.

Prescription of Currency

The Central Bank of Comoros maintains an Operations Account with the French Treasury; settlements with France (as defined above), Monaco, and the Operations Account countries are made in Comorian francs, French francs, or the currency of any other Operations Account country. Settlements with all other countries are usually made through correspondent banks in France, in any of the currencies of those countries, or in French francs through Foreign Accounts in Francs. All settlements with South Africa are prohibited.

Imports and Import Payments

Imports of South African origin are prohibited, and the import of certain other goods is prohibited from all countries. The import from any source of certain other commodities is subject to individual licensing. All import transactions relating to foreign countries must be domiciled with the authorized bank if the value is CF 500,000 or more.

Payments for Invisibles

All payments to South Africa are prohibited. Payments for invisibles to France (as defined above), Monaco, and the Operations Account countries are permitted freely. Those to other countries are subject to approval; with the exception of travel, for which there are maximum allocations, such approvals are generally given liberally.

For tourist travel, residents traveling to France (as defined above), Monaco, and the other Operations Account countries, may take out the equivalent of CF 125,000 in bank notes and any amount in other means of payment. Residents traveling to countries other than France (as defined above), Monaco, and the Operations Account countries may obtain up to CF 250,000 in foreign currency a person a trip. The maximum that may be allocated in bank notes is CF 125,000; the remainder may be in the form of a bank transfer, traveler’s checks, a certified check, or any other means of payment. For business travel, a special allocation may be authorized by the Central Bank of Comoros upon the request of the authorized bank.

Exports and Export Proceeds

All exports to South Africa are prohibited. With a few exceptions, exports to France (as defined above), Monaco, and the Operations Account countries are free of license. Most exports to other countries require licenses. Proceeds from exports to foreign countries must normally be collected, and the receipts repatriated within 30 days of the expiration of the commercial contract and sold immediately to the authorized bank. All export transactions relating to foreign countries must be domiciled with the authorized bank if the value is CF 500,000 or more.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and the Operations Account countries may be retained. All amounts due from residents of other countries in respect of services and all income earned in those countries from foreign assets must be collected and, if received in foreign currency, be surrendered within one month of the due date or the date of receipt. Resident and nonresident travelers may bring in any amount of domestic and foreign bank notes and coin.

Capital

All settlements between the Comoros and South Africa are prohibited. Capital movements between the Comoros and France (as defined above), Monaco, and the Operations Account countries are, in principle, free of exchange control; capital transfers to all other countries require exchange control approval, but capital receipts from such countries normally are permitted freely.

Special controls (additional to any exchange control requirements that may be applicable) are maintained over borrowing abroad, inward direct investment, and all outward investment; these controls relate to the transactions themselves, not to payments or receipts.

Gold

Imports and exports of monetary gold require prior authorization. Imports and exports of articles containing gold are subject to declaration, but transfers of personal jewelry within the limit of 500 grams a person are exempt from such declaration.

Changes During 1985

No significant changes occurred in the exchange and trade system.

People’s Republic of the Congo

(Position on December 31, 1985)

Exchange Arrangement

The currency, of the People’s Republic of the Congo is the CFA Franc,1 which is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 = F 0.02. Exchange transactions in French francs between the BEAC and commercial banks take place at the rate of CFAF 50 = F 1. Buying and selling rates for certain other foreign currencies are also officially posted, with quotations based on the fixed rate for the French franc and the rates for the currencies concerned in the Paris exchange market.

Payments to France and its Overseas Departments and Territories, Monaco, and the Operations Account countries (see section on Administration of Control, below), as well as the purchase of those countries’ bank notes and traveler’s checks, are subject to a commission of 0.75 percent, with a minimum charge of CFAF 75; exempt from this commission are payments of the State, the Postal Administration, and the BEAC, salaries of Congolese diplomats abroad, expenditures of official missions abroad, scholarships of persons studying or training abroad, and debt service payments due from companies that have entered into an agreement with the Congo. Most payments to other foreign countries and credits to Foreign Accounts in Francs are subject to a commission of 1 percent or, for foreign exchange purchased by the Diamond Purchase Office, 0.50 percent; these commissions are subject to a minimum of CFAF 100. A commission of 0.25 percent is levied on all capital transfers to countries that are not members of the BEAC. There are no taxes or subsidies on purchases or sales of foreign exchange.

Administration of Control

Payments to the following countries, although subject to declaration, are unrestricted: (1) France (and its Overseas Departments and Territories) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, the Comoros, Côte d’Ivoire, Gabon, Mali, Niger, Senegal, and Togo). Settlements and investment transactions with all foreign countries, however, are subject to control. Foreign countries are defined as all countries other than the Congo.

The General Directorate of Credit and Financial Relations in the Ministry of Finance supervises borrowing and lending abroad. Exchange control is administered by the Minister of Finance, who has delegated his approval authority to the General Directorate. All exchange transactions must be effected through authorized banks or the Postal Administration. Import and export licenses are issued by the Foreign Trade Directorate in the Ministry of Commerce.

Prescription of Currency

Since the Congo is an Operations Account country, settlements with France (as defined above), Monaco, and the Operations Account countries are made in CFA francs, French francs, or the currency of any other institute of issue that maintains an Operations Account with the French Treasury. Settlements with all other countries are usually made in any of the currencies of those countries or in French francs through Foreign Accounts in Francs.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. The crediting of BEAC bank notes to Foreign Accounts in Francs is permitted when they have been mailed to the BEAC agency in Brazzaville by the foreign correspondent of an authorized bank.

Imports and Import Payments

Imports from all sources require prior authorization. There is an indicative annual import program which distinguishes five zones: (1) the countries of the Central African Customs and Economic Union (UDEAC); (2) France; (3) other countries of the French Franc Area; (4) EC countries other than France; and (5) all remaining countries. All imports under this program require licenses. The quotas for non-EC countries may be used to import goods originating in any country outside the French Franc Area.

All import transactions relating to countries other than France (as defined above), Monaco, and the Operations Account countries must be domiciled with an authorized bank. Licenses for imports from countries other than France (as defined above), Monaco, and the Operations Account countries must be domiciled with an authorized bank. Licenses for imports from countries other than France (as defined above), Monaco, and the Operations Account countries require the visa of the Foreign Trade Directorate and the General Directorate of Credit and Financial Relations. The approved import license entitles importers to purchase the necessary exchange, provided that the shipping documents are submitted to an authorized bank.

All imports must be insured with the state insurance company, Société d’Assurances et de Reassurances du Congo (SARC). To implement this measure, the Congolese Customs Service releases imports only after an insurance certificate issued by the SARC has been produced.

There has been some accumulation of arrears on external payments owing to the imposition of statutory ceilings on central bank credit to the Government and an ensuing shortage of domestic currency with which to purchase foreign exchange.

Payments for Invisibles

Payments for invisibles to France (as defined above), Monaco, and the Operations Account countries are permitted freely, provided they have been declared and are made through an authorized intermediary; those to other foreign countries are subject to approval. Payments for invisibles related to trade are permitted freely when the basic trade transaction has been approved or does not require authorization. Transfers of income accruing to nonresidents in the form of profits, dividends, and royalties are permitted with the authorization of the General Directorate of Credit and Financial Relations.

Residents traveling as tourists to countries other than France (as defined above), Monaco, the Operations Account countries, or Zaïre may obtain an exchange allocation of an amount equivalent to CFAF 175,000 a person a trip (CFAF 87,500 for children under 10 years) or CFAF 10,000 if the duration of the trip is less than 24 hours, for any number of trips a year; any foreign exchange in excess of CFAF 5,000 remaining after return to the Congo must be surrendered.

For business travel, there is a special allocation of the equivalent of CFAF 20,000 a person a day, subject to a maximum of CFAF 400,000 a trip; additional amounts may be authorized in appropriate cases. The use of credit cards abroad by residents is prohibited. There are special facilities for travelers to Kinshasa who request no foreign means of payment other than Zaïrian bank notes. Residents traveling to France (as defined above), Monaco, or an Operations Account country may take out CFAF 25,000 (CFAF 12,500 for children under 10 years) in BEAC bank notes. Residents and nonresidents traveling to foreign countries other than France (as defined above), Monaco, the Operations Account countries, or Zaïre may freely take out up to a maximum of CFAF 10,000 in BEAC bank notes, French bank notes, and bank notes issued by any other institute of issue maintaining an Operations Account with the French Treasury.

The transfer of the entire net salary of a foreigner working in the Congo is permitted upon presentation of the appropriate pay voucher, provided that the transfer takes place within three months of the pay period.

Exports and Export Proceeds

All exports require prior authorization. Most exports to countries in the French Franc Area may be made freely; among the exceptions are commodities exported by the National Marketing Office for Agricultural Products (Office National de Commercialisation des Produits Agricoles) and by the National Marketing Office for Timber (Office Congolais du Bois).

Proceeds from exports to foreign countries must be collected and repatriated, generally within 180 days of arrival of the commodities at their destination. Export proceeds must be surrendered within a month of the due date. All export transactions relating to countries other than France (as defined above), Monaco, and the Operations Account countries must be domiciled with an authorized bank.

Proceeds from Invisibles

All amounts due from residents of foreign countries in respect of services and all income earned in those countries from foreign assets must be collected when due and surrendered within a month of the due date. Resident and nonresident travelers may bring in any amount of bank notes and coin issued by the BEAC, the Bank of France, or any other bank of issue maintaining an Operations Account with the French Treasury, as well as any amount of foreign bank notes and coin (except gold coin).

Capital

Capital movements between the Congo and France (as defined above), Monaco, and the Operations Account countries are free, though ex post declarations are required. Such movements to countries that are not members of the BEAC are subject to a commission of 0.25 percent. Most international capital transactions are subject to prior authorization. Capital transfers abroad require exchange control approval and are restricted, but capital receipts from abroad generally are permitted freely. All foreign securities, foreign currency, and titles embodying claims on foreign countries or nonresidents that are held in the Congo by residents or nonresidents must be deposited with authorized banks in the Congo.

Special controls (additional to any exchange control requirements that may be applicable) are maintained over borrowing and lending abroad, over inward and outward direct investment, and over the issuing, advertising, and offering for sale of foreign securities in the Congo; these controls relate to the transactions themselves, not to payments or receipts.

Direct investments abroad2 require the prior approval of the Minister of Finance; the full or partial liquidation of such investments also requires the prior approval of the Minister. Foreign direct investments in the Congo3 require prior approval by the Minister of Finance, unless they involve the creation of a mixed-economy enterprise. The full or partial liquidation of direct investments in the Congo must be declared to the Minister. Both the making and the liquidation of direct investments, whether these are Congolese investments abroad or foreign investments in the Congo, must be reported to the Minister within 20 days. Direct investments are defined as investments implying control of a company or enterprise.

The issuing, advertising, or offering for sale of foreign securities in the Congo requires prior authorization by the Minister of Finance. Exempt from authorization, however, are operations in connection with (1) borrowing backed by a guarantee from the Congolese Government, and (2) shares similar to securities whose issue, advertising, or offering for sale in the Congo has already been authorized.

Borrowing by residents from nonresidents requires prior authorization by the Minister of Finance. However, loans contracted by registered banks and small loans, where the total amount outstanding does not exceed CFAF 10 million for any one borrower, are exempt from this requirement. The contracting of loans that are free of authorization, and each repayment thereon, must be reported to the General Directorate of Credit and Financial Relations within 20 days of the operation.

Lending by residents to nonresidents is subject to exchange control, and all lending in CFA francs to nonresidents is prohibited, unless special authorization is obtained from the Minister of Finance. The following are, however, exempt from this authorization: (1) loans in foreign currencies granted by registered banks; (2) other loans in foreign currencies when the total amount outstanding of these loans does not exceed the equivalent of CFAF 5 million for any one lender; and (3) foreign currency loans whose interest rate does not exceed 5 percent a year and whose maturity is two years or less. The making of loans that are free of authorization, and each repayment thereon, must be reported to the General Directorate of Credit and Financial Relations within 20 days.

Under the Investment Code of April 26, 1973, a number of privileges may be granted to approved foreign investments. The Code provides for four categories of preferential treatment.

Gold

By virtue of Decree No. 66/236 of July 29, 1966, as amended by Decree No. 66/265 of August 29, 1966, residents are free to hold gold in the form of coin, art objects, or jewelry; however, to hold gold in any other form or to import or export gold in any form, from or to any other country, the prior authorization of the Minister of Finance is required. Exempt from the latter requirement are (1) imports and exports by or on behalf of the Treasury or the BEAC, and (2) imports and exports of manufactured articles containing a minor quantity of gold (such as gold-filled or gold-plated articles). Both licensed and exempt imports of gold are subject to customs declaration. There are no official exports of gold.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Costa Rica

(Position on December 31, 1985)

Exchange Arrangement

The currency of Costa Rica is the Costa Rican Colón. Costa Rica follows a flexible exchange rate system under which the exchange rate is adjusted from time to time, taking into account relative rates of inflation between Costa Rica and its trading partners and balance of payments developments. All transactions take place at the unified exchange rate. On December 31, 1985 the unified (or banking) rate was Ȼ 53.45 = US$1 buying and Ȼ 53.95 = US$1 selling. Export proceeds are converted at a mixed exchange rate composed of 0.2 percent at the official rate of Ȼ 20 = US$1 and 99.8 percent at the banking rate. The spread between the buying and selling rates in the banking exchange market is legally set at Ȼ 0.50. Purchases and sales of other Central American currencies are effected on the basis of quotations in colones, taking into account the value of those currencies in terms of U.S. dollars in the parallel exchange markets of the respective countries.

Costa Rica formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from February 1, 1965.

Administration of Control

Exchange controls are operated by the Central Bank. The only institutions authorized to deal with foreign exchange transactions are the Central Bank of Costa Rica, the state commercial banks, and certain private banks authorized by the Central Bank.

Prescription of Currency

In practice, nearly all exchange transactions in Costa Rica are expressed in U.S. dollars. Beginning from May 20, 1985, settlements in respect of all trade with Central American countries are required to be made in U.S. dollars. Payments to and from Colombia in respect of commercial operations, services, and capital may be made in U.S. dollars through a reciprocal credit arrangement between the member central banks of the Central American Clearing House and the Bank of the Republic of Colombia. Payments to Mexico in respect of trade, invisibles, and capital may also be made in U.S. dollars under an agreement between the member central banks of the Central American Clearing House and the Bank of Mexico.

Imports and Import Payments

There is no import licensing, and all import payments may be made freely, subject to submission of evidence of prior registration (see below), except for goods originating in the Central American Common Market (CACM) countries or Panama. Imports made on a barter basis require a barter license (licencia de trueque) issued by the Ministry of Economy and Commerce. To be eligible for foreign exchange, orders for imports valued at over US$500 must be registered with the Central Bank upon confirmation by the foreign supplier, unless the goods originate in CACM countries or Panama. Imports from South Africa are prohibited.

In addition to any applicable customs duty, the following taxes are levied on imports: (1) a stamp tax of 3 percent of the customs duty; (2) a sales tax of 10 percent ad valorem, from which certain essential items are exempt; and (3) a selective consumption tax at rates of 10 percent, 12 percent, 50 percent, and 75 percent, depending on the considered degree of essentiality. In addition, other levies are imposed as follows: a 2 percent surcharge on capital and consumer goods originating in Central America and Panama, as well as on construction materials; a 10 percent surcharge on non-agricultural capital goods for use by firms not generating a positive net effect on the balance of payments, vehicles with a load capacity exceeding two tons, and specified cabs with a load capacity of one ton or more; a 12.5 percent surcharge for consumer goods originating outside Central America; a 100 percent surcharge on vehicles with an engine displacement capacity not over 1,250 cubic centimeters, and a 200 percent surcharge on vehicles with engine capacities of over 1,250 cubic centimeters. There is also a small consular tax on certain imports.

Under the provisions of the Central American Agreement on Fiscal incentives, Costa Rica grants duty exonerations on imports of raw materials and capital goods to approved industrial firms.

Payments for Invisibles

Withholding taxes of 15 percent and 10 percent, respectively, are levied on remittances abroad of dividends and interest; interest on certain borrowing abroad (e.g., from government banks) is exempt. Costa Rican nationals and resident foreigners traveling abroad by air, sea, or land must pay a travel exit tax in colones equivalent to US$10; Costa Rican nationals who reside abroad must pay, in addition, a consular fee of US$20 upon renewal of their passports abroad. For residents covered by Law No. 4812 (pensionados rentistas) and residents not so covered, the payment differs from the national one. Costa Rican diplomats and certain Peace Corps officials pay an exit fee of only Ȼ 6, provided their passport states that they are exempt from the above charges. Civil servants and students are not exempt from these payments unless so determined by the Ministry of Finance or the Migration Council. Costa Rican minors are subject to all the above payments, except for dependents of diplomatic parents, who pay only the Ȼ 6 exit fee.

Commercial banks dealing in the unified market may sell foreign exchange—without prior authorization of the Central Bank—in the following amounts: (1) for foreign travel, a limit of US$100 a day up to a maximum of US$800 a traveler (upon presentation of passport and travel tickets, commercial banks are authorized to sell the equivalent of this amount in the currency of a Central American country to travelers to Central American countries other than Panama); (2) for family remittances, up to US$500 a month a person to a maximum of US$1,000 a family; and (3) for unregistered students, a maximum of US$500 a month for living expenses, in addition to tuition, textbooks, and insurance, upon presentation of documents. Remittances to students pursuing higher education abroad are not eligible in the official market. Subject to approval by the Central Bank, these limits may be exceeded where justified by evidence of bona fide current expenditures for the specified purpose. Prior authorization by the Central Bank is also required for any foreign exchange purchases for the servicing of private foreign debt, foreign payment of dividends, royalties, patent rights, and professional services.

Exports and Export Proceeds

The Central Bank supervises exports to ensure that exchange proceeds are surrendered to the banking system; the latter sell to the Central Bank all of their purchases. Exporters of nontraditional commodities to markets outside Central America are entitled to receive tax credit certificates (CATs, which are freely negotiable) for 15 percent of the f.o.b. value in the case of exports to the United States and Puerto Rico, and for 20 percent for other destinations outside Central America. In addition, exporters of nontraditional commodities eligible for CATs may also receive certificates for increases in exports (CIEX) for 1–10 percent of the increase in the f.o.b. value of exports over the preceding calendar year; the certificates are redeemable against cash at the Central Bank.

Licenses from the Central Bank are necessary for the exportation of merchandise. Exports to Nicaragua must be on the basis of advance payment in U.S. dollars, barter arrangement, or letters of credit confirmed by a major international bank. In addition to the export license from the Central Bank, other export licenses are required as follows: strategic materials, such as armaments, munitions, scrap iron, and scrap of nonferrous base metals (from the Ministry of Economy and Commerce); sugar (from the Agricultural Industrial Board for Sugarcane); beans, rice, potatoes, onions, cotton, meat, and purebred cattle (from the National Council of Production); airplanes (from the Civil Aviation Board and the Ministry of Economy and Commerce); Indian art objects made of gold, stone, or clay (from the National Museum); tobacco (from the Tobacco Defense Board); lumber, root of ipecacuanha, certain livestock, and animals and plants of forest origin (from the Ministry of Agriculture and Livestock); and coffee (from the Coffee Office); in addition, when there is a lien on coffee in favor of a bank, that bank’s approval is required before the Central Bank grants an export license. Exports to South Africa are prohibited.

The exchange proceeds from coffee, bananas, sugar, beef, bovine cattle, and other perishable items must be surrendered within 30 days of shipment; within 90 days of shipment for exports of other agricultural goods as well as industrial goods; and within 180 days of shipment for capital goods. Foreign-owned banana companies that have contracts with the Government must surrender their net export proceeds, which are calculated by deducting from their gross export proceeds (1) profits obtained during the year from their transactions in Costa Rica; (2) the allowance for depreciation on their investment in Costa Rica that is acceptable to the U.S. Internal Revenue Service; (3) the export tax on bananas payable in foreign currency; and (4) the cost of imports made during the year that were necessary for their normal business in Costa Rica. There are no taxes on nontraditional exports to countries outside of the Central American Area and Panama; traditional exports do pay tax, in some cases graduated in line with the international prices.

Proceeds from Invisibles

Proceeds from invisibles are free from controls or restrictions, but receipts from invisibles must be sold to the Central Bank or other authorized institutions.

Capital

All capital transfers between residents and nonresidents may be made, subject to prior authorization by the Central Bank. Capital received by the private sector may be registered at the Central Bank of Costa Rica, provided that it meets various requirements, including the requirements that (1) the project financed with the funds has (or will eventually have), directly or indirectly, a positive effect on Costa Rica’s balance of payments; (2) the amount of the capital is not less than US$5,000; and (3) the individual concerned sells the foreign exchange to the Central Bank. The registration guarantees the individual that the Central Bank will sell to him the exchange required to service the debt at the exchange rate in force at the time the servicing is effected. The National Budget Authority1 is in charge of authorizing the negotiation of new external credits contemplated by the Central Government, decentralized agencies, and state enterprises. Foreign and domestic capital transferred from abroad may be deposited as time deposits in U.S. dollars with agent banks in the form of specified foreign currencies or be invested in certificates of deposit denominated in colones; such funds, when they mature, are repaid in the currency in which the deposits were made.

Gold

The Central Bank may purchase, sell, or hold gold coin or bars as part of the monetary reserves in freely, at home or abroad, domestically produced gold (except national archaeological treasures), provided there is no infraction of international agreements. As in the case of other exports, licenses from the Central Bank are required for exports of gold. Gold may also be held in any form in Costa Rica. The Central Bank does not supply gold to artistic or professional users.

Changes During 1985

Exchange Arrangement

September 17. Law No. 6999 was issued, requiring all exchange transactions to be effected at the interbank exchange rate.

Prescription of Currency

April 11. The clearing arrangement with Mexico was suspended.

Exports and Export Proceeds

September 19. The prevailing rate of tax credit certificates (CATs) was changed from a uniform basis of 15 percent of the f.o.b. value of exports to 15 percent for exports to the United States and Puerto Rico, and 20 percent for exports to other destinations outside Central America.

Côte d’Ivoire

(Position on December 31, 1985)

Exchange Arrangement

The currency of Côte d’Ivoire is the CFA Franc,1 which is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 = F 0.02. The official buying and selling rates are CFAF 50 = F 1. Exchange rates for other currencies are derived from the rate for the currency concerned in the Paris exchange market and the fixed rate between the French franc and the CFA franc. The BCEAO levies a commission of 0.10 per mill on transfers from countries outside the West African Monetary Union, and one of 2.50 per mill on transfers to such countries.2 Banks and the postal system also levy a commission on transfers to all countries outside the West African Monetary Union, part of which must be surrendered to the Treasury. There are no taxes or subsidies on purchases or sales of foreign exchange.

With the exception of measures relating to gold and the repatriation of export proceeds, the exchange control measures of Côte d’Ivoire do not apply to (1) France (and its Overseas Departments and Territories) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, the Comoros, the Congo, Equatorial Guinea, Gabon, Mali, Niger, Senegal, and Togo). Hence, all payments to these countries may be made freely. All other countries are considered foreign countries.

Administration of Control

Exchange control is administered by the Directorate of External Finance and Credit in the Ministry of Economy and Finance. The BCEAO is authorized to collect any information necessary to compile the balance of payments statistics, either directly or through the banks, other financial institutions, the Postal Administration, and notaries public. All exchange transactions relating to foreign countries must be effected through authorized banks or the Postal Administration. Import and export licenses are issued by the Directorate of External Trade in the Ministry of Commerce.

Prescription of Currency

Since Côte d’Ivoire is an Operations Account country, settlements with France (as defined above), Monaco, and the Operations Account countries are made in CFA francs, French francs, or the currency of any other Operations Account country. Current payments to or from The Gambia, Ghana, Guinea, Guinea-Bissau, Liberia, Mauritania, Nigeria, and Sierra Leone are normally made through the West African Clearing House. Settlements with all other countries are usually effected through correspondent banks in France, in any of the currencies of those countries, or in French francs through Foreign Accounts in Francs.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. BCEAO bank notes may be credited to Foreign Accounts in Francs when they have been mailed to the BCEAO agency in Abidjan by authorized banks’ foreign correspondents. Otherwise, the crediting to nonresident accounts of BCEAO bank notes, French bank notes, or bank notes issued by any other institute of issue that maintains an Operations Account with the French Treasury is prohibited. Foreign Accounts in Francs may be debited, without prior authorization, with the value of BCEAO bank notes that are mailed by authorized intermediaries to their foreign correspondents.

Imports and Import Payments

Imports from South Africa are prohibited. Under a decree that came into force on January 1, 1982, all imports are classified into four categories, as follows: (a) prohibited imports (e.g., wheat flour, and used garments); (b) import items (e.g., paints, matches, detergents, man-made fabrics, articles of leather, footwear, and carpets) for which import licenses are obligatory for each import transaction exceeding CFAF 25,000, f.o.b.; (c) import items requiring a declaration of intent to import; and (d) import items requiring both prior authorization and a declaration of intent to import; in the last two cases, (c) and (d), the requirements apply only to individual transactions exceeding CFAF 100,000, f.o.b., or CFAF 500,000 for goods considered essential. As noted below, certain other import items are subject to annual volume or value quotas. Imports of rice depend on domestic production, since they are intended as a supplementary means of satisfying domestic demand; such imports take place on the basis of an international invitation to bid or a government-to-government contract. All other imports may be made freely from any country; however, as mentioned above, when valued f.o.b. at CFAF 100,000 or more they are subject to the submission of a declaration of intent to import or to prior authorization, and when the f.o.b. value exceeds CFAF 1.5 million or more they are subject to mandatory preshipment inspection by the Société Générale de Surveillance (SGS), in order to control their price, quantity, and quality. Tariffs have been raised with a view to harmonizing effective protection of local production; in the case of some goods quotas have been replaced by temporary surcharges scheduled to decline progressively during a five-year period. Imports from member countries of the West African Economic Community (WAEC) and of the Economic Community of West African States (Ecowas) are exempt from the surcharge.

All import operations relating to foreign countries must be domiciled with an authorized bank when their value exceeds CFAF 500,000; transactions of lower value also must be domiciled with an authorized bank if a financial transaction is to be undertaken before customs clearance. The import licenses or import attestations entitle importers to purchase the necessary exchange, but not earlier than eight days before shipment, if a documentary credit is opened, or only on the due date of payment, if the commodities have already been imported. Effective June 15, 1981, foreign exchange for import payments must be purchased either on the settlement date specified in the commercial contract or at the time when the required downpayment is made. Spot foreign exchange cover is limited to imports effected by means of documentary credits; the transaction must be domiciled with an authorized intermediary, and shipment of goods must be within eight days of the exchange operation. Forward exchange cover for imports in eligible cases must not extend beyond one month for certain clearly specified goods and three months for goods designated as essential commodities; no renewal of cover is possible.

Payments for Invisibles

Payments for invisibles to France (as defined above), Monaco, and the Operations Account countries are permitted freely; those to other countries are subject to approval. Payments for invisibles related to trade are permitted freely when the basic trade transaction has been approved or does not require authorization. Transfers of income accruing to nonresidents in the form of profits, dividends, and royalties are also permitted freely when the basic transaction has been approved. Any resident may make payments abroad freely, at any time, through an authorized bank, up to the equivalent of CFAF 50,000 a month without submitting any documentation.

Residents traveling to countries other than France (as defined above), Monaco, and the Operations Account countries may obtain an exchange allocation for tourism of an amount equivalent to CFAF 175,000 a person a year (CFAF 87,500 for children under ten). For business travel a special foreign exchange allocation is authorized up to a maximum of CFAF 20,000 a day and CFAF 400,000 a trip. Any foreign exchange remaining in excess of CFAF 5,000 after return to Côte d’Ivoire must be surrendered. The transfer of the full basic salary of a foreigner working in Côte d’Ivoire is permitted upon presentation of the appropriate pay voucher, provided that the transfer takes place within three months of the pay period. Resident and nonresident travelers to foreign countries may take out BCEAO bank notes up to CFAF 25,000. Travelers to other countries of the French Franc Area may take out any amount in BCEAO bank notes; however, if they travel to a country that is not a member of the West African Monetary Union (WAMU), the amount taken out must be declared to the customs if it exceeds CFAF 150,000.

Nonresident travelers to foreign countries may freely take out foreign bank notes and coin up to the equivalent of CFAF 175,000, as well as any traveler’s checks, etc., issued abroad. Subject to documentation, they may also take out any amount of traveler’s checks, etc., in foreign currency established in their name after conversion of foreign currency into CFA francs, or drawn against a Foreign Account in Francs, or in a foreign currency in Côte d’Ivoire. Nonresidents who have made a currency declaration upon entry or are able to show the proper banking notices may take out larger amounts.

Exports and Export Proceeds

All exports to South Africa are prohibited. Most exports are free of license and require a declaration only. Exports of certain processed and unprocessed agricultural commodities, however, require the visa of the Directorate of External Trade. An export premium is applied on the basis of the domestic value added in locally manufactured products. Export taxes are waived for products receiving the premium, and products covered by taxation agreements under the WAEC are not eligible for the premium. The due date for payment in respect of exports to foreign countries, including those in the French Franc Area, must not be later than 180 days after the arrival of the goods at their destination. Regardless of the currency of settlement and the buying country, export receipts must be collected and repatriated through authorized intermediary banks within one month of the due date. Regardless of destination, all export transactions must be domiciled with an authorized bank when valued at more than CFAF 500,000.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and the Operations Account countries may be retained. All amounts due from residents of other countries in respect of services, and all income earned in those countries from foreign assets must be collected and surrendered within two months of the due date or the date of receipt. Resident and nonresident travelers may import any amount of bank notes and coin issued by the BCEAO, the Bank of France, or any bank of issue maintaining an Operations Account with the French Treasury, as well as any amount of foreign bank notes and coin (except gold coin) of countries outside the French Franc Area; residents bringing in foreign bank notes or other foreign means of payment must surrender any amount in excess of CFAF 5,000 to an authorized bank within eight days and must make a declaration to the customs upon entry.

Capital

Capital movements between Côte d’Ivoire and France (as defined above), Monaco, and the Operations Account countries are free of exchange control; capital transfers to all other countries require exchange control approval, but capital receipts from such countries are permitted freely.

Special controls (additional to any exchange control requirements that may be applicable) are maintained over borrowing abroad, over foreign inward direct investment, over all outward investment in foreign countries, and over the issuing, advertising, or offering for sale of foreign securities in Côte d’Ivoire. Such operations require prior authorization by the Ministry of Economy and Finance, as do issues by Côte d’Ivoire companies. Exempt from authorization, however, are operations in connection with (1) loans backed by a guarantee from the Côte d’Ivoire Government, and (2) shares similar to securities whose issuing, advertising, or offering for sale in Côte d’Ivoire has already been authorized. With the exception of controls relating to foreign securities, these measures do not apply to relations with France (as defined above), Monaco, member countries of the WAMU, and the Operations Account countries. Special controls are maintained also over imports and exports of gold, over the soliciting of funds for deposit with foreign private persons and foreign firms and institutions, and over publicity aimed at placing funds abroad or at subscribing to real estate and building operations abroad; these special controls also apply to France (as defined above), Monaco, and the Operations Account countries.

All investments abroad by residents of Côte d’Ivoire require prior authorization by the Minister of Economy and Finance.3 Foreign direct investments in Côte d’Ivoire,4 are subject to prior authorization by the Minister of Economy and Finance. Effective June 15, 1981, at least 75 percent of investments abroad by residents of Côte d’Ivoire must be financed by borrowing abroad. The liquidation of investments, whether direct investments or not, in Côte d’Ivoire or abroad must similarly be reported in advance to the Minister. Both the making and the liquidation of investments, whether these are Côte d’Ivoire investments abroad or foreign investments in Côte d’Ivoire, must be reported to the Minister within 20 days following each operation. Direct investments are defined as investments implying control of a company or enterprise. Mere participation is not considered as direct investment, provided that it does not exceed 20 percent of the capital of a company whose shares are quoted on a stock exchange.

Borrowing by residents from nonresidents requires prior authorization by the Minister of Economy and Finance. The following are, however, exempt from this authorization: (1) loans taken up by industrial firms to finance transactions abroad, to finance imports into or exports from Côte d’Ivoire, or by approved international trading houses to finance international merchanting transactions; (2) loans contracted by authorized banks; and (3) loans other than those mentioned above, when the total amount outstanding of these loans, including the new borrowing, does not exceed CFAF 50 million for any one borrower, and provided that the annual interest rate does not exceed the normal market rate. The repayment of loans constituting a direct investment is subject to the formalities prescribed for the liquidation of direct investments. The repayment of other loans requires authorization only if the loan itself was subject to prior approval. Lending abroad is subject to exchange control authorization.

Under the investment code introduced in 1984, special incentives are provided for foreign and domestic investments in certain priority sectors and priority geographical areas. The incentives include exemption from customs duties and tariffs on all imported capital equipment and spare parts for investment projects, provided that no equivalent item is produced in Côte d’Ivoire. In addition, all such investments are exempted for a specified period, depending on the investment sector or area, from corporate profit taxes, patent contributions, and capital assets taxes. In general, the exemption covers 100 percent of applicable tax up to the third to last year of the exemption period, and is reduced progressively to 75 percent of the tax in the second to last year of the exemption period, 50 percent in the penultimate year, and 25 percent in the last year of the exemption period. The code does not exempt from import duties and taxes, imports of intermediate goods or raw materials for which no equivalents are produced locally.

Gold

Residents are free to hold, acquire, and dispose of gold in any form in Côte d’Ivoire. Imports and exports of gold from or to any other country require prior authorization by the Minister of Economy and Finance, which is rarely granted. Exempt from this requirement are: (1) imports and exports by the Treasury or the BCEAO; (2) imports and exports of manufactured articles containing a minor quantity of gold (such as gold-filled or gold-plated articles); and (3) imports and exports by travelers of gold articles up to a weight of 250 grams. Both licensed and exempt imports and exports of gold are subject to customs declaration.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Cyprus

(Position on December 31, 1985)

Exchange Arrangement

The currency of Cyprus is the Cyprus Pound. The exchange rate for the Cyprus pound is adjusted daily with the aim of maintaining its effective relationship with the currencies of the main trading partners. On December 31, 1985 the official buying and selling rates for the U.S. dollar, the intervention currency, were £C 0.5438 and £C 0.5429, respectively, per US$1. The Central Bank of Cyprus also quotes daily buying and selling rates for the deutsche mark, the Greek drachma, and the pound sterling. It also quotes indicative rates for other foreign currencies1 on the basis of market rates in international money market centers. There are no taxes or subsidies on purchases or sales of foreign exchange. The Central Bank offers authorized dealers (banks) facilities for forward purchases and sales of U.S. dollars and pounds sterling for periods of up to six months, in respect of trade and tourist transactions only. Rates for longer periods are available for exports and tourism on request.

Administration of Control

Exchange controls are administered by the Central Bank in cooperation with authorized dealers. Authority to approve applications for the allocation of foreign exchange for a number of purposes has been delegated to authorized dealers.

Prescription of Currency

Payments may be made by crediting Cyprus pounds to an External Account, or in any foreign currency;2 the proceeds of exports to all countries may be received in Cyprus pounds from an External Account, or in any foreign currency.

Nonresident Accounts

Residents of countries outside Cyprus may open and maintain with authorized banks nonresident accounts in Cyprus pounds, designated External Accounts, or Foreign Currency Accounts. These accounts may be credited freely with payments from nonresidents of Cyprus (such as transfers from other External Accounts or Foreign Currency Accounts), proceeds from sales of any foreign currency by nonresidents (including declared bank notes), and the entire proceeds, including capital appreciation, from the sale of an investment made by a nonresident in Cyprus with the approval of the Central Bank and with authorized payments in Cyprus pounds. External Accounts and Foreign Currency Accounts may be debited for payments to residents and nonresidents, for remittances abroad, for transfers to other External Accounts or Foreign Currency Accounts, and for payments in cash in Cyprus. Companies registered or incorporated in Cyprus that are accorded nonresident status by the Central Bank may maintain External Accounts and Foreign Currency Accounts in Cyprus or abroad, as well as local disbursement accounts for meeting their payments in Cyprus.

Blocked Accounts are maintained in the name of nonresidents for funds that may not immediately and in their entirety be transferred outside Cyprus under the existing exchange control regulations. Blocked funds may either be held as deposits or be invested in government securities or government-guaranteed securities. Income earned on blocked funds so invested is freely transferable to the nonresident beneficiary or it may be credited to an External Account or Foreign Currency Account. In addition to income, the principal released in each such case annually for transfer outside Cyprus may not exceed £C 5,000. Funds can also be released from Blocked Accounts to meet reasonable educational expenses in Cyprus of the account holder’s children, reasonable living expenses of the account holder while visiting Cyprus, donations to charitable institutions in Cyprus, and for other authorized purposes.

Imports and Import Payments

Imports of fresh fruits, fresh vegetables, and fresh meat are prohibited. Most other imports are free of licensing requirements. Only imports of certain commodities require an import license. Such commodities include goods produced or manufactured locally, as well as all machinery, plant and equipment, spare parts and accessories.

The Minister of Commerce and Industry may take measures whenever required to regulate the importation of goods for the encouragement of local production and manufacture. Exchange is allocated to pay for imports freely and without restriction through authorized banks, provided that documentary evidence of shipment or actual importation of goods is available.

Advance payments before shipment require the prior approval of the Central Bank, except for imports whose value does not exceed £C 500. Payments for imports requiring a license are expected to be made within the time limits specified on the license. An import surcharge of 6 percent (3.9 percent for imports from EC countries) ad valorem is levied on all imports except food, feedstuff, pharmaceuticals, and goods imported by the Government.

Payments for Invisibles

Payments for invisibles abroad require the approval of the Central Bank, but approval for certain types of payments has been delegated to authorized banks. Profits, dividends, and interest from approved foreign investments are transferable abroad without limitation, after payment of any due charges and taxes. Insurance premiums due to foreign insurance companies are remittable after deduction of all contingencies. Allowances are granted for study abroad at colleges, universities, or other institutions of higher education, and certain lower-level institutions of learning. Exchange allowances are based on the cost of living and cover the full amount of tuition fees plus living expenses for the student. For studies in the Eastern Mediterranean, the Middle East, Yugoslavia, and Comecon countries, the maximum yearly allowance for living expenses is £C 1,800; for Canada and the United States, £C 4,400; for the United Kingdom, £C 3,000; and for all other countries, £C 2,600. There is no limit for the remittance of foreign exchange for payment of tuition fees. The exchange allowance for tourist travel is £C 450 a person a year; the allowance for business travel is not fixed, but depends on the length of stay abroad, the country or countries to be visited, and the purpose; for medical treatment abroad, the amount is unlimited but based on actual expenses.

On leaving Cyprus, travelers may take out with them up to £C 50 in currency notes. There is no limit on the amount of foreign currency notes that departing residents may take out of the country as part of any of their foreign exchange allowances. Nonresident travelers may take out any amount of foreign currency notes they declared on arrival. Foreign currency notes equivalent to US$1,000 need not be declared. In addition, authorized banks may convert up to £C 100 into foreign currency for departing nonresidents. Furthermore, authorized banks are permitted to issue to nonresidents any amount of foreign currency notes against external funds.

Exports and Export Proceeds

Exports of potatoes and carrots are subject to control by the respective Marketing Boards, and those of wheat, barley, and maize to control by the Cyprus Grain Commission. Exports of cement are subject to a license for the purpose of ensuring adequate domestic supply. All exports are subject to licensing when the f.o.b. value exceeds £C 100, to ensure the inflow of the sales proceeds. Export proceeds must be surrendered without delay.

Proceeds from Invisibles

Receipts from invisibles must be sold to an authorized bank. Persons entering Cyprus may bring in any amount in foreign currency notes and up to £C 50 in Cyprus currency notes.

Capital

Payments abroad of a capital nature require prior approval. Applications for outward direct investment by residents are approved provided they are expected to contribute to foreign exchange inflows and the exportation of goods and services. Such investments include those by construction and tourist companies.

Investments in Cyprus by nonresidents require prior approval of the Central Bank. In considering applications, due regard is given to the purpose of the investment, the extent of possible foreign exchange savings or earnings, introduction of know-how, and, in general, the benefits accruing to the national economy. Foreign direct investment is normally permitted in selected fields of production such as export-oriented industries and new products. Yearly profits and proceeds from the liquidation of approved foreign investments may be repatriated in full at any time, after payment of any due charges and taxes.

With the permission of the Council of Ministers, alien nonresidents may acquire in Cyprus immovable property for use as a residence or holiday home; they are required to pay the value of such property in foreign exchange. The sales proceeds of such property are transferable outside Cyprus up to the amount originally paid for the purchase of the property; the balance, if any, is transferable at the yearly rate of £C 5,000.

Residents of Cyprus (Cypriots or foreign nationals) who take up residence outside Cyprus may transfer abroad immediately up to £C 5,000; any excess amount is deposited in a Blocked Account and released at the rate of £C 5,000 per year. The transfer abroad of funds resulting from estates and intestacies and from the sale of real estate is limited to £C 5,000, with any excess amount to be credited to a Blocked Account and also released at the rate of £C 5,000 per year.

Transactions in foreign securities owned by residents require prior permission from the Central Bank. In principle, all securities held abroad by residents are subject to registration.

Gold

Residents may hold and acquire gold coins in Cyprus for numismatic purposes. With this exception, residents other than the monetary authorities, authorized dealers in gold, and industrial users are not allowed to hold or acquire gold in any form other than jewelry, at home or abroad. Authorized dealers in gold are permitted to import gold only for the purpose of disposing of it to industrial users. The export of gold requires the permission of the exchange control authorities.

Changes During 1985

Payments for Invisibles

January 1. The basic tourist travel allowance was increased from £C 350 to £C 450 a person a year.

January 25. The maximum amount of Cyprus bank notes allowed to be imported into or exported from Cyprus by travelers was increased from £C 10 to £C 50.

February 28. It was announced that, without reference to the Central Bank, authorized banks could sell foreign exchange for business or professional travel abroad, for up to £C 100 daily within a limit of £C 1,000; they could also issue credit cards valid abroad to pay hotel and restaurant bills and transportation expenses, but the above-mentioned limits were fixed at £C 60 and £C 600, respectively, for users of credit cards.

July 19. Foreign exchange allowances for education abroad during the academic year 1985/86 were fixed at the equivalent of the following amounts in Cyprus pounds (previous years levels in brackets): (a) United States and Canada, 4,400 [4,000]; (b) United Kingdom, 3,000 [2,800]; (c) Eastern Mediterranean countries, Middle East Countries, Comecon countries, and Yugoslavia, 1,800 [1,700]; and (d) other countries, 2,600 [2,500].

Payments for Imports

February 9. The authorized limit on advance payments for imports was increased from £C 100 to £C 500. In addition, authorized banks could issue foreign exchange to departing residents up to £C 10,000 for purchases of goods abroad.

Denmark

(Position on December 31, 1985)

Exchange Arrangement

The currency of Denmark is the Danish Krone. Denmark participates with Belgium, France, the Federal Republic of Germany, Ireland, Italy, Luxembourg, and the Netherlands in the exchange rate and intervention mechanism of the European Monetary System (EMS). In accordance with this agreement, Denmark maintains the spot exchange rates between the Danish krone and the currencies of the other participants within margins of 2.25 percent (in the case of the Italian lira, 6 percent) above or below the cross rates based on the central rates expressed in European Currency Units (ECUs).

The agreement implies that the National Bank of Denmark (the central bank) stands ready to buy or sell the currencies of the other participating states in unlimited amounts at specified intervention rates. On December 31, 1985 these rates were as follows:

Danish Kroner
Specified Intervention
Rates Per:Upper limitLower limit
100 Belgian or
Luxembourg francs18.54317.727
100 deutsche mark371.40355.06
100 French francs121.11115.78
100 Netherlands guilders329.63315.13
100 Irish pounds1,147.351,096.87
100 Italian lire0.56760.5035

The participants in the EMS are not maintaining the exchange rates for other currencies within fixed limits. However, in order to ensure a proper functioning of the system, the Danish central bank intervenes to smooth out fluctuations in exchange rates. Middle rates for 20 foreign currencies are quoted daily on the basis of market rates.1 On December 31, 1985 the middle rate for the U.S. dollar was DKr 896.90 per US$100. There are no taxes or subsidies on purchases or sales of foreign exchange.

Authorized exchange dealers may engage in arbitrage, both spot and forward. Spot transactions are defined as transactions where actual delivery takes place within two banking days; transactions that mature in three banking days or more are defined as forward transactions. Spot transactions in all currencies, including Danish kroner, and forward transactions involving purchases of foreign currencies against sales of foreign currencies may be concluded freely with domestic and foreign banks. Forward transactions that involve Danish kroner may also be concluded, but for not more than three years. Forward premiums and discounts are generally left to the interplay of market forces. Forward transactions that involve resident and nonresident purchases of foreign currencies against sales of Danish kroner must cover contractual payments, the payments covered being due not more than three years from the date of the forward contract. There are no restrictions on forward transactions that involve resident and nonresident purchases of Danish kroner against sales of foreign currencies, other than the three-year limit on maturity.

Denmark formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from May 1, 1967.

Exchange Control Territory

The Danish Monetary Area comprises Denmark, Greenland, and the Faeroe Islands.

Administration of Control

Exchange control is administered by the National Bank and the authorized exchange dealers, that is, most banks, some savings banks, and some stock exchange brokers who are members of the Copenhagen Stock Exchange. The exchange regulations generally do not apply to individual transactions and transfers of DKr 40,000 or less. Transfers of up to DKr 40,000 may, in any event, be made without delivery of forms. Permission, when required, for foreign direct investments in Denmark has to be obtained from the Ministry of Industry. Licenses for imports and exports, when required, are issued by the Ministry of Industry, the Ministry of Agriculture, or the Ministry of Fisheries.

Prescription of Currency

Payments to or from foreign countries may be made in any foreign currency or in Danish kroner.

Nonresident Accounts

Nonresident Krone Accounts are convertible. The only exceptions are Emigrant Accounts.

Krone Accounts may be opened by authorized banks for foreign banks, insurance companies, and shipping companies, and for institutions of the EC. They may also be opened for other nonresidents, provided that the total credit balance of the accounts of an individual nonresident does not exceed DKr 300,000; any amount in excess of DKr 300,000 must be transferred abroad within three days. Special accounts not subject to a maximum balance may be opened for nonresidents, provided they are credited only with the liquidation proceeds or capital earnings from certain investments in Denmark and some other funds.

Emigrant Accounts are kept by authorized exchange dealers for holding liquid assets owned by or accruing to Danish emigrants, to the extent that the amounts exceed the exchange allowance of DKr 100,000 available to each person at the time of departure. Certain payments to residents may be made freely from these accounts, and the balances are in any case made convertible one year after departure.

Imports and Import Payments

Most commodities, except for textiles, are free of licensing from all sources. For textiles, a common EC system of export-import licenses has now been established for almost all countries exporting low-priced textiles. The only commodities that require a license when originating in or purchased from member countries of the EC are alcoholic beverages and unwrought and semimanufactured gold. A few items require a license when originating in Japan, the Republic of Korea, or any other non-state-trading, non-EC country. A larger number of items require a license when originating in or purchased from Albania, Bulgaria, the People’s Republic of China, Czechoslovakia, the German Democratic Republic, Hungary, the Democratic People’s Republic of Korea, Mongolia, Poland, Romania, the U.S.S.R., or Viet Nam.

Payments for imports and the related shipping expenses may as a general rule be made freely within five years from the end of the month in which the goods were cleared through customs, provided that the terms of payment conform to normal commercial practice in the trade concerned. Repayments of debts must not be made more than 30 days before the day stipulated as the latest in the contract (or before the latest customary date in the trade). However, commercial credits can be repaid at any time if a discount is obtained as a result, provided the payment is made to the supplier and conforms to normal commercial practice in the trade concerned. Prepayments linked to trade in goods and services that are in conformity with normal commercial practice may be granted to nonresidents up to one year prior to the expected date of import or the effected date of performance of the service; the permitted period is up to five years for capital goods (ships, aircraft, heavy machinery, and major installations) when purchased for an amount of DKr 1 million or more. All other advance payments for imports require prior approval by the National Bank.

Payments for Invisibles

Payments by residents for invisibles may in general be made freely; only a few cases require approval. Authorized banks are empowered to allow the transfer of funds to an account abroad kept by a person of foreign nationality who has not resided in Denmark for more than seven years, provided that the balance of the account does not exceed DKr 200,000. Foreign exchange for travel is allocated freely and may be obtained for travel to any country, but not earlier than 30 days before the trip if the amount applied for exceeds the equivalent of DKr 40,000.

Travelers may take out freely DKr 40,000 in Danish bank notes and coin, and any amount in foreign bank notes or other means of payment. Nonresidents may, in addition, export amounts of up to DKr 50,000 or any such larger amount in Danish kroner and foreign exchange that they can substantiate as having been imported upon entry into Denmark.

Exports and Export Proceeds

Gold is the only commodity that requires a license when exported to member countries of the EC. Except for certain items subject to strategic controls, licenses for exports to other destinations are required only for waste and scrap of certain metals and monetary gold.

Export proceeds must be transferred to Denmark without undue delay unless the National Bank permits otherwise. However, such amounts collected abroad may be kept in an account with a foreign bank for a maximum period of 30 days; otherwise, foreign exchange receipts must either be offered for sale to the National Bank or to an authorized exchange dealer without undue delay, or kept in an account with an authorized exchange dealer for a maximum period of three months.

Proceeds from Invisibles

Foreign exchange derived from invisibles must be transferred to Denmark, unless the National Bank permits otherwise, and offered for sale to the Bank or to an authorized exchange dealer without undue delay, with exceptions similar to those that apply to export proceeds (see section on Exports and Export Proceeds, above). Travelers may bring in any amount of Danish bank notes and coin, foreign bank notes, and other Danish or foreign means of payment.

Capital

Both inward and outward transfers of capital and all borrowing and lending between residents and nonresidents are subject to exchange control and may be restricted. The general rules on exchange control issued by the Ministry of Industry are based on EC directives on capital movements and the OECD Capital Code; no distinction is made in these rules between residents of member countries of the EC and those of the rest of the world. Residents have an obligation to repatriate proceeds realized from the sale or liquidation of assets abroad.

Transfers abroad may be made by residents to pay interest on, or to redeem upon maturity, or to repurchase any Danish securities. Residents may lend amounts not exceeding DKr 2 million in a calendar year to subsidiary companies (direct investments of loan capital) or, in the case of resident persons, DKr 500,000 in a calendar year to a member of the resident’s family. Contributions from a parent enterprise to a branch are treated as direct investment of equity capital. Residents may buy foreign shares as portfolio investments, provided that these are listed on the stock exchange, or in other cases, provided that these are acquired on the basis of a subscription right to shares or the like owned by the resident concerned.

Residents may only subscribe to or purchase foreign bonds with an original maturity exceeding two years that are listed on a stock exchange. The purchases have to be made through an authorized exchange dealer against cash. The Central Bank applies a liberal procedure to the approval of residents’ purchases of unlisted foreign securities.

No special permission is required for residents to make transfers abroad, within certain limits, in connection with most direct investments or with private acquisitions of real estate abroad. The limits are DKr 10 million a year for each foreign enterprise for direct investments of equity capital.2 Private acquisition of real estate for noncommercial purposes and expenses related to building and construction work on such property can be made without limitations. Direct investments abroad by residents are normally approved in accordance with Denmark’s obligations as a member of the EC and the OECD. Authorized exchange dealers do not need special permission to grant loans to nonresidents for the financing of payments to residents for purchases of Danish goods and services, provided normally that the loan is granted directly to the foreign purchaser; in those cases where the National Bank’s approval is required, this is generally given when the loans are customary in the trade concerned. Permission from the National Bank is required for certain other transfers abroad of a capital nature by residents.

Danish emigrants are granted an exchange allowance of up to DKr 100,000 for each person at the time of departure. The remaining liquid assets must be credited to an Emigrant Account in the name of the owner and may be transferred abroad one year after departure, or earlier if the emigrant can show that he has taken up permanent residence abroad with the approval of the relevant foreign authorities.

Inward direct investment in the form of equity capital may be made without prior license if the investment does not increase total direct foreign investment in the enterprise concerned by more than DKr 10 million in each calendar year. However, prior license is always required if the investment is undertaken by a foreign firm in which a resident directly or indirectly owns an interest representing a direct investment. Direct investments require notification to the National Bank if they are made without a prior license. A contribution from a parent company to a branch is treated as direct investment of equity capital. Other direct investments by nonresidents require permission from the exchange control authorities, which is granted liberally in accordance with Denmark’s obligations as a member of the EC and the OECD. The purchase by a nonresident of real property in Denmark normally requires a special license from the Ministry of Justice; permission is usually granted readily where real estate is to be used for industrial or similar enterprises.

The sale to nonresidents of Danish bonds listed on a stock exchange does not require a special license. Nonresidents may freely purchase or subscribe to all types of Danish shares, including shares of joint stock and private companies; they may also acquire private mortgage deeds with a residual maturity of five years or more.

Residents may as a general rule take up loans for up to five years from nonresidents to finance imports of commodities and services; they may also take up such loans to finance the granting of credits for exports of commodities and services, provided that the credits are in conformity with normal commercial practice and that the maturity of the loans does not exceed the borrowers’ credits to nonresidents in connection with exports of goods and services. Most business enterprises may borrow abroad without restriction, provided that the maturity is at least one year. Residents may take up loans of up to DKr 500,000 in a calendar year from the borrower’s family members. Foreign borrowing by municipalities and public utility companies is subject to control by the appropriate department of the Government.

Transfers of proceeds from the sale or liquidation of all types of investments and transfers of all other liquid funds in Denmark owned by nonresidents, other than new emigrants, are permitted freely, irrespective of when and how the original investment was acquired. Interest and repayment of principal on authorized loans, credits, and deposits received from persons and firms who are nonresidents at the time of receipt may be paid freely, with the proviso that loans and credits obtained from a nonresident generally must not be amortized or repaid in full more than 30 days before the amortization payment or repayment is due.

Inheritances and gifts to relatives may normally be transferred to any country without limitation. Individual payments above DKr 40,000 as gifts to persons other than relatives are subject to approval from the National Bank.

Imports and exports of securities are subject to regulation, the details of which are established by the National Bank. Bona fide imports and exports of Danish and foreign securities are permitted. Danish securities held in Denmark and belonging to nonresidents may, in most cases, be sold freely to residents. Foreign securities held in Denmark may be negotiated freely between residents, provided that the exchange control regulations are not circumvented.

Authorized foreign exchange dealers’ commercial net balances in accounts with foreign countries may be negative to the extent of an amount equal to the loans that the authorized dealer has granted to residents in foreign currency in conformity with the exchange control regulations and, for the purpose of financing Denmark’s foreign trade, within a limit of DKr 3 million; for banks and savings banks, the limit is up to 5 percent of net worth (up to 10 percent of net worth allowed under certain conditions). A positive net commercial foreign position is, in principle, allowed only so long as it does not exceed DKr 2 million or, for banks and savings banks, 15 percent of the capital and reserves, whichever is higher.

Gold

Residents may freely buy, hold, and sell gold coin in Denmark; they may also import gold coin. Otherwise, residents other than the monetary authorities and authorized industrial and dental users are not allowed to acquire gold abroad. Imports and exports of gold normally require licenses issued by the Ministry of Industry and Commerce; such licenses are not normally granted except for imports and exports by or on behalf of the monetary authorities and industrial and dental users. Imports of gold in bars or coin, unless made by or on behalf of the monetary authorities, are subject to value-added tax at a rate of 22 percent; domestic transactions in gold are also taxed at a rate of 22 percent. There is no customs duty on imports of gold in bars or coin.

Changes During 1985

Exchange Arrangement

July 22. The intervention limits of the Danish krone within the EMS were redefined as follows, with respect to the Italian lira:

Danish Kroner
Specified Intervention
Rates Per:Upper limitLower limit
100 Italian lire0.56760.5035

June 1. The maximum amount of foreign exchange transactions exempted from exchange control requirements was increased from DKr 25,000 to DKr 40,000.

Capital

June 11. The length of the period during which residents could maintain foreign exchange accounts with Danish banks was extended from 30 days to three months. In addition, the limit on foreign investment in Danish enterprises without prior permission was raised from DKr 5 million to DKr 10 million annually, and the corresponding limit on investment by residents in foreign enterprises was increased from DKr 2 million to DKr 10 million annually. The minimum permissible maturity for finance loans contracted abroad by residents was lowered from five years to one year, and it was announced that the Central Bank would introduce a liberal procedure for approving residents’ purchases of unlisted foreign securities.

Djibouti

(Position on December 31, 1985)

Exchange Arrangement

The currency of Djibouti is the Djibouti Franc, which is freely convertible into U.S. dollars, the intervention currency, at the fixed rate of DF 177.721 = US$1. The buying and selling rates for the U.S. dollar are DF 176.84 and DF 179.48, respectively, per US$1. Buying and selling rates for certain other currencies1 are set by local banks on the basis of cross rates for the U.S. dollar in international markets. The posted rates are subject to commission charges of 1.5–6.0 percent set by the commercial banks, depending on the currency concerned. In addition, there is a fixed commission amounting to DF 300 for transfers in Djibouti francs, DF 500 (or US$3.00) for transfers in foreign currencies, and zero for transfers in French francs. There are no taxes or subsidies on purchases or sales of foreign exchange.

On September 19, 1980 Djibouti formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement.

Administration of Control

There is no exchange control and no prescription of currency. The Djibouti franc is issued in notes and coins by the National Bank of Djibouti, which issues and redeems the currency against U.S. dollars. Deposits in U.S. dollars constitute the cover for the notes issued.

Prescription of Currency

All settlements with Israel and South Africa are prohibited. Otherwise, no prescription of currency requirements are in force.

Imports and Import Payments

Imports from Israel and South Africa are prohibited. Djibouti has a free trade zone in the port of Djibouti, but the territory as a whole does not constitute a free zone. Formally, no customs duty is charged on imports, but in practice, fiscal duties are levied by means of indirect taxes (the general consumption tax). The rate of the general consumption tax is 26 percent for luxury goods and 23 percent for all other goods. A surtax of 5 percent is levied on the c.i.f. value of most imports. Certain commodities, including alcoholic beverages, noncarbonated mineral water, petroleum products, khat, and tobacco, are subject to surtaxes at various rates. Additional taxes are levied on imported milk products and fruit juices.

Exports and Export Proceeds

Exports to Israel and South Africa are prohibited. Otherwise, there are virtually no restrictions on exports, with the exception of the prohibition on exports of live animals. Export proceeds may be retained.

Payments for and Proceeds from Invisibles

No restrictions are imposed on payments for or proceeds from invisibles, except that payments must not be made to or received from Israel and South Africa.

Capital

No restrictions are imposed on inward or outward capital transfers, but payments may not be made to or received from Israel and South Africa. Under the Investment Code of June 5, 1975, enterprises established or expanded to undertake certain specific economic activities are eligible for various tax exemptions.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Dominica

(Position on December 31, 1985)

Exchange Arrangement

The currency of Dominica is the Eastern Caribbean Dollar,1 which is issued by the Eastern Caribbean Central Bank (ECCB). The Eastern Caribbean dollar is pegged to the U.S. dollar, the intervention currency, at EC$2.70 = US$1. On December 31, 1985 the buying and selling rates for the U.S. dollar were EC$2.6949 and EC$2.7084, respectively, per US$1. The ECCB also quotes daily rates for the Canadian dollar and the pound sterling. There is a 2.5 percent tax on sales of foreign exchange for invisible trade transactions involving more than EC$100.

Dominica informed the Fund on December 13, 1979 that it formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement.

Administration of Control

Exchange control is administered by the Ministry of Finance and applies to all countries outside the Eastern Caribbean Central Bank area. The Ministry of Finance has delegated to commercial banks certain of its powers to approve sales of foreign currencies within specified limits. The Ministry of Trade administers import and export arrangements and controls.

Prescription of Currency

Settlements with residents of territories participating in the Eastern Caribbean Central Bank Agreement must be made in Eastern Caribbean dollars; those with member countries of the Caribbean Common Market (Caricom)2 must be made in the currency of the Caricom country concerned. Settlements with residents of other countries may be made in any foreign currency.3

Foreign Currency Accounts

Foreign currency accounts may be operated only with the permission of the Ministry of Finance; such permission is normally confined to major exporters and foreign nationals not ordinarily resident in Dominica. The accounts can only be credited with foreign currencies obtained outside Dominica. Payments from these accounts require no approval, but transactions are subject to the foreign exchange sales tax.

Imports and Import Payments

All imports from South Africa are prohibited. Most other goods are imported under open general license, but individual licences are required for manufactures or items which compete with regionally available products.

Payments for authorized imports are permitted upon presentation to a bank of documentary evidence of purchase. Advance payments for imports require prior approval by the Ministry of Finance.

Payments for Invisibles

All settlements overseas require exchange control approval. However, commercial banks have been delegated with authority to sell foreign currency to local residents as specified below: (a) for incidentals, EC$50, subject to a limit of EC$250 a person a year; (b) for each trip outside the area served by ECCB, EC$2,500 subject to a maximum of two trips in any 12-month period, and upon presentation of travel documents; (c) for bona fide business travelers, EC$350 for each day outside Dominica, provided the total does not exceed EC$10,500 in any 12-month period, and upon presentation of travel documents; and (d) for overseas travel for medical treatment, EC$350 a day up to a maximum of EC$20,000 in any 12-month period, subject to the presentation of a medical certificate stating that the journey is necessary and upon presentation of travel documents.

Amounts in excess of specified limits may be obtained with approval from the Ministry of Finance.

Exchange control approval will normally be given for the payment of fees and subscriptions to recognized institutions and for such other educational items as newspapers, upon presentation of the invoice. Foreign currency may also be bought to meet educational expenses, including accommodation, up to EC$15,000 a student in each academic year. Outward remittances of cash gifts are allowed up to EC$ 1,000 a year to each recipient. Profits may be remitted overseas in full, provided that the Comptroller of Inland Revenue has prior knowledge of the transfer.

Exports and Export Proceeds

Exports to South Africa are prohibited, and specific licenses are required for the export of certain goods to any destination. The conversion of export proceeds to an Eastern Caribbean Central Bank currency account is mandatory, except where the exporter has a foreign currency account into which the proceeds may be paid. Export duties are levied on bananas, fresh fruit, fruit juices, nuts, essential oil, and timber.

Proceeds from Invisibles

Foreign currency proceeds from transactions in invisibles must be sold to a bank or paid into a foreign currency account. There is no restriction on importation of bank notes and coin.

Capital

All outward transfers of capital or profits require exchange control approval. The purchase by residents of foreign currency securities and of real estate located abroad is not normally permitted. Capital transfers, such as inheritances, to nonresidents require approval, which normally is granted, subject to the payment of any taxes due. Emigrants leaving Dominica to take up residence outside the Eastern Caribbean Central Bank area may transfer up to EC$20,000 (for a husband, wife, and children under 18 years) from their assets, subject to income tax clearance. Approval from the Ministry of Finance may be granted in special cases for remittance of amounts in excess of EC$20,000.

Direct investment in Dominica by nonresidents may be made with exchange control approval. The remittance of earnings on, and liquidation proceeds from, such investment is permitted, subject to the discharge of any liabilities related to the investment. The approval of the Ministry of Finance is required for nonresidents to borrow in Dominica. Any borrowing abroad by authorized dealers to finance their domestic operations requires the approval of the Ministry.

Gold

Residents are permitted to acquire and hold gold coins for numismatic purposes only. Small quantities of gold may be imported with the approval of the Ministry of Finance, for industrial purposes only.

Changes During 1985

Exchange Arrangement

August 12. The levy of 1.5 percent on sales of foreign currency was increased to 2.5 percent and imposed on all sales of over EC$100, with the exception of payments for the importation of goods, which are exempt from that levy.

Administration of Control

April 1. In a revision of the exchange control regulations, the commercial banks were given new instructions on their delegated authority to approve sales of foreign currencies.

Imports and Import Payments

September 1. In conformity with the Nassau Agreement of 1984, common external tariffs were raised on a short list of import items similar to those produced or with potential supply capability within the Caricom region, and the tariff rate on regional products listed in Schedule III of the Caricom Treaty was reduced by 50 percent.

Payments for Invisibles

July 3. The ad valorem tax of 10 percent on all travel tickets was abolished.

Dominican Republic

(Position on December 31, 1985)

Exchange Arrangement

The currency of the Dominican Republic is the Dominican Peso. All foreign exchange operations, with the exception of those for which the peso counterpart had already been deposited with the Central Bank by January 23, 1985 or those that had been otherwise authorized by the Monetary Board as of this date, take place at the transaction-weighted average market-determined buying and selling rates of the last available survey published daily by the Central Bank (usually with a lag not exceeding two days). All other transactions not channeled through the Central Bank take place at the free market rate of the day. On December 31, 1985 the buying and selling rates of the Dominican Peso in terms of the U.S. dollar, as published by the Central Bank, were RD$2.94 = US$1 and RD$2.97 = US$1, respectively.

A small fund of US$10 million created in 1984 for the importation of generic medicines continues to be administered at a rate of RD$2.00 = US$1.00; at the end of 1985 US$3,000 was left in this fund.

A surcharge of 36 percent on exports of traditional products and services and another of 5 percent on exports of nontraditional products and specified services are collected at the point of conversion of foreign exchange proceeds into peso by the exporter, thereby involving a multiple currency practice.1

Exchange transactions in U.S. dollars between the Central Bank and other banks carry a commission of 132 of 1 percent. Commercial banks charge their customers commissions of ¼ of 1 percent (buying) and ½ of 1 percent (selling); an additional 1 percent commission is levied on payments by letter of credit.

Foreign Currency Accounts

Under a Monetary Board resolution of August 24, 1982 commercial banks are authorized to open two types of foreign exchange accounts for their clients.2 One of these is a noninterest-bearing U.S. dollar account, from which funds can be drawn to make payments for current transactions approved by the Central Bank. The other type of account yields interest at a rate announced periodically by the Central Bank but not more than 1 percentage point below the federal funds rate in the United States; such an account is subject to a minimum deposit requirement of US$25,000. Both types of account are subject to a 100 percent reserve requirement. Beginning in mid-November 1983, exchange banks have been established and empowered to purchase and sell foreign exchange.

Administration of Control

Exchange control policy is determined by the Monetary Board and is administered by the Central Bank. Commercial banks are permitted to freely transact in foreign exchange. Payments abroad are subject to documentation and limited to transactions via commercial banks. At the end of 1985, there were 12 commercial banks and 80 exchange banks operating in the foreign exchange market in the Dominican Republic.

Prescription of Currency

Imports from the United States that are financed by the U.S. Agency for International Development must be made under special letters of credit. Settlements with Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay, and Venezuela may be made through special accounts established under reciprocal credit agreements within the framework of the Latin American Integration Association (LAIA). Import payments in currencies other than the U.S. dollar must be made through letters of credit. Otherwise, no obligations are imposed on importers, exporters, or other residents regarding the currency to be used for payments to or from nonresidents.

Imports and Import Payments

In principle, all import payments can be made with foreign exchange purchased freely in the market. Import settlements against collection or by draft must be denominated in U.S. dollars. Prepayment of letters of credit is required for certain imports.

Beginning from November 1983, the prohibition on imports of vehicles no longer applies, but imports are subject to an annual quota of US$25 million.

In principle, “nominal duty rates” range from a minimum of 40 percent to almost 900 percent for imports of malted beverages. Most of the nominal duty rates at the three- and four-digit level of the tariff schedule range between 40 percent and 75 percent. However, a number of imports were exempted from the payment of these nominal duties. An internal consumption tax of 20 percent ad valorem and a 4 percent surcharge on the total amount of all customs charges are applied on all imports subject to the minimum duty of 20 percent, with the exception of agricultural and industrial machinery and inputs for the manufacture of agrochemical products, which are subject to a 5 percent duty.

Payments for Invisibles

Beginning from May 1984, all categories of invisible payments can be made freely through commercial banks, subject to documentation requirements.

Exports and Export Proceeds

Certain exports are temporarily prohibited, including some food products and animal species, unprocessed wood (for environmental protection purposes), and blood (for public health reasons). In addition products imported under specified bilateral trade agreements are prohibited for export under the terms of such agreements. A number of products (such as sugar, molasses, coffee, and cocoa) are subject to prior authorization. Export licenses, issued by the Dominican Center for Export Promotion (Cedopex), are required for all products.

A surcharge of 36 percent (traditional exports and services other than tourism) and of 5 percent (nontraditional exports, and certain services) are levied on export proceeds through the exchange system. The traditional exports are defined as raw sugar, molasses, refined sugar intended for the North American market, green coffee, roasted coffee, cocoa beans, cocoa liquor, cocoa cake, cocoa butter, leaf tobacco, gold, silver, and ferronickel.

With specified exceptions, exporters must, within two working days of receiving payments, surrender to the Central Bank, through the commercial banks, foreign exchange equal to 100 percent of the value of their exports. For the purposes of exchange surrender, declared export prices must equal or exceed the minimum export prices established by Cedopex for certain exports.

Firms operating in industrial free zones and ferronickel exports are exempted from the exchange surrender requirements and are required to convert only the foreign exchange needed by them to cover local costs and taxes.

Law No. 69 provides for the issuance of tax credit certificates (certificados de abono tributario—CATs) for a value not exceeding 15 percent of the f.o.b. or c.i.f. value of exports; the percentage can be up to 25 percent when exports contain a high degree of domestic agricultural inputs. The CATs are, in principle, fully negotiable and can be used for the payment of taxes or other obligations to the Government. However, only a limited number of CATs have been issued. Law No. 69 also regulates the system of temporary admission for imports, under which duties are waived for any imports used in the manufacture of nontraditional products to be exported within a year.

Nontraditional exports are entitled to a refund of a percentage of the import duties paid on raw materials or component parts used in the manufacture of goods subsequently exported; the refund is 90 percent on exports containing only imported inputs, 95 percent on exports containing domestic inputs, and 100 percent on exports produced in the industrial free trade zone.3 Exporters are also eligible for a refund of 95 percent of any internal tax levied on locally manufactured goods that are exported. Exporters may not extend credit to foreign buyers for more than 90 days from the date of shipment without authorization by the Central Bank.

Proceeds from Invisibles

With certain exceptions, such as those relating to tourism and remittances of Dominicans living abroad, foreign exchange proceeds from invisibles must be surrendered to the Central Bank through the commercial banks. Such proceeds are subject to a surcharge of 36 percent or of 5 percent, depending on their classification. The import of Dominican bank notes and coin is prohibited.

Capital

There are no restrictions on the inward movement of capital by either residents or nonresidents. However, direct foreign investment is regulated by Law No. 861 of July 19, 1978, which created a Directorate of Foreign Investment to approve direct investment requests. Such investments must be registered with the Central Bank. Beginning from May 1984, outward remittances related to investments are made freely through the banks, subject to prior registration with the Central Bank.

Foreign debt can be contracted directly by the Central Government, subject to congressional authorization. According to Law No. 251 of 1964, new loans by other public and private entities require Monetary Board authorization. According to a set of criteria established by the Monetary Board on November 19, 1981, priority in the approval of new loans is given to foreign borrowing for export, import substitution, and social projects such as housing and education. Total financial charges on foreign loans are not allowed to exceed the principal international interest rate by more than 3 percent. There are also minimum maturity requirements according to the type of financing.

Beginning from January 23, 1985, the Central Bank provides foreign exchange for the servicing of public external debt at the market rate; the servicing of private external debt is effected through the market. There are no restrictions on the amount of foreign exchange that Dominican residents can purchase in the market.

Gold

Residents may purchase, hold, and sell gold coins in the Dominican Republic for numismatic purposes. With this exception, residents other than the monetary authorities and authorized industrial users are not allowed to hold or acquire gold in any form other than jewelry, in the Dominican Republic or abroad. Imports and exports of gold in any form other than jewelry constituting the personal effects of a traveler require licenses issued by the Central Bank; such licenses are not normally granted except for imports and exports by or on behalf of the monetary authorities and industrial users.

Changes During 1985

Exchange Arrangement

January 23. The different rates in the foreign exchange market were unified at the parallel market rate (Monetary Board Resolution No. 12).

December 12. The computation of the exchange rate for official purposes was changed from a weighted average of the market rate during the last five days to the rate of the last available day, with a maximum lag of two days.

Imports and Import Payments

January 23. Procedures and conditions for settlement of letters of credit approved before April 17, 1984 were announced, and an audit commission was established (Monetary Board Resolution No. 1).

March 22. The advance import deposit requirement for imports financed under reciprocal credit agreements with Latin American central banks was reduced from 100 percent to 50 percent of value. The remaining 50 percent of the deposit would be required at the time of settlement for transaction through the Central Bank (Monetary Board Resolution No. 12).

Exports and Export Proceeds

January 23. An Exchange Stabilization Fund was established to be financed from proceeds from a 36 percent surcharge on exports of traditional products and services and a 5 percent surcharge on exports of nontraditional products and certain services. Both levies were to be collected at the point of receipt by the exporter of the local-currency counterpart of export proceeds, thereby constituting exchange taxes and involving a multiple currency practice. Receipts from tourism and Dominicans living abroad were not affected.

March 22. The surcharge applicable to exchange proceeds from industrial free zones was reduced from 36 percent to 5 percent.

Proceeds from Invisibles

January 23. An arrangement was introduced under which proceeds from transactions financed with credit cards were to be directed to the Banco de Reservas.

Capital

March 22. Foreign exchange receipts in the form of foreign investments, loans, transfers, and expenditures of diplomatic missions were exempted from surcharges (Monetary Board Resolution No. 8).

Ecuador

(Position on December 31, 1985)

Exchange Arrangement

The currency of Ecuador is the Ecuadoran Sucre. There are two exchange markets: the official market of the Central Bank and a legal parallel market. The exchange rate in the official market of the Central Bank may be flexibly determined but has been kept fixed at S/. 95.00 (buying) and S/. 96.50 (selling) since November 12, 1985 when the official and intervention markets were unified. The buying and selling rates for other currencies1 are officially quoted on the basis of daily buying and selling rates against the U.S. dollar in foreign markets.

Sales and purchases of foreign exchange by oil companies are subject to a service charge of S/. 0.25 per US$1. Loan capital from international agencies and foreign governments to the Government and public institutions is converted at the intervention rate prevailing on the disbursement date.

External loans are subject to a tax that varies between 0.5 percent and 2 percent for maturities of 6 months to 24 months. Exempted from this tax are: (1) loans of more than 24 months; (2) loans from foreign governments and international agencies; (3) loans to the public sector; and (4) suppliers’ credits involving no inflow of foreign exchange.

An arrangement for refinancing specified private external debt involves different implicit exchange rates arising from charges imposed on the official rate to compensate for possible exchange losses.

Ecuador formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, with effect from August 31, 1970.

Administration of Control

The Monetary Board has authority to shift transactions between the two exchange markets and has extensive powers with respect to import policy. The official market is under the control and supervision of the Central Bank, which also issues import and export licenses and registers foreign capital. Imports entering the country as part of a direct foreign investment and imports by foreign enterprises that have contracts with the Government require prior authorization by the Ministry of Industry, Commerce, and Integration (MICEI) and, when exemptions from fiscal charges are sought, by the Ministry of Finance. The MICEI authorizes and supervises foreign investment in Ecuador.

Prescription of Currency

Most settlements with the German Democratic Republic, Hungary, and Poland take place through bilateral accounts. Payments between Ecuador and Argentina, Bolivia, Brazil, Chile, Colombia, the Dominican Republic, Mexico, Paraguay, Peru, Uruguay, and Venezuela must be made within the framework of the multilateral clearing system of the Latin American Integration Association (LAIA). Exchange proceeds from other countries must be received in convertible currencies. Whenever possible, import payments must be made in the currency stipulated in the import license.

Imports and Import Payments

Permitted imports are divided into two categories: List I, consisting of priority goods (Group I “Special”), essential goods (Group A), and semiessential goods (Group B); and List II, consisting of less essential and luxury goods. All goods not included in these two lists are prohibited. Mainly for reasons of industrial protection, certain imports require prior authorization from government ministries or agencies.

With specified exceptions, prior import licenses are required for all permitted imports. Books, newspapers, periodicals, and printed music may be imported with or without prior import licenses; with import licenses, the transactions are effected without limitation through the Central Bank at the exchange rate of the intervention market; if without import licenses, the transactions are effected directly through the free private market at the rate obtained on that market, except that recorded music may be imported only with an import license through the intervention market of the Central Bank. These imports are subject to payment of the applicable taxes and charges regardless of their purpose. Medicines and spare parts for machinery and automotive vehicles are free of license when valued at US$500 f.o.b. or less, but all applicable charges and taxes must be paid on them. In addition, the State Petroleum Corporation may import supplies, materials, and equipment necessary for the conduct of its business during emergency situations without obtaining a prior import license. A few goods may be imported only from member countries of the LAIA, and some only from Paraguay. With these exceptions, import licenses are issued freely irrespective of the origin of the goods, provided that: the appropriate import taxes (including import surcharges) have been paid; the required advance deposit payment of 80 percent of import duties has been made; prior ministerial authorization (where applicable) has been obtained; a credit arrangement with a minimum maturity of 120 or 180 days (depending on the item) has been concluded with an outside party; and a certificate is submitted showing that insurance has been arranged in Ecuador. Upon arrival of the merchandise, the importer must settle up to 20 percent of the total f.o.b. value in cash and must deposit sucres for the remaining amount, which has to be financed within the established minimum financing periods mentioned. As a condition for obtaining foreign exchange for import payments, importers are required to submit to the Central Bank inspection certificates issued by the Société Générale de Surveillance, a Swiss-Based company.

All imports are subject to a tax of 6 percent levied on commercial transactions. Furthermore, all imports are subject to a service charge of 1 percent of the c.i.f. value, unless they represent gifts or foreign loans. With certain exemptions, imports on List II are subject to an import surcharge of 30 percent ad valorem.

Payments for Invisibles

Payments for current invisibles are mostly unrestricted and can be settled at the official rate. The arrangement for the refinancing of private external debt involves different implicit exchange rates arising from the imposition of charges on the official rate to compensate for possible exchange losses. These rates are applicable to the refinancing of private external credits contracted or endorsed by the domestic financial system or directly by the private sector, and to payment of interest on loan proceeds sold to the Central Bank before refinancing or sold in the same way at any time if under Resolution No. 1202, or those sold at the free market beginning from July 1, 1982 up to a day prior to short- or long-term financing. With respect to foreign loans to petroleum companies, interest, commissions, and other financial charges on foreign loans may not exceed the equivalent of 2 percent above the rates of interest of the creditor country, and annual amortization may not exceed the sum of undistributed profits, depreciation of fixed assets and liquidated assets, and any variation in working capital.

Residents traveling abroad by air must pay a tax of S/. 602 for each exit visa. Airline tickets for foreign travel are taxed at 10 percent, and tickets for travel by ship are subject to tax at the rate of 8 percent for departure from Ecuador and 4 percent for the return trip.

Exports and Export Proceeds

All exports require licenses to ensure the required surrender of the exchange proceeds to the Central Bank; licenses are issued freely, subject to guarantee. All export proceeds must be surrendered not later than 30 days from the date of the export permit for exports against cash payment, exports of bananas, coffee beans, cacao beans, prawns in any marketable form, and other unprocessed seafood products; 90 days from the date of each shipment for perishable products appearing on the lists issued by the Ministry of Industry, Commerce, and Integration, and the Ministry of Agriculture and Stock-breeding, provided it is shown that the sale was made on an installment basis or on consignment; no later than 60 days from the date of the export permit for the remaining primary products, provided it is shown that the sale was made on an installment basis; and no later than 180 days from the date of the export permit for products not mentioned above, provided it is shown that the sale was made on an installment basis; however, the Central Bank may extend these periods. No surrender is required for exports effected under authorized barter transactions; however, barter transactions require a prior contract. Minimum reference prices are established for exports of bananas, coffee, fish products, cacao, and semifinished products of cacao to help ensure the full surrender of the exchange proceeds. Reference prices are also established for exports of crude petroleum based on sales contracts; these serve as the basis for the calculation of taxes, royalties, etc. Certain exports require prior authorization of specified ministries. Certain commodities are subject to export taxes, payable at the time the export license is received, with the exception of the export tax on coffee, which is payable within one month of the receipt of the export license. Exports of coffee and cocoa are subject to a sliding-scale tax in relation to international prices; the tax ranges up to 13 percent for washed coffee, 20 percent for raw coffee, and 15 percent for cocoa. Proceeds from taxes on coffee and cocoa are channeled to price stabilization funds, farmer credit funds, and funds for both the national coffee and cacao programs.

Proceeds from Invisibles

All receipts from invisibles may be sold at the official rate. Travelers may bring in any amount of foreign or domestic bank notes.

Capital

Capital may freely enter or leave the country through the parallel market. Most borrowing abroad is subject to an exchange tax ranging from 0.5 percent to 2 percent (see section on Exchange Arrangement, above).

All foreign direct investment in Ecuador must be registered with the Central Bank. New investment requires the prior authorization of the Ministry of Industry, Commerce, and Integration. For foreign capital entering Ecuador in the form of machinery and equipment, the investor must show that the merchandise has been cleared through customs and that it took the form of a “nonreimbursable” import. Additionally, the investor must present to the Central Bank the certification from the appropriate ministry that the declared value conforms to the actual value of the machinery and equipment. The Department of Credit and Foreign Investment of the Central Bank must submit a recommendation to the General Management of the Central Bank within 30 days from receipt of the request for registration and all pertinent documentation. Thereafter, the General Management of the Central Bank must approve or deny the request for registration for foreign exchange purposes within an additional 30 days, taking into account the interests of the Ecuadoran economy and priorities established in the country’s development plans. In certain cases, where all documentation has been submitted, the Central Bank can provisionally register the investment for a period of up to 90 days.

Similarly, loans granted to the Government or to official entities involving the disbursement for foreign exchange must be registered for foreign exchange purposes with the Exchange Department of the Central Bank; for all other foreign loans, registration is mandatory for statistical purposes. In the case of short-term suppliers’ credits, no special registration procedure is required. Foreign nationals are prohibited from owning rural properties and from owning or operating mining industries within 30 miles of Ecuador’s coastline or borders. The Ministry of Industry, Commerce, and Integration does not authorize direct foreign investment for the purpose of establishing publicity firms, commercial broadcasting stations, television stations, newspapers, or magazines.

Withdrawal of foreign investment from Ecuador is allowed five years after the date of registration, on the basis of a schedule agreed by the Central Bank. Profits accumulated in previous years may be repatriated also on the basis of a schedule agreed by the Central Bank. The limit on the repatriation of profit remittances is 30 percent a year, or 40 percent for firms that export at least 40 percent of their production.

Residents who are private individuals are not granted official foreign exchange by the Central Bank to purchase securities or real estate abroad. Commercial banks are authorized to maintain accounts with correspondent banks abroad in convertible currencies.

Gold

Residents other than the Central Bank may export gold only in the form of filigree work, the gold content of which does not represent more than 25 percent of its market value. Imports of monetary gold are reserved for the Central Bank. Imports of nonmonetary gold in bars may be made by the Central Bank; gold bars are exempt from import duty, while the duty on semiworked gold is 40 percent ad valorem; semiworked gold is treated as a List II import.

Changes During 1985

Exchange Arrangement

March 5. The exchange arrangement was modified as follows: Proceeds from oil exports by the State Petroleum Corporation (CEPE) were transferred from the official market to the intervention market. In addition, the servicing of public debt and registered private debt contracted and disbursed by September 4, 1984 was transferred from the official to the intervention market (Monetary Board Regulation No. 235/85).

March 15. The Central Bank of Ecuador was prohibited from making advance sales of foreign currency for imports of goods and services other than medical products (Monetary Board Regulation No. 238/85).

June 7. All transactions remaining in the official market, with the exception of imports of medicine and related items, petroleum exports by foreign oil companies, interest income on the international reserve of the Central Bank, profit remittances, and purchases of foreign exchange for study and medical care abroad, were transferred to the intervention market.

August 28. Under Monetary Board Regulation No. 284/85, settlements in respect of payments for imports of medicine and related items, petroleum exports of foreign oil companies, interest income on the international reserves of the Central Bank, profit remittances, and purchases of foreign exchange for study and medical care abroad were transferred from the official to the intervention market. In addition, purchases and sales of foreign exchange for travel and royalty payments were transferred from the parallel market to the intervention market. As a transitional step, special provisions were made for the Central Bank to continue to sell foreign exchange at the official rate for the following transactions: (a) requests for foreign exchange at the official rate submitted prior to August 28, 1985 but still being processed by the Central Bank; (b) profit remittances arising from direct foreign investments registered with the Central Bank prior to September 4, 1984; (c) foreign exchange required by students and disabled persons who had registered with the Central Bank prior to September 4, 1984 for the original term of their studies or medical treatment abroad; and (d) settlement in respect of previously eligible imports. In addition, the surpluses generated by foreign oil companies in Ecuador during the period April-August 1985 could be repatriated at the rate of S/. 67.85 per U.S. dollar irrespective of the prevailing official rate at the time of effecting the transfers.

November 12. The exchange market was formally unified, by moving the official rate from S/. 66.5 per U.S. dollar to S/. 95.00 per U.S. dollar and terminating all transitional provisions to sell foreign exchange at a rate different from the new unified rate. (Monetary Board Regulation No. 303/85 and Executive Decree No. 1304.)

Prescription of Currency

May 7. The bilateral payments agreement with Romania was terminated.

Imports and Import Payments

January 10. An import item on List I, Group A was made subject to prior authorization of the Ministry of Industry, Commerce, and Integration, instead of the Ministry of Natural Resources and Energy (Monetary Board Regulation No. 222/85).

February 6. A regulation was introduced requiring importers to submit to the Central Bank “Import Declaration” forms issued by the Customs, together with proof of payments of import duties as a prerequisite for obtaining the foreign exchange for import payments (Monetary Board Regulation No. 227/85).

February 28. The Société Générale de Surveillance, S.A. was designated to verify all foreign trade transactions (Monetary Board Regulation Nos. 230/85 and 231/85).

February 28. A regulation was introduced, requiring importers to submit to the Central Bank inspection certificates issued by the Société Générale de Surveillance as a condition for obtaining foreign currency for import payments (Monetary Board Regulation No. 232/85).

February 28. Import prohibitions on 203 items were lifted and the items were placed on List II (Monetary Board Regulation No. 233/85).

March 15. An import item on List II was made subject to prior authorization of the Ministry of Industry, Commerce, and Integration (Monetary Board Regulation No. 236/85).

March 28. The advance deposit requirement for imports was removed (Monetary Board Regulation No. 240/85).

April 18. Import items under 40 tariff headings on List I, Group “Special,” were transferred to List I, Group A (Monetary Board Regulation No. 251/85).

May 28. Prior authorization of the Ministry of Industry, Commerce, and Integration was introduced for imports of parts for lamps and related items (Monetary Board Regulation No. 255/85).

Exports and Export Proceeds

March 6. A list of prohibited exports was issued (Ministerial Resolution No. 135 of MICEI).

April 30. Temporary export licenses were made valid for 90 days (Monetary Board Regulation No. 253/85).

Capital

January 17. New regulations were issued for investment by foreign oil companies contracting with the State to explore for, and develop production of, hydrocarbons (Monetary Board Regulation No. 224/85).

February 28. The regulations with regard to reinvestment of profits from foreign investments were modified (Monetary Board Regulation No. 229/85).

March 28. A regulation was introduced, specifying that the value of inward foreign investment in the form of goods should be certified by the Société Générale de Surveillance (Monetary Board Regulation No. 245/85).

Egypt

(Position on December 31, 1985)

Exchange Arrangement

The currency of Egypt is the Egyptian Pound, which is pegged to the U.S. dollar, the intervention currency, at LE 1 = US$1.42857. The established buying and selling rates of the Central Bank of Egypt for the U.S. dollar on December 31, 1985 were LE 0.700 and LE 0.707, respectively, per US$1. Established rates for 16 other convertible currencies are based on cross rates quoted in New York.1

The established rate applies on the receipt side only to proceeds from exports of petroleum, cotton, and second-grade rice, Suez Canal dues, Sumed pipeline revenues, and foreign exchange funds for the purpose of covering the local expenditure and related expenses of the oil exploration and drilling companies as well as their subcontractors; on the payments side, it is applied to settlements for imports of certain essential foodstuffs, insecticides and fertilizers, and specified capital transactions. A special exchange rate, equivalent to LE 0.3913 = US$1, is used for transactions under bilateral payments agreements with countries that are not members of the International Monetary Fund, as well as for liquidation of accounts related to past bilateral payments agreements.2 A different rate, also established by the authorities, is applied to specified transactions through the authorized commercial banks, including, on the receipt side, local expenses of foreign embassies, consulates, international and regional organizations, and foreign company branches, as well as funds to cover the local expenses of Sumed and enterprises established in the context of international or regional agreements, and payments by foreigners for renewing residence permits; and, on the payment side, specified transactions including transfers by foreign aviation companies and (until December 18, 1986) external expenditures of domestic aviation companies. On December 31, 1985 the established buying and selling rates for the U.S. dollar for transactions by the commercial banks were LE 0.83168 and LE 0.84000 per US$1, respectively.

A premium exchange rate is used for all other transactions through the commercial banks; the rate is applied on the receipts side notably to workers’ remittances, tourist receipts, and exports; and on the payments side, to, inter alia, public sector imports, capital transactions other than those assigned to the Central Bank, and private import and import-related transactions. The commercial banks may freely utilize up to 75 percent of their foreign exchange receipts from transactions at the premium rate; the remaining 25 percent is utilized in accordance with regulations issued by the Central Bank. The premium exchange rate for transactions by the commercial banks is set by a committee composed of representatives from the Central Bank, the Ministry of Economy and Foreign Trade, and the commercial banks, largely on the basis of demand and supply conditions. On December 29, 1985 the premium buying and selling rates for the U.S. dollar were LE 1.3400 and LE 1.3534 per US$1, respectively. In addition, certain transactions, especially invisibles, take place through free accounts held with domestic banks (“own exchange”).

Forward cover is available for foreign trade transactions. Banks do not require prior exchange control approval for dealings or transactions in foreign currencies.

Administration of Control

Exchange control is supervised by a Committee for Foreign Exchange, under the Ministry of Economy and Foreign Trade, and is implemented under the supervision of the Under Secretary for Foreign Exchange Affairs. A foreign exchange budget is established annually. Banks are authorized to execute foreign exchange transactions, within the framework of a general authorization, without the need to obtain specific exchange control approval. The Ministry of Economy and Foreign Trade supervises imports and exports. Certain imports and exports are reserved for public sector entities. Port Said City is accorded the status of a free zone.

Prescription of Currency

Payments to and from countries with which Egypt does not have bilateral payments agreements may be made in any convertible currency, in Egyptian pounds, or in a convertible currency to the debit or credit of the appropriate Free Account (see section on Nonresident Accounts, below), or in any other manner prescribed or permitted by the foreign exchange regulations manual. However, by a decision of the Central Bank, the proceeds from exports of raw cotton to convertible currency countries must be received in deutsche mark, Swiss francs, or U.S. dollars (in addition, for exports to France, Japan, and the United Kingdom, in the currencies of those countries).

Settlements with countries with which Egypt has bilateral payments agreements are made according to the terms of those agreements.3 However, payments to such countries for imports and various other purposes not covered by these agreements may be made in convertible currency. Certain settlements with countries with which indemnity agreements concerning compensation for nationalized property are in force are made through special accounts in Egyptian pounds with the Central Bank of Egypt. Suez Canal dues are expressed in SDRs and may be paid by debiting Canal Dues Accounts, Advance Payment Canal Dues Accounts, Free Accounts in Foreign Currency, or Free Accounts in Egyptian Pounds. Canal Dues Accounts must be opened in foreign currency, and balances are retransferable abroad.

Nonresident Accounts

In addition to the special accounts related to Egypt’s bilateral payments agreements or to the indemnity agreements concluded with certain countries and Canal Dues Accounts, there are three types of accounts: Free Accounts, D Accounts, and Nonconvertible Capital Accounts.

Free Accounts may be opened in the name of any entity other than the Egyptian Government, public authorities, and public sector entities. They may be opened either in foreign currency or Egyptian pounds; the latter are freely convertible. Free Accounts may be credited with transfers of convertible currency or with the proceeds from the sale of such currency; with transfers from other Free Accounts; with the proceeds of surrendered foreign bank notes, irrespective of the source; with interest on the accounts; and with the equivalent of any payment authorized in convertible currency. They may be debited for nonimport payments abroad in a convertible currency including imports; for transfers to other Free Accounts; for purchases of foreign bank notes or other means of payment; for any payments in Egypt, including those for exports; and for bank charges and commissions.

D Accounts may be opened in the name of any resident of a country with which Egypt has a bilateral payments agreement. The accounts must be designated by the name of the partner country concerned. These accounts may be credited with receipts under the respective payments agreement and with the equivalent of transfers authorized to the country of the account holder. They may be debited for transfers to the country of the account holder and for local payments (including those for Egyptian exports) authorized by the implementing regulations and within the scope of the relevant payments agreement.

Nonconvertible Capital Accounts must be credited with any payment of a capital nature to a foreigner living outside of Egypt that is not remittable under the exchange control regulations. Banks may debit these accounts for charges legally due from the account holder. Accounts held by individuals may be debited up to a limit of LE 2,000 a year for use by the account holder. Accounts held by juridical persons may be debited for settlement of outstanding obligations to the Egyptian authorities and for payments to residents for services rendered and up to a limit of LE 2,000 a year for expenses incurred in connection with the activities or residence of the holder’s employees in Egypt.

Resident Accounts

In addition to Free Accounts, which may be opened by both nonresidents and residents, residents may hold foreign currency in foreign exchange retention accounts, as described below.

Foreign Exchange Retention Accounts may be opened in the name of authorized recipients and credited with all or part of proceeds from certain exports of goods and nonfactor services. Public sector companies may use these funds for their purposes within the provision of the foreign exchange budget or transfer them to other public sector companies within the same sector. Private sector exporters may debit these accounts for visible and invisible payments related to their economic activity. Exporters of onions, garlic, potatoes, peanuts, and citrus fruits are entitled to retain only 50 percent of their foreign exchange earnings. Banks are allowed to pay interest on the balances in retention accounts. With specified exceptions, balances in Foreign Exchange Retention Accounts must be surrendered at the announced premium rate to the commercial banks six months after the funds have been deposited.

Import Accounts in Foreign Exchange may be opened by authorized banks in the name of Egyptian nationals. These accounts may be credited with transfers in free currency, transfers from free accounts in foreign exchange or in Egyptian pounds, transfers from another import account in foreign exchange, and the equivalent in free currency of any amount of foreign exchange submitted by clients, regardless of the means and the source. They may be debited to finance imports of the private sector on behalf of the account holder or others, to transfer abroad to cover invisible purposes related to the activity of the account holder, to settle obligations related to import transactions effected on behalf of the private sector, or in the form of foreign bank notes and other acceptable means of payment to cover the expenditures of the account holder or others abroad within the limit of US$5,000 (or its equivalent) a calendar year, provided that the amount drawn is registered on the user’s passport and travel ticket.

Imports and Import Payments

All imports from South Africa are prohibited. A Supreme Council for the Planning of Foreign Trade is entrusted with establishing a long-term policy for exports and imports, controlling the annual export and import plan, and supervising the execution of the foreign exchange budget. Most imports from payments agreement countries (except those made under the “own exchange” arrangement), as well as imports of specified goods from any source, are reserved for the public sector.

Imports by the central government, public authorities, and public sector companies, as well as certain private imports under the scheme for artisans and craftsmen, are effected within the provisions of the foreign exchange budget through the Central Bank and the authorized commercial banks. For purposes of administration, the economy is divided into several sectors (agriculture, industry, transportation, etc.). The annual foreign exchange budget provides for a specific quota for each sector, and the authorities in charge of each sector decide upon the goods to be imported and the entities that are to import them within that quota. All imports financed by the Central Bank are at the established rate, with the exception of imports under bilateral payments agreements with countries that are not members of the Fund, which are financed at a special more appreciated rate. A more depreciated rate applies to imports financed by commercial banks.

With certain exceptions, imports by the private sector take place through the “own exchange” system. Import licensing is required in the case of 277 items, which are subject to approval by the Import Rationalization Committee. The list of controlled items includes foodstuffs and medicines (to ensure compliance with price controls), direct substitutes for domestically produced goods (for protective reasons), other items that are restricted for social reasons, and imports by luxury hotels.

After an import license has been issued for items subject to approval by the Import Rationalization Committee and before a letter of credit has been opened, an importer is required to lodge with an authorized commercial bank an advance import deposit in foreign currency as a percentage of the f.o.b. value for imports, ranging from 15 percent to 50 percent. Imports by companies registered under the Foreign Investment Law (Law No. 43 of 1974) are not subject to the advance import requirement.

An economic development tax of 10 percent of the c.i.f. value is payable on imports; the tax is 5 percent for certain essential foodstuffs imported by the Ministry of Supply. A statistical tax of 1 percent of the c.i.f. value is payable on all imports except wheat.

Payments for Invisibles

Banks are authorized to provide foreign exchange for payments for certain invisibles in accordance with general authorizations and instructions and up to specific quotas. Residents may purchase, through local banks and up to specified amounts, the foreign exchange required for travel expenses and certain other purposes, at the premium rate announced for such transactions with the commercial banks. Egyptian nationals are entitled to retain their earnings in foreign exchange (except those accruing from exports and tourism) in Free Accounts and may use this foreign exchange freely for invisible payments abroad. They may also acquire additional foreign exchange through the medium of Free Accounts (see section on Nonresident Accounts, above).

Travelers may not export more than LE 20 in Egyptian bank notes. Egyptian travelers may take with them any foreign exchange that they have acquired legitimately; foreign travelers leaving Egypt may reconvert their remaining Egyptian pounds after deduction of US$30 for each night spent in Egypt.

Exports and Export Proceeds

Apart from exports to South Africa, which are prohibited, and commodities required for the national economy that may be restricted, exports may be made free of license. Exports of many products are organized and supervised by foreign trade committees. Cotton, rice, and petroleum are exported by the public sector only, and their proceeds must be repatriated within three months.

Proceeds from exports of movies, television programs, and video cassettes must be repatriated within six months. Proceeds from books, newspapers, and other publications must be repatriated as soon as received and in any case within a period not exceeding five years from the date of shipment. Proceeds from other exports must be repatriated within four months. Proceeds from exports other than petroleum, cotton, and rice may be fully or partially retained in Foreign Exchange Retention Accounts. Proceeds from exports to bilateral payments agreement countries must be obtained in accordance with the provisions of the relevant agreement. Some exports to specified countries may be settled through indemnity accounts.

Proceeds from Invisibles

Earnings abroad by persons other than the Egyptian Government, public authorities, and public sector entities may be held abroad or retained indefinitely in Free Accounts. Within specified limits, receipts from the provision of local hotel, transport, or travel agency services to tourists may be retained in Foreign Exchange Retention Accounts. Many public sector and other entities are permitted to retain their receipts from invisibles in Foreign Exchange Retention Accounts, and in many instances are exempt from the periodic surrender requirements applied to these accounts. Certain travel in Egypt by foreigners may be financed from various special accounts, such as those under indemnity agreements with certain countries.

Persons arriving in Egypt from abroad may import up to LE 20 in Egyptian bank notes and are permitted to bring in, and to use locally, unlimited amounts in foreign exchange; a customs declaration is required if the traveler wishes to re-export foreign currency. Foreign travelers must convert into Egyptian currency the equivalent of US$150 each at the established rate quoted by the commercial banks in order to obtain an entry visa.

Capital

Egyptian nationals who have deposited foreign earnings in Free Accounts in Egyptian banks may use this foreign exchange for any invisible payment, including transfer abroad. With this exception, outward capital transfers are restricted. Egyptian emigrants are authorized to transfer abroad funds up to LE 900 a person or LE 3,500 a family, and to export other personal effects and furniture up to LE 200 a person or LE 500 a family.

Authorized banks are empowered to import, export, and negotiate securities and to effect transfers related to the sale or purchase of either Egyptian or foreign securities. Brokers registered on the stock exchanges of Cairo and Alexandria are authorized to intermediate in the transfer of ownership of securities, whether at home or abroad, and to undertake the local collection or payment in foreign currency of the value of the securities. Foreign and joint-venture banks are required to ensure that 15 percent of their foreign currency deposits can be made available on call, if necessary, by the Central Bank.

Transfers of accrued alimony are permitted in accordance with court orders. An amount not exceeding LE 5,000 a family—irrespective of whether the sum is made up of capital or income—may be released from a family’s assets in Egypt to persons of foreign nationality who leave the country permanently after a period of residence of at least five years. Any amount above this limit is credited to a Nonconvertible Capital Account. Any payment of a capital nature not remittable under the exchange control regulations must be credited to a Nonconvertible Capital Account.

Law No. 43 of June 19, 1974 (amended by Law No. 32 of June 9, 1977) concerning the investment of Arab and Foreign Funds and the Free Zones defines the treatment of new foreign investments. Requests for transfers of profits not covered by this law are considered on an individual basis.

Gold

Authorized banks are empowered to buy, sell, and keep abroad gold (including gold coin) and other precious metals for the account of customers entitled to hold Free Accounts. Authorized banks may import such gold and other precious metals for local deposit and may subsequently re-export them. Certain persons other than the monetary authorities, including authorized industrial users, are allowed to import precious metals and stones for industrial and local market requirements. Exports of gold and silver fabrics are permitted, provided that the sales proceeds are repatriated in convertible currency. Travelers are permitted to take out and bring in gold jewelry within specified limits. There is a free market for gold coin in Cairo. A person arriving or departing may carry jewelry and other valuables up to LE 500.

Changes During 1985

Exchange Arrangement

January 3. A 12-member committee was established and charged with the task of determining the premium on the official commercial bank rate; the rate would apply, with specified exceptions, to transactions by commercial banks. The committee was composed of the Deputy Governor of the Central Bank (as Chairman), a subgovernor of the Central Bank, two undersecretaries of the Ministry of Economy and Foreign Trade, and representatives of eight commercial banks (the four public sector commercial banks and four private banks on a six-month rotation basis) (Ministerial Order (MO) No. 3).

January 24. A circular issued by the Ministry of Economy and Foreign Trade specified that authorized commercial banks could freely utilize up to 75 percent of their foreign exchange receipts at the premium rate, with the remainder to be used in accordance with regulations issued by the Central Bank.

April 6. A Chamber for the determination of the premium on the official commercial bank rate was established at the Central Bank, composed essentially of the same members as the committee that was set up on January 3 by MO No. 3. (The circular of January 24 was accordingly withdrawn.)

July 26. It was announced that foreign exchange funds converted by foreigners for the purpose of renewing their residences should be effected through the authorized banks.

December 18. Permission was granted for authorized banks to transfer any type of deposits and savings in foreign exchange from unknown sources (as well as the relevant interest) to free accounts in foreign exchange, provided that such deposits would be kept for a period of at least one year.

Nonresident Accounts

January 3. It was decided that foreign exchange funds in Free Accounts could no longer be used for effecting import payments.

January 23. Authorization was granted until March 21, 1985 for private importers with outstanding balances in Free Accounts and Import Accounts on January 3, 1985 to use funds in Egyptian pounds resulting from the sale of such balances (at an exchange rate announced by the relevant committee) for imports related to the activities of the account holder.

Resident Accounts

January 3. Import Accounts, in effect since March 1982, were abolished and replaced by Free Accounts. Restrictions on the use of Foreign Exchange Retention Accounts were also introduced, limiting exporters’ use of these accounts to visible and invisible payments related to their economic activities.

Imports and Import Payments

January 3. With specified exceptions, the “own exchange” system of financing private imports was abolished, and private importers were required to make import settlements by means of local currency payment through the commercial banks. In addition, the advance import deposit requirements, as a percentage of the f.o.b. value of imports, were reduced from 25 percent, 40 percent, 75 percent, and 100 percent, to 15 percent, 20 percent, 40 percent, and 50 percent, respectively (MD No. 5); all such deposits were also required to be made in domestic instead of foreign currency, as was done previously.

January 5. Private importation of cars was restricted to authorized dealers on the basis of quotas, with the exception of Egyptians working abroad (who could import one car every four years) and persons needing cars for professional use.

January 21. Imports of three items hitherto exempt from licensing requirement, namely reinforcing iron and steel bars, cement, and wood, were made subject to prior approval by the committee in charge of setting the premium exchange rate.

January 23. Authorization was granted until March 21, 1985 for private importers with outstanding balances in Free Accounts and Import Accounts on January 3, 1985 to use funds in Egyptian pounds resulting from the sale of such balances (at an exchange rate announced by the relevant committee) for imports related to the activities of the account holder.

April 6. The following changes were made in regulations affecting imports: (a) Authorization was granted for private sector imports financed by their own foreign exchange from Free Accounts, on condition that the payments for such imports, including the applicable advance deposit requirement, were made in foreign currency, (b) In a delineation of the sources and uses of funds transacted at premium exchange rate, Decree No. 168 was issued, specifying that the premium exchange rate should be applied to specified transactions proceeds from which should be channeled to a special fund (the “premium pool”) within the commercial bank pool, and that the selling rate should be set at 1 percent above the buying rate, with the latter to be determined by the special Chamber attached to the Central Bank. The premium should be distributed equally between the commercial banks undertaking the transaction and a special account called the “Account for Profits Resulting from Foreign Exchange Transactions.” The sources of funds for the “premium pool” would be all remittances to residents, all amounts exchanged from free accounts with the commercial banks, all exports assigned to the commercial bank pool, and all receipts from tourism other than the part required to be exchanged by tourists at the rate of LE 0.84 = US$1 at the port of entry. Funds in the “premium pool” would be used to finance imports covered under the foreign exchange budget (other than those assigned to the Central Bank pool), servicing of loans and credit within the commercial bank pool (within the limits established in the foreign exchange budget and excluding those assigned to the Central Bank pool), and all invisible payments other than those assigned to the Central Bank pool. In addition, accounts in Egyptian pounds opened under the facility to attract savings and approved by the Central Bank Chamber as eligible for the exchange rate premium would be considered as private accounts. Authorization was also granted for commercial banks to engage in interbank foreign exchange trading, provided that it would be at the premium exchange rate determined by the Central Bank Chamber. (c) In an amendment to Ministerial Decree No. 316 of 1976 concerning sources and uses of foreign exchange funds that continued to be channeled to the commercial bank pool at the rate of LE 0.84 = US$1, the eligible sources were defined as foreign exchange to cover the domestic expenditure of foreign diplomatic missions, all transfers in respect of shipping transactions and local expenses of airline companies, all local foreign exchange expenditures of local subsidiaries, the Sumed pipeline and other international organizations, all foreign currency required to be exchanged by tourists at the port of entry at the rate of LE 0.84 = US$1, and all invisible receipts of ministries and government bodies. Eligible uses were defined as all transfers of foreign airline and shipping companies, official travel expenditures, official medical expenses, transfers of pensions, and all invisible payments of ministries and government bodies. It was also specified that all transfers for the purchase of real estate by non-nationals and all transfers to finance petroleum drilling and exploration would be converted at the exchange rate of the Central Bank pool; all other transactions not otherwise specified in the decree should be channeled through the premium exchange rate pool of the commercial banks.

June 9. The licensing procedures for private sector imports were modified, and a list was issued including 277 items subject to approval by the Import Rationalization Committee; all other items could be freely imported.

December 18. It was announced that import accounts could be opened in foreign currency by authorized banks in the name of Egyptian individuals or juridical persons.

Payments for Invisibles

December 18. Authorization was granted for outward transfers of surplus proceeds of airline companies of convertible-currency countries, provided that they submitted their statements of financial position as of December 18, 1985.

El Salvador

(Position on December 31, 1985)

Exchange Arrangement

The currency of El Salvador is the Salvadoran Colón. El Salvador maintains a two-tier exchange market system consisting of (a) an official market in which the Salvadoran colón is pegged to the U.S. dollar, the intervention currency, at Ȼ 2.50 = US$1; and (b) a parallel market in which the value of the colón in principle is allowed to fluctuate, but which in practice is set by the banks. The rates of the Central Reserve Bank for transactions with the public are Ȼ 2.49 buying and Ȼ 2.51 selling, per US$1. Official market transactions by commercial banks with the public take place within these limits. Buying and selling rates in the official market for other currencies are based on the daily quotations for the U.S. dollar in markets abroad. Buying and selling rates in the parallel market are determined by the commercial banks.1 Only commercial banks, the Mortgage Bank, the Banco de Fomento Agropecuario (BFA), and the Banco Nacional de Fomento Industrial (Banafi), are permitted to purchase or sell foreign exchange in the parallel market; individuals2 may open foreign accounts in the commercial banks and the Mortgage Bank and use the funds in such accounts to deal in the parallel market in respect of certain authorized transactions. A stamp tax of 0.1 percent is applicable to all sales of exchange; on amounts below (Ȼ 100,000, the tax is levied at fixed amounts that may be slightly in excess of 0.1 percent. There is a third, informal and illegal foreign exchange market; in addition to unauthorized transactions, this market handles transactions not effected in the other two exchange markets because of restrictions and administrative rationing. The exchange rate in this third market fluctuates according to market forces and averaged Ȼ 6.65 = US$1 at the end of December 1985.

On November 6, 1946 El Salvador notified the Fund that it was prepared to formally accept the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement.

Administration of Control

Subject to the general directives issued by the Monetary Board, exchange control authority is exercised by the Central Reserve Bank through its Exchange Control Department. Prior authorization by the Exchange Control Department of the Central Reserve Bank is required for all payments through the official market and for all requests of payment for imports and invisibles included in the “G” list,3 eligible for parallel market financing. Authority to approve most payments through the parallel market is delegated to the commercial banks, the Mortgage Bank, the BFA and the Banafi. Exports of a number of commodities require licenses issued by the Ministry of Economy, subject to agreement by the Ministry of Agriculture. Since January 30, 1980 exports of two major commodities have been under government supervision. Exports of sugar are governed by the Instituto Nacional de Azúcar (Inazucar), and those of coffee are governed by the Instituto Nacional de Cafe (Incafe).

Prescription of Currency

Payments to other member countries of the Central American Common Market (CACM)4 in respect of trade and specified invisibles must be settled in the currencies of those countries or in Salvadoran colones through the Central American Clearing House. Payments to Mexico are also settled through a clearing house. Otherwise, residents are free to make authorized payments in any currency they choose.

Nonresident Accounts

Accredited diplomatic missions and other foreign institutions or persons established in El Salvador may hold nonresident accounts in foreign currency with authorized banks, provided that such accounts are credited with foreign exchange received from abroad. Banks may also freely open foreign currency accounts, for any period of time and in any amount, in the names of individuals (whether of foreign or Salvadoran nationality) who reside abroad and, for a maximum period of six months, in the names of foreign persons residing in El Salvador for less than six months. All nonresident accounts may be utilized freely, but the commercial banks must make periodic reports to the Central Reserve Bank of the movements on such accounts.

Foreign Currency Deposit Accounts

Foreign currency deposit accounts may be opened only by exporters of specified nontraditional products, industrial enterprises exporting part of their products to countries outside the CACM, certain individuals with receipts from foreign companies, tourism, as well as staff of embassies, consulates, and international organizations. Transfers of funds between foreign currency deposit accounts are prohibited; balances in such accounts can be used for conversion into colones through sales to the banks at the parallel market rate, for payment for imports of goods and services, or for expenses for foreign travel, family maintenance abroad, education, medical treatment, personal insurance premiums, and other personal needs, subject to prior approval by the Central Reserve Bank. The accounts may be opened in U.S. dollars or in any other approved foreign currency; transactions can be effected only in the currency in which an account is opened. Accounts may be in the form of a demand or time deposit and are subject to a reserve requirement of 10 percent. The banks must place the funds thus deposited in investments abroad, provided that the maturity of investments does not exceed 30 days for demand deposits and that the maturity of investments from time deposits is the same as the maturity of the time deposit. The banks are required to pay interest on the time deposits at rates of up to 2 percent below LIBOR.

Imports and Import Payments

Certain imports, such as automobiles with an engine size of over 2,000 cubic centimeters or priced at more than US$14,000, certain other motor vehicles and motorcycles, buses, recreational vehicles, airplanes, pleasure boats, and other vessels not used for fishing are prohibited. Import licenses are issued by the Ministry of Economy and are required for only a few items, including airplanes, firearms, ammunition, military equipment, dynamite, cotton for industrial use, jute sacks, skins, leather, some chemical and pharmaceutical products, coffee for seeding, sugar, and saccharin.

Imports valued at US$2,000 or more from all countries must be registered with the Central Reserve Bank before orders are placed. Orders for imports eligible for foreign exchange financing through the official market and requests for the import of items contained in list “G” that are eligible for financing in the parallel market must be approved by the Exchange Control Department, while approval for other imports through the parallel market is delegated to the commercial banks and the Mortgage Bank. Only items considered as priority imports may be paid for through the official market.5 Imports of all consumer goods (other than certain food items and medicines), which represent about 30 percent of the total value of imports, may be paid for only through the parallel market. Furthermore, 100 percent of imports of most intermediate goods must be settled at the parallel rate.

Imports from countries outside the CACM that apply discriminatory restrictions against exports from El Salvador must be paid for before customs clearance, with the exception of industrial raw materials, which may be paid for within three years (medicines from Mexico may be paid for within 90 days; this applies also to imports of spare parts from Mexico by importers who are regarded as small enterprises).

Under the provisions of the Central American Agreement on Fiscal Incentives, El Salvador grants duty exonerations on imports of raw materials and capital goods to approved industrial firms.

Imports originating outside the CACM are subject to an import surcharge of 30 percent of the applicable import duty; the surcharge is not applied to certain industrial equipment and raw materials that are free of duty under the Industrial Incentive Law. Many nonessential goods are subject to a selective consumption tax, at rates of 5, 10, 20, 25, or 30 percent. Goods of Central American origin are exempt.

There has been an accumulation of arrears on payments for private sector imports.

Payments for Invisibles

Most payments for invisibles, except for certain student expenses, official travel, and payments of interest and dividends on registered capital, are prohibited in the official market and must be settled in the parallel market. All requests for invisible payments contained in the “G” list, including foreign travel expenses that are eligible for financing at the parallel market rate, require prior approval by the Central Bank; nonresident holders of foreign currency deposit accounts are exempted from this prior approval requirement. Students registered with the Central Reserve Bank prior to November 30, 1981 for university, postgraduate, or technical training abroad may purchase foreign exchange in the official market up to the equivalent of US$300 a month for living expenses and up to a maximum of US$5,000 a year for educational expenses until the end of 1985. Students with public sector scholarships awarded as of June 17, 1985 may also purchase foreign exchange in the official market up to the amounts specified in the scholarships.

With prior approval of the Central Bank, the commercial banks and the Mortgage Bank are permitted to sell foreign exchange in the parallel market for payments for invisible transactions of a personal nature (i.e., study abroad, foreign travel, medical care, family assistance, and insurance fees) within the following limits: (a) up to US$2,000 a trip to countries outside Central America for each person over 12 years of age (one half of the amount for children under 12 years), with a limit of two trips a year; (b) up to a limit of US$500 a trip to countries in Central America, with an annual limit of US$3,000; and (c) up to US$2,000 a year for personal expenses, such as family maintenance and insurance premiums. Additional amounts for foreign travel and family remittances can be sold to meet bona fide requirements; there is no limit on the amount that can be sold to meet expenses for medical treatment and study abroad. There are arrears on private sector payments for certain invisibles.

Exports and Export Proceeds

Export licenses are not required except for certain foodstuffs and other items for which the authorities wish to ensure an adequate local supply. An export registration certificate from the Central Reserve Bank is required for all exports exceeding US$200. Proceeds from traditional exports (coffee, cotton, sugar, shrimp) must be received through a bank in El Salvador. With regard to traditional exports, the following authorizations are in effect for sales at the parallel market rate: (a) up to US$90 million of the proceeds from coffee; (b) up to US$17.5 million of sugar exports to the U.S. quota market and all the proceeds from sugar exports to the world market; (c) all the proceeds from cotton exports; and (d) all the proceeds from the export of shrimp and prawns. All proceeds from nontraditional exports to the Central American region may be sold in the parallel market, with the exception of proceeds from exports of medicines, fertilizers, fungicides, insecticides, herbicides, and other goods involving imported inputs that are payable 100 percent through the official market. All proceeds from exports to countries outside the Central American region may be sold at the parallel rate. Exporters of nontraditional products are required to use funds in their special foreign currency accounts or to purchase foreign exchange in the parallel market to effect payments for their own imports of goods and services.

Export transactions exceeding US$200 must be declared to the Exchange Control Department before shipment. The collection term normally must not exceed 90 days, but longer credit terms may be authorized by the Exchange Control Department. Exports of coffee and sugar are subject to an export tax.

Proceeds from Invisibles

All exchange receipts from invisibles must be surrendered to the Central Reserve Bank or an authorized commercial bank. Receipts from personal transfers, and by representatives of foreign companies, resident individuals, corporate entities, and from tourism must be sold to the commercial banks and the Mortgage Bank in the parallel market. All proceeds from services involving transportation, investment, government services, insurance, reinsurance, and other service exports are transacted at the parallel market rate, with the exception of remittances received by the Government for services rendered by embassies and consulates accredited abroad and interest received by the public sector and the banking system. Receipts from personal transfers may be deposited in special foreign currency accounts only in the name of the beneficiaries. Embassies, consulates, and offices of international organizations in El Salvador and their employees are allowed to sell their foreign receipts to commercial banks and the Mortgage Bank at the parallel exchange rate or deposit such receipts in the special foreign currency accounts in their names for purposes of meeting their foreign exchange requirements. Travelers may bring in Ȼ 200 in domestic notes and coin. This limit is subject to modification, however, to facilitate border trade with other Central American countries.

Capital

All exchange receipts resulting from capital transactions must be surrendered to the monetary authorities, except all private capital inflows which are permitted to be transacted at the parallel rate, including direct and indirect international investment, inflows pertaining to repatriated investments registered on or after February 19, 1983, inflows from loans registered on or after June 17, 1985, and inflows of other foreign assets and liabilities registered on or after June 17, 1985. The entry of capital with a maturity in excess of one year in the form of foreign investment must be registered with the Ministry of Economy. Registration ensures (1) free remittance of net profits on foreign capital invested in industrial enterprises, enterprises engaged in the extraction of nonrenewable natural resources, and tourist enterprises; (2) the remittance of net profits of enterprises engaged in other activities up to a limit of 10 percent a year of the registered capital (larger amounts may be authorized in special cases by the Ministry of Economy); (3) repatriation of the proceeds from the total or partial liquidation of the enterprise (after payment of taxes) in proportion to the participation of foreign capital in the total capital; (4) remittance of the sales proceeds of shares and other instruments representing investments or participations, including capital gains; and (5) payment of interest and amortization as determined at the time of registration. In the cases under (3) and (4), in addition to the approval of the Exchange Control Department, the prior approval of the Ministry of Economy is required. Foreign investments made in El Salvador prior to June 1, 1961 must also be registered with the Ministry of Economy or the Exchange Control Department.

Payments abroad representing capital movements require exchange licenses; such licenses are not granted for resident-owned capital. Prior approval by the Exchange Control Department is required for outward remittances of interest and amortization on short-term loans from abroad through the official market; foreign loans with a maturity of up to one year must be authorized by the Central Reserve Bank; foreign loans with a maturity of more than one year must be authorized by the Ministry of Economy. Payments related to repatriation of foreign investment and dividends must be settled through the parallel exchange market.

Decree No. 279 of March 27, 1969 sets certain minimum capital requirements for businesses that are owned by foreign nationals and for those in which foreign nationals have a shareholding interest. For purposes of this decree, foreign nationals are defined as persons who are not citizens of one of the five CACM member countries.

Gold

Gold coins in denominations of Ȼ 25, Ȼ 50, Ȼ 100, and Ȼ 200 have been issued as legal tender, but do not circulate. Residents may hold and acquire gold coins in El Salvador for numismatic purposes. With this exception, residents other than the monetary authorities are not allowed to hold or acquire gold in any form other than jewelry, at home or abroad. Imports and exports of gold in any form other than jewelry require licenses issued by the Central Reserve Bank; such licenses are granted for imports and exports by or on behalf of the monetary authorities and industrial users. In practice, imports of nonmonetary unworked gold are made only by jewelers’ cooperatives acting on behalf of their members and other users.

Changes During 1985

Exchange Arrangement

August 24. The National Assembly delegated full authority to the Monetary Board in the conduct of exchange rate policy.

Imports and Import Payments

June 12. With effect from June 17, 1985, financing for the full c.i.f. value of imports of most intermediate goods was transferred to the parallel market. (Previously 50 percent of such goods were required to be paid for at the parallel market rate and the remaining 50 percent at the official market rate.)

June 12. The exchange restriction aspect of the advance deposit requirement on certain import payments was abolished.

Exports and Export Proceeds

February 27. A requirement was introduced that, with effect from March 4, 1985, 70 percent of proceeds from nontraditional exports to Central American countries (other than those from exports of medicines, fertilizers, and insecticides and their inputs) could be sold in the parallel market; previously, the applicable rate was 50 percent.

March 13. Authorization was granted for the Association of Cotton Producers (Copal) to sell all their cotton exports from the harvest of 1984/85 and 1985/86 at the parallel market rate. (Previously, only up to US$18.5 million was authorized to be sold at the parallel rate.)

June 12. The limit on the amount of export proceeds from coffee that Incafe could convert into local currency at the parallel market was increased from US$35 million to US$90 million.

June 12. Inazucar was authorized to sell at the parallel market up to US$17.5 million of the proceeds from sugar exports to the U.S. preferential quota market during the 1984/85 harvest period. (Previously, only the proceeds from sugar exports outside the quota market could be surrendered at the parallel rate.)

June 12. With effect from June 17, 1985, the proportion of the foreign exchange proceeds from exports of shrimp and prawns that could be sold in the parallel market was increased from 80 percent to 100 percent.

June 12. With effect from June 17, 1985, the proportion of foreign exchange proceeds from exports to the Central American region that could be sold in the parallel market was increased from 70 percent to 100 percent. Excluded from this coverage were foreign exchange proceeds from exports of fertilizers, fungicides, insecticides, herbicides, medicines, and other goods involving imported inputs that are payable 100 percent through the official market; such proceeds were to be sold in the official market.

June 12. One hundred percent of the foreign exchange proceeds from exports of nontraditional exports to countries outside the Central American region was authorized to be sold in the parallel market.

Payments for and Proceeds from Invisibles

June 12. Changes were made as follows in regulations affecting invisible transactions: (a) the conversion of all foreign exchange proceeds from services involving transportation, international travel, international investment, government services, insurance, reinsurance, and other service exports were transferred to the parallel market, with the exception of remittances received by the Government for services rendered by embassies and consulates accredited abroad and interest received by the public sector and the banking sector; (b) the exchange restriction aspect of the 100 percent advance deposit requirement on requests for official foreign exchange for medical treatment abroad was abolished; and (c) requests for invisible payments abroad contained in the “G” list, including foreign travel expenses, that were eligible for financing at the parallel market rate were made subject to prior approval by the Central Bank. (Previously, approval of such requests was delegated to the commercial banks.) Nonresident holders of foreign currency deposit accounts were exempted from the prior approval requirement.

Capital

June 12. Settlements in respect of all private capital inflows were transferred to the parallel market, including direct and indirect international investment, inflows pertaining to repatriated investments registered on or after February 19, 1983, inflows from loans registered on or after June 17, 1985, and inflows of other foreign assets and liabilities registered on or after June 17, 1985. In addition, settlements relating to the following private capital outflows were transferred to the parallel market: (a) direct and indirect international investment; (b) repatriation of investments registered on or after February 19, 1983; (c) repayments of loans registered on or after June 17, 1985, with repayments of the loans previously registered remaining at the official market; and (d) outflows of other foreign assets and liabilities registered on or after June 17, 1985, with those previously registered remaining at the official market.

Equatorial Guinea

(Position on December 31, 1985)

Exchange Arrangement

The currency of Equatorial Guinea is the CFA Franc,1 which is pegged to the French franc, the intervention currency, at the fixed rate of CFAF 1 = F 0.02. Exchange transactions in French francs between the BEAC and commercial banks take place at the rate of CFAF 50 = F 1, free of commission. Buying and selling rates for certain other foreign currencies are also officially posted, with quotations based on the fixed rate for the French franc and the rate for the currency concerned in the Paris exchange market. A commission of 0.50 percent is levied on transfers to countries that are not members of the BEAC, except transfers in respect of central and local Government operations, payments for imports covered by a duly issued license domiciled with a bank, scheduled repayments on loans properly obtained abroad, travel allowances paid by the Government and its agencies for official missions, and payments of reinsurance premiums. There are no taxes or subsidies on purchases or sales of foreign exchange.

With the exception of those relating to gold, Equatorial Guinea’s exchange control measures generally do not apply to (1) France (and its Overseas Departments and Territories) and Monaco; and (2) all other countries whose bank of issue is linked with the French Treasury by an Operations Account (Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, the Comoros, the Congo, Côte d’Ivoire, Gabon, Mali, Niger, Senegal, and Togo). Hence, all payments to these countries may be made freely, but all financial transfers in excess of CFAF 500,000 to countries of the French Franc Area must be declared to the authorities for statistical purposes. All other countries are considered foreign countries.

Administration of Control

Exchange control is administered by the Directorate General of Exchange Control (ONCC) in the Ministry of Finance. Exchange transactions relating to all countries must be effected through authorized intermediaries, that is, authorized banks. Import and export licenses are issued by the Ministry of Commerce and Industry.

Prescription of Currency

As Equatorial Guinea is an Operations Account country, settlements with France (as defined above), Monaco, and the Operations Account countries are made in CFA francs, French francs, or the currency of any other institute of issue that maintains an Operations Account with the French Treasury. Settlements with all other countries are usually made through correspondent banks in France in any of the currencies of those countries or in French francs through Foreign Accounts in Francs.

Nonresident Accounts

The regulations pertaining to nonresident accounts are based on those applied in France. The principal nonresident accounts are Foreign Accounts in Francs. BEAC bank notes received by the foreign correspondents of authorized banks and mailed to the BEAC agency in Equatorial Guinea by the Bank of France or the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO) may be credited freely to Foreign Accounts in France.

Imports and Import Payments

All import transactions must be domiciled with an authorized bank when their value exceeds CFAF 50,000. Import transactions by residents involving goods for use outside Equatorial Guinea must be domiciled with a bank in the country of final destination. Settlements for imports effected under an import license benefit from the authorization of uninterrupted transfer given to the authorized banks by the Ministry of Finance.

Payments for Invisibles

Payments in excess of CFAF 500,000 for invisibles to France (as defined above), Monaco, and the Operations Account countries require prior declaration but are permitted freely; those to other countries are subject to the approval of the Ministry of Finance. Payments for invisibles related to trade are permitted freely when the basic trade transaction has been approved or does not require authorization. Transfers of income accruing to nonresidents in the form of profits, dividends, and royalties are also permitted freely when the basic transaction has been approved. For tourist travel, residents traveling to countries other than France (as defined above), Monaco, and the Operations Account countries may obtain an exchange allocation of an amount equivalent to CFAF 200,000 a person a year; any foreign exchange remaining after return to Equatorial Guinea must be surrendered. For business travel, the corresponding allocation is the equivalent of CFAF 15,000 a day, subject to a maximum of CFAF 450,000 a trip. CFAF 150,000 of that amount may be bills; travelers must present certificates of their activity and permission by enterprise to travel. Additional allocations may be allowed.

The transfer of rent from real property owned in Equatorial Guinea by foreign nationals is permitted up to a limit equivalent to 50 percent of the income declared for taxation purposes, net of tax. Remittances for current repair and management of real property abroad are to be limited to the equivalent of CFAF 200,000 every two or three years. The amount of transfer of the salary of a foreigner working in Equatorial Guinea will be permitted upon presentation of the appropriate pay voucher as well as justification of expenses, provided that the transfer takes place within a month of the pay period concerned. Except in the case of foreigners working in Equatorial Guinea temporarily, payments of insurance premiums to foreign countries up to CFAF 50,000 are permitted; larger amounts may be authorized by the ONCC. Resident and nonresident travelers to countries outside the French Franc Area may take out up to CFAF 20,000 in BEAC bank notes. Travelers to other countries of the French Franc Area may, subject to prior declaration, take out any amount in BEAC banknotes.

Nonresident travelers may take out bank notes and up to the amount declared by them on entry, or up to CFAF 50,000 if no declaration was made.

Exports and Export Proceeds

All exports to South Africa are prohibited. Export transactions valued at CFAF 50,000 or more must be domiciled with an authorized bank. Exports to all countries are subject to domiciliation requirements for the appropriate documents. Proceeds from exports to all countries must be repatriated within 30 days of the payment date stipulated in the sales contract. Payments for exports must be made within 30 days from the arrival date of the merchandise at its destination.

Proceeds from Invisibles

Proceeds from transactions in invisibles with France (as defined above), Monaco, and the Operations Account countries may be retained. All amounts due from residents of other countries in respect of services, and all income earned in those countries from foreign assets, must be collected within a month of the due date and surrendered within a month of collection if received in foreign currency. Resident and nonresident travelers may bring in any amount of bank notes and coin issued by the BEAC, the Bank of France, or a bank of issue maintaining an Operations Account with the French Treasury, as well as any amount of foreign bank notes and coin (except gold coin) of countries outside the French Franc Area.

Capital

Capital movements between Equatorial Guinea and France (as defined above), Monaco, and the Operations Account countries are free of exchange control. Capital transfers to all other countries require exchange control approval and are restricted, but capital receipts from such countries are permitted freely.2

Gold

Residents are free to hold, acquire, and dispose of gold jewelry in Equatorial Guinea. They require the approval of the Directorate of Mines to hold gold in any other form. Such approval is normally given only to industrial users, including jewelers. Newly mined gold must be declared to the Directorate of Mines, which authorizes either its exportation or its sale to domestic industrial users; exports are made only to France. Imports and exports of gold require prior authorization by the Directorate of Mines and the Minister of Finance, which is seldom granted for imports. Exempt from this requirement are (1) imports and exports by or on behalf of the monetary authorities, and (2) imports and exports of manufactured articles containing a minor quantity of gold (such as gold-filled or gold-plated articles). Both licensed and exempt imports of gold are subject to customs declaration.

Changes During 1985

No significant changes occurred in the exchange and trade system.

Ethiopia

(Position on December 31, 1985)

Exchange Arrangement

The currency of Ethiopia is the Ethiopian Birr, which is pegged to the U.S. dollar, the intervention currency, at the official rate of Br 2.07 = US$1. Buying and selling rates for certain other currencies are also officially posted; daily quotations by the National Bank of Ethiopia (the central bank) are set on the basis of the official rate for the U.S. dollar and the previous day’s closing rate of the currency concerned against the U.S. dollar in London. The National Bank does not deal with the public; its transactions in U.S. dollars with the authorized dealers take place at the official rate. Authorized dealers must observe the official rate for the U.S. dollar and prescribed commission charges, which accrue to the National Bank, of 0.50 percent buying and 1.50 percent selling; in addition, they are authorized, but not obliged, to levy service charges for their own account of up to 0.25 percent buying and 0.75 percent selling and, for currencies other than the U.S. dollar, to include the margin charges applied by the correspondents abroad. In practice, the authorized charges are usually levied. These commissions are applied also to the National Bank’s dealings with the Government and certain public sector entities. There are no taxes or subsidies on purchases or sales of foreign exchange. Authorized dealers require the approval of the National Bank to undertake forward exchange transactions.

Administration of Control

All transactions in foreign exchange must be carried out through authorized dealers under the control of the National Bank. All payments abroad require licenses issued by the Exchange Controller, whose office is a division of the National Bank. All exports are licensed by the Exchange Controller to ensure the surrender of the foreign exchange proceeds, and shipments require permits issued by that office. The Minister of Foreign Trade has statutory authority to prohibit, restrict, or regulate imports and exports.

Prescription of Currency

Outgoing payments are normally made in convertible foreign exchange appropriate to the country of the recipient or in U.S. dollars. The net proceeds of exports must be received in a foreign currency that is freely convertible, or in any other acceptable foreign currency.

Nonresident Accounts

Nonresidents may, subject to exchange control approval, open nonresident accounts either in birr or in foreign currencies at authorized banks. Deposits to these accounts can only be made in foreign exchange. Balances on nonresident foreign currency accounts may be freely transferred abroad. Transfers between nonresident accounts do not require prior approval. Members of the diplomatic community must use transferable or nontransferable birr accounts for payments of local expenses. No resident Ethiopian national may maintain a bank account abroad. A joint venture may be permitted to open foreign currency, transferable or nontransferable, birr accounts for the purchase of raw materials, equipment, and spare parts not available in the local market. As soon as the goods are received, documentary evidence of entry of the goods purchased with such funds must be submitted to the Exchange Control Division. In general, the accounts may only be replenished after such documents have been presented.

Blocked accounts of nonresidents are maintained with authorized banks and are used to retain funds in excess of Br 20,000 arising from disinvestments in Ethiopia (see section on Capital, below).

Imports and Import Payments

All imports from South Africa are prohibited. Payments abroad for imports require exchange licenses, which are obtainable upon presentation of a valid importer’s license. Approval of applications for exchange licenses is conditional upon the provision of satisfactory information on costs and payment terms and the submission of evidence that adequate insurance has been arranged with the Ethiopian Insurance Corporation, particularly for goods imported under letters of credit. Foreign exchange is not made available for a specified range of imported goods (including alcoholic beverages and certain durable consumer goods) considered to be nonessential or readily substitutable by domestic products. Imports of cars and other vehicles require prior authorization by the Minister of Transport. Exchange licenses are granted in the currency appropriate to the country of origin, or in any convertible currency that may be requested. Payments by letter of credit, mail transfer, telegraphic transfer, or cash against documents at sight are all normally acceptable, but the National Bank must be consulted regarding imports on a cash against documents basis. Goods that were previously subject to advance deposit requirements (about 100 items, mostly consumer goods) may not be financed on an acceptance basis, and virtually no imports take place on this basis. Importation on suppliers’ credit is prohibited except for goods such as raw and intermediate materials, pharmaceuticals, and machinery and transport equipment, in which case prior approval of the terms and conditions of the credit is required.

Payments for Invisibles

Payments for invisibles require exchange licenses. Invisibles connected with trade transactions are treated on the same basis as the goods to which they relate. Foreign employees may remit monthly up to 30 percent of their net earnings (but only for the first three years of their contract if employed by the private sector); they may remit a maximum ranging between 40 percent and 50 percent of total net earnings during the period of service and upon final departure. Other expatriate employees may on final departure take out the same maximum amount, but not more than Br 20,000 in any one year. Foreign nationals who are not entitled to remittance facilities may, however, remit up to 30 percent of their net earnings for the education of their children. Persons traveling abroad are allowed foreign exchange equivalent to Br 125 a day for a maximum period of 30 days in any one calendar year if the journey is made for business purposes; for tourism, persons 18 years of age or over are allowed up to the equivalent of Br 600 a year. Students are allowed foreign exchange up to the equivalent of Br 500 for study abroad, and Ethiopian nationals having dependents pursuing higher studies in accredited institutions abroad are allowed to remit funds to meet school fees and reasonable expenses. Residents may remit premiums on insurance policies taken out before April 1962. Subject to certain limits and to submission of evidence, persons may obtain foreign exchange for medical treatment and travel abroad. After providing for payment of local taxes, foreign companies may, in principle, remit dividends on their invested and reinvested capital in any currency. Travelers may take with them a maximum of Br 10 in Ethiopian bank notes.

Exports and Export Proceeds

All exports to South Africa are prohibited. Exports of most cereals to any destination other than Djibouti also are prohibited. Exports of horsebeans are suspended. All commodity exports require permits from the Exchange Controller and some require, in addition, the approval of specified public bodies. When applying for a permit, an exporter must specify the goods to be exported, the destination, and the value. For exports on a c.i.f. basis, exporters must obtain full insurance from the Ethiopian Insurance Corporation. The granting of a permit by the Exchange Controller enables the goods to pass through customs. The licensing system is used to ensure that foreign exchange receipts are surrendered to the National Bank, generally within three months, and that export proceeds are received in an appropriate currency (see section on Prescription of Currency, above).

Proceeds from Invisibles

Foreign exchange receipts from invisibles must be surrendered. Travelers may bring in Br 10 in Ethiopian currency. Foreign exchange must be declared by travelers on entry, and its re-export is subject to authorization, except for temporary visitors. Reconversion of birr must be supported by documentary evidence of prior exchange of foreign currency.

Capital

Controls over capital movements are designed to restrict outflows, to preclude an unwarranted accumulation of external debt, and to keep the authorities informed of the country’s external debt position.

All receipts of capital in the form of foreign exchange must be surrendered. Exchange control authorization is required, and registration of capital inflows with the exchange control authorities establishes evidence of receipt, which is required for repatriation. All recognized and registered foreign investments may be terminated on presentation of documents regarding liquidation and payment of all taxes and other liabilities. Subject to appropriate documentation, foreign businessmen having nonregistered investments may transfer their capital abroad on liquidation and final departure from Ethiopia, but may not transfer more than Br 20,000 in any one calendar year; funds in excess of this amount must be deposited in a blocked account with an authorized bank. (This regulation does not apply to joint ventures established under the new foreign investment code.) Transfers by emigrants who had operated their own businesses are restricted to Br 20,000 in any one calendar year.

Joint ventures are permitted between the Ethiopian public sector and foreign investors, with up to 49 percent foreign ownership, except in the precious metals, public utilities, telecommunications, banking and insurance, transport, and domestic trade sectors. All applications for joint ventures must be approved by the Office of the National Committee for Central Planning and registered with the Domestic Trade Ministry; a minimum of 25 percent of share capital is required to be paid before registration. Exemptions from income taxes are granted for up to five years for new projects, and for up to three years for extensions to existing projects. Imports of investment goods and spare parts for such ventures are also eligible for exemptions from customs duties and other specified import levies. Such ventures must be limited to 25 years in duration, but could be extended beyond this limit with the approval of the Council of Ministers.

Borrowing abroad requires exchange control approval and is restricted. Authorized banks may freely place their funds abroad, except on fixed-term deposit, but they may not acquire securities denominated in foreign currency without the permission of the National Bank. In addition, they need the prior approval of the National Bank to overdraw their accounts with foreign correspondents, to borrow funds abroad, or to accept deposits in foreign currency.

Gold

The ownership of personal jewelry of which gold or platinum forms a part is permitted. Unless specifically authorized by the Minister of Mines, Energy, and Water Resources, the possession or custody of 50 ounces or more of raw or refined gold or platinum, or of gold or platinum in the form of nuggets, ores, or bullion, is not permitted. Newly mined gold is sold by the Ethiopian Mineral Resources Development Corporation to the National Bank. Imports and exports of gold in any form other than jewelry require exchange licenses issued by the National Bank. Such licenses are not normally granted except for imports and exports by or on behalf of the monetary authorities.

Changes During 1985

Payments for Invisibles

January 24. A regulation was introduced, specifying the foreign exchange allowance for business travel as the equivalent of B 125 a person a day, for a maximum period of 20 days.

August 1. The foreign exchange allowance of B 600 an adult a year for tourist travel (as provided under Article 45 of the Foreign Exchange Regulations issued under Notice No. 1/1977 of January 5, 1977) was repealed.

Fiji

(Position on December 31, 1985)

Exchange Arrangement

The currency of Fiji is the Fiji Dollar, the value of which is determined on the basis of the fixed relationship between the Fiji dollar and a weighted basket of currencies of Fiji’s most important trading partners. The exchange rate of the Fiji dollar in terms of the U.S. dollar, the intervention currency, is fixed daily on the basis of quotations for the U.S. dollar and other currencies included in the basket. On December 31, 1985 the midpoint exchange for the Fiji dollar in terms of the U.S. dollar was F$ 1.1204 = US$1. The Reserve Bank of Fiji provides official quotations only for the U.S. dollar. There are no taxes or subsidies on purchases or sales of foreign exchange.

On August 4, 1972 Fiji formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement.

Administration of Control

Exchange control is administered by the Reserve Bank of Fiji, acting as agent of the Government; the Bank delegates to authorized dealers the authority to approve normal import payments. Except with the specific permission of the Reserve Bank, residents of Fiji are required to offer for sale to an authorized dealer all foreign currencies they receive.1 The Ministry of Economic Development is responsible for the issue of import licenses, with the exception of those for gold, timber, rice, and dairy products. Import licenses for gold are issued by the Ministry of Finance, for timber by the Ministry of Forestry, and for rice and dairy products by the Ministry of Agriculture and Fisheries. Export licenses are issued by the Comptroller of Customs.

Prescription of Currency

Transactions with all countries are subject to exchange control. Settlements with residents of any country may be made in Fiji currency through an External Account or in any foreign currency. Payments for exports to any destination outside Fiji may be made in Fiji currency from an External Account or in any foreign currency.

Nonresident Accounts

A nonresident2 may maintain an External Account in Fiji currency or a Foreign Currency Account with an authorized bank; such accounts may be opened without the specific approval of the Reserve Bank of Fiji. These accounts may be credited freely with interest payable on the account, with payments from other External Accounts, with the proceeds of sale of foreign currency or foreign coin by the account holder, and with Fiji currency notes which the account holder brought into Fiji or acquired by debit to an External Account or by the sale of foreign currency in the country during a temporary visit. External Accounts also may be credited with payments by residents for which either a general or a specific authority has been given. External Accounts may be debited for payments to residents of Fiji, transfers to other External Accounts, payments in cash in Fiji, and purchases of foreign exchange.

Imports and Import Payments

Imports of most goods are under open general license, although imports of a range of specified goods, including tea, mild steel bars, steel shelving and racking, tubes and pipes of iron or steel, certain foodstuffs, alcoholic beverages, kerosene stoves, safety matches, seed potatoes, polyvinyl chloride pipes, PVC-insulated electric wires and wiring pin clips, polypropylene bags and ropes, louver window frames, shirts, wood screws, and incense sticks and chemicals used as raw materials in their manufacture, are subject to individual import licensing; licenses for some of these items are issued restrictively. There is a wide range of consumer goods imported by national cooperative societies under a joint arrangement with six other Pacific Island countries. Import prohibitions are imposed on a few commodities from all sources, mainly for security, health, or public policy reasons.

Payments for authorized imports are permitted upon application and submission of documentary evidence to authorized dealers who may allow payments for goods which have been imported under either a specific import license or an open general license. Authorized banks may allow advance payments for all imports, provided that the goods are imported into Fiji within 90 days of the date the payment is made.

Payments for Invisibles

Payments for invisibles are permitted either under a delegated authority to banks or, where large amounts or nondelegated payments are involved, upon application to the Reserve Bank of Fiji. Payments may be made freely for all bona fide current transactions. Residents of Fiji traveling to other countries may obtain from a bank, without reference to the Reserve Bank, a foreign currency travel allowance for private or business visit up to the equivalent of F$2,000 a person a journey. For an extended visit, a traveler may apply before his departure to the Reserve Bank of Fiji for funds in excess of F$2,000 a person; applications may also be made from abroad through the traveler’s bank. There is no restriction on the number of trips a resident may make in any one year. Each traveler may take with him F$100 in Fiji currency and the equivalent of F$500 in other currencies, provided that these amounts are not in addition to travel allowances approved by a bank or the Reserve Bank of Fiji.

Exports and Export Proceeds

Specific licenses are required only for exports of rice, sugar, wheat bran, copra meal, certain lumber, scrap metals, certain animals, and a few other items. Irrespective of any export licensing requirements, however, exporters are required to produce an export permit for commercial consignment of all goods with an f.o.b. value exceeding F$ 1,000; this permit is required for exchange control purposes. Exporters are required to collect the proceeds of exports within six months of the date of exportation of the goods from Fiji, and may not grant credit to a nonresident buyer in excess of six months without specific permission. All foreign currencies must be offered for sale to an authorized dealer within one month of receipt.

Proceeds from Invisibles

All receipts from invisibles must be surrendered to authorized dealers. Travelers may bring in freely any amount in Fiji notes or foreign currency notes. Residents are required to sell their foreign currency holdings to an authorized dealer within one month of return.

Capital

The inflow of capital in any form requires specific permission of the Reserve Bank of Fiji. Foreign investment in Fiji normally is expected to be financed from a nonresident source. Such foreign investment may be given “approved status,” which guarantees the right to repatriate dividends and capital. All capital outflows are subject to prior approval. Capital transfers by residents to finance direct investments require the specific permission of the Reserve Bank of Fiji and are permitted only where benefits will accrue to Fiji within a reasonably short period.

Authority is delegated to banks operating in Fiji to approve transactions involving F$50,000 or more arising from (1) the conversion of foreign currency into Fiji currency, whether for credit to a resident account or to an External Account, and (2) the crediting of an External Account with Fiji currency emanating from another External Account (including Fiji currency accounts of overseas banks). The banks must send confirmation of such inflows to the Reserve Bank; they must also have the approval of the Bank before granting any loans in excess of F$10,000 to a company or branch in Fiji (other than a bank) which is controlled directly or indirectly by persons resident outside Fiji or by individuals designated as nonresidents; however, the banks do not need such approval to lend up to F$10,000 to individual nonresident customers who must repay such loans prior to their departure from Fiji. The banks may not lend foreign currency to any resident of Fiji without the specific permission of the Reserve Bank of Fiji. Residents require permission from the Reserve Bank of Fiji before they may borrow foreign currency within Fiji or outside.

The transfer of inheritances and dowries due to nonresidents is permitted, as is the transfer of the proceeds from the sale of a house owned by a nonresident. Residents of Fiji are allowed to make cash gifts to nonresidents equivalent to F$500 a donor a year; additional funds are permitted in compassionate cases. Emigrants may take out their entire net assets on departure.

With the prior approval of the Reserve Bank, residents are permitted to purchase foreign currency up to a maximum of F$5,000 a family a year to acquire foreign currency securities. The purchase of personal real property outside Fiji is not permitted. Special tax incentives are granted for investments in the tourist industry, and an investment allowance similar to that for the hotel industry is provided for large outlay investment projects supportive of the tourist industry. Portfolio investment in Fiji by nonresidents requires approval by the Reserve Bank; the proceeds of the sale or realization of such investment may be repatriated. Banks require exchange control permission to borrow abroad; they may accept deposits from nonresidents.

Gold

Residents may freely purchase, hold, and sell gold coin in Fiji but not gold bullion. The export of gold coin, except numismatic coins and collectors’ pieces, requires the specific permission of the Reserve Bank of Fiji. Gold imports from all sources, other than imports of gold coin, require a specific import license issued by the Ministry of Finance; these are restricted to authorized gold dealers. Gold coin is free of customs duty and fiscal tax, while gold bullion is exempt from customs duty but is subject to a fiscal tax of 7.5 percent. Gold jewelry is subject to customs duty at the rate of 7.5 percent and to a fiscal duty of 20 percent but does not require any license when valued at less than F$200; samples of gold and gold jewelry sent by foreign manufacturers require import licenses if over F$200 in value.

Exports of gold jewelry do not require licenses and are free of export duty. All newly mined gold is refined in Australia and sold at free market prices. Commemorative gold coins of F$100, F$200, and F$250 have been issued; these are legal tender but do not normally circulate.

Changes During 1985

Imports and Import Payments

At various times during the year the list of goods subject to import licensing was expanded, by a total of 6 items, bringing the total to 48 items. The new items included butter, canned mackerel, wet cell batteries, prawns, onions, certain types of roofing materials, and multiwall paper bags. In the case of roofing materials, imports were banned to prevent the importation of substandard products used in cyclone-proofing of the buildings; the ban was scheduled to be lifted after the introduction of a national code laying down minimum standards for building materials.

Finland

(Position on December 31, 1985)

Exchange Arrangement

The currency of Finland is the Finnish Markka. The external value of the markka is defined in terms of an index reflecting a weighted average of the exchange rates of the convertible currencies most important for Finland’s foreign trade. These are defined as the convertible currencies of countries that have accounted for not less than 1 percent of Finland’s commodity imports and exports in each of the preceding three calendar years. The value of the exchange rate index is maintained by the Suomen Pankki within a margin established by the Council of State; since January 1984 the range has been 101.3–106.0 (1982 = 100). The actual level of the index has been in the range of 102.3–102.7 since March 1984. The index weights are adjusted quarterly and based on the average trade shares for the past two years; the base year is changed annually. The Suomen Pankki calculates and publishes the currency index on a daily basis. Daily (noon) buying and selling rates for the U.S. dollar, the intervention currency, are quoted by the Suomen Pankki. On December 31, 1985 the rates were Fmk 5.4090 and Fmk 5.4250 per US$1, respectively. The rates for the U.S. dollar are applicable also to clearing dollars. Buying and selling rates for the clearing ruble are based on the rates of the State Bank of the U.S.S.R. for the U.S. dollar against the ruble. Quotations for other currencies are based on market cross rates. There are no exchange taxes or subsidies.

Authorized banks may deal among themselves, with residents, and with nonresident banks in U.S. dollars and other convertible currencies. Forward premiums and discounts quoted by authorized banks reflect interest rate differences in various currencies.

Finland formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from September 25, 1979.

Administration of Control

The Suomen Pankki operates the exchange control system, delegating authority to the authorized banks (mainly commercial banks). Import and export licensing is administered by the Export and Import Permits Office (a unit subordinate to the Ministry of Trade and Industry), which is headed by a Board composed of government officials, including a representative of the Suomen Pankki.

Prescription of Currency

For prescription of currency purposes, countries are divided into two groups: the bilateral countries1 and the convertible currency countries (all others). Settlements with the bilateral countries must be made in the currency of the agreement (the clearing ruble for the U.S.S.R., the clearing U.S. dollar for Bulgaria, and the clearing Finnish markka for the German Democratic Republic). Settlements with the convertible currency countries may be made in any convertible currency or through Convertible Accounts.

Nonresident Accounts

There are three categories of nonresident accounts: Convertible Accounts, Restricted Accounts, and Capital Accounts.2

Convertible Accounts are held by nonresidents in Finnish markkaa or in convertible currencies. These accounts may be credited by an authorized bank with amounts transferred from other Convertible Accounts, with Finnish currency received directly from a foreign bank or imported into Finland, with amounts which the bank would be authorized to transfer abroad, with amounts of convertible currency received by the bank, and with interest accrued on funds held in the accounts. These accounts may be debited freely and balances may be transferred abroad to any country.

Restricted Accounts are held by residents of countries with which Finland has bilateral payments arrangements, and are designated according to the holder’s country of residence. They may be held in Finnish markkaa or the appropriate bilateral payments agreement currency. They may be credited by an authorized bank with amounts transferred from Convertible Accounts and from Restricted Accounts related to the same country. The accounts may also be credited with Finnish currency received from a bank in the country indicated on the account, with amounts that the bank is authorized to receive to the credit of a Restricted Account related to the country indicated on the account, with currency surrendered to the bank and restricted to the country indicated on the account, and with interest accrued on funds held in the accounts. These accounts may be debited freely and balances may be transferred to the bilateral country concerned.

Capital Accounts comprise all other nonresident accounts. They are held in markkaa and are intended primarily for payments of a capital nature. The assignment of a Capital Account to another nonresident and the transfer abroad of funds held in such an account may be effected only with the permission of the Suomen Pankki. A monetary institution may credit a Capital Account with the purchase price of assets other than foreign securities bought from the holder by a resident, with funds received as an inheritance, and with redemption payments and interest on matured bonds and debentures quoted on the Helsinki Stock Exchange. These accounts may also be credited with rent on property owned in Finland by the holder of the account, with proceeds from other assets belonging to the holder of the account and managed by the monetary institution with which the account is held, with the amount of a loan based on a contract granting to a nonresident a loan not exceeding Fmk 50,0003 in value to be utilized in Finland, and with interest accrued on funds held in the account.

Capital Accounts may be debited freely for noncommercial current expenses in Finland of and for account of the holder, and funds in Capital Accounts may be used for capital payments when the transaction does not require authorization or is authorized for transferable funds. The Suomen Pankki generally grants permission for transfer abroad of funds deposited in Capital Accounts to an account holder who has resided abroad during the last calendar year and who continues to do so.

Imports and Import Payments4

Most goods may be imported free of license from the multilateral countries, provided that the goods are purchased from and originate in those countries. However, certain goods5 may be imported from the multilateral area under a global quota system, which provides for import licenses to be issued at least up to the amounts of quotas for specified commodity groups.

With the exception of the commodities to which reference was made in the preceding paragraph, import licenses are not required for most commodities originating in and purchased from the U.S.S.R., or originating in and purchased from the five countries with which agreements on the reciprocal removal of obstacles to trade have been concluded (Bulgaria, Czechoslovakia, the German Democratic Republic, Hungary, and Poland). All imports of commodities originating in countries or areas not classified6 in either the multilateral area or the bilateral area require individual licenses. The State Granary is the main agency for the import of wheat, rye, barley, oats, and products of these grains for human consumption, but individual importers may also import these commodities under license. There is a state monopoly for imports of alcoholic beverages.

Exchange is granted by authorized banks for all permitted imports on presentation of an application form, the import license (when required for imports from countries with nonconvertible currencies), and the original commercial invoice, provided that the goods are already in the country or there is sufficient evidence to guarantee their importation. Payment for imports must be made within 12 months after the date of customs clearance of the goods; if the period of suppliers’ credit exceeds 6 months, the credit is subject to an “overtime fee” (see footnote 4), unless specially authorized by the Suomen Pankki; if the import payment is made to the seller through foreign financing credit arranged by an authorized Finnish bank, the credit period may not exceed 6 months without a special permit. The Suomen Pankki applies nominal quotas on the authorized banks for this purpose.

Payments for Invisibles

Payments in respect of invisible transactions are not restricted. The authorized banks have general permission to effect payments for most invisibles, with a few exceptions relating to insurance, subject in some cases to a maximum allowance or other conditions.

A Finnish resident traveling abroad may purchase from commercial banks foreign exchange equivalent to Fmk 10,000 a trip,7 or, in the case of business travel, any amount made available by a bank for that purpose. Once abroad, a traveler may withdraw foreign exchange on a bank account passbook or check issued by a Finnish monetary institution, provided that the utilized amount of his travel allocation does not exceed a total of Fmk 10,000. A resident traveler may use a credit card abroad without a limit on amount for travel services and settle the transaction after his return. A credit card may also be used to buy merchandise, provided that the purchase price of each such item does not exceed Fmk 10,000. Nonresident travelers may take out Fmk 10,000 a trip in Finnish notes and coin and any amount in Finnish or foreign notes and coin declared upon entry; resident travelers may take out foreign or domestic currency, or any combination of these, up to Fmk 10,000, without the special permission of the Suomen Pankki. For all types of travel, bona fide applications for additional amounts of foreign exchange are approved by the Suomen Pankki.

Exports and Export Proceeds

Sales of arms are strictly controlled. Exports to countries that are not in the convertible area and that are outside the scope of agreements on the reciprocal removal of obstacles to trade are allocated by means of bilateral trade arrangements. Foreign exchange acquired through commodity exports need not be surrendered to the Suomen Pankki or to an authorized exchange dealer. Exporters are required to repatriate foreign exchange proceeds within eight days of collection, which may then be held in a foreign currency account with an authorized bank in Finland or be converted into domestic currency. Export licenses are required only for exports of scrap metal.

Proceeds from Invisibles

Foreign exchange receipts from current invisibles must be repatriated within eight days of collection. The funds may be held in a domestic foreign currency account in Finland. Any unutilized foreign bank notes and traveler’s checks must be repatriated, but these are exempt from the repatriation requirement up to Fmk 10,000 for assets held in Finland. The import of domestic and foreign currency and coin is unrestricted.

Capital8

Most outward transfers of nonresident capital are subject to approval by the Suomen Pankki. Inheritances are transferred to the beneficiaries after verification. Persons who have resided outside Finland during the last calendar year and continue to do so are allowed to transfer abroad their assets in Finland in one lump sum, subject to the prior approval of the Suomen Pankki.

Nonresidents may purchase shares quoted on the Helsinki Stock Exchange through an authorized bank, against convertible currencies, or by debiting a Convertible Account. When the securities so acquired by a nonresident are deposited in the custody of the authorized bank, the nonresident purchaser is permitted to sell the securities on the Helsinki Stock Exchange through the authorized bank and to repatriate the proceeds of the sale in a convertible currency. The acquisition of shares quoted on the Helsinki Stock Exchange with funds from Capital Accounts is also permitted automatically if they are acquired by an authorized bank, but proceeds from the sale of such securities may not be transferred abroad without the permission of the Suomen Pankki. Any other transactions in securities, and the export of securities that involve nonresident interests, require approval. If the securities were acquired with convertible foreign exchange or with markkaa from a Convertible Account, approval for their export can be obtained freely.

Inward direct investments that involve participation of more than 20 percent in the share capital of a Finnish enterprise require the approval of the Council of State. Such approval is usually granted, with the exception of investments in the forest and mining industries and in certain traditionally regulated activities. The transfer of direct investment capital requires authorization by the Suomen Pankki. Such authorization is usually granted, if the underlying investment has been approved by the Council of State. Repatriation of direct investment is subject to the approval of the Suomen Pankki, which is freely given. Outward transfers of capital, including transfers of direct investment by residents, require individual approval by the Suomen Pankki.

Proceeds from the sale of securities and real property must be repatriated under the general rule of repatriation. Subject to certain regulations, authorized banks and insurance companies have permission to purchase foreign and Finnish securities issued abroad. Purchases of real estate abroad are authorized up to a limit of Fmk 300,0009 a person, subject to the approval of the Suomen Pankki, which is granted liberally. The upper limit on shares entitling part-time use of a real estate abroad is Fmk 300,000.10

Finnish emigrants11 are generally permitted an exchange allowance of up to Fmk 300,000 a person or, in the case of emigrating families, Fmk 150,000 a person in addition to the basic tourist travel allowance. There is an automatic exchange allowance of up to Fmk 10,00012 a calendar year for each donor for gifts and contributions to nonresidents.

External borrowing by Finnish residents, particularly in the form of short-term or long-term financial credits, including bond issues abroad, requires the specific approval of the Suomen Pankki, which exercises surveillance over the amount of capital inflow as well as the terms and timing. Lending to nonresidents by nonbanks is generally restricted to export credits. No permission is needed for customary export credits.13 Medium-term and long-term borrowing abroad, other than borrowing by the State or in the form of import credits, is in certain exceptional cases subject to deposit requirements by the Suomen Pankki. International banking activities of Finnish commercial banks are mostly free of regulations, other than certain supervisory reporting requirements.

Gold

Residents may freely hold, buy, and sell gold in any form in Finland. Imports of unwrought gold in any form other than jewelry require licenses issued by the Export and Import Permits Office; such licenses are not normally granted except for imports by or on behalf of the monetary authorities and industrial users. The global quota list contains a quota for industrial gold, for which licenses are granted freely.

Changes During 1985

Prescription of Currency

February 1. Following the termination, on January 31, 1985, of the payments agreement between Finland and Hungary, payments between the two countries were placed on a convertible currency basis.

April 1. The U.S. dollar clearing account between Finland and Bulgaria was replaced by a Finnish markka clearing account, in keeping with an agreement concluded between the two governments in November 1984.

Payments for Invisibles

March 1. In a relaxation of existing regulations, authorization was granted for dividends from nonresident direct investment in Finland to be transferred abroad through an authorized bank without the prior approval of the Suomen Pankki.

Capital

March 1. The Suomen Pankki granted authorization for authorized banks (not involving the Finnish markka) to conclude currency and interest rate option contracts, subject to certain regulations. In addition, it was announced that collateral securities could be obtained on behalf of nonresidents without the prior permission of the Suomen Pankki, and that collateral securities could be granted to nonresidents on behalf of a resident without such prior authorization.

June 24. The Suomen Pankki prohibited until further notice the sale abroad of bonds and debentures quoted in the Helsinki Stock Exchange.

September 1. The Suomen Pankki issued new guidelines on operations in the forward market, under which firms were granted the right to hedge against the foreign exchange risk arising from the difference between their foreign currency claims and liabilities. (Firms and private persons could also hedge against foreign exchange risks on an individual transaction basis as before.)

France

(Position on December 31, 1985)

Exchange Arrangement

The currency of France is the Franc. France participates with Belgium, Denmark, the Federal Republic of Germany, Ireland, Italy, Luxembourg, and the Netherlands in the exchange rate and intervention mechanism of the European Monetary System (EMS). In accordance with this agreement, France maintains the spot exchange rates between the franc and the currencies of the other participants within margins of 2.25 percent (in the case of the Italian lira, 6 percent) above or below the cross rates based on the central rates expressed in European Currency Units (ECUs).

The agreement implies that the Bank of France (the central bank) stands ready to buy or sell the currencies of the other participating states in unlimited amounts at specified intervention rates. On December 31, 1985 these rates were as follows:

Specified InterventionFrancs
Rates Per:Upper limitLower limit
100 Belgian or
Luxembourg francs15.659014.9700
100 Danish kroner86.365082.5650
100 deutsche mark313.6300299.8500
100 Netherlands guilders278.3500266.1000
100 Irish pounds968.8500926.2500
100 Italian lire0.47850.4259

The participants in the EMS are not maintaining the exchange rates for other currencies within fixed limits. However, in order to ensure a proper functioning of the system, they intervene in concert to smooth out fluctuations in exchange rates, the intervention currencies being each other’s and the U.S. dollar. Buying and selling rates for 20 foreign currencies are quoted daily on the basis of market rates.1 On December 30, 1985 the buying and selling rates for the U.S. dollar were F 7.55300 and F 7.56900, respectively, per US$1. There are no taxes or subsidies on purchases or sales of foreign exchange.

Fixed conversion rates in terms of the franc apply to the currencies of the overseas territories and to the currencies of the countries that are linked to the French Treasury through an Operations Account2 as follows: (1) In the overseas territories of French Polynesia, New Caledonia, and Wallis and Futuna Islands, the currency used is the CFP franc, which has a fixed parity with the franc of CFPF 1 = F 0.055. (2) Fixed conversion rates in terms of the franc apply to the currencies of the Operations Account countries (see footnote 2). These rates are CFAF 1 = F 0.02 for the CFA franc, which circulates in Benin, Burkina Faso, Cameroon, the Central African Republic, Chad, the Comoros, the Congo, Côte d’Ivoire, Equatorial Guinea, Gabon, Mali, Niger, Senegal, and Togo.

Authorized banks in France and in Monaco, which may also act on behalf of banks established abroad or in Operations Account countries, are permitted to deal spot or forward in the exchange market in France. Authorized banks may also deal spot and forward with their correspondents in foreign markets in all currencies. Nonbank residents may purchase foreign exchange forward in respect of specified transactions. Forward exchange cover is prohibited for term transactions on commodity markets; and forward cover in respect of spot transactions in commodities is limited to two days, with the obligation to redeem foreign exchange receipts after the eight-day period.

France formally accepted the obligations of Article VIII, Sections 2, 3, and 4, of the Fund Agreement, as from February 15, 1961.

Exchange Control Territory

The exchange control regulations are applicable in all territories of the French Republic, that is, in continental France, Corsica, the Overseas Departments (Guadeloupe, Martinique, French Guiana, Reunion, and St. Pierre and Miquelon), Mayotte, and the three Overseas Territories (Wallis and Futuna Islands, New Caledonia, and French Polynesia). No exchange control is applied in relation to Monaco or the Operations Account countries (see footnote 2); payments between France and these countries are free of restriction on the part of France and take place at fixed exchange rates. All other countries are considered foreign countries for exchange control purposes; all payments between France and foreign countries are subject to exchange control. For imports and exports of gold, the Operations Account countries are also considered foreign countries.

The exchange control regulations include controls over inward and outward direct investment and other borrowing abroad on the basis of Decree No. 68–1021 of November 24, 1968. This decree is applicable to financial relations with all countries except those belonging to the French Franc Zone (i.e., Operations Account countries). Certain exchange operations are free from any prior authorization; these include direct investment coming from and going to EC countries, which are nevertheless submitted to prior notification.

Administration of Control

The Directorate of the Treasury of the Ministry of Economy, Finance, and the Budget is the coordinating agency for financial relations with foreign countries. It is responsible for exchange control and all matters relating to inward and outward direct investment and to borrowing abroad, unless they relate to real estate companies, in which case the Bank of France screens applications. The Directorate of the Treasury also evaluates the balance of payments, together with the Bank of France, which collects the data for its compilation. Certain exchange control powers have been delegated to the Bank of France, including the authority to license imports and exports of gold. Other exchange control powers have been delegated to the Directorate-General of Customs and Indirect Taxes and, in the Overseas Departments and Territories, to the Caisse Centrale de Coopération Economique (CCCE).

The Directorate of Insurance of the Ministry of Economy, Finance, and the Budget has certain powers in respect of matters relating to insurance, reinsurance, annuities, etc. The execution of all transfers has been delegated to authorized banks and stockbrokers and to the Postal Administration. The Directorate-General of Customs and Indirect Taxes establishes import and export procedures and controls, within the framework of commercial policy directives given by the Directorate of Foreign Economic Relations (DREE); the Directorate-General also issues import and export licenses and is responsible for any litigation relating to the exchange regulations. Technical visas required for certain imports and exports are issued by the appropriate ministry or by the Directorate-General of Customs and Indirect Taxes. The Ministry of Industry has certain responsibilities in respect of licensing contracts and contracts relating to technical assistance.

Prescription of Currency

Settlements with the Operations Account countries may be made in francs or the currency issued by any institute of issue that maintains an Operations Account with the French Treasury.3 Settlements with all other countries may be made in any of the currencies of those countries or through nonresident Foreign Accounts in Francs. Importers and exporters are free to invoice in any currency.

Nonresident Accounts

A nonresident account in francs may be freely opened by an authorized bank for nonresidents, including French nationals (other than officials) who have been residing abroad for at least two years. All overdrafts and advances on nonresident-held franc accounts are subject to general or specific permission.

Foreign Accounts in Francs may be freely credited with (1) the franc proceeds of the spot or forward sale of foreign currencies on the exchange market by a nonresident; (2) the franc proceeds of the sale of foreign bank notes to an authorized bank by a nonresident bank or a traveler; (3) the franc equivalent of an authorized bank’s arbitrage in foreign currencies on a foreign market; (4) French bank notes (and those of the Operations Account countries) mailed direct from abroad to the main office of the Bank of France by an authorized bank’s foreign correspondents; (5) transfers from other Foreign Accounts in Francs; (6) any authorized payment by a resident to a nonresident, including interest on balances in Foreign Accounts in Francs; (7) the proceeds, income, and amortization from French and foreign securities held in a foreign dossier in France, and the proceeds of the sale on a French stock exchange of securities denominated in French francs, including securities held by authorized banks; (8) liquidation proceeds of nonresident-held direct investments;4 and (9) the proceeds of the sale, through the intermediation of a notary public, of nonresident-owned real estate to physical or juridical persons of foreign nationality; should the nonresident be a French national, he or she m