Annual Report on Exchange Arrangements and Exchange Restrictions, 2007
Chapter

BOLIVIA

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
October 2007
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(Position as of July 31, 2007)

Status under IMF Articles of Agreement
Article VIIIDate of acceptance: June 5, 1967.
Exchange Measures
Restrictions and/or multiple currency practicesNo restrictions as reported in the latest staff report as of December 31, 2006.
International security restrictionsNo.
References to legal instruments and hyperlinksn.a.
Exchange Arrangement
CurrencyThe currency of Bolivia is the boliviano.
Other legal tenderThe dollar is also legal tender.
Exchange rate structureUnitary.
Classification
Conventional pegged arrangementAlthough Bolivia continues to maintain a de jure crawling peg arrangement, the rate of crawl of the exchange rate was near zero vis-à-vis the dollar from January 2006 to January 2007 because of appreciation pressures from hydrocarbons exports. Starting January 2007, the Central Bank of Bolivia (CBB) gradually appreciated the currency but at a very moderate pace until end-April 2007. As a result, the exchange rate arrangement has been reclassified effective January 1, 2006, to the category conventional pegged arrangement from the category crawling peg. The official selling rate is determined daily by the CBB at a daily competitive auction (“bolsín”). The Committee for Exchange and Monetary Policy (CEMP) sets the amount of foreign exchange to be auctioned and a price below which the CBB will not accept any bids. This floor price, which is expressed in dollars, is the official exchange rate. The CBB board determines the difference between the selling rate and a buying rate, which is currently Bs 0.10 (as of December 31, 2006), based on the CEMP recommendations. Effective March 9, 2006, the buy and sell spread on the boliviano against the dollar has been increased to Bs 0.10 from Bs 0.08. The private sector may participate in the auctions (with a minimum bid of $100,000 or its equivalent) through financial institutions that have accounts with the CBB. The opening up of the CBB exchange rate spread has resulted in the development of a private foreign exchange market, and foreign exchange sales through the bolsín have become scarce. In the present environment of a current account surplus, it is more common for the CBB to acquire foreign exchange from the financial system at the buying rate for the day, without any restriction as to the amount.
Exchange taxNo.
Exchange subsidyNo.
Forward exchange marketNo.
References to legal instruments and hyperlinksBoard Resolution 144/2002 (Approving Exchange Regulations); Board Resolution 092/2005 (Amending Exchange Regulations); www.bcb.gov.bo.
Arrangements for Payments and Receipts
Prescription of currency requirementsNo.
Payments arrangements
Regional arrangementsPayments between Bolivia and the other LAIA countries may be made through accounts maintained with each other by the CBB and the CBs of the countries concerned, within the framework of the multilateral clearing system of the LAIA.
Clearing agreementsYes.
Administration of controlNo.
Payments arrearsNo.
Controls on trade in gold (coins and/or bullion)Gold may be traded freely, subject to the following tax scale in accordance with the gross value of the sale of gold bullion: 7% for official quotations larger than $700 a troy ounce; between 4% and 7% for official quotations between $400 and $700 a troy ounce, calculated as a 0.01 factor multiplied by the official quotation; and 4% for official quotations of less than $400 a troy ounce.
Controls on exports and imports of banknotesNo.
References to legal instruments and hyperlinksLAIA Reciprocal Payments and Credits Arrangement; www.aladi.org/NSFALADI/CONVENIO.NSF; Law 1777, dated March 17, 1997 (Mining Code); www.mineria.gov.bo/web.
Resident Accounts
Foreign exchange accounts permittedYes.
Held domesticallyYes.
Held abroadYes.
Accounts in domestic currency held abroadNo.
Accounts in domestic currency convertible into foreign currencyYes.
References to legal instruments and hyperlinksn.a.
Nonresident Accounts
Foreign exchange accounts permittedYes.
Domestic currency accountsYes.
Convertible into foreign currencyYes.
Blocked accountsNo.
References to legal instruments and hyperlinksn.a.
Imports and Import Payments
Foreign exchange budgetNo.
Financing requirements for importsNo.
Documentation requirements for release of foreign exchange for imports
Letters of creditLCs have to be opened at a bank in the Bolivian banking system.
Import licenses and other nontariff measures
Negative listCertain imports are controlled for reasons of public health or national security.
Import taxes and/or tariffsBolivia applies an import tariff of 10% on consumer goods. Tariffs of zero and 5% are applied to capital goods in accordance with approved lists. A zero rate is also applied to imports of books and printed materials. Donated food, including wheat, is exempt from the import tariff.
State import monopolyNo.
References to legal instruments and hyperlinksn.a.
Exports and Export Proceeds
Repatriation requirementsNo.
Financing requirementsNo.
Documentation requirementsNo.
Export licensesNo.
Export taxesNo.
References to legal instruments and hyperlinksn.a.
Payments for Invisible Transactions and Current Transfers
Controls on these transfersSince July 1, 2004, a temporary tax on financial transactions (ITF) has been applied on inward transfers or shipments of money made through authorized financial institutions without using current or savings accounts and/or through institutions that provide funds transfer services that are legally established in Bolivia. Law No. 3446 of July 21, 2006, and Supreme Decree No. 28815 of July 26, 2006, extended the ITF until mid-2009 in order to maintain this tax on transactions between financial institutions. In contrast to the provisions in the previous regulation, the new law provides for taxation of all foreign currency deposits, both principal and interest, as well as shares in investment funds, including redemptions of shares and earnings. Also, the previous rate of 2.5% on $1 million was reduced to 1.5% on $1 million and is not subject to a gradual reduction as previously provided for in the April 2004 regulation. The most important exemptions from this tax are (1) savings accounts of individuals, up to $2,000 (with deposits and withdrawals being considered taxable events); this extends the $1,000 limit set in the original regulation; (2) credits and debits to accounts held by entities governed by the Securities Market Law with financial institutions or with the CBB; and (3) redemptions and earnings of shares in investment funds with balances (in local or foreign currency) less than or equal to $2,000.
Investment-related paymentsThere are no restrictions on capital inflows and outflows, nor on outward remittances of dividends, interest, and royalties with respect to technology transfers or under other business categories. All remittances or transfers are subject to payment of the taxes prescribed by law. When income of Bolivian origin is paid to beneficiaries abroad, the taxed net profit must be equivalent to 50% of the total amount paid or remitted. Those who pay or remit such items to beneficiaries abroad must apply a single and final withholding at the rate of 25% of the presumed taxed net profit.
Indicative limits/bona fide testYes.
References to legal instruments and hyperlinksLaw No. 2646 and other related provisions; Investment Law No. 1182, dated September 17, 1990; Law No. 1606 Amending Law No. 843, dated December 22, 1994; Law 3446 of July 21, 2006; Supreme Decree No. 28815 of July 26, 2006; www.impuestos.gov.bo/itf.
Proceeds from Invisible Transactions and Current Transfers
Repatriation requirementsNo.
Restrictions on use of fundsNo.
References to legal instruments and hyperlinksn.a.
Capital Transactions
Controls on capital transactionsOnly securities authorized by the Superintendency of Pensions, Securities, and Insurance may be traded on the over-the-counter market. Pursuant to a specific resolution, the Superintendency of Securities identifies securities exchanges abroad so that the instruments listed thereon may be publicly offered on the Bolivian securities market, provided they comply with the registration and disclosure requirements envisaged in the law.
Repatriation requirementsNo.
Controls on capital and money market instrumentsBrokerage houses have the sole corporate purpose of engaging in activities and intermediation related to securities, carrying out any action related to the transfer thereof, and performing activities allowed under this law. Brokerage houses authorized by the Superintendency of Securities may, among other things, represent foreign brokers and persons incorporated abroad who have activities connected with the exchange market.
Controls on derivatives and other instrumentsNo.
Controls on credit operationsAll 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 national congress, which is obtained by the MOF. All cash proceeds of borrowings from foreign public sector agencies are channeled through the CBB. Commercial and financial credits to the private sector without official guarantees are not subject to authorization but must be reported to the CBB for statistical purposes.
Commercial credits
To residents from nonresidentsYes.
Financial credits
To residents from nonresidentsYes.
Controls on direct investmentNo.
Controls on liquidation of direct investmentNo.
Controls on real estate transactionsNo.
Controls on personal capital transactionsNo.
References to legal instruments and hyperlinksExchange Market Law No. 1834, Articles 3, 6, 17, and 19.
Provisions Specific to the Financial Sector
Provisions specific to commercial banks and other credit institutions
Borrowing abroadShort-term foreign liabilities are subject to reserve requirements, except for liabilities incurred solely for foreign trade operations, and provided assets and liabilities are fully matched for each transaction.
Differential treatment of deposit accounts in foreign exchange
Reserve requirementsA reserve requirement rate of 2% in cash is applied to time deposits, savings account deposits, and deposits with a maturity of up to 60 days in foreign currency and in housing development units (UFV), and with a maturity of up to 360 days for foreign currency and in domestic currency saving accounts.
Liquid asset requirementsA reserve requirement of 12% applies to demand deposits, savings account deposits, and deposits with a maturity of up to 720 days in foreign currency and in local currency indexed to the dollar (MVDOL). In addition, a marginal liquid asset requirement of 7.5% applies to liabilities in foreign currency and MVDOL exceeding 80 percent of their stock as of March 31, 2005. This requirement may be offset at the same rate (7.5%) against increases in deposits in local currency and UFV above the level as of March 31, 2005. Pursuant to CBB Board Resolution No. 118/2006 of December 12, 2006, the reference rate for calculating the additional reserve requirement in foreign currency and MVDOL is reduced to 70% from 80% effective January 15, 2007, and to 60% effective July 2, 2007.
Investment regulations
Abroad by banksBanks may engage in investment abroad for the purpose of setting up banks, branches, or agencies; this investment must not exceed 40% of their net worth.
Open foreign exchange position limitsFinancial institutions may maintain a short foreign exchange position up to the equivalent of 20% of the book value of their net worth and up to 25% of the balance of provisions for losses on the indexed foreign currency and domestic currency portfolios.
Provisions specific to institutional investors
Insurance companies
Limits (max.) on securities issued by nonresidentsBy law, the maximum limit for investment in securities issued by issuers established abroad may not exceed 50% of resources for investment. Pursuant to a board resolution, the CBB each year sets the maximum amount for investments abroad by insurance companies. Since January 2005, this limit has been 10%.
Limits (max.) on investment portfolio held abroadn.a.
Pension funds
Limits (max.) on investment portfolio held abroadThe maximum limit that pension fund administrators may invest abroad varies between 10% and 50% of each individual capitalization fund. The sum of investments in equities, in investment fund shares, or in any other equity security issued by issuers established in Bolivia or abroad, may not together exceed 45% of the value of the Individual Capitalization Fund. The securities that pension funds may hold should be rated by private international rating agencies. The minimum acceptable rating for long-term securities is BB3 or Level 2 for short-term securities. Trading with these securities may be performed only on authorized foreign secondary markets.
Investment firms and collective investment funds
Limits (max.) on investment portfolio held abroadOpen investment funds may invest up to 20% of their total portfolio on international financial markets. In the case of closed investment funds whose nominal value at the time of issue is less than $20,000, the limit is 40% of their total portfolio. If the nominal value of the share is larger, the limit is up to 100% of their total portfolio.
References to legal instruments and hyperlinksLaw on Banks 1488, Article 43, updated May 5, 2004; Administrative Resolution SPVS-IP No. 038/2002, Article 6(d); Board Resolution No. 048/2005 (Approving New Regulations to Govern the Legal Reserve Requirements); Board Resolution No. 076/2003 (Approving Amendments to the Regulations Governing Exchange Positions in the Financial System); Insurance Law; Regulations for the Insurance Law; Board Resolution No. 006/2006 (Approving Maximum Limits for Foreign Investments by Insurance Companies); Law on Pensions; Administrative Resolution SPVS-IV No. 421 (Regulations Governing Investment Funds and Investment Fund Administrators); CBB Board Resolution No. 118/2006 of December 12, 2006; www.bcb.gov.bo; www.sbef.gov.bo; www.spvs.gov.bo.
Changes during 2006
Exchange arrangementJanuary 1. The exchange rate arrangement was reclassified to the category conventional pegged arrangement from the category crawling peg.
March 9. The buy and sell spread of the boliviano against the dollar increased to Bs 0.10 from Bs 0.08.
Payments for invisible transactions and current transfersJuly 21. Under Law No. 3446 of July 21, 2006 and Supreme Decree No. 28815 of July 26, 2006, the ITF was extended until mid-2009 in order to maintain this tax on transactions between financial institutions. The new law provides for taxation of all foreign currency deposits, both principal and interest, as well as shares in investment funds, including redemptions of shares and earnings. The previous rate of 2.5% on $1 million was reduced to 1.5% on $1 million.
Changes during 2007
Provisions specific to the financial sector
Provisions specific to commercial banks and other credit institutionsJanuary 15. The reference rate for calculating the additional reserve requirement in foreign currency and MVDOL was reduced to 70% from 80%.
July 2. The reference rate for calculating the additional reserve requirement in foreign currency and MVDOL was reduced to 60% from 70%.

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