Chapter

Introduction

Author(s):
International Monetary Fund. Monetary and Capital Markets Department
Published Date:
January 1989
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The Report provides 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 Aruba and the Netherlands Antilles, for which the Kingdom of the Netherlands has accepted the Fund’s Articles of Agreement. 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 1988, but in appropriate cases reference is made to significant developments that took place in early 1989.

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 1988.

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 1988 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, 1988, 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.

In the section on Capital, the special arrangements or limitations attached to international capital movements are described. 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.

Afghanistan

(Position on December 31, 1988)

Exchange Arrangement

The currency of Afghanistan is the Afghani. Da Afghanistan Bank (the central bank) maintains an official rate that is applied to (1) transactions of the Central Government; (2) certain foreign currency income earned in Afghanistan (see section on Proceeds from Invisibles, below); and (3) all transactions in accounting units specified under bilateral payments agreements. The official exchange rate is defined in terms of the U.S. dollar. On December 30, 1988, the official exchange rate was Af 50.60 = US$1 buying and Af 51.20 = US$1 selling, respectively.

Aside from the official rate, there are several mixed rates that apply to certain export transactions, a market-determined rate that prevails in the money bazaar, and a rate set by commercial banks that is supposedly linked to the money-bazaar rates. On December 30, 1988, the commercial bank rate was Af 241.00 = US$1 buying and Af 242.00 = US$1 selling, respectively.

There are surrender requirements for a number of exports, and mixed rates result from the rates of surrender requirements, as follows. For medical roots, other medical products, raisins, and skins (except karakul), exporters are required to surrender 10 percent of the foreign exchange proceeds to Da Afghanistan Bank. For patl wool, licorice, and other wools, the surrender requirements are 15 percent, 20 percent, and 30 percent, respectively. For all these products one half of the amount to be surrendered is converted at the rate of Af 51.2 = US$1, and one half at the rate of Af 100.0 = US$1, or at an average rate of Af 75.0 = US$1. The remaining foreign exchange proceeds may be used for imports, converted at the money-bazaar rate, deposited in an account with a commercial bank, or retained in an account abroad for a period not to exceed 8, 10, or 12 months, depending on the country. For karakul skins, exporters are required to surrender 100 percent of the proceeds, of which 45 percent is converted at the official rate, and 55 percent, at the commercial bank rate. Cotton may only be exported by four approved state enterprises, which pay the producer Af 158.30 per kilogram.

Da Afghanistan Bank posts rates for deutsche mark, 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. There are no arrangements for forward cover against exchange rate risk operating in the official and the commercial banking sectors.

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, which can only be exported by 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 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) is also 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. Except for public sector imports under the government budget, all importers are required to lodge minimum import deposits with banks at the time of opening letters of credit; the deposit ratios, based on the c.i.f. value of imports, range from 25 percent for essentials to up to 45 percent for other imports.

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. 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 to all countries, including payments agreement countries, must be received in convertible currencies. Receipts from exports of natural gas, karakul, cotton, and wool are subject to 100 percent surrender requirements. Receipts from medical roots, other medical products, raisins, skins (except karakul), and licorice are subject to surrender requirements ranging from 10–30 percent. Export proceeds from these products are converted at various exchange rates (see section on Exchange Arrangement, above).

In the case of trade under bilateral payments agreements, export proceeds may be retained in bilateral clearing dollar accounts with Da Afghanistan Bank. These retained proceeds may either be used directly by the original exporter or sold to other importers. In either case, the retained proceeds are converted at the basic official rate of Af 51 = US$1, with the exception of proceeds from cotton exports by ginning and pressing enterprises of the Ministry of Light Industries and Food, which are converted at the rate of Af 50 = US$1. In the case of exports to countries trading in convertible currencies, export proceeds may be retained abroad for 8, 10, or 12 months, depending on the country of destination. During the period the funds are held abroad, the exporter may use them for import of any goods other than those included in the list of prohibited goods. Alternatively, the exporter may sell the proceeds to an importer who may use them to purchase abroad from a list of 33 specified items. At the end of the periods indicated above, the foreign exchange holdings abroad have to be repatriated to a non-interest-bearing foreign currency account with a bank in Afghanistan. After this transfer, the retained proceeds may be used by the exporter or sold to another importer only for importation from the list of 33 specified commodities referred to above. In all cases, sale of retained proceeds to other importers takes place at the commercial bank rate.

Proceeds from Invisibles

Sixty percent of the foreign currency salaries of foreign employees working in the Afghan public and private sectors and 40 percent of the foreign currency salaries of foreign experts and advisors paid from grants under aid programs 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 take place only 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 1988

No significant changes occurred in the exchange and trade system.

Algeria

(Position on December 31, 1988)

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 partly 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. On December 31, 1988, the buying and selling rates for the U.S. dollar were DA 6.7233 = US$1 and DA 6.7383 = 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 arrangements for forward cover against exchange rate risk.

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. Foreign trade is carried out within the framework of the foreign exchange allocation (budget devises) system administered by the Ministry of Commerce and the Ministry of Finance. Investment of foreign capital in excess of DA 500,000 in Algeria requires approval by the 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 of 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 ministerial officer; 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).

4. Foreign Currency Accounts may be opened by physical or juridical Algerian nationals resident in Algeria or by nonresident Algerian nationals who have resided for more than six months in a foreign country. Such accounts may be freely credited with (1) book transfers from abroad using either postal or banking facilities, (2) imported convertible foreign currencies that have been declared at the account holder’s entry into the country, and (3) 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. The interest rate payable on deposits in these accounts is fixed quarterly by the Central Bank of Algeria.

Imports and Import Payments

Imports from Israel and South Africa are prohibited. Certain imports are prohibited regardless of origin. In accordance with Law No. 88/29 of July 19, 1988, the Government has a monopoly over foreign trade, which it exercises by granting concessions to public economic enterprises, public agencies, and interest groups. In principle, all import operations are carried out within the framework of the foreign exchange allocation, which the Government grants to (1) public economic enterprises for their own requirements, (2) foreign trade offices for resale, and (3) the National Chamber of Commerce for the private sector as a whole to cover its needs. Nevertheless, in certain cases, imports may be authorized through the issuance of import authorizations to public and private enterprises that enable them to import goods and services not covered by the foreign exchange allocation. The foreign exchange allocation is formulated on a multiyear basis, except for 1989, as an integral part of the enterprise’s medium-term plan. It includes: (1) revenue (e.g., export receipts, external loan receipts), (2) expenditure (imports payments, repayment of external loans), and (3) short-term and medium-term borrowing ceilings.

In priority cases, the Government may grant an enterprise the right to exchange more foreign currency than it takes in to cover the necessary operations. For certain products (cereals, semolina, coffee, etc.), the exchange right is expressed in terms of the quantities needed for consumption, while for other products it is in terms of value (spare parts, pharmaceuticals, etc.). An enterprise that holds a foreign exchange allocation may use it freely for its current operations and is subject to no further a priori administrative and financial control formalities.

Special regulations apply to unremunerated imports of capital goods, to automotive vehicles, and to noncommercial goods that have an f.o.b. value exceeding DA 10,000. These imports are not subject to any prior formalities or to any limits, regardless of the value or number of operations concerned. The list of items that may be imported in this manner is prepared periodically by ministerial decree.

Import supporting documents must be presented to the bank through which the payments relating to the transaction must be paid. Except as otherwise indicated by the exchange control authorities (Ministry of Finance or Central Bank), down payments may not exceed 15 percent of the total value of an import operation. In accordance with Law No. 80–07 of August 3, 1980, imports must be insured by Algerian insurers. When a public agency, public enterprise, or ministry is effecting expenditures for imports deemed to be urgent or of an exceptional nature, the bank may effect payment before exchange and trade control formalities have been completed.

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. Public enterprises may use exchange allocations (budgets devises) freely for payments for specified invisibles, including transportation and other services contracted abroad. The transfer of family remittances is suspended. The premiums for insurance on all risks arranged in Algeria by Algerian residents must be paid in Algeria. Public and private sector national exporters may open EDAC accounts (i.e., exporters’ Convertible Dinar Accounts) denominated in convertible dinars, which can be credited with up to 10 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; representation costs at overseas trade fairs and exhibitions; and legal and administrative expenses.

Residents of other countries working in Algeria under technical cooperation programs, 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.

Foreign exchange allocations for tourism abroad by Algerian residents are suspended. Residents requiring medical treatment abroad are entitled to 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. 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 travel 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 export operations are carried out within the framework of the foreign exchange allocation system. Non-hydrocarbon exports may take advantage of certain incentive measures granted by the Government, including, for example, (1) exemption from the tax on industrial and commercial profits and the flat-rate levy on the wage bill, and (2) export promotion assistance (Ampex).

Sales on consignment are subject to authorization by the Ministry of Finance and must always be registered prior to customs clearance. Export proceeds must be repatriated immediately after they are collected. 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. 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 abroad 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 reinvested 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 1988

Administration of Control

The foreign exchange allocation system was introduced for 41 public enterprises; in 1989, the system will be extended to all economic agents.

Antigua and Barbuda

(Position on December 31, 1988)

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, 1988, 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 licenses are 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. Arrears are maintained with respect to external payments.

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 licenses 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.

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 reasons. Official authorization is required for amounts exceeding 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. Surrender of export proceeds is not 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 freely bring in 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 1988

No significant changes occurred in the exchange and trade system.

Argentina

(Position on December 31, 1988)

Exchange Arrangement1

The currency of Argentina is the Austral (plural Australes). A dual exchange rate system is in operation consisting of the official exchange rate and a fluctuating, largely market-determined exchange rate (the “free rate”) for all transactions not required to be channeled through the official exchange market. After August 1988, the transactions to be conducted at the official exchange rate were restricted to receipts from most agricultural exports and half of the receipts from industrial exports, imports of fuel and certain pharmaceuticals, nonfinancial service payments of the Government for embassy expenditures, and debt-service payments by the Treasury. The Central Bank auctions foreign exchange in the free market on a regular basis, with the aim of maintaining a certain spread between the two rates. The official exchange rate for the austral in terms of U.S. dollars is announced on a daily basis by the Central Bank of Argentina. On December 30, 1988, the closing rate for the austral in terms of the U.S. dollar was A 13.37 = US$1 (selling).

Transactions are allowed in certain other currencies,2 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 transactions in foreign currency are permitted. Since August 1988, limited forward transactions have been taking place in the official exchange market. Exchange rate guarantees operate in respect of certain financial transactions (see section on Capital, below).

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. Arrears are maintained with respect to external payments.

Prescription of Currency

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). Under an agreement maintained with Bolivia, a fixed proportion of Argentina’s payments for Bolivia’s natural gas exports is made into a non-interest-bearing account at the Central Bank of Argentina, and it is used solely for purchases of Argentine goods to be consumed in Bolivia and for Bolivia’s debt-service payments to Argentina. Argentina maintains reciprocal credit arrangements with Bulgaria, Cuba, Hungary, 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. The Central Bank of Argentina maintains a special account with Romania under which payments for imports of equipment and capital goods from Romania are offset with receipts from exports of certain products from Argentina.

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, and since August 1988, they have been carried out at the rate in the free exchange market. 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 a “Sworn Declaration of Need to Import” to be submitted by the importer to the intervening banks, which are authorized to accept, check, and process these declarations and submit them to the National Import Directorate. Some imports require an import license (Certificate of Sworn Declaration of Need to Import) issued by the National Import Directorate. Certain public enterprises are also permitted to import under foreign treaties without the issuance of an import license.

Import license requests submitted by the private sector to the Industry and Foreign Trade Secretariat 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 time defined in the central bank regulations, whichever is earlier; they are indexed in terms of the U.S. dollar.

The following set of procedures applies to the acquisition of an import license for all imports that require licensing. Although 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 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 Industry and Foreign Trade 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.

For goods on List II, the Secretary of Industry and Foreign Trade issues import licenses in consultation with an Honorary Import Advisory Committee on which both government institutions and competent commercial and industrial organizations are represented. When the industrial section of the Industry and Foreign Trade Secretariat does not approve an import license request, the Secretariat is empowered to study the individual case and make a determination. The goods on List II include a range of consumer goods and industrial inputs for which close substitutes are available in Argentina, now covering 18 percent of domestic production. 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. These include goods imported under the Temporary Admission Regime. Also, 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.

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 payments can take the form of the exportation of promoted goods.

Payments for Invisibles

In general, the sale of foreign exchange at the official rate is not permitted for invisible payments; all payments may be made through the free exchange market, with the exception of transfers of profits and dividend earnings. Authorized entities may carry out most types of transactions without prior authorization of the Central Bank.

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 of the respective time limits. Proceeds from exports of most agricultural commodities must be surrendered at the official exchange rate; 50 percent of the proceeds from other exports must be surrendered at the official rate and 50 percent at the free exchange rate.

A number of traditional exports (soybeans, beef, and processed hides) are subject to export taxes. Certain nontraditional exports are eligible for rebates of estimated indirect taxes paid in the process of production. Exports shipped through certain ports are eligible for additional rebates ranging from 7 percent 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 prefinancing and financing regimes to be granted to Argentine exporters through banks, with a view to promoting exports of certain goods and services. Also, the Compañía Argentina de Seguro de Crédito a la Exportación S.A. provides export credit insurance coverage against commercial risks. It also provides coverage for extraordinary risks, on the account of the Central Government, for transactions included under the General System of Financing for Promoted Exports. 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: (1) a deduction from taxable profits, up to 10 percent of the value of certain exports; (2) 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; (3) the establishment of international trading companies; (4) permission for firms to engage in countertrade when marketing promoted exports; (5) a tax drawback scheme under which rebates would be allowed for taxes of imported inputs and other taxes; (6) the elimination of the 0.5 percent stamp tax for exports from the Federal Capital Area; and (7) the funding of an Export Promotion Fund to finance participation in trade fairs and exhibitions.

Under the Argex program, enterprises that can establish that their export receipts are at least three times their import payments are eligible for automatic and unrestricted access to the Temporary Admission Regime for all inputs and intermediate products and to prefinancing. Under the Special Export Program Scheme, exporters of specified goods who commit themselves to expanding exports are eligible for special payments from the Treasury of up to 15 percent of the increase in the f.o.b. value of exports, for access to central bank prefinancing, and for other benefits. Authority to provide additional benefits under this scheme was restored in August 1988.

For traditional exports, the maximum terms for anticipated payments and foreign currency export prefinance are 360 days for processed goods, 240 days for vegetable oils and their by-products, peas, garden produce, chickpeas, rice, wheat flower, and processed meats, and 180 days for grains and other unprocessed agricultural products. For nontraditional exports, the maximum term for anticipated payments and foreign currency export prefinance is 360 days.

Proceeds from Invisibles

Foreign currency receipts obtained from private sector invisibles transactions need not be surrendered to the official exchange market, but may be sold in the free exchange market. 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

Since October 1987, proceeds from private sector financial loans have had to be transacted in the free foreign exchange market; transactions before this date in the official exchange market are eligible for subsequent purchases of foreign exchange in the official market to service such loans. Private sector loans disbursed since October 1987 have been serviced through the free exchange market. Proceeds of loans from international organizations, and of all public sector borrowing, may be transacted in the free or official foreign exchange market and must be serviced through the market where the proceeds were transacted. Proceeds from financial loans must be transacted through the official market only if they are to be used as supplementary funds in relending operations. For these loans, interest rates may not exceed LIBOR plus 1 percent, must have maturities of at least 360 days, and in all cases must have fixed maturity dates. There are no conditions, on maturity dates or interest rates, for financial loans transacted through the free market. 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 not subject to regulation A 558 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. Loans covered by exchange rate guarantees that fell due in 1986 were rescheduled by means of the issuance of U.S. dollar-denominated obligations of the Government of Argentina (Notes) with a 19-year maturity from October 1987.

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 24, 1975. Outward capital transfers are not permitted through the official market but may be effected through the free market without restrictions.

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 is 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 in which the investor is a juridical person under public law; and (f) investments in which 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. No transactions of this type took place during 1986–1987.

In October 1987, a debt conversion scheme was announced that would allow investments to be financed through conversion of external loan claims into domestic currency at the free foreign exchange market rate. The value of the loan claims would be determined through an auction system. The scheme came into effect on January 1, 1988, and the first auction was held in January 1988. Profits on investments under this scheme may not be remitted for at least four years, and capital may not be repatriated for ten years.

Other 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 transferred 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 for 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 1988

Exchange Arrangement

August 3. Additional transactions were shifted to the free exchange market, including most import payments and half of the proceeds from exports of industrial products. Following this change, transactions to be conducted at the official exchange rate were restricted to the proceeds from exports of most agricultural products and half of the proceeds from industrial products, public sector imports of fuel and certain pharmaceuticals, nonfinancial service payments of the Government for embassy expenditures, and debt-service payments by the Treasury.

September 23. Half of the proceeds from some additional export items, including eggs, powdered milk, and some meat products, were transferred from the official to the free exchange market.

Imports and Import Payments

March 4. All transfers abroad for payments of medical services or the purchase of medical supplies were moved from the free exchange market to the official exchange market.

March 25. A comprehensive reduction in import duties and quantitative restrictions on imports of petrochemicals and of iron and steel products was effected. In the case of petrochemicals, a range of products was exempted from the prior consultation requirement, and import duties were generally reduced to a maximum of 20 percent plus a 5 percent transitional tariff through end-1988. In the case of iron and steel, existing import authorization requirements were eliminated, while tariffs were also reduced to a maximum of 20 percent for most items, plus a 5 percent transitional tariff through end-1988.

April 18. Import duties on a number of agrochemical products were reduced.

June 6. A range of agricultural machinery and equipment items (including tractors and tractor parts) was removed from the list requiring prior authorization. At the same time, import tariffs were eliminated for some products and were set in the range of 10–38 percent for others.

September 21. Import controls were lifted on 2,400 items, covering capital goods, textiles other than garments, chemicals and petroleum products, and tobacco. Imports of these products on average represented 18 percent of domestic production.

October 21. An import tariff reform was implemented that narrowed the tariff band for most imports from 15–53 percent (including surcharges) to 0–40 percent, reduced the maximum tariff (applicable on automobiles, motor vehicle bodies, and tractors) from 115 percent to 40 percent, and reduced the special surcharge on electronic goods. As a result, the average tariff, weighted by production, fell from 43 percent to 30 percent. The special 15 percent import surcharge was abolished.

Payments for Invisibles

August 3. Trade-related services and other services, except for certain central government payments including expenses for embassies abroad and interest on external debt of the Treasury, were shifted to the free exchange market.

Exports and Export Proceeds

April 4. Import duty drawbacks on exports were increased to include the additional import duties introduced in October 1987.

June 3. The following changes, aimed at increasing incentives to obtain external financing and imposing a stricter control on the quality of operations financed, were introduced in the export prefinancing and financing regimes.

(1) Regarding export prefinancing (applicable to promoted exports) included under Communication “A” 1205, (1) the portion of foreign currency deposits that may be used for export prefinancing was raised from 10 percent to 20 percent; (2) the limit on utilization of rediscounts was raised from 75 percent to 100 percent of the intervening bank’s capital (the requirement that the excess over 50 percent be offset by a special deposit was maintained); (3) a provision was included in this regulation that aims at using foreign borrowing to raise funds for export prefinancing; and (4) in the case of operations funded by central bank resources, the annual interest rate paid by the exporter was raised from 1 percent to 8 percent (plus the exchange rate differential). For operations funded by foreign borrowing, the Central Bank pays the intermediary bank 6 percent as a compensation for the rate paid by the exporter. In the case of operations funded by foreign currency deposits, the Central Bank receives 4.5 percent. In the case of operations funded with the central bank resources, it retains 5 percent.

(2) For export financing, (a) the financing available for goods with import content exceeding certain maximum limits was restricted; (b) the interest rate structure was changed in favor of shorter maturities; (c) the guarantee requirements were raised; (d) the minimum size of eligible operations was increased; and (e) maximum periods in force for financing according to the type of product to be exported were maintained.

August 3. One half of the proceeds from industrial exports were allowed to be channeled through the free exchange market, with the remainder to be surrendered in the official exchange market; the interest rate on rediscounts for export financing was raised to 8 percent.

September 23. Additional agricultural-based products were included in the category of goods to which the 50 percent surrender requirement of the export proceeds in the official market applies.

Aruba1

(Position on December 31, 1988)

Exchange Arrangement

The currency of Aruba is the Aruban Florin, which is pegged to the U.S. dollar at Af. 1.7900 = US$1. The official buying rates for the U.S. dollar on December 31, 1988 were Af. 1.77 per US$1 for bank notes and Af. 1.78 per US$1 for drafts, checks, and transfers. The official selling rate was Af. 1.80 per US$1.

The Central Bank van Aruba (the Central Bank) deals with local commercial banks within margins of 0.00279 percent on either side of parity; on December 31, 1988, the buying and selling rates were Af. 1.7895 per US$1 and Af. 1.7905 per US$1, respectively.

Official buying and selling rates for other currencies2 are set daily on the basis of rates for the U.S. dollar on the international exchange markets. A foreign exchange commission of 1.3 percent is levied on all payments made by residents to nonresidents.

Administration of Control

Foreign exchange controls are administered by the Central Bank. Import licenses, where required, are issued by the Department of Economic Affairs, Commerce, and Industry.

Prescription of Currency

Payments to and receipts from nonresidents may be made in any convertible currency, except in the legal tender of Aruba. All payments made by residents to nonresidents and receipts through local banks as well as through banks abroad must be reported to the Central Bank.

Nonresident Accounts

Nonresidents may freely open accounts in any foreign currency, but they are not permitted to hold accounts in Aruban florins.

Resident Foreign Bank Accounts

The opening and maintaining of foreign bank accounts by residents is subject to a central bank license.

Imports and Import Payments

Imports of certain products, for which locally produced substitutes exist, are subject to quotas. Certain products are subject to import surcharges. Payments for imports may be made freely.

Payments for Invisibles

Depending on the amount, payments for invisibles may require a license from the Central Bank. Nonresidents may take with them on departure any foreign currency that they brought in. The export of Aruban bank notes is prohibited. Transfers of profits and dividends are permitted by the Central Bank upon application.

Exports and Export Proceeds

Exports do not require a license. Export proceeds must be converted into local currency within eight working days, credited to a foreign currency account with a local bank, or credited with a foreign bank with the approval of the Central Bank.

Proceeds from Invisibles

The regulations governing export proceeds also apply to proceeds from invisibles. Nonresidents may bring in any amount of checks, traveler’s checks, or bank notes denominated in foreign currency.

Capital

The following transactions require a central bank license: (1) purchases from and sales to nonresidents of domestic securities; (2) purchases of officially listed foreign securities with values exceeding Af. 50,000 a year; and (3) purchases from and sales to nonresidents of foreign real estate.

Australia

(Position on December 31, 1988)

Exchange Arrangement

The currency of Australia is the Australian Dollar.1 The Australian authorities do not maintain margins in respect of exchange transactions; spot and forward 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 30, 1988, the closing buying and selling rates in terms of the U.S. dollar were $A 1.168 = US$1 and $A 1.169 = US$1, respectively. There are no taxes or subsidies on purchases or sales of foreign exchange.

Authorized foreign exchange dealers may deal among themselves and with their customers at mutually negotiated rates for both spot and forward transactions in any currency, in respect of trade- and non-trade-related transactions. The Reserve Bank sets a limit for each dealer’s net open overnight foreign exchange exposure. Foreign currency futures contracts and options on futures are traded on the Sydney Futures Exchange.

As part of Australia’s current foreign exchange arrangements, a range of outward foreign exchange transactions is 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 shown to authorized foreign exchange dealers before foreign exchange or other means of payment are 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.)

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 persons in Australia in exchange for Australian currency must be undertaken with an authorized foreign exchange dealer in Australia.

Nonresident Accounts

Nonresidents may establish and fund accounts without formality; funds may also be repatriated without restriction. Accounts may be denominated in foreign currency, but purchases and sales of foreign currency must be handled through authorized dealers in Australia. Special requirements apply in the case of interest-bearing investments by foreign government monetary authorities (see section on Capital, below).

Imports and Import Payments

Nearly all goods may be imported without import licenses, and no restrictions are imposed on payments for imports. Import-licensing restrictions are imposed on a small range of secondhand equipment, including ships and aircraft, although not for exchange control purposes. An embargo exists for imports of sugar, although this has been temporarily suspended and is expected to be replaced with a tariff from July 1989. Tariff quotas apply to most textiles, clothing, and footwear, but they are expected to be phased out by 1995 through reductions in the out-of-quota tariff rates. Import restrictions are maintained mainly for reasons of health, community protection, or quality standards.

Tariffs on manufactured imports—except those subject to separate industry plans and prior tariff-phasing arrangements4—and certain agricultural products are subject to a phased tariff reduction program announced in the May 1988 Economic Statement. Tariff rates above 15 percent are to be reduced in annual steps to 15 percent, while rates of 15 percent and less (but greater than 10 percent) will be reduced to 10 percent. Tariffs on passenger motor vehicles will be reduced to 35 percent by 1992.

The revised Customs Tariff (Antidumping) Act of 1988 has simplified the antidumping procedures. It provides for stricter conditions for demonstrating the causal link between dumping and material injury to the domestic industry. Antidumping duties and undertakings will lapse automatically after three years, although the domestic industry may renew the antidumping action. Antidumping actions may be introduced retrospectively or in anticipation of the arrival of dumped or subsidized goods. An antidumping authority has been established to advise the Government on these actions, although the Australian Customs Service remains responsible for the preliminary investigation of a complaint.

Under the terms of the Australia-New Zealand Closer Economic Relations Trade Agreement (Anzcerta), almost all goods imported from New Zealand enter duty free, and quantitative restrictions are being phased out to achieve free trade in goods by July 1, 1990. Currently, imports of motor vehicles from New Zealand are subject to a customs tariff that is to be abolished by January 1, 1990. Quotas on imports of clothing from New Zealand are separate from global quotas; quotas on textiles and footwear are to be abolished on March 1, 1989. Imports of liquid milk and cheese from New Zealand are currently restricted but will be fully liberalized by July 1, 1990. Antidumping actions against imports from New Zealand will not be taken after July 1, 1990; they are expected to be replaced by actions to be taken under domestic trade practices legislation if it is considered necessary to redress unfair competition.

The South Pacific Regional Trade and Economic Agreement provides for duty-free and unrestricted access to Australian and New Zealand markets for most of the products exported by the member countries.5

Payments for Invisibles

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

Travelers may take out of Australia unlimited amounts of foreign currency or Australian currency instruments purchased from authorized foreign exchange dealers, and up to $A 5,000 in Australian notes and coins in any combination. Travelers who are not residents of Australia may also 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.

The Anzcerta also provides, through a protocol, for the liberalization of the trade in services between Australia and New Zealand, subject to the foreign investment policies of both countries. In addition, certain service activities are excluded from the agreement. Among Australia’s list of exclusions are telecommunications, banking, airport services and aviation, coastal shipping, media, and postal services. The operation of the trade-in-services protocol is to be reviewed before December 31, 1990.

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, Protection of Movable Cultural Heritage Act, 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 specified minerals, metals, hydrocarbons, and nuclear-sensitive material is prohibited unless permission is granted by the Minister for Primary Industries and Energy or an authorized person.

Exports are controlled for different objectives for individual mineral commodities. Depending on the commodity, the objectives may be one or more of the following: (1) pricing and other contractual conditions are fair in relation to the market, consistent with maximizing the trade benefits for Australia; (2) exports are in compliance with Australia’s nuclear policy, international obligations, and bilateral agreements where applicable—e.g., the Non-Proliferation Treaty, as well as bilateral agreements between Australia and each of its nuclear customer countries; (3) supplies are adequate for domestic requirements; and (4) the provisions of the Environment Protection (Impact of Proposals) Act and the Australian Heritage Commission Act are met.

There are controls on exports of alumina, bauxite, coal, iron ore, uranium, and other materials of nuclear significance. On completion of negotiations, exporters of these minerals are required to seek approval from the Department of Primary Industries and Energy. For negotiation of contracts for the sale of uranium, they must meet the requirements of the Ministerial Determinations issued to the three producers. For exports of monazite and xenotime, additional requirements must be met under 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.

With respect to agricultural 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

Provided that the procedural requirements of the Government’s taxation-screening arrangements are met, the vast majority of transactions involving transfers of capital from Australia and nonresident investments at interest in Australia may be undertaken without formality. The only exceptions are that borrowings in Australia by foreign governments, their agencies not similar to private sector commercial entities, and international organizations are not permitted. Moreover, while there are no limits applying to the interest-bearing investments by international organizations or by foreign central banks and other monetary authorities, the Reserve Bank may determine an amount up to which the investment by foreign government monetary institutions (which also undertake commercial investments) will be regarded as having been undertaken for official foreign reserve management purposes and hence qualify for sovereign immunity from Australian taxation. All investing agencies are expected to be stable holders of Australian dollar assets and to keep the Reserve Bank advised of their Australian dollar portfolio.

Direct investment in Australia by nonresidents is subject to the Government’s foreign investment policy, which is based on the recognition that foreign investment makes a substantial contribution to the development of Australia’s industries and resources. The Government’s policy is therefore to welcome and encourage long-term direct foreign investments that have beneficial economic effects and are consistent with the needs of the Australian community. The policy is concerned primarily with direct foreign investments that have significant implications for the levels of foreign ownership and foreign control of Australian industries and resources. Portfolio (debt and equity) investments are not subject to the policy.

The guidelines for the policy on direct foreign investments are administered 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 of 1975; those involving the establishment of a new business or project, irrespective of size, in the media and civil aviation sectors, 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 tourism, mining, and primary industries; those involving direct investment by foreign governments or their agencies (excluding investments related to their official representation); and proposals to acquire real estate and undertake real estate development projects.

The Foreign Takeovers Act of 1975 is concerned with the acquisition by foreign interests of companies or businesses operating in Australia. The Act requires nonresidents, non-resident-controlled corporations or businesses, and companies (including Australian companies) in which nonresidents have a substantial shareholding to notify the Government of proposals to acquire, or increase, 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.

New investments (and acquisitions of existing businesses) in the industrial sectors are normally approved unless judged contrary to the national interest. Proposals involving civil aviation and the media are examined on a case-by-case basis, and acquisitions of existing mining (non-oil and gas) operations over $A 5 million are approved if sufficient economic benefits can be demonstrated. Certain restrictions apply to investment in developed residential real estate.

After inviting applications for banking licenses, the Government selected 16 foreign banks in 1985 to establish banking operations in Australia. It is not envisaged that further such invitations will be issued to foreign interests. The Government’s policy on uranium projects provides for no further uranium mines to be developed and for further stages of the nuclear fuel cycle to be prohibited.

Australia’s foreign investment policy also provides an incentive for the “naturalization” of partly foreign-owned companies. The naturalization process is an entirely voluntary one and may be entered into by 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 application of the policies, every effort is made to avoid unnecessary interference in normal commercial processes, and recognition is given to the special characteristics and circumstances that may arise in individual cases. The policy is nondiscriminatory as to the country of origin of investors, and the Foreign Investment Review Board, which acts as an independent source of advice to the Government on foreign investment matters, stands ready to assist and advise foreign investors in the formulation of their proposals.

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 Krugerrand, subject to normal customs procedures. However, the export of Australian gold coin in excess of five of the $A 200 denomination and in excess of five of the Australian nugget gold coins in any 12-month period requires reserve bank approval.

Changes During 1988

Imports and Import Payments

April 13. Tariff quotas on passenger motor vehicles were abolished, and customs tariff rates are to be reduced to 35 percent by 1992.

May 25. Wide-ranging customs tariff reductions were announced in the Economic Statement. They included general rate reductions with most customs tariffs on manufactured goods and certain agricultural products to be reduced to 15 or 10 percent by July 1, 1992. A limited liberalization was also introduced in the arrangements for textiles, clothing, and footwear.

July 1. Customs tariffs on imports of goods from New Zealand were eliminated under the Anzcerta.

August 18. The Anzcerta was revised to provide for a more rapid liberalization of the trade in goods and services between Australia and New Zealand. In particular, it provides for free trade in goods by July 1, 1990.

September 1. Revised procedures were introduced under the Antidumping Authority Act of 1988 to reduce administrative and legal delays in antidumping investigations.

December 20. The embargo on sugar imports, scheduled to be replaced with tariffs in 1989, was temporarily suspended.

Exports and Export Proceeds

January 1. The controls on the exports of petroleum and petroleum products were lifted, except for the ban on exports to South Africa.

June 14. The controls on exports of defense-related goods were relaxed to apply only to goods of a military and/or lethal nature.

June 24. A bilateral agreement was concluded with Japan providing for the liberalization of the Japanese market for beef and an expansion of Australian exports.

Capital

January 22. The guideline for Australians to hold at least 50 percent of the equity and voting power in new mining development projects exceeding $A 10 million was waived for new oil and gas projects.

Austria

(Position on December 31, 1988)

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 transactions are permitted up to 18 months, and they must be related to an authorized transaction in the case of residents. Forward premiums and discounts are, in principle, left to the interplay of market forces, and the Austrian National Bank does not intervene in the forward market or provide cover for commercial banks’ forward positions. On December 30, 1988, the authorized banks’ buying and selling rates for the U.S. dollar were S 12.48 and S 12.49, 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 for Economic Affairs (Licensing Office) for industrial products, or the Federal Ministry of Agriculture and Forestry for agricultural products. For products falling under state monopolies, 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 are generally based on the distinction between member countries of the IMF or the Organization for Economic Cooperation and Development (OECD) and other countries.

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 customs at the time of clearance, irrespective of the country they are imported from.1 Nearly all imports from General Agreement on Tariffs and Trade (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 is governed by the international agreement for this commodity. 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, 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 a few exceptions, involving transport and insurance transactions, residents are permitted to conclude transactions involving current invisibles with residents of countries that are members of the IMF or the OECD. 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 10,000 (up to S 5,000 to non-IMF and non-OECD countries) 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 abroad for tourism purposes may purchase foreign exchange from authorized banks or obtain short-term advances from nonresidents in multilateral countries without limitation; if the amount exceeds the equivalent of S 50,000,3 the Austrian National Bank must be informed. 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. The use of credit cards abroad for travel expenditures is permitted. Persons leaving Austria may take with them S 50,0003 in Austrian bank notes and coin and any amount in foreign bank 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 proceeds may either be surrendered or 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 of 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.

Capital4

The acquisition by nonresidents of Austrian securities, shares, and participations in Austrian companies, and Austrian real estate is covered by a general license. The acquisition of real estate is, however, subject to the approval of the local authorities. Direct investments by nonresidents, except in the form of loans for nonproductive purposes (unless loans are granted at preferential terms and do not exceed three times the paid-up equity of the lender), 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.

Foreign banks cannot establish branches in Austria, except through an enterprise incorporated in Austria. Nonresidents are also not permitted to invest in the auditing, mining, energy, transport, or legal sectors, and they are not permitted to acquire a share of 25 percent or more in ships registered in Austria.

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 an additional amount. Mortgage loans, export finance credits, and loans to Austrian subsidiaries abroad are not subject to this limit. A number of authorized banks are permitted to accept deposits in convertible currencies from abroad for interbank on-lending abroad at maturities of up to five years. Major banks are permitted to borrow from nonresidents in foreign currency over the medium and long term.

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 are 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 are also 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 banks may grant short-term foreign currency loans to nonresidents against collateral in securities, if the proceeds are to be used either for the purchase of securities to be deposited as collateral with the lending institution or, after conversion into Austrian schillings, for authorized payments to residents. Domestic insurance companies may conclude life insurance contracts in Austria with nonresidents.

Residents are allowed to purchase from nonresidents, without restriction, Austrian securities and foreign securities issued in member countries of the IMF or the OECD with which settlements take place in convertible currencies and which are quoted in an official securities market;5 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 (re-strikes) to authorized credit institutions for resale to the public.6 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 are subject to a value-added tax 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 for Economic Affairs 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 10,000 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 for Economic Affairs.

Changes During 1988

No significant changes occurred in the exchange and trade system.

The Bahamas

(Position on December 31, 1988)

Exchange Arrangement

The currency of the 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 midrate, 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 when 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”1 may be negotiated between residents through an investment currency dealer at freely determined rates, usually attracting a premium over the official market rate.

Commercial banks may provide forward cover for residents of The Bahamas where the resident is due to receive or has to pay foreign currency under a firm contractual commitment. Commercial banks may not, however, sell foreign currency spot to be held on account in cover of future requirements unless the Central Bank’s permission has been given. Authorized dealers may deal in foreign currency forward with nonresidents without prior approval from the Central Bank. Commercial banks may deal among themselves forward at market rates and must ensure when carrying out all forward cover arrangements that their open position carried either spot or forward does not exceed the equivalent of B$500,000 long or short. There are no forward cover arrangements in the official sector.

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 facilities, and cash gifts is not delegated, except in the Family Islands.2 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 zero to 200 percent, depending on the type of good. Customs entries are subject to a stamp tax at a rate of 1.5 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, education, 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$10,000 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. Temporary residents may also repatriate all of their accumulated savings resulting from their employment in The Bahamas.

A traveler may take out Bahamian bank notes not exceeding B$70 in value; Bahamian travelers may not take out notes of any other country, except with the specific approval of the Central Bank.

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 foreign currency bank accounts.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 by or 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) that is resident in The Bahamas and is controlled by any means, 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 customs is also payable on commercial shipments of gold jewelry from any source. There is no restriction on residents’ acquisition or retention 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 1988

No significant changes occurred in the exchange and trade system.

Bahrain

(Position on December 31, 1988)

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. The exchange rate for the Bahrain dinar in terms of the SDR may be set within margins of plus or minus 7.25 percent of this fixed relationship. In practice, however, the Bahrain dinar has maintained a relatively stable relationship with the U.S. dollar, the intervention currency, and 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 in the early 1980s, the exchange rate of the dinar in terms of the SDR remained outside the 7.25 percent margin throughout the period May 1981–June 1986. The exchange rate of the dinar in terms of the SDR returned to within the 7.25 percent margin in July 1986 and remained within this margin at end-December 1987. The middle rate of the Bahrain dinar for the U.S. dollar is quoted by the Bahrain Monetary Agency (BMA) and has remained unchanged since December 1980. The BMA provides daily recommended rates for banks dealing with the public for amounts up to BD 1,000 in U.S. dollars, pounds sterling, and deutsche mark, based on the latest available rates for the U.S. dollar against those currencies. On December 31, 1988, the BMA’s buying and selling rates for the U.S. dollar were BD 0.375 and BD 0.377, respectively, per US$1. The BMA does not deal with the public. In their dealings with the public, commercial banks are required to use the BMA’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. There are no arrangements for forward cover against exchange rate risk operating in the official sector, while the BMA monitors forward exchange transactions of commercial banks through the open position of commercial banks’ monthly returns.

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. The rates of customs tariffs range between 5 percent and 10 percent on most commodities, except for a limited range of domestically produced goods (including paper and plastic goods, medical equipment, furniture, and aluminum extrusions), which are subject to a 20 percent rate to be effective until the end of February 1989. The customs tariffs on alcoholic beverages and tobacco are 125 percent and 50 percent, respectively. Government procurements are required to give preference to goods produced in Bahrain and within the member countries of the Cooperation Council for the Arab States of the Gulf (GCC), provided that the prices of these goods are within specified margins of the prices of imported substitutes; the margins are 10 percent for goods produced in Bahrain and 5 percent for goods produced within the member countries of the GCC. Foreign 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 1988

Imports and Import Payments

January 1. The customs tariff on tobacco was raised from 25 percent to 50 percent, and on alcoholic beverages, from 100 percent to 125 percent.

January 1. Preferential treatment was required to be given to goods produced in Bahrain or within the member countries of the GCC in government procurement if the prices of these goods were within specified margins of the prices of imported substitutes (margins are 10 percent for goods produced in Bahrain and 5 percent for GCC goods produced in the member countries of the GCC).

March 1. The temporary 20 percent customs tariff on 11 locally produced manufactured goods, which took effect on March 1, 1987, was extended until end-February 1989.

Bangladesh

(Position on December 31, 1988)

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 with reference to a weighted basket of currencies. On December 31, 1988, the official (spot) middle rate of the taka in terms of the U.S. dollar was Tk 32.27 = US$1. On December 30, 1988, the spot buying and selling rates of the Bangladesh Bank (the central bank) for authorized dealers were Tk 32.23 and Tk 32.31, respectively, per US$1. On the same date, the spot buying and selling rates (telegraphic transfers) of authorized dealers were Tk 32.1987 and Tk 32.3413, respectively, per US$1.

Exchange rates for currencies other than the U.S. dollar are based on the daily closing rates of the U.S. dollar in New York for the currencies concerned. Different effective exchange rates arise from the operation of the Secondary Exchange Market (SEM), which comprises the Wage Earners’ Scheme (WES) and the Export Performance Benefit (XPB) Scheme. Under the WES, foreign exchange earnings remitted by workers abroad, tourist receipts, and most service receipts are sold at a rate determined by a committee of authorized foreign exchange dealers (mainly banks) constituted by the Bangladesh Bank. Under the XPB Scheme, exporters and certain indirect exporters of nontraditional items are eligible to receive an exchange rate premium, which is set to equal the difference between the WES rate (in taka per U.S. dollar) and the official rate. Each eligible item receives a coefficient of either 40 percent, 70 percent, or 100 percent of the XPB, depending on that item’s domestic value added and the priority that the Government places on encouraging its export. At the end of 1988, 76 items were eligible for 100 percent of the XPB, covering domestic value added of 70 percent and above. A coefficient of 70 percent was given to 38 items. Other export products with a value added of between 50 percent and 69 percent were also given a coefficient of 70 percent. However, electrical and engineering products, machine tools and equipment, cast iron products, household electrical appliances, and electric cables with a value added of between 40 percent and 59 percent were also given a coefficient of 70 percent. Exports of garments and leather were subject to a schedule of coefficients. Garments received 70 percent XPB if they were made from imported raw materials, and 100 percent XPB if domestic materials were used. In case of leather items, the coefficients were 40 percent for products using imported raw materials and 100 percent for products using domestic materials. Seventy percent XPB was given to exports of intermediate textile products (i.e., fabric) and to domestic sales of intermediate products that were finished locally and then exported. All other nontraditional exports, except wet-blue leather, received 40 percent XPB. On December 31, 1988, the middle exchange rate in the secondary market was Tk 32.925 per US$1.

Forward facilities at authorized banks are available in all approved foreign currencies and in currencies of the member countries of the Asian Clearing Union (ACU),1 covering periods of up to six months for export proceeds and import payments and covering up to three months for remittances of surplus collection of foreign shipping companies and airlines. The authorized banks may in their turn take forward cover in the interbank market or from the Bangladesh Bank against transactions for which they have entered into forward contracts with their customers. Authorized banks may also take forward cover for one month from the Bangladesh Bank against sight export bills negotiated by them, and enter into forward contracts with their overseas branches/correspondents against underlying export or import transactions. Authorized banks are permitted to retain relatively small working balances with their foreign correspondents, and currency swaps are not permitted unless they are against underlying approved commercial transactions. 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 ACU.

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 three are nationalized), together with three joint-venture banks and four 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 registration of exporters and importers and for issuance of the Import Policy Order (IPO). Registered importers can make their imports in terms of the IPO against letters of credit. Letters of credit authorization forms are issued by authorized dealers and a separate import license is not required. 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 agreements2 normally must be effected through nonconvertible U.S. dollar or pound sterling accounts for goods and services specified in the agreements 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 ACU in respect of current transactions must be effected in terms of the Asian Monetary Unit (AMU) through the Clearing Union.3 Settlements with other countries normally take place in convertible currencies and, in a 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.4 Nonresident Foreign Currency Accounts may be opened by authorized dealers without prior approval of the Bangladesh Bank in respect of Bangladesh nationals/foreign nationals who reside abroad and in respect of foreign firms operating abroad. 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 WES, 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 customs upon arrival in Bangladesh; (3) transfers from other Foreign Currency Accounts opened under the WES; 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 WES; (3) payment for imports of specified goods against letters of credit; (4) payment of bank commissions and other bank charges connected with imports; and (5) travel expenditures abroad for business or private purposes up to prescribed limits. For travel on private purposes, the upper limit is the equivalent of US$400 a person a year (regardless of the number of visits annually) for air travel to Bhutan, Burma, India, Maldives, Nepal, Pakistan, and Sri Lanka (but up to US$150 for overland travel to India); and US$1,800 a person a year and a maximum of US$1,000 a trip for travel to other countries.

Nonresident Foreign Currency Deposit Accounts. Bangladesh nationals residing abroad, foreign nationals, and foreign companies/firms registered and/or incorporated abroad, banks, and other financial institutions, including institutional investors, may open interest-bearing Nonresident Foreign Currency Deposit Accounts, denominated in pounds sterling or U.S. dollars. These accounts, whose terms range from one month to one year, may be credited, in initial minimum amounts of US$1,000 or £ stg. 500 (US$25,000 for foreigners), with (1) remittances in convertible currencies, and (2) transfers from existing Foreign Currency Accounts maintained under the WES. 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 WES, may also transfer the balance to any Foreign Currency Account maintained under the WES. The balances in the accounts are freely convertible into taka at the SEM rate. The official rate for foreigners must be reported by banks monthly to the Bangladesh Bank and the accounts must be closed within one year 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 from Israel and South Africa are prohibited. Imports are guided by an annual import policy (IPO) announced by the Government. The IPO for the fiscal year 1988/89 (July to June) is based on two lists, the negative list and the restricted list, described according to the Harmonized System of Nomenclature and the Import Trade Control (ITC) schedule. The negative list includes items in 189 out of 1,012 categories at the ITC four-digit level, for which importation is totally banned either for social or religious reasons or because similar items are locally produced. The IPO 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. The restricted list includes items in 153 categories that may be imported only if certain conditions relating mainly to the nature of end users and quality standards are met. In addition, there are special negative lists for the jute and textile mills. Items not on these lists are freely importable through the SEM, provided that the importer has a valid import registration certificate. Imports at the official exchange rate are subject to allocation on the basis of foreign exchange availability.

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 IPO 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 SEM Scheme, an importer is required to have a valid import registration certificate either as a commercial importer or industrial consumer or under the SEM 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 otherwise valid worldwide, except that imports from Israel and South Africa and imports transported on the flag vessels of Israel and South Africa are prohibited. For shipment of imports under cash and the SEM Scheme, the validity of LCAFs is as follows: (1) 11 months from the date of issuance/registration of an LCAF for commercial items and industrial raw and packing materials; and (2) 17 months from the date of issuance/registration of an 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 effect remittances within 12 months of the date of registration of an LCAF for the importation of commercial items and industrial raw materials and packing materials and within 18 months of the date of registration of an LCAF for the importation of capital machinery and spare parts. If the importers require additional time to make remittances, then authorized dealers may allow such remittances only under the SEM Scheme.

Payment against imports is generally permissible only under cover of irrevocable letters of credit. Under the SEM 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. Raw materials may be imported under letters of credit on a deferred-payment basis up to 180 days. 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 on a deferred-payment basis up to 180 days against export letters of credit received by them. Public sector importers may import on a cash-against-documents basis, subject to authorization by the Bangladesh Bank.

Imports of specified raw materials and packing materials by industrial consumers are 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 to raw materials and packing materials on the free list that are imported under the SEM Scheme. However, for items appearing on the restricted list, the entitlement system applies even in the case of imports under the SEM. 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 are generally 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.

Exporters with export earnings exceeding Tk 100 million during the preceding year are entitled to a maximum business travel allowance of US$25,000 a year. Exporters with export earnings exceeding Tk 50 million but not exceeding Tk 100 million in the preceding year are entitled to the allowance equivalent to 1 percent of the f.o.b. value of their exports, subject to a maximum of US$18,000 a year. Those with export earnings exceeding Tk 2.5 million but not exceeding Tk 50 million in the preceding year are also entitled to the allowance equivalent to 1 percent of the f.o.b. value of their exports, subject to a minimum of US$4,500 and a maximum of US$11,000 a year; exporters with a performance of up to Tk 2.5 million in the preceding year are allowed up to US$4,500 a year. New exporters are allowed US$90 a day, subject to a maximum of US$3,000 a year. All business travel allowance must be purchased at the SEM rate. For medical treatment the amount granted is the actual requirement, which must be purchased at the SEM rate, subject to the approval of the Bangladesh Bank. A Bangladesh national flying abroad is allowed to purchase foreign exchange from a Foreign Currency Account under the WES, 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 net salaries, subject to a maximum of £ stg. 200 a month (net of tax), 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; if no declaration has been made, up to US$150 may be reconverted. Resident travelers may take out foreign currency and traveler’s checks up to the amount of any travel allocation they have been granted. A Bangladeshi or a foreign national 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 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 the import of foreign exchange not exceeding US$1,000 by nonresidents and 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 non-resident-owned or non-resident-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 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 the 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 investments where the foreign equity portion exceeds 49 percent require the approval of 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 and silver in any form are prohibited without special permission, which is not normally granted. Exports of gold are allowed only in jewelry form under the Jewelry Export Scheme. 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 1988

Exchange Arrangement

The official exchange rate of the taka was adjusted on five occasions during the year, from Tk 31.20 = US$1 at the end of 1987 to Tk 32.27 = US$1 at the end of 1988. The secondary market rate did not change during the year and remained at Tk 32.925 = US$1. The spread between the two rates (the maximum XPB entitlement) was reduced below 2 percent effective November 12, 1988.

March 17. The SEM rate, instead of the official rate, was applied to all encashments of export receipts of the industrial unit in the Export Processing Zones (EPZs). The SEM rate was also applied to encashment of funds brought in from abroad by the units in EPZs for meeting their local expenses.

June 30. The Exchange Rate Fluctuation Burden Absorption Scheme (EFAS) expired as scheduled. EFAS coverage remained available for a small number of loan agreements approved before June 30, 1988, if letters of credit were established before November 30, 1988.

July 1. Exports of waste cotton, buttons, industrial alcohol, and dropout fuses were entitled to the XPB at the rate of 100 percent. Exports of toothpaste and soap were entitled to the XPB at the rate of 70 percent.

September 15. Locally produced packaging materials used by export-oriented garment industries and exports of toys, luggage, and fashion accessories, electronic goods, and leather goods, as well as the domestically supplied ingredients, were considered to be indirect exports and were thus entitled to the XPB, at the rate of 100 percent for products having a value-added content of 50 percent or more, and at the rate of 70 percent for products having a value-added content of less than 50 percent.

Prescription of Currency

January 5. A barter protocol between the governments of Bangladesh and the U.S.S.R., signed in December 1987, was announced to be valid up to December 31, 1988. Bangladesh will export mainly ready-made garments and jute products and will import mainly machinery and equipment.

January 6. Trading Corporation of Bangladesh and CGL of Austria signed a special trading arrangement to be valid for one year from the date of its execution, in the amount of US$15 million, on a self-balancing basis.

February 14. The Bangladesh Export-Import Company Limited (Beximco) and Comtrade Limited of Switzerland signed a special trading arrangement to be valid for a period of one year, in the amount of US$10 million, on a self-balancing basis.

February 22. Transcom Limited of Bangladesh and André & Cie of Switzerland signed a special trading arrangement to be valid for a period of one year, in the amount of US$5 million, on a self-balancing basis.

February 23. Elite International of Bangladesh and Comtrade Limited of Switzerland signed a special trading arrangement to be valid for one year, in the amount of US$4.5 million, on a self-balancing basis.

February 27. Nisu Limited of Bangladesh and V.M.S. Abdul Razak & Co. Limited of Singapore signed a special trading arrangement to be valid for a period of one year, in the amount of US$4.05 million, on a self-balancing basis.

March 1. Meenhar Seafoods Limited of Bangladesh and Slopefield of the United Kingdom signed a special trading arrangement to be valid for one year, in the amount of US$4.5 million, on a self-balancing basis.

March 6. Trading Corporation of Bangladesh and Elders IXL Limited of Australia signed a special trading arrangement to be valid up to April 5, 1989, in the amount of US$24 million, on a self-balancing basis.

April 18. Trading Corporation of Bangladesh and André & Cie of Switzerland signed a special trading arrangement to be valid up to April 19, 1989, in the amount of US$22 million, on a self-balancing basis.

April 25. The governments of Bangladesh and Albania signed a barter protocol to remain valid until April 24, 1989, in the amount of US$4.1 million. Bangladesh will export mainly chemical goods and leather and will import mainly cement and pig iron.

July 19. The governments of Bangladesh and the People’s Republic of China signed a barter protocol, to be valid for one year from July 1, 1988, in the amount of US$30 million. Bangladesh will export mainly leather and jute goods and will import mainly machinery, equipment, industrial products, and chemicals.

Imports and Import Payments

March 16. The import of rice by the private sector was authorized subject to permission of the Ministry of Food; and an advance deposit in foreign exchange of 100 percent was required before establishing the letter of credit, with at least 30 percent cash margin obtained from the importers.

April 6. The interim Import Policy Order (IPO) reduced the negative list from 355 to 292 items, and the restricted list from 261 to 226 items at the four-digit ITC category level.

July 1. Margin deposits on letters of credit were to be arranged only on a banker-customer relationship basis; previously, minimum import margin deposits were imposed by Bangladesh Bank.

July 1. The 1988/89 IPO came into effect. The new IPO shortened the negative list to 189 items, and the restricted list to 153 items. Essential inputs for the local industry and some consumer goods were removed from the restricted and negative lists. Entitlement limits on individual firms were also eased. The import targets were raised, and the share of imports transacted through the secondary market was increased. Industrial importers were allowed to import up to three times the value of their industrial passbooks entitlements compared with two times the value under the previous IPO. New industries were allowed to import up to 200 percent of their entitlement in the first year, compared with 100 percent under the previous IPO.

July 5. The advance foreign exchange deposits for the establishment of import letters of credit in the secondary market were to be arranged only on a banker-customer relationship basis; previously, minimum advance deposits were imposed by Bangladesh Bank.

Exports and Export Proceeds

March 19. The guidelines describing the procedures for the allocation of export credit to direct and indirect exports for procurement of inputs from the domestic market through inland letter of credit were issued.

July 1. The 1988/89 Export Policy Order came into effect. The policy formally extended all export incentives to indirect exporters. Provisions were included for providing the XPB at the rate of 100 percent to electronic items, toys, luggage, and fashion goods when local raw materials were used, and at the rate of 70 percent when imported raw materials were used. Cash assistance amounting to 15 percent of the f.o.b. value was provided to hosiery goods and textiles when bonded warehouse or duty drawbacks were not available. Project exports, such as engineering services, consultancy services, and civil construction, were considered to be merchandise exports and provided all export incentives.

Barbados

(Position on December 31, 1988)

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 30, 1988, 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 30, 1988, the buying and selling rates of the Central Bank of Barbados for the Canadian dollar were BDS$1.6744 and BDS$1.7079, respectively, per Can$1; those for the deutsche mark were BDS$1.1165 and BDS$1.1388, respectively, per DM 1; and those for the pound sterling were BDS$3.5728 and BDS$3.6444, 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 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.

The Central Bank periodically obtains forward cover in the international foreign exchange market to cover or hedge its own or the Central Government’s exchange risks associated with foreign exchange loans that are not denominated in U.S. dollars. Commercial banks are allowed to obtain forward cover in the international markets. Swap transactions in U.S. dollars are entered into between the Central Bank and commercial banks, while commercial banks may freely switch between nonregional currencies.

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 Trade, Industry, and Commerce.

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. Import licensing requirements and quantitative restrictions are the chief tools of Barbadian external commercial policy. 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. Authorized dealers may release foreign currency for advance payments for imports into Barbados up to the equivalent of BDS$20,000 (c.i.f.). Payments over BDS$20,000 require the prior approval of 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$2,000 a person a calendar year may be allocated for private travel within or outside the Caricom area; and BDS$500 a day, up to BDS$10,000 a person a calendar year, for business travel within the Caricom area, and BDS$15,000 outside the Caricom area), expenses of education abroad (BDS$20,0000 a person a year), remittances of cash gifts not exceeding BDS$500 a donor a year, subscriptions to newspapers and magazines (BDS$500 a person a year), 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 of 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 Economic Community.

Proceeds from Invisibles

Foreign currency proceeds from invisibles must be sold to authorized dealers. Travelers to Barbados may freely bring in 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 under delegated authority, 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, BDS$200, and BDS$500 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 Trade and Commerce; no license is required to export gold, but exchange control permission is required to do so.

Changes During 1988

Imports and Import Payments

March 17. Soya bean oil, coconut (copra) oil, and corn (maize) oil were deleted from the list of items requiring import licenses.

March 17. Fixed vegetable oil (fluid or solid crude, refined or purified) was added to the list of items requiring import licenses.

April 12. Gift wrapping paper (surface colored or decorated, in rolls or sheets) was added to the list of items requiring import licenses.

November 10. Authorized dealers were allowed to sell foreign exchange for advanced payments for imports into Barbados, up to BDS$20,000 (c.i.f.) against specified documentary evidence.

Payments for Invisibles

November 10. Authorized dealers were empowered to approve, without reference to the Central Bank, applications for foreign exchange remittances of cash gifts, legal fees, commissions, dividends, subscriptions, film processing, and charges and refunds, not exceeding BDS$500.

November 10. Authorized dealers were allowed to release foreign exchange for education abroad up to BDS$20,000 for each academic year.

November 10. Authorized dealers were allowed to sell foreign exchange for travel purposes, as follows: (1) from Barbados to another country within Caricom, BDS$2,000 a person a calendar year; from Barbados to countries outside Caricom, BDS$2,000 a person a calendar year; and (2) for business travel, from Barbados to another country within Caricom, at the rate of BDS$500 a day up to a maximum of BDS$10,000 a person a calendar year; from Barbados to countries outside Caricom at the rate of BDS$500 a day up to a maximum of BDS$15,000 a person a calendar year.

Belgium and Luxembourg

(Position on December 31, 1988)

Exchange Arrangement

The currency of Belgium is the Belgian Franc, and 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 rates1 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 30, 1988, these rates were as follows:

Specified Intervention

Rates Per:
Belgian Francs or

Luxembourg Francs
Upper limitLower limit
100Danish kroner553.0000528.7000
100deutsche mark2,109.50002,016.5500
100French francs628.9700601.2950
1Irish pound56.511554.0250
100Italian lire3.03872.6953
100Netherlands guilders1,872.15001,789.8500

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 (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. Most convertible currencies are dealt in the official market.2 There are no taxes or subsidies on purchases or sales of foreign exchange.

Nonbank residents may not acquire 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 30, 1988, the buying and selling rates for the U.S. dollar in the official market were BF 37.255 and BF 37.435, 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 30, 1988, the free market rates between banks for the U.S. dollar were BF 37.45 buying and BF 37.48 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 F1 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 (BLEU) is exercised by the Belgian-Luxembourg Exchange Institute (BLEI). Exchange control powers for most payments and transfers are delegated to authorized banks. The Belgian-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.

All inward and outward transactions are classified into 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 credit card companies, 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 immigrant 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 and transfers by emigrants of foreign nationality. List D covers gifts, life insurance payments, family maintenance payments, capital investments, liquidation of long-term investments, dealings in gold and diamonds, 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.

Summary of Permissible Methods of Settlement for Foreign Payments
Transaction

List
Foreign

Currency
Exchange

Market
Nonresident

Account

in Francs
Outward Payments
A, BConvertibleOfficialConvertible
CAnyOfficial or

Free
Convertible

or Financial
DAnyFreeFinancial
Inward Payments
A, BConvertibleOfficialConvertible
C, DAnyOfficial

or Free
Convertible

or Financial

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 of diamonds, including related costs, may be paid for only 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.

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.3 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 to Financial Accounts or be converted into any currency in the official or the free market. Advances on Convertible Accounts other than mail-credit advances are subject to authorization by the BLEI. 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 for all nonresidents.4 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 or the official 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.

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;5 and (2) a number of imports from all other countries outside the BLEU.6 The commodities for which individual licenses are required include many textile and steel products, certain agricultural products and foodstuffs, coal and petroleum products, diamonds, semiprocessed gold, and weapons. All other commodities are free of license. Many commodities subject to individual licensing are also admitted without quantitative restriction. Along with other European Communities (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 (CAP) 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.

Import payments are subject to the same rules as those applicable to payments for invisibles (List A). No exchange control documentation is required. Special authorization must be obtained for import payments that precede the date of customs clearance by more than three months. Payments for transit transactions must be supported by a form (model T) which must be presented to an authorized bank; these payments cannot be made earlier than three months before the date on which the payment from the foreign buyer is expected to be received. Other transit payments are subject to the same rules as those applicable to payments for invisibles (List A). Prior examination of supporting documents by the BLEI is required for import and transit payments exceeding BF 25 million.

Import and transit payments that are fully or partially settled by means of bilateral netting have to be reported to BLEI. Authorization of the BLEI is required for participation in a multilateral netting system involving import and transit payments.

Payments for Invisibles

Payments 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. An authorized bank is required to make certain that payment is made by one of the methods stipulated in the regulations (see section on Prescription of Currency, above) and that spot foreign exchange is not acquired until the payment is due. For payments exceeding BF 25 million and in other exceptional cases, prior examination of supporting documents by the BLEI is required. Payments for items on List C can be made either through the official market (alternatively, by crediting Belgian or Luxembourg francs to a Convertible Account) or through the free market (alternatively, by crediting Belgian or Luxembourg francs to a Financial Account, or in foreign or domestic bank notes); payments for items on 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). 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.7 All other exports are free of license.

Export proceeds must be collected in accordance with the same rules as those applicable to proceeds from invisibles (List A). Exchange control documentation is not required. Special authorization must be obtained to collect export proceeds more than six months after the date of exportation.

Proceeds from transit transactions have to be notified on a form (model T), which must be presented to an authorized bank. These proceeds must be collected within three months from the date of payment to the foreign supplier. Proceeds from other transit transactions have to be collected in accordance with the same rules as those applicable to proceeds from invisibles (List A).

Export and transit receipts that are fully or partially settled by means of bilateral netting have to be reported to the BLEI. Authorization of the BLEI is required for participation in a multilateral netting system involving export and transit receipts.

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 through the official market. 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 BLEI 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 foreign currencies from transactions included in Lists C and D may be retained or sold in the official or 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 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 companies 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 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 nonresidents, 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. 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.

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.

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 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 1988

No significant changes occurred in the exchange and trade system.

(See Appendix for a summary of antidumping duties, countervailing charges, and import surveillance measures introduced or eliminated by the European Economic Community during 1988, page 561.)

Exchange Arrangement

February 1. The Greek drachma was included in the list of currencies dealt in the official market.

Prescription of Currency

November 23. The special rules applying to payments for imports of goods originating in Egypt were abolished.

Belize

(Position on December 31, 1988)

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 of Belize and the commercial banks are BZ$1.9937 and BZ$2.0063 per US$1, respectively. On December 31, 1988, 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 or other quantitative restrictions for balance of payments reasons. Most imports are subject to a stamp duty of 12 percent of the c.i.f. value; the rate of stamp duty on citrus is 25 percent. 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.

Payments for Invisibles

There are no restrictions on payments for invisibles. Authorized dealers have the power to provide foreign exchange for such payments within certain limits. The following limits are applied to purchases of foreign exchange: (1) nonbusiness travel by residents, up to BZ$2,500 a person a calendar year; (2) business travel by residents, BZ$500 a day a person, up to BZ$10,000 a year; (3) 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; (4) educational allowance, BZ$500 a course a year (apart from a once-only allowance of BZ$1,000 for educational expenses and maintenance); and (5) 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 the 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 be neither imported nor exported without the approval of the Central Bank.

Changes During 1988

No significant changes occurred in the exchange and trade system.

Benin

(Position on December 31, 1988)

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 (WAMU) and of 2.50 per mill for transfers to countries outside the WAMU.2 Banks levy a commission on transfers to all countries outside the WAMU, part of which must be surrendered to the Treasury. There are no taxes or subsidies on purchases or sales of foreign exchange. Forward exchange contracts may be arranged, with the prior authorization of the Minister of Finance, for payments for specified imports. The maturity period cannot be extended.

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, 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 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 and Economy, in conjunction with the Directorate of External Commerce in the Ministry of Commerce, Handicrafts, and Tourism. The Ministry of Finance and Economy, 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 National Executive Council (Council of Ministers).

Arrears are maintained with respect to external payments.

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

Nonresidents may hold Foreign Accounts in Francs with authorized intermediary banks. 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 intermediary bank’s foreign correspondent for credit to a Foreign Account in Francs opened by the latter with an authorized intermediary 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. Certain agencies have an import monopoly for specified commodities.

Imports of goods from any country, whether made with or without transfer of exchange, are subject to prior authorization from the Directorate of External Commerce. Goods may be imported into Benin according to one of the following two regimes: (1) goods that may be imported under a global import authorization issued to an enterprise; or (2) unrestricted goods that may be freely imported with the authorization of the Directorate of External Commerce. There are no import quotas or prohibitions other than for public health or safety reasons.

All imports originating in foreign countries, when valued at more than CFAF 500,000, must be domiciled with an authorized intermediary 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. Import licenses are subject to a tax equivalent to 0.85 percent of the c.i.f. value of corresponding imports.

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 intermediary 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 subject to prior authorization.

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 10 years) 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. However, with the special authorization of the Minister of Finance, larger allocations may be obtained up to the equivalent of CFAF 250,000 a person a trip for tourist travel and up to the equivalent of CFAF 1,500,000 for business travel.

The transfer of one half of the net salary of a foreigner working in Benin is permitted, subject to authorization by the Directorate of Money and Credit upon presentation of the appropriate pay voucher, provided that the transfer takes place within three months of the pay period. 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 WAMU, 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 intermediary bank when valued at more than CFAF 500,000. All exports, except gold and diamonds, are free of license but require an export application issued by the Directorate of External Commerce. The due date of payment for exports 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 to Benin 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 intermediary 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 Minister 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 WAMU, 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 in charge 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 intermediary 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 is intended for domestic and foreign private enterprises contributing to the economic and social development of Benin and provides, in addition to the benefits of Plan A, certain tax privileges for a maximum exemption period of five years. 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 advantages. For Plans A, B, and C, up to two years for installation time may 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 National Economic Council (Council of Ministers), acting on the advice of the Minister of Finance, 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, Handicrafts, and Tourism, 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 1988

Imports and Import Payments

February 22. A special tax was introduced on imported wheat flour (Law No. 88-QPQ).

July 1. The quantitative restrictions applied to imports of products that compete with domestic production (sugar, beverages, textiles, edible oils, and wheat flour) were eliminated and replaced by import duties and taxes.

Bhutan

(Position on December 31, 1988)

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 = Rs 1. The rates for currencies other than the Indian rupee are determined on the basis of the prevailing quotations by the Reserve Bank of India for those currencies. If no large transactions are involved, 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, 1988, the buying and selling rates of the ngultrum for the U.S. dollar were Nu 14.80 and Nu 15.30 per US$1, respectively. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

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. Exports of cardamom to countries other than India receive a subsidy at the rate of 30 percent of the f.o.b. value. Exports of antiques of Bhutanese origin require approval by the Government. 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 1988

No significant changes occurred in the exchange and trade system.

Bolivia

(Position on December 31, 1988)

Exchange Arrangement

The currency of Bolivia is the Boliviano (Bs). The official buying rate is determined at an auction held daily by the Central Bank of Bolivia. On December 30, 1988, the official buying (and selling) rate was Bs 2.47 = US$1. The official exchange rate applies to all foreign exchange operations in Bolivia. The auctions are conducted by the Committee for Exchange and Reserves (Comité de Cambio y Reservas) in the Central Bank. Before 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 is required to offer in all auctions unitary lots of US$5,000 or multiples of this amount. The minimum allowable bid is US$5,000 or multiples of this amount. Successful bidders are charged the exchange rate specified in their bid. In general, the spreads between the maximum and minimum bids have been less than 2 percent.

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. Successful bids channeled through the banking system are voided if the banking institution submitting the bid is not complying with the legal reserve requirement on deposits at the time of the auction. However, banks must maintain a balanced spot position in foreign exchange at all times and sell to the Central Bank any excess balance 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 but tolerated exchange market, in which the exchange rate on December 30, 1988 was Bs 2.52 = US$1 (buying) and BS 2.48 = 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. Arrears are maintained with respect to external 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, which is temporarily subject to licensing requirements, and those controlled for reasons of public health or national security.

The import tariff rates on selected capital goods were lowered from 20 percent to 10 percent in March 1988. The import tariff rates on all other goods were consolidated at 17 percent on December 29, 1988. The import tariffs on capital goods are payable over a three-year period with a one-year grace period, rather than on importation. Importers are required to pay an inspection charge of between 1.89 and 1.90 percent of the f.o.b. value of imports.

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. 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. Exports, other than hydrocarbons, are subject to an inspection fee of 1.67 percent of the f.o.b. value (including value-added tax); the fee is 1.05 percent in the case of exports by Specialist Services International Limited (SSI) and 1.65 percent in the case of exports by Bureau Veritas. Exporters of nontraditional products receive, at the time of the surrender of foreign exchange receipts, a customs duty rebate certificate (certificado de reintegro arancelario) equivalent to 10 percent of the net value of exports as determined by the Central Bank of Bolivia. The certificate may be subdivided into amounts of Bs 100 or multiples of Bs 100. Exporters also receive redeemable tax bonds (bonos tributarios redimibles). Tax bonds are redeemable for up to one calendar year from the date of issuance. All exporters may use the redeemable tax bonds for income tax and customs duty payments, with the exception of exporters of mineral products, who can use the redeemable tax bonds only for increasing the capital share of the Banco Minero S.A. As regards minerals, the Compañía Minera Boliviana (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 may retain the proceeds from their foreign exchange purchases from invisible transactions, including those from tourism. They are required, however, to report daily their purchases on account of these transactions.

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. 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. Under Supreme Decree No. 21060 of August 29, 1985, banks are authorized to conduct foreign trade operations such as letters of credit, bonds and guarantees, advances and acceptances, loans for the required financing with their correspondents abroad, and other operations generally accepted in international banking, in favor of the country’s exporters and importers.

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 Mining Code. Certain foreign investments are subject to Decision Nos. 24 and 103 of the Cartagena Agreement.

Gold

Under Supreme Decree No. 21060 of August 29, 1985, gold may be traded freely, subject to a tax of 1.5 percent.

Changes During 1988

Imports and Import Payments

April 1. The import tariff rate on selected capital goods was reduced from 20 percent to 10 percent. It was also announced that the general tariff rate of 20 percent on all other goods would be lowered by 1 percentage point each quarter until the tariff level is unified by end-1990 at the rate of 10 percent. The previous preferential tariff of 2 percent for imports of YPFB (state petroleum company) was removed, and YPFB was subject to the general tariff rate of 20 percent.

December 29. The customs duty reduction program was suspended, and all duties except those on selected capital goods were consolidated at the rate of 17 percent (Supreme Decree No. 22103).

Botswana

(Position on December 31, 1988)

Exchange Arrangement

The currency of Botswana is the Botswana Pula, which is pegged to a basket of currencies consisting of a weight of approximately 65 percent for the South African rand and of approximately 35 percent for the SDR. On December 30, 1988, the closing middle rate for the U.S. dollar, the intervention currency, was P 1.9357 per US$1; on the same date, the rate for the SDR was P 2.5934 per SDR 1. Exchange rates for certain other currencies1 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.

External borrowings by parastatals are protected from exchange rate movements under a Foreign Exchange Risk Sharing Scheme. Risk associated with up to 4 percent fluctuations in the exchange rate is fully borne by the borrower. The Government bears one half and three quarters, respectively, of the risk associated with exchange rate fluctuations of between 5–10 percent and 11–16 percent. Risk associated with exchange rate fluctuations exceeding 16 percent is fully borne by the Government. Forward exchange cover is also offered by the commercial banks. The period for which forward cover may be given in respect of the foreign currency proceeds from exports of goods is six months.

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 considerable 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 non-resident-held pula account in Botswana. Botswana does not maintain any bilateral payments agreement.

Imports and Import Payments

Botswana is a member of a customs union with Lesotho, South Africa (including Namibia), 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 and Zimbabwe by virtue of a customs agreement of 1956, provided they meet certain local value-added requirements and are not intended for re-export. Import shipments of less than P 2,500 are exempt from exchange controls.

Applications in respect of forward purchases of foreign currency to cover payment for imports when the contract covers a period exceeding six months must be referred to the Bank of Botswana.

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 10,000 a calendar year for an adult (P 5,000 for a child). The allowance for business travel is P 500 a day, up to a maximum of P 30,000 a calendar year. The amount of unused foreign currency for travel that a resident can retain for future travel use is the equivalent of P 1,000 in currency and the equivalent of P 1,000 in traveler’s checks; any excess amount must be surrendered within two months of the date of return in the case of currency notes and coin, and six months in the case of traveler’s checks. The basic foreign study allowance for permanent residents is P 3,000 a month a person and P 5,000 a family, with a vacation travel allowance of P 5,000 a year. The annual limit on outward remittances by a temporary resident on contract is P 20,000 or 50 percent of eligible salary, whichever is greater; for a self-employed temporary resident, the limit is P 20,000. Separately, travelers may take out domestic bank notes and foreign currency in an amount of P 500 and P 1,000 respectively, and may freely bring in any amount of domestic 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. Authorized dealers may approve payment of dividends to nonresidents up to P 50,000 a year a company.

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. Any local borrowing in excess of P 250,000 by nonresident-controlled companies must be matched by nonresident funds in the company in a 3:1 debt-to-equity ratio. Equity is defined as paid-up capital, reserves, and retained earnings. The 3:1 limit is permitted to be exceeded if the project is to create significant employment. Any external borrowing by a local business must have at least a three-month grace period. Departing temporary residents are entitled to a basic remittable terminal allowance of up to P 20,000. Permanent residents are eligible for an emigration allowance of up to P 150,000. The balance of assets is normally permitted to be remitted in equal installments over three years from the date of departure, but faster remittances may be permitted in exceptional circumstances.

Changes During 1988

Imports and Import Payments

March 1. The limit up to which exchange control formalities are not required in respect of payment for imports was increased to P 2,500.

Payments for Invisibles

March 21. The basic travel allowance for permanent residents in a calendar year was increased to P 10,000 for an adult and P 5,000 for a child, while the business travel allowance (covering both residents and temporary residents) was increased to P 500 a day, up to a maximum of P 30,000 in a calendar year.

March 21. The basic overseas study allowance for permanent residents was increased to P 3,000 a month for a single person and P 5,000 a month for a family. The allowance for vacation travel abroad was increased to P 5,000 a year.

March 21. The commercial banks were authorized to provide unlimited amounts to meet medical expenses abroad, subject to certain conditions.

March 21. The amount of unutilized foreign currency travel allowances that a resident may retain for future travel requirements was increased as follows: (1) P 1,000 in foreign currency notes and coin; and (2) P 1,000 in foreign currency traveler’s checks. The period allowed for the extension of foreign exchange facilities on return to Botswana in excess of (1) and (2) above has been increased to two months from the date of return to Botswana in respect of foreign currency notes and coin and six months in respect of traveler’s checks.

March 21. The amount of Botswana currency notes and coin that may be exported by a traveler was increased to P 500.

March 21. The amount of foreign currency bank notes and coin that may be exported by a traveler was increased to P 1,000.

March 21. The amount in foreign exchange facilities that may be issued to nonresident travelers in exchange for pula notes was increased to the equivalent of P 500 a person.

March 21. The basic terminal allowance of a departing temporary resident was increased to P 20,000, and the amount of foreign currency that may be made available by authorized dealers in a calendar year was increased to P 20,000 or 50 percent of eligible emoluments, whichever is the greater.

March 21. The general limit up to which authorized dealers may approve payments of dividends and branch or partnership profits due to a nonresident and payments of directors’ fees to a director was increased to P 50,000 and P 15,000 (P 30,000 for a company), respectively.

Capital

March 21. The initial tranche of local financial support that a non-resident-controlled business entity may borrow in Botswana was increased from P 100,000 to P 250,000.

March 21. Parastatals were advised that they should not borrow from outside Botswana until they were convinced that equivalent facilities were not available locally.

March 21. The limit up to which the authorized dealers may approve emigration allowances for permanent residents was increased to P 150,000 a family.

Brazil

(Position on December 31, 1988)

Exchange Arrangement

The currency of Brazil is the Cruzado (Cz$).1 Brazil follows a flexible exchange rate policy under which the exchange rate for the cruzado is adjusted on a daily basis in terms of its intervention currency, the U.S. dollar.2

Exchange transactions are carried out by the Central Bank of Brazil 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 Central Bank and the effective rates of the Central Bank is ensured by the Central Bank’s practice 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 30, 1988, the buying and selling rates quoted by the Central Bank to the public were Cz$761.49 and Cz$765.3 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 3/16 of 1 percent on either side of the rates set by the Central Bank.

Different effective rates arise, on the selling side, from (1) the application of a financial transactions tax (imposto sobre operações de crédito, câmbio e seguro, e sobre operações relativas a títulos e valores mobiliarios) (IOF) of 25 percent to purchases of foreign exchange for imports of selected services and the extension of short-term trade credit, and (2) the requirement that payments for Brazilian investment abroad be made in gold instead of cruzados. Different effective rates arise, on the buying side, from (1) payment in gold to exporters of gems and other precious stones, and (2) payment in gold to Brazilian investors abroad for foreign exchange receipts corresponding to profits and dividends.

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 bought position of US$1.5 million and a sold position of up to US$7.5 million apply to most banks. 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; it is 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, 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. The commercial banks are permitted to provide forward exchange facilities to exporters, usually for a period of up to 180 days. The banks provide daily forward quotations for foreign currencies, with forward premia reflecting corresponding interest differentials between the countries concerned. Commercial banks are subject to daily limits on bought and sold positions in foreign exchange.

Administration of Control

The National Monetary Council (CMN) 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 foreign borrowing by the public sector are applied by the Secretariat for Control of Public Enterprises (SEST) in the Planning and Coordinating Secretariat of the Presidency of the Republic, and the National Treasury Secretariat of the Ministry of Finance.

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 declaraçãos 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 countries3 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.

Foreign Exchange Accounts

Beginning October 30, 1986, exporters, importers, national companies with foreign capital participation, and official institutions in the field of education and technological research have been authorized to open foreign exchange accounts in U.S. dollars at the Central Bank. On June 29, 1988, foreign exchange accounts held by exporters and importers began to be gradually abolished, and their total abolition is expected in early 1989. Companies whose foreign capital participation is registered at the Central Bank continue to be authorized to open foreign exchange accounts. These accounts can be credited with funds from new foreign direct investments and reinvestments, reserve profits, consolidated surplus, profit remittances, and returns and gains from capital remittances. Deposits are remunerated at LIBO rate, and withdrawals require 90 days’ prior notice, or 30 days in cases of deposits from profits or dividends and sales of investments and participating capital stocks.

Imports and Import Payments

All importers must be registered with Cacex and goods can be imported only by registered firms or persons. Imports may be grouped into the following three broad categories: (1) imports that are free of requirements to secure prior administrative documentation, including samples without commercial value and certain educational materials; (2) imports that require an import certificate, which is issued by Cacex if it conforms to a previously approved and binding annual import plan; and (3) prohibited imports, which include goods that are not licensed for reasons of security, health, or moral reasons, as well as for reasons of industrial policy.

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 sector (the Government, autonomous agencies, and public enterprises).4

Most imports require the prior approval of Cacex. The regulations governing the 1988 annual import programs required enterprises with more than US$50,000 in annual imports (and US$25,000 if imports were used for own use) to submit to Cacex an annual binding budget.5 Since July 1988, requests for import licenses for capital goods are approved even if they exceed the importers’ annual limit for that import category. The Minister of Finance may, on a temporary basis, and in accordance with the directives of the Economic Development Council and without prejudice to commitments under LAIA, authorize Cacex to reject applications for import certificates where: (1) imports are for speculative stock-building 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. Cacex is authorized to levy a processing fee 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 product. 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.

It is a prior condition for the granting of import certificates that importers arrange external financing with specified minimum maturities.6 The limit on cash imports is US$200,000 an importer, with an additional allowance of US$200,000 for capital goods imports. Minimum financing requirements are as follows: 2 years for capital goods imports; 180 days for parts and components; and 90 days for all other import categories. Cacex is entitled to authorize in exceptional cases imports that do not satisfy minimum financing requirements.

Certain products require the approval of the Special Secretariat for Information. For some commodities, eligibility for exemption from import duties may be precluded by the existence of satisfactory domestic equivalents (similares nacionais).

Goods imported into the Manaus free zone are subject to an annual quota, which was set at US$800 million for 1988. Foreign goods imported into the Manaus free zone up to the equivalent of US$600 can be transferred to other parts of Brazil (as a passenger’s baggage) free of import taxes.

As a general rule, imports may be cleared through customs before an exchange contract is closed. Cacex may approve applications for the payment of imports of any goods at terms of up to 360 days from the date of shipment without authorization from the Central Bank. External financing at terms in excess of 360 days for imports 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) of the Central Bank. Prior to shipment of the goods, total payments to suppliers for the nonfinanced amount may not exceed 15 percent of the import value.

Spot exchange contracts can be closed if the contract is intended to settle drafts, at sight or on maturity, and once 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. Exchange contracts for imports financed under letters of credit must be closed on the date of settlement or two working days in advance of the maturity date of the letters of credit.

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 authorize 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, of which US$100 is available in cash and the remainder in traveler’s checks; for trips to Central or South America, the amount is US$500.7 In the latter case, if the country does not participate in the LAIA compensatory mechanism, the traveler can request up to US$100 in cash and the remainder in traveler’s checks; otherwise US$50 is available in cash and the remainder in the form of an order of payment to be cashed abroad through LAIA accounts. The basic allowances are one half of the preceding amounts for minors between the ages 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; profit remittances are subject to withholding tax on income at a rate of 25 percent or other rate determined under agreements between Brazil and other countries for the purpose of avoiding double taxation. A supplementary income tax applies, when profits paid to a foreign investor during a three-year period exceed an average of 12 percent of the foreign currency value of registered capital, at the rates of 40 percent, 50 percent, and 60 percent if the average profit paid is in the range of 12–15 percent, 16–25 percent, and above 25 percent, respectively.

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 tax 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 declaração de exportação) issued by Cacex to ensure compliance with exchange and trade regulations. Some exports are free of controls, but exports of several commodities require prior approval of Cacex, while exports of specified commodities are suspended. 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 coffee are subject to an annual quota and to authorization by the IBC.

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 1988 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. Coffee exports are subject to a contribution quota at a rate that is changed regularly by the IBC depending on market prices. The exporter must pay 50 percent of the contribution quota no later than three days after the export operation is registered and 50 percent no later than one day after the coffee is shipped.

The foreign exchange proceeds from all exports are sold at freely negotiated rates within the limits of the official market established by the Central Bank. Exporters of gems and other precious stones are allowed to obtain gold from the Central Bank in exchange for their export receipts. Foreign exchange contracts covering transactions may be closed either prior to the shipment of goods or within 10 working days of shipment. Export proceeds must be surrendered to the Central Bank within 180 days of 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 before July 1982 under the Special Program of Tax Benefits for Exporters (Befiex). Firms signing new Befiex contracts are not eligible for the credits. For a number of exports to the United States (primarily textiles, leatherware, footwear, and certain steel products), export taxes of 0.6–11.0 percent are levied. For exports of ladies’ footwear to all destinations, a tax of 2.2 percent is levied. In 1988 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 other 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 in the field of export credit insurance and by way of guarantees.

Proceeds from Invisibles

Exchange proceeds from current invisibles must be sold through the authorized banks at the prevailing market rate. Traveler’s checks and foreign bank notes are sold in the manual market. Travelers may freely bring in domestic and foreign currency notes.

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) 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 sector (i.e., the Government, autonomous agencies, and public enterprises). In addition, 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 resident abroad may make portfolio investments in Brazilian commercial and industrial securities 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 investment companies by foreign firms or individuals is US$1,000. Portfolio investments are exempted from the capital gains tax. Portfolio investments may also be made through the purchase of quotas of the “Investment Fund-Foreign Capital.” The minimum participation in this fund is US$5,000, and the money must stay in the country at least three months. Funds and other collective investment entities established abroad may maintain, in Brazil, portfolios of bonds and other securities, once their constitution and administration have been previously approved by the Central Bank and the securities and exchange commission.

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.

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 abroad when they 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 distributions of profits and dividends to nonresidents in excess of 12 percent of registered capital and reinvestments 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 Desenvolvimento Econômico e Social 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 seven 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 cruzados, and it is released as follows: one third after 60 days from the deposit date, 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 cruzados and is released as follows: 20 percent after 150 days from the deposit date, 40 percent after 180 days, and the balance after 210 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 nonfinancial 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, was 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. As of the end of 1988, the Central Bank’s minimum acceptable maturity was set at seven 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 re-lent 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 rescheduled with foreign commercial banks in 1988, subject to yearly quantitative limits.

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 in Brazil under Decree No. 1,038 of October 21, 1969. Gold mining is conducted under Law No. 4425 of October 8, 1964. The first domestic negotiation of newly mined gold is subject to a mining tax of 1 percent, plus Finsocial fees (an income tax surcharge and a sales tax) (0.6 percent) and PIS/PASEP (Programa de Integraçã/Assisttencia Social de Empregados Publicos) contributions (a levy on the wage bill payable by employers) (0.75 percent), due on each transaction, unless the operation takes place in the financial market when the Finsocial fees are due on the profits of the firm. The Central Bank is empowered to buy and sell gold on the domestic market at domestic prices. (CMN Resolution 1182 of April 4, 1986.) Purchases of gold are made at current domestic prices; the international price is considered as a target price. Imports of gold are subject to the issuance of an import certificate by the Central Bank. Exports of gold are subject to authorization by the Central Bank, which is always the alternative buyer.

Changes During 1988

Exchange Arrangement

January 18. The Central Bank was authorized to request that payments for Brazilian investment abroad be made in gold instead of cruzados (Central Bank Circular 1280). In the case of profit remittances and capital repatriation to Brazil, or of an increase in exports in real terms by the investor’s firm, the Central Bank may pay out gold instead of cruzados in exchange for surrendered foreign exchange up to an amount equal to that sold by the investor to the Central Bank at the time of investment abroad.

November 30. The Central Bank was authorized to make payments in gold to exporters of gems and other precious stones from the time the exchange contract is signed; previously, payments took place at the time export earnings were surrendered to the Central Bank (CMN Resolution 1533).

December 22. The Central Bank announced the introduction of an exchange market for tourism transactions at a rate to be freely determined by market participants. A limit of US$4,000 would be placed on sales of foreign exchange by bank and trading houses; there would be no limit on purchases of foreign exchange (CMN Resolution 1542). (The market came into operation on January 9, 1989.)

December 22. Hotels were allowed to operate in the exchange market for tourism. Sales of foreign exchange in the form of money orders were allowed in the tourism market (CMN Resolution 1554).

Foreign Exchange Accounts

June 29. Foreign exchange accounts held by exporters (according to CMN Resolution 1208) or importers (according to CMN Resolution 1209) began to be gradually eliminated. Export deposits would be reduced by one sixth each month, and exporters would be eligible to exchange these deposits for public sector bonds with exchange rate adjustment. Import deposits would be reduced according to the original conditions that required a 90-day pre-authorization (CMN Resolution 1492).

July 19. The criteria for the public sector bonds that could be obtained by exporters in exchange for foreign exchange deposits were established (Finance Ministry Portaria 261).

Imports and Import Payments

March 4. A limit of US$800 million on total imports for the Manaus Free Trade Zone in 1988 was established (Decree 95780).

May 4. Foreign trade in cotton, maize, soybeans, and rice was liberalized (Concex Resolution 155).

May 19. The general principles on reductions or exemptions of import duties were established (Decree Law 2434).

May 25. Minimum financing requirements for imports were liberalized. The limit on cash imports was increased from US$100,000 to US$150,000 an importer with an additional allowance of US$200,000 an importer for capital goods imports. Minimum financing requirements for capital goods imports were set as follows: (1) two years for total annual purchases in the US$200,000–US$500,000 range; (2) three years for purchases in the US$500,001–US$1 million range; and (3) five years for purchases above US$1 million. Financing requirements on parts and components remained at one year, and at 180 days for the remaining products. Imports under the drawback scheme, imports from LAIA, and selected other imports were exempted from these requirements (CMN Resolution 1485).

June 17. A new tariff schedule was introduced. The IOF tax on imports and the tax for the renovation of harbors were abolished. The scope of special import regimes that allowed for tariff reductions and/or exemptions was reduced (CPA Resolution 1516).

July 22. Reference prices for imports and minimum import values were abolished (CPA Resolution 1526).

August 30. Cacex was permitted to authorize imports that do not satisfy the minimum import financing requirements in exceptional cases (CMN Resolution 1511).

November 21. New regulations regarding the 1989 import programs were announced (Cacex Communiqué No. 207).

November 21. The prohibited import list was reduced from 2,400 items to 1,200 items (Cacex Communiqué No. 208).

November 30. Minimum financing requirements for imports were liberalized. The limit on cash imports was increased to US$200,000 an importer. Minimum financing requirements were reduced to: (1) two years for capital goods imports when the importer’s annual purchases surpassed US$200,000; (2) 180 days for parts and components; and (3) 90 days for all other products (CMN Resolution 1534).

December 21. A 50 percent tax on port rates charged on both exports and imports was introduced, with the proceeds earmarked for the improvement of the harbors (Decree Law 7700).

Payments for Invisibles

September 9. The limit on sales of foreign exchange available for travel to Central and South America was reduced from US$500 a trip to US$250 and kept unchanged at US$1,000 for travel elsewhere. Only up to US$20 may be made available in foreign currency or traveler’s checks for travel to Central and South America, and only up to US$100 for travel to destinations outside that region (CMN Resolution 1514).

September 21. The moratorium on interest payments on medium- and long-term debt owed to foreign commercial banks was lifted (CMN Resolution 1516).

September 28. Foreign exchange allowances for travel to Central and South America were increased to US$500 a trip, of which US$50 may be made available in cash or traveler’s checks and the remainder in the form of payment orders to be cashed abroad through LAIA accounts. In cases where the country is not a participant in the LAIA compensatory mechanism, the traveler may request up to US$100 in cash and the remainder in traveler’s checks. In the case of travel to destinations outside the Central and South American region, US$100 would be made available in cash and the remainder in traveler’s checks (Central Bank Circular 1357).

December 1. The limit on foreign exchange allowances for travel was increased to US$4,000, irrespective of destination, which may be purchased at a freely determined exchange rate in a market to be operated by domestic commercial banks and exchange houses. (CMN Resolution 1542.) (This market came into operation on January 9, 1989.)

Exports and Export Proceeds

February 10. The corporate tax rate on profits from export operations was raised from zero to 3 percent for 1989 and to 6 percent for 1990 (Decree Law 2413).

February 11. The tax on exports of iron and steel plates and tubing, machine wire, carbon steel plates, and laminated steel and stainless steel bars to the United States was eliminated (CMN Resolution 1463).

March 2. Cacex was authorized to enter into long-term export contracts of products with exportable surpluses (Concex Resolution 152).

May 19. Prior controls on exports were terminated, except on selected medical products, military goods, radioactive goods, goods with historical and cultural values, and goods subject to international agreements (Decree Law 2435).

May 25. The privatization of the marketing of sugar exports, which was expected to take place on June 1, 1988, was postponed for one year (Decree Law 2437).

June 22. The list of products subject to the new trade agreements on metallurgy with the United States and the European Community was published (Cacex Communiqué 193).

July 29. Export Processing Zones (ZPEs), which would benefit from the same treatment as free trade areas, were permitted (Decree Law 2452).

November 30. The regulations governing the establishment of ZPEs were issued (Central Bank Circular 1390).

Capital

February 1. New regulations on debt equity conversion were introduced (CMN Resolution 1416).

June 30. The requirement that prepayments of principal or interest on external obligations be done through the banking system and be communicated to the Central Bank within two days of occurrence was introduced (Central Bank Circular 1326).

July 28. Regulations governing the participation of foreign capital in mutual funds were introduced (Central Bank Circular 1339).

September 1. Special tax treatments for profits earned from mutual funds owned by nonresidents were introduced (Decree Law 2469).

November 30. Investment abroad by Brazilian enterprises was allowed at the official exchange rate in an amount equal to direct foreign investment received by the enterprise, excluding investment from debt equity conversion (CMN Resolution 1534).

Burkina Faso

(Position on December 31, 1988)

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 (WAMU) 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 WAMU, part of which must be surrendered to the Treasury. There are no taxes or subsidies on purchases or sales of foreign exchange.

In the official and commercial banking sectors, forward exchange cover may only be arranged by residents for settlements with respect to imports of goods on specified lists. All contracts for forward exchange cover must be denominated in the currency of payments stipulated in the contract, and they are subject to the prior authorization of the Minister of Finance. Forward exchange contracts may be concluded for a period of one month and may not be renewed; for certain products, the maturity period of forward exchange cover may be renewed once for a period of three months.

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 Finance. 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 Foreign Trade 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.

Arrears are maintained with respect to external payments.

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 and Supply; 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 special authorization, to be obtained in advance from the Ministry of Commerce and Supply. 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 exempted from the import document requirement. The Minister of Commerce and Supply 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 tax of 4 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 10 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. Larger allocations are granted, however, for bona fide reasons. Residents traveling to foreign countries may take out up to a maximum of CFAF 25,000 in BCEAO bank notes or the equivalent in French bank notes or 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 WAMU, they must declare to 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 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. They may also take out freely up to CFAF 25,000 in BCEAO bank notes or the equivalent in French bank notes or 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 competent services of the Ministry of Commerce and Supply, 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 and Supply, exports of certain products may be subject to special regulations. Exports of any product may require prior special authorization from the competent services of the Ministry of Commerce and Supply, 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 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 Finance. 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 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, 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 Finance4 and, unless specifically exempted by the Minister of Finance, 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 Finance. 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 Finance, who establishes the sale value.

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 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 Finance.

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 Finance. 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 Comptoir Burkinabé des Métaux Précieux (CBMP) has a monopoly on exports of gold from Burkina Faso.

Changes During 1988

No significant changes occurred in the exchange and trade system.

Burma

(Position on December 31, 1988)

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 30, 1988, the buying and selling rates for the U.S. dollar were K 6.3469 and K 6.4739, 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. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

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 maintains 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 of 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 who earn foreign exchange in Burma, and those who are working abroad and have returned from abroad after the completion of their employment, as well as Burmese seamen are, however, permitted to import one motor vehicle. Seamen and other travelers may bring in a reasonable amount of personal goods when they enter the country.

Payments for Invisibles

There is no licensing for payments in connection with foreign trade handled by the public sector. All payments for invisibles outside the public sector are subject to licensing and 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 nonnationals 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.

Burmese nationals require official permission to travel abroad. Such permission may be granted for travel on official missions, for approved religious pilgrimages, or for approved employment abroad. Travel for medical reasons is authorized on a case-by-case basis, while travel for educational purposes is authorized only in connection with state scholarships. Tourist travel by Burmese nationals has been suspended. Residents who have been granted an official permit to travel abroad may take out freely the equivalent of K100 in the currency of the country of destination or, if that currency is not available, in U.S. dollar notes.

Nonresidents who have stayed in Burma for less than six months may, on leaving the country, 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. Since February 1988, private traders and cooperatives have been permitted to export rice. Export proceeds must be obtained in a manner satisfactory to the exchange control authorities, i.e., in approved convertible currencies or by debiting the kyat account of banks in the importing country, and surrendered to the Myanma Foreign Trade Bank within six months of 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 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 the kyat equivalent is credited to their bank accounts. 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

Under the Union of Burma Foreign Investment Law enacted on November 30, 1988 by the State Law and Order Restoration Council, the Foreign Investment Commission is empowered to accept proposals for investment in Burma from (1) foreigners to the extent of 100 percent foreign capital, and (2) a joint venture between a foreign investor and a Burmese citizen, with the share of foreign capital of at least 35 percent of the total capital. In order to facilitate and promote foreign investment, the Commission may grant exemption from the customs duties on machinery and equipment imported during construction of the project, and from the income tax for a period of up to three years from the date of commencement of production of goods and services. The income tax relief may exceed three years, depending upon the success of the enterprise. Foreign investments are guaranteed from nationalization during the term of the contract, and the transfer abroad of the following through a bank prescribed by the Commission at the prevailing official rate of exchange is permitted with the approval of the Commission: (1) foreign capital that was brought in; (2) profits net of all taxes; and (3) balances of the salary and lawful income obtained by the foreign personnel during performance of service in Burma and remaining after payments of taxes and living expenses incurred by him and his family.

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 customs when it was brought into Burma.

Changes During 1988

Capital

November 30. A new Foreign Investment Law permitting up to 100 percent capital participation by foreign investors and providing for certain tax incentives came into force.

Burundi

(Position on December 31, 1988)

Exchange Arrangement

The currency of Burundi is the Burundi Franc, which is pegged to the SDR. In August 1986 Burundi introduced a flexible exchange rate system under which the exchange rate was to be adjusted periodically to reflect underlying economic conditions. On December 31, 1988, the exchange rate was FBu 201 = SDR 1, and the official buying and selling rates for the U.S. dollar were FBu 149.19 and FBu 150.69, 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 the Burundi franc/SDR rate 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. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

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 four authorized banks (Bancobu, BCB, ABB, and Meridien Bank).

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, except for bank notes. 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 (1) trade samples without commercial value; (2) merchandise not intended for sale whose declared consumer value c. & f. Bujumbura is FBu 150,000 or less; (3) travelers’ personal effects; and (4) gifts and supplies for diplomatic missions and United Nations agencies. These licenses, used for purposes of payment and statistical control, are automatically granted. 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.

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 also constitutes an authorization to obtain foreign exchange. With specified exceptions, authorized banks approve applications for licenses with a value not exceeding FBu 10 million (c. & f. point of landing); applications for amounts in excess of FBu 10 million require the approval of the Bank of the Republic of Burundi. A license is valid for eight months starting from the day of its validation, but extensions may be granted by the Bank of the Republic of Burundi. An administrative fee 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 1 million in value (f.o.b.) are subject to preshipment inspection with regard to quality, quantity, packaging, and price by international private agencies acting on behalf of 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 service 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 50 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 50 percent of the distributed profits for industrial and agricultural enterprises and 50 percent for commercial and service enterprises, net of corporation tax and the tax on capital income. Up to 50 percent of emoluments and dividends paid to foreign directors and auditors are transferable if the recipients are residents, and up to 100 percent if they are nonresidents. Requests for transfer of the balance of the profits are authorized subsequently as follows: 50 percent after two years of saving, 60 percent after four years, and 100 percent after five years. Profits awaiting remittance are required to 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 later, provided that the funds have been held on deposit with a domestic financial institution for two years. Transfer of up to 50 percent is permitted after at least three years of placement 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 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 with prior authorization by the Bank of the Republic of Burundi, 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 Lakes Countries (CEPGL).

Exports and Export Proceeds

All exports to South Africa are prohibited. All exports valued above FBu 10,000 require a prior declaration, which must be presented for certification by the Bank of the Republic of Burundi through an authorized bank. Declarations are valid for six 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 customs. All exchange proceeds from exports must be surrendered to an authorized bank within eight 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 are subject to export taxes; however, coffee exports have been exempt from the export tax since 1981. 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 July 10, 1986, 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 process or for the upkeep of the original investment. Taxes on profits and real estate may likewise be reduced or suspended for up to eight years. Enterprises accorded priority status may be granted reduction or suspension of export taxes and import taxes on equipment and raw materials for renewable periods of five years. 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 ten 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 and transfers of foreign capital on which a repatriation guarantee has been granted require individual authorization. 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 1988

Exchange Arrangement

February 25. The Burundi franc was devalued from FBu 161.0 to FBu 177.1 per SDR 1. Subsequently, the exchange rate was adjusted on several occasions, and on August 1, it was adjusted to FBu 201.0 per SDR 1.

Imports and Import Payments

January 1. The customs tariff rate on manufactured products was changed from 50 percent to 45 percent and, on intermediate goods, from 15 percent to 20 percent.

April 1. Quantitative controls on the importation of luxury goods were eliminated and replaced with customs duties.

April 1. Commercial banks were authorized to approve import licenses up to a value of FBu 10 million.

October 6. The duty drawback procedure for exporters was simplified.

Cameroon

(Position on December 31, 1988)

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, Equatorial Guinea, 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.

Forward exchange cover requires the prior authorization of the exchange control authorities. It must be denominated in the currency of settlement prescribed in the contract, and the maturity period must not exceed nine months. Settlement must be effected within eight days of the maturity date of the forward contract.

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 and revised in 1985, 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 diversify economic activity geographically. 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 not more than CFAF 500 million over a ten-year period and are at least 65 percent Cameroonian-owned. 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 1988

No significant changes occurred in the exchange and trade system.

Canada

(Position on December 31, 1988)

Exchange Arrangement

The currency of Canada is the Canadian Dollar. The Canadian authorities 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, 1988 was Can$0.83879 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. Import licenses are required for carbon and specialty steel products for monitoring purposes only. For some agricultural items, such as certain dairy products, licenses are generally not 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 clothing and certain textile products from low-cost sources are subject to bilateral agreements concluded under the Multifiber Arrangement (MFA) that was negotiated within the framework of the General Agreement on Tariffs and Trade (GATT). Japan and the Republic of Korea monitor their automobile exports to Canada in order to avoid disruption of 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 the provisions of this Act, new foreign investments are in general subject to notification requirements but not to review, and direct acquisition of businesses with assets exceeding Can$5 million and indirect acquisitions involving assets exceeding Can$50 million are subject to review. In addition, acquisitions below these limits and investments to establish new businesses in culturally sensitive sectors may be reviewed. Investments 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.1

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 External Affairs, 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 1/10 ounce of gold, respectively, have also been issued; since 1986, a half-ounce coin with a face value of Can$50 has been issued.

Changes During 1988

Canada-United States Free Trade Agreement

January 2. A free trade agreement between Canada and the United States, subject to ratification by the legislatures of both countries, was signed. The agreement is designed to eliminate tariff and non-tariff barriers on most goods and services, to liberalize trade rules and secure market access, to reduce impediments to investment, to establish procedures and institutions for the administration of the agreement and the resolution of disputes, and to lay the foundation for future expansion of the agreement. (The agreement was ratified on December 30, 1988.)

Imports and Import Payments

January 29. The investigation into allegations of injurious dumping of carbon steel welded pipe was terminated following the acceptance of price undertakings from Brazil, Luxembourg, Poland, Turkey, and Yugoslavia. Products from Belgium and France were found to be not dumped.

February 5. Countervailing duties on imports of grain corn from the United States were reduced from Can$1.10 a bushel to Can$0.46 a bushel following a public interest inquiry by the Canadian Import Tribunal.

February 26. Definitive antidumping duties were imposed on imports of photograph albums with pocket sheets from the People’s Republic of China, the Federal Republic of Germany, Hong Kong, Japan, the Republic of Korea, Malaysia, Singapore, and Taiwan Province of China following a finding of injury by the Canadian Import Tribunal.

March 18. The Canadian Import Tribunal found no injury with regard to imports of recreational vehicle doors from the United States.

March 23. The Canadian Import Tribunal found no injury with regard to imports of motor vehicles from Korea.

April 5. Provisional antidumping duties were imposed on imports of stainless steel butt-weld fittings from Japan following a preliminary determination of injurious dumping by Revenue Canada.

June 6. The imposition of antidumping duties on soda ash from the United States, which began in July 1983, was terminated.

June 30. The imposition of antidumping duties on countertop microwave ovens from Japan, the Republic of Korea, and Singapore, which began in March 1982, was terminated.

July 27. The imposition of antidumping duties on stainless steel plate from Belgium, France, the Federal Republic of Germany, Italy, Sweden, and the United Kingdom, which began in March 1983, was terminated.

July 29. Definitive antidumping duties were imposed on barbed wire from Poland following a finding of injury by the Canadian Import Tribunal.

August 3. Definitive antidumping duties were imposed on imports of stainless steel butt-weld fittings from Japan following a finding of injury by the Canadian Import Tribunal.

August 22. The imposition of antidumping duties on handsaw blades from the United States, introduced in February 1983, was terminated.

August 23. The imposition of antidumping duties on ladies’ handbags from Hong Kong, the Republic of Korea, and Taiwan Province of China, introduced in November 1977, was terminated.

September 1. Tariffs on five specialized woven fabrics used in the manufacture of apparel were removed temporarily (until June 30, 1989).

September 30. Provisional antidumping duties were imposed on imports of sour cherries from the United States following a preliminary determination of injurious dumping by Revenue Canada.

October 6. Provisional antidumping duties were imposed on imports of fresh red delicious and golden delicious apples from the United States following a preliminary determination of injurious dumping by Revenue Canada.

November 30. The phased removal of quotas on ladies’ and girls’ footwear, introduced in 1985, was completed.

December 6. The imposition of antidumping duties on porcelain insulators from Japan and the United States, introduced in January 1985, was terminated.

December 7. The imposition of antidumping duties on camping tents from the People’s Republic of China and the German Democratic Republic, introduced in October 1977 and October 1984, respectively, was terminated.

December 8. The imposition of antidumping duties on abrasion-resistant steel pipe from the United States, introduced in February 1985, was terminated.

December 12. The antidumping investigation on grinding balls from the United States was suspended following the acceptance of a price undertaking by the exporter.

December 15. Provisional antidumping duties were imposed on padded clothes hangers from Taiwan Province of China and the United States.

December 29. Provisional antidumping duties were imposed on polyphase induction motors above 200 h.p. from Brazil, France, Japan, Sweden, Taiwan Province of China, the United Kingdom, and the United States. Provisional countervailing duties were also imposed on the same motors from Brazil.

Cape Verde

(Position on December 31, 1988)

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, 1988, the buying and selling rates for the U.S. dollar were C.V. Esc 73.36 and C.V. Esc 73.97, respectively, per US$1. There are no taxes or subsidies on purchases or sales of foreign exchange. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

Administration of Control

All foreign exchange transactions are under the control of the Department of Foreign Relations and Exchange Control (DRE), 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 10,000. Foreign exchange transactions, including the surrender of foreign exchange proceeds, are effected through the central bank.

Arrears are maintained with respect to external payments.

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 Sao Tome 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: (1) foreign exchange deposit accounts; (2) savings-credit deposit accounts; and (3) special accounts in Cape Verde escudos. These accounts can be credited only 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 10,000. Licenses, which are issued by the General Directorate of Commerce in the Ministry of Transportation, Trade and Tourism, require the visa of the central bank and are generally valid for 90 days; they 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. Any person traveling abroad may take out foreign currency equivalent to C.V. Esc 20,000. Cape Verdean nationals traveling abroad as tourists are required to buy round-trip tickets in advance and 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 20,000 on leaving the country; students who do not hold scholarships are, in addition, entitled to a monthly allowance that varies according to the country of destination. Persons traveling abroad on business may take an amount of foreign currency that varies according to the country of destination and the duration of each business trip. Persons traveling abroad for medical treatment may take out an amount of foreign currency that varies in accordance with medical needs. Applications for these allowances must be accompanied by medical certification prior to the trip, and medical bills must be presented on return to Cape Verde.

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 10,000. 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 1988

No significant changes occurred in the exchange and trade system.

Central African Republic

(Position on December 31, 1988)

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, and 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. Export declarations are to be made through the Directorate of Foreign Trade in the Ministry of Commerce and Industry, except those for gold, which are to be made through the BEAC. Arrears are maintained with respect to external payments.

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. Imports from all other countries are neither subject to licensing requirements nor to quotas. Imports of firearms are prohibited irrespective of origin. Import declarations are required for all imports, and 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.

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 require a declaration. 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, 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 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 (A, B, and C), 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 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 1988

No significant changes occurred in the exchange and trade system.

Chad

(Position on December 31, 1988)

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 abroad, 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. However, they must be declared and be made only through authorized banks and with bank checks. All other countries are considered foreign countries. There are no arrangements for forward cover against exchange risk operating in the official or the commercial banking sector.

Administration of Control

The Office of the Minister of Finance 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 administered by the Minister of Finance, who has delegated his approval authority in part to the External Finance and Exchange Control Subdirectorate, which exercises this authority through instructions issued to the authorized intermediaries. 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 Commerce and Industry.

Arrears are maintained with respect to external payments.

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 European Communities (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 Ministry of Commerce and Industry 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.

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. This allocation is increased by the equivalent of CFAF 50,000 for each child under 10 years of age. 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 External Finance and Exchange Control Department may approve additional amounts. Travelers to foreign countries may take out up to a maximum of CFAF 30,000 in BEAC bank notes; the limit for children under 10 years of age is CFAF 5,000.

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.

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 or an Operations Account country must be surrendered. Export proceeds normally must be received within 180 days of 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 Finance, 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 Finance 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 30 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 Finance. 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, 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 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 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, 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 Finance. 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 published on December 9, 1987, 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 provides for four categories of enterprises which would receive various forms 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 Finance 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, CFAF 3,000, CFAF 5,000, CFAF 10,000, and CFAF 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 Ministry of Finance and by the Directorate of Energy, Mines, and Geology, as well as the visa of the External Finance Department. 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, 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 1988

No significant changes occurred in the exchange and trade system.

Chile

(Position on December 31, 1988)

Exchange Arrangement

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 30, 1988, the official exchange rate was Ch$249.70 per US$1. Foreign exchange dealers, the Banco del Estado, commercial banks, exchange houses, and other authorized entities are free to trade in foreign exchange at any price. However, the Central Bank intervenes in the foreign exchange market when the upper or lower limit (3 percent on either side of the official rate) is reached.

Since January 1, 1986, commercial banks have been authorized to provide a forward market for foreign exchange with a maturity of between 15 and 180 days. On maturity, contracts are settled in pesos on the basis of the difference between the market rate and the contract rate. Contract rates are determined freely without intervention by the Central Bank. The regulations impose limits on banks’ gross forward purchases and on their net exposure both overall and in individual currencies. The Central Bank provides forward cover against exchange risk in the form of currency swaps. The maturity periods of forward transactions range from 5 days to 720 days. 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 16 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.

The Central Bank has provided an exchange subsidy on service payments on some debts contracted prior to August 6, 1982 (the original amount of the debt was about US$8 million). 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 indexed to inflation with a minimum maturity of six years, and carrying a 3 percent rate of interest. On December 30, 1988, the difference between the official rate and the subsidized rate was Ch$70.7 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. Most imports require a document (known as Informe de Importación) issued by the Central Bank, which must 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.

Imports valued more than US$20,000 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 January 4, 1988, imports are subject to a uniform 15 percent tariff rate, with some exceptions. Exceptions include tariffs bound under the General Agreement on Tariffs and Trade (GATT) and tariffs negotiated with LAIA countries. A few items are exempted from the general tariff regime. Imports of some dairy products, such as condensed and powdered milk, butter, and cheese, are subject to specific duties and to a customs valuation regime based on European Communities (EC) internal prices for these products. Since May 2, 1984, imports of wheat, edible oil, and sugar have been subject to a special regime involving price bands within which the after-duty price has to remain. In addition, tariff duties or surcharges are applied, on a temporary basis, 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$1,000 a trip for travel to Latin America and Caribbean countries and of US$3,000 a trip to other countries. For travel by land to neighboring destinations, 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 Foreign Trade 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 from 2 percent 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 Codelco (the state 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. However, export proceeds may be surrendered within 180 days from the date of shipment if they are held as swaps or foreign exchange deposits with resident banks. Extension of repatriation periods may be granted for certain products.

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 or equal to US$2.5 million, have an option of taking a subsidy, 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. At the end of December 1988, this subsidy was equal to 8 percent of the net export value of sales for those exporters whose annual export value was less than or equal to US$8.1 million and 5 percent for those exporters whose annual export value was between US$8.1 million and US$12.1 million.

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; the exceptions to this regulation are lines of credit of up to one-year maturity with foreign correspondents, and short-term loans for domestic relending. Short-term loans are subject to a limit determined mainly by a bank’s capital and reserves. However, the Central Bank must still be notified of foreign borrowings even if they do not require its approval. Foreign capital may enter Chile under one of the following arrangements, depending on the purpose and type of the investment.

(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 that the investment program 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 general limitations on profit remittances, but specific agreements in this regard may be included in the above-mentioned investment contract. Capital may be repatriated after three years unless specified otherwise in the investment contract. 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 a tax system similar to that which is applied to domestic corporations. (According to this system, foreign investors are subject to an effective tax rate of 32.5 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 is not 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, introduced in May 1985 and amended several times since, 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 XIX 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 and of private sector external debt not guaranteed by the Government. 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 gold coins, 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 1988

Exchange Arrangement

April 9. New minimum amounts were set for foreign exchange swap operations with the Central Bank.

Imports and Import Payments

January 5. Customs duties were lowered across the board from 20 percent to 15 percent. At the same time, the maximum surcharge was raised to 20 percent from 15 percent, the drawback subsidy for small exporters was reduced to 8 percent from 10 percent, and the fiscal credit under the system of deferred import duty payments was lowered to 11 percent from 15 percent.

June 22. Import payments were not allowed to be made before their due date, except for imports with financing exceeding 120 days, in which case payments may be effected up to 5 days before the due date.

June 22. Imports valued less than US$5,000 were exempted from the 120-day minimum financing requirement.

November 19. Minimum customs reference prices were set for tires, tubes, and aluminum profiles.

December 30. Imports valued less than US$20,000 were exempted from the 120-day minimum financing requirement.

Payments for Invisibles

March 16. The travel allowance for trips of less than 500 kilometers to neighboring countries would henceforth be allocated partly in foreign exchange (20 percent) and partly in nontransferable money orders drawn on a bank located in that country (80 percent).

May 17. Commercial banks were authorized to sell foreign exchange for the payment of premia for insurance contracted in Chile, in amounts of up to US$50,000; for insurance premia above that limit, prior authorization by the Central Bank continued to be required.

October 8. Minimum customs reference prices were established for imports of blenders and certain polyester fibers.

November 2. The date applicable for the allocation of travel allowances was defined as not earlier than 20 days before date of travel.

Exports and Export Proceeds

April 9. The period for surrender of export earnings was lengthened to 90 days after repatriation if those earnings in the meantime were held as swaps or foreign exchange deposits with Chilean resident banks.

May 13. The import duty drawback scheme for exporters would henceforth apply to raw materials, semifinished products, and spare parts imported by exporters themselves or by other importers, if these imports were directly incorporated or used in the production of exported goods.

Capital

March 8. Chapter XVIII of the Exchange Laws was modified to allow debt conversions by mortgage debtors, in amounts of up to US$6,000 and without having to be subjected to the auction system, which is required for Chapter XVIII operations.

People’s Republic of China

(Position on December 31, 1988)

Exchange Arrangement

The currency of the People’s Republic of China is the Renminbi and its unit is the yuan. Since January 1, 1986, China formally has followed an exchange arrangement whereby the exchange rate for the renminbi is based on developments in the balance of payments and in costs and exchange rates of China’s major competitors, although since July 5, 1986, the exchange rate for the renminbi has not changed against the U.S. dollar. The exchange rates for the U.S. dollar and 20 other currencies are published on a daily basis by the State Administration of Exchange Control;1 on December 30, 1988, the buying and selling rates for the U.S. dollar were Y 3.7128 and Y 3.7314, 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 between 0.5 percent and 1 percent. Since November 1986, Chinese enterprises in the four economic zones of Shantou, Shenzhen, Xiamen, and Zhuhai, and foreign investment corporations have been permitted to transact foreign exchange in foreign exchange adjustment centers at rates mutually agreed on between buyers and sellers under the supervision of the State Administration of Exchange Control (SAEC). In early 1988, all domestic entities which are allowed to retain foreign exchange earnings were granted permission to trade in the adjustment centers, and by October 1988, 80 adjustment centers were established. Initially, a relatively small volume of transactions took place in these markets, but the volume has increased substantially since access to the centers was expanded. The average exchange rate in these markets has tended to depreciate since early 1987, from an average of Y 5.25 per US$1 in the first quarter of 1987 to Y 6.6 per US$1 at the end of 1988.

Forward exchange rates are published for 15 currencies.2 China does not apply a system of forward premiums and discounts but instead uses the spot rate plus a forward charge. Forward transactions are permitted only 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 deutsche mark, Netherlands guilder, Japanese yen, and 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 (PBC) exercises central bank functions and control over foreign exchange; and the SAEC, as a government institution under the leadership of the PBC, 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. The Bank of China (BOC) is the specialized foreign exchange bank of the People’s Republic of China. Other banks and financial institutions, including affiliates of nonresident banks, may handle designated transactions with the approval of the SAEC. Currently, 90 institutions are authorized to handle foreign exchange transactions. 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 generally 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 conducted in accordance with a foreign exchange plan. The PBC has responsibility for foreign exchange reserves and external borrowing. Within guidelines recommended to the State Council by the PBC on balance of payments management and total external borrowing, the Ministry of Foreign Economic Relations and Trade (Mofert) prepares estimates for those parts of the foreign exchange plan dealing with foreign trade, foreign loans, and China’s external assistance program; 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 State Planning Commission (SPC) and 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 is 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.3 The annual plan is divided into quarterly plans, and at the end of each quarter, the SAEC and SPC review the implementation of the plan and determine 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 Albania and Cuba, in U.S. dollars 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

Nonresidents4 in China for a short period may open nonresident accounts with the BOC and other authorized banks and financial institutions. Joint ventures may also open foreign exchange accounts and use them to make payments abroad. 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 BOC and other authorized banks and financial institutions may check any use made of renminbi in such accounts. Foreign banks in the 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 BOC and may withdraw funds from such accounts in the form of foreign currency.

Imports and Exports

All trade, both direct and indirect, with 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 Mofert, which also issues the licenses required for restricted imports and a large number of exports;5 following the reform in the exchange and trade system effected in early 1985, Mofert no longer engages in direct foreign trade transactions and is no longer involved in the daily enterprise management of trading corporations. Foreign trade is conducted by foreign trade corporations (FTCs) and other entities licensed by Mofert to conduct foreign trade. In early 1988, control over FTCs was decentralized by making local branches of most of these corporations independent entities accountable to local government authorities and responsible for their own profits and losses under the contract responsibility system. Application of the agency system, under which companies conduct foreign trade as agents on a commission basis, was also expanded; a larger number of domestic enterprises were given the authority to export their products directly or to import needed materials directly. 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 foreign trade corporations, need approval from the local foreign trade bureau in accordance with the authorization of Mofert and a license from the local bureau for industry and commerce to engage in foreign trade. Proceeds of certain exports (joint-venture companies and 100 percent foreign-owned companies) may be retained in a foreign exchange account with the BOC or an authorized bank. All other foreign exchange earnings from exports must be repatriated and surrendered to the BOC, unless specific exception is granted by the SAEC, and may not be used directly to offset import payments.

Part of the proceeds of exports (including foreign exchange earned in compensation trade) may be held as foreign exchange retention quotas6 in the SAEC or its sub-bureaus by localities and enterprises in accordance with state regulations. The percentage of export earnings that can be retained varies with the enterprise. Typically, domestic enterprises are allowed to retain 25 percent of their foreign exchange earnings up to a target amount of such earnings established for each enterprise in negotiations with the Central Government; the remainder is remitted to the Central Government. In turn, a portion of the foreign exchange retained by the enterprises has to be shared with local governments. This portion is usually 12½ percent, but it can vary depending on agreements between the local authorities and individual enterprises. Enterprises are generally allowed to retain a major share of foreign exchange earnings in excess of targeted amounts. Foreign direct investment enterprises retain all of their foreign exchange earnings.

In early 1988, retention quotas for domestic enterprises in several industrial sectors (light industry, arts and crafts, clothing, and machinery) and in some regions (Hainan Island and the special economic zones) were raised. Retention quotas for these enterprises vary with the degree of processing of the goods exported up to 100 percent. Retention quotas can be traded in the foreign exchange adjustment centers or used for imports. The BOC 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.

Imports consist of those included in the annual import plan and those outside of the annual plan. The foreign trade plan is drawn up by Mofert in conjunction with the SPC. 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 Mofert and the SPC 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.

Imports into China are also classified into two other categories—restricted imports and unrestricted imports.7 A number of restricted imports overlap with those included in the annual import plan.8 Import licensing serves to limit, and in some cases, prohibit imports of restricted goods that are included in the annual plan. Imports of seven assembly lines on the restricted list (for television sets, household refrigerators, household washing machines, radio-cassette recorders, room air conditioners, motorcycles, and light motor vehicles) are effectively banned through the licensing system; import of these lines requires approval by the State Economic Commission, which currently does not grant approval.

Apart from imports that are restricted through the licensing system, a few types of imports are explicitly banned, such as all secondhand garments. Imports of poisons, narcotic drugs, diseased animals, and plants are prohibited, as is the export of valuable cultural relics and rare books, rare animals, seeds and plants, and precious metals and artifacts made from these metals. In addition, 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. All imports and exports require prior inspection before release by customs at the port of entry or exit. 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 tariff rates for imports fall into two categories: minimum and general. The minimum tariff rates apply to imports originating in the countries with which China has concluded trade treaties or agreements with reciprocal favorable tariff clauses therein;9 the general tariff rates apply to imports originating in the countries with which China has not concluded trade treaties or agreements with reciprocal favorable tariff clauses. The duties are calculated on the basis of the c.i.f. value of imported goods. Excluding goods that are exempt from duties, goods in the general tariff rate category are subject to 17 rates ranging from 8 percent to 180 percent, and goods in the minimum tariff rate category are subject to 17 rates ranging from 3 percent to 150 percent. In addition to the import duties mentioned above, a regulatory tax on imports is applied to 15 selected products; the regulatory tax rates range from 20 percent to 80 percent.

Imports into Tibet through border trade with the neighboring countries are subject to a separate system of customs duties established by the People’s Government of the Tibet Autonomous Region. The tariff, however, applies to goods imported directly into Tibet for use only. 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.

Special economic zones have been set up in Shantou, Shenzhen, Xiamen, and Zhuhai. Economic and technological 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.

A number of restrictions are imposed on exports. Certain products (primarily raw materials and food products) are subject to export licensing. The number of items subject to export licensing requirements was reduced to 159 in July 1988, but licensing requirements were imposed on 12 additional products in December 1988. Exports of some products are prohibited. In December, exports of 6 items (which previously were subject to licensing) were prohibited, bringing the number of items whose exportation is banned to 10. In addition, exports of a number of products are subject to duties. The number of such products was increased in July and September 1988 to 46 from 12.

Payments for and Proceeds from Invisibles

Enterprises must sell their foreign exchange earnings from invisible transactions to the BOC and other authorized banks, except for enterprises with foreign investment and some foreign trade sectors designated as an experiment area for trade reforms. 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 BOC 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 or remitted through the BOC or taken out of China against certification by the BOC.

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,10 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 SAEC 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 apply for foreign exchange up to a specified limit 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 BOC. 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 renminbi or foreign exchange certificates denominated in renminbi. Foreign exchange certificates can be used by nonresidents in hotels, restaurants, and shops serving nonresidents, for purchasing airline tickets and 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 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

Foreign borrowing is classified either as “plan” or “nonplan” borrowing.11 Plan borrowing includes borrowing by the Central Government (through the PBC, the Ministry of Finance, the Ministry of Agriculture, Animal Husbandry and Forestry, and Mofert and enterprises under the control of Mofert) from international organizations and bilateral sources, borrowing by CITIC and other investment and trust companies (ITICS) (mostly in the form of bond issues and bond borrowing abroad) to finance plan projects, borrowing by the BOC from foreign commercial banks to finance plan projects, and borrowing by provincial governments (either directly and through the BOC) for large projects included in provincial governments’ annual plans. Nonplan borrowing includes borrowing by the BOC for purposes other than projects included in the annual plan (this includes interbank loans and foreign exchange deposits held in BOC headquarters and abroad), foreign exchange deposit taking by other financial institutions, short-term trade credits, borrowing by joint-venture companies and 100 percent foreign-owned companies, all borrowing at the provincial level to finance small projects, lease financing, and borrowing from offshore Chinese enterprises (mainly in Hong Kong).

The total amount of external borrowing for a specified future period and its split between concessional and nonconcessional sources is approved by the SPC. Within these limits, the SPC coordinates foreign borrowing for projects included in the annual and five-year plans. Under this procedure, the project-executing agencies (the Ministry of Finance, Mofert, foreign trade corporations, and provincial governments) propose projects to the SPC. Proposals indicate the total amount of foreign exchange needed, how much of it will be earned and how much will be borrowed from abroad, and the kinds of imports for which loans are intended. The SPC reviews these plans and in cooperation with the SAEC, the Ministry of Finance, and Mofert recommends to the State Council the overall number of projects and their associated financing. 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.

Within these guidelines, loans from international financial institutions and foreign governments require the sanction of the SPC 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 Mofert; and loans from international financial institutions are the responsibility of the PBC. Government departments, local governments, and enterprises usually borrow through the BOC (or with its guarantee) or through specialized agencies such as ITICS, rather than borrowing directly abroad themselves. The SPC sets an annual limit on such borrowing. Foreign borrowing in the form of deferred payments requires the approval of Mofert. Resident organizations may not issue securities for foreign exchange unless approved by the PBC.

All commercial borrowing abroad (including bond issues) for nonplan purposes requires prior SAEC approval. Joint-venture enterprises and 100 percent foreign-owned companies are required to balance their foreign exchange receipts and payments. While their borrowing is not subject to prior approval by the SAEC, it must be reported.12

All foreign direct investment projects are in principle subject to the approval of 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 BOC or an authorized bank; 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,13 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 profitmaking 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, 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 from 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 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, on 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 BOC, 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 PBC 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 other 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 customs or a PBC 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 1988

Administration of Control

March 13. Mofert announced major reforms in the trading system. Control over the foreign trade corporations (FTC) was decentralized by making local branches of most of the FTCs independent entities accountable to local authorities and subject to the contract responsibility system. The agency system for exports and imports was extended, and additional enterprises were given authority to directly export their products or to directly import materials needed. In addition, it was announced that all enterprises that are allowed to retain foreign exchange would be granted permission to trade foreign currencies at the foreign exchange adjustment centers. At the same time, foreign exchange retention quotas for enterprises in several industrial sectors (light industry, arts and crafts, clothing, and machinery) and in some regions (Hainan Island and the special economic zones) were liberalized.

Imports and Import Payments

February 1. Customs duties were lowered from 12 percent to 9 percent on imports of numerically controlled machine tool parts and components. Customs duties were raised on 38 other import items, which included natural rubber, air conditioners, refrigerators, washing machines, electronic music instruments, textile machinery, and complete machine tools. The 40 percent surcharge on natural rubber imports was eliminated.

May 16. Customs duties were lowered on 23 items, including intermediate products used in the production of farm chemicals and unfinished precious stones.

July 26. Customs duties were raised on 4 items, including aluminum sheets, cans, and containers.

September 15. Surcharges were levied on the purchase of certain imported items by Beijing-based government organizations and businesses. Imported items that are subject to a 40 percent surcharge include automobiles, motorcycles, television sets, refrigerators, washing machines, air conditioners, and cameras.

September 20. Customs duties on ply layers used in making plywood were reduced. Duties were increased on 14 items, including photographic film, color television sets, and tape recorders.

Exports and Export Proceeds

July 1. The number of export items subject to licensing was reduced to 159.

July 6. Export duties were established for 18 items, including copper and aluminum and a number of products made from these materials.

September 20. Export taxes were levied on 16 items, including phosphorus, some petrochemicals, iron, lead, and zinc.

October 26. Export duties on raw silk and some silk products were raised, with some duties running as high as 100 percent.

December 20. It was announced that effective January 1, 1989, exports of 6 commodities would be prohibited. Products covered include copper and copper-based alloys, aluminum and aluminum-based alloys, platinum, yellow phosphorous, and nickel and nickel-based alloys and products. In addition, exports of 12 other commodities are to be restricted. They include polypropylene, chromium ore, molybdenum ore, metallic magnesium, metallic manganese, resin, polystyrene, methylbenzene, xylene, ferrochrome, ferromanganese, and rubber.

Capital

April 13. The National People’s Congress adopted a new Chinese-foreign cooperative joint ventures law.

Colombia

(Position on December 31, 1988)

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 30, 1988, the buying and selling rates in the official market for the U.S. dollar, the intervention currency, were Col$335.86 and Col$337.20, 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 three different percentage rates for most export proceeds; (3) the imposition of a remittance tax at two different rates on certain service payments; and (4) 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 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 foreign 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 deutsche mark, Japanese yen, Netherlands guilders, or 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 expressed in U.S. dollars 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 the average 30-day rate on primary certificates of deposit at the close of operations in the New York market for the day before the certificate is issued 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 of the Republic 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. 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 for El Cerrejón 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 the People’s Republic of China, Cuba, the Dominican Republic, Spain, Yugoslavia, 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 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 cases where 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. Reimbursable imports 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. Imports of crude oil and petroleum products are subject to prior approval of Empresa Colombiana de Petroleo (Ecopetrol).

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 Bogotá), 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 Central 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 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$250 a day, within a limit of US$12,500 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).

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 course work extends beyond six months; and (6) a onetime 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 normally limited to 25 percent of the registered direct investment a year. Profits beyond such limit may be counted toward increasing the capital base.

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 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; for petroleum exports, the requirement is 25 percent of the projected value of production. The periods for surrendering export proceeds are normally as follows: (1) for coffee, within 20 days of the date of registration of the export (180 days for instant coffee); and (2) for other goods, generally within 5 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 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. Three rates—5 percent, 9 percent, and 14 percent—are applied, depending on the product 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; (2) exporters pay a tax in foreign exchange at the rate of 6.5 percent ad valorem, of which 3.2 percent is paid to the National Coffee Fund, 0.8 percent is paid to the Departmental Committees of Coffee Growers, and the remainder provides revenue for the Treasury; (3) exporters must either surrender without payment (in the form of untreated coffee) the equivalent of 35 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), which must be paid to the Federation either in kind or in pesos; and (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. In respect of exchange receipts from gifts and the rendering of professional services other than medical, hospital, or educational services, prior authorization from the Exchange Office is required before conversion.

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 before application can be made 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 governed by Decree No. 1265 of July 10, 1987 and are in accordance with the provisions of Decision No. 220 of the Cartagena Agreement, which governs 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 can amount to 100 percent of ownership. If the enterprise is entitled to the benefits under the provisions of the Cartagena Agreement, however, foreign investment is required to become 51 percent Colombian-owned by the thirtieth year after its registration, with the exception of investment in enterprises that satisfy one of the following conditions: (1) at least 25 percent of their production is exported; or (2) 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 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 the National Planning Department and the recommendation of the Ministry of Mines and Energy. Foreign direct investment is prohibited in public services, all branches of communication, television, film distribution and showing, internal passenger transport (except tourism), and residential construction. 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 with the Exchange Office entitles the investor to export profits and to repatriate capital under specified conditions. The transfer of profits is limited to 25 percent of registered direct investment with certain exceptions. Profit remittances from direct investment in internal exploration may be limited to a percentage of dollar-denominated capital determined by adding 25 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 Popayán, 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, Zurich, and New York markets on the day preceding the domestic gold purchase plus 3 percent. 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 issues commemorative gold coins, which are legal tender. Residents and nonresidents may freely buy such coins, but export licenses are not normally granted.

Changes During 1988

Exchange Arrangement

June 1. The Bank of the Republic was authorized to sell exchange warrants in currencies other than the U.S. dollar.

Imports and Import Payments

March 3. The lists of freely importable goods and of goods subject to prior licensing requirement were modified.

March 4. Import tariff preferences were granted to certain goods originating in Argentina.

March 30. Minimum official import prices (on f.o.b. basis) were set for the import of certain campers, as a base for the calculation of ad valorem tariffs.

April 21. Import tariffs were lowered, resulting in a decrease in the average rate from 26 percent to 24 percent. The tariff dispersion covering 200 customs headings for capital goods produced domestically with low to medium value added was narrowed from 37.6 percent to 30.4 percent.

May 19. A 2 percent import surcharge was imposed on certain goods brought in by travelers.

May 24. The ceiling on duty-free imports which could be brought in from the free port of San Andrés y Providencia after a minimum stay of three days was raised.

July 22. The special import-export regime providing for import duty exemptions on specified inputs for eligible exporters (Plan Vallejo) was modified. Main changes concerned the system of guarantees and certain operational procedures.

August 23. The coal industry was allowed to import a wide range of products required for its operation under a six-month licensing regime.

September 23. Import tariffs were lowered on average by 10 percent for industrial capital goods and 5 percent for other goods, resulting in a decline in the average tariff rate from 37.3 percent to 30 percent.

October 3. Import tariff preferences were granted to certain goods originating in Uruguay.

Comoros

(Position on December 31, 1988)

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. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

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. Arrears are maintained with respect to external payments.

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, must 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 1988

No significant changes occured in the exchange and trade system.

People’s Republic of the Congo

(Position on December 31, 1988)

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 = F1. 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 these 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, Equatorial Guinea, 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 Planning and Finance supervises borrowing and lending abroad. Exchange control is administered by the Minister of Planning and 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. With the exception of 13 products, the system of import licenses has been replaced by a system of ex post declarations (Decree No. 88/414, May 28, 1988).

Arrears are maintained with respect to external payments.

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 a declaration or a license. An indicative annual import program 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) European Communities (EC) countries other than France; and (5) all remaining countries. Thirteen product items under this program require licenses and others are subject to ex post declaration. 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, and they 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 Réassurances 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.

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

In principle, all exports require prior authorization, but 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 Congolese 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 are generally 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 apply) 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 Planning and 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 Planning and 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 Planning and 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 Planning and 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 Planning and 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 Planning and 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 1988

Administration of Control

May 28. The import licensing system was replaced by a system of ex post declarations (by Decree No. 88/414), except for 13 product items (specified in Arrêté No. 5469 of August 15, 1988).

Costa Rica

(Position on December 31, 1988)

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, with the exception of allowances for studies abroad (see below), take place at the unified exchange rate. On December 30, 1988, the buying and selling banking rates were ¢ 79.0 and ¢ 80.0 per US$1, respectively. The official exchange rate of ¢ 20.30 = US$1 is used exclusively for granting foreign exchange to students in foreign countries who registered with the Central Bank prior to 1981. The spread between the buying and selling rates in the banking exchange market is legally set at ¢ 1.00. 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. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

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.

Arrears are maintained with respect to external payments.

Prescription of Currency

In practice, nearly all exchange transactions in Costa Rica are expressed 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. All imports must be registered in the Central Bank before removal from customs or before the submission of requests for foreign exchange, with the following exceptions: (1) merchandise whose c.i.f. value is less than US$500; (2) temporary imports; (3) domestically produced goods reimported into Costa Rica; (4) imports by diplomatic and foreign missions and international organizations; and (5) household items. Imports made on a barter basis require a barter license (licencia de trueque), issued by the Ministry of Economy and Commerce. Imports from South Africa are prohibited.

In addition to any applicable customs duty, the following taxes are levied on imports: (1) a tax of 1 percent on import value; (2) a sales tax of 10 percent ad valorem, from which certain essential items are exempt; and (3) a selective consumption tax at rates varying from 10 percent to 75 percent, depending on how essential the item is considered. In addition, other levies are imposed as follows: (1) for inputs—if nominal protection (ad valorem tax plus 1 percent pursuant to Law No. 6946) is less than 8 percent, a surcharge is applied until the 8 percent level is reached; (2) for capital goods—if nominal protection is less than 10 percent, a surcharge is applied until the 10 percent level is reached. The above-mentioned nominal protection includes a general surcharge of 2 percent. Surcharges on imports from Central America are levied at a maximum rate of 2 percent. Vehicles used in paid (public service) transportation, trucks, ambulances and hearses, and chassis with single or dual cab are exempt from the surcharge. Minibuses with a displacement of up to 1,250 cubic centimeters are subject to a surcharge of 100 percent. Other vehicles with an import value of up to US$6,000 are subject to a surcharge of 17 percent, and those with a larger import value are subject to a surcharge of 152 percent.

Minibuses for collective transportation and vehicles with displacement of up to 1,300 cubic centimeters or with a customs value of up to US$4,000 are exempt from the selective consumption tax. Other vehicles are subject to an ad valorem selective consumption tax of up to 75 percent, depending on import value, displacement, and extra accessories. Vehicles with a weight of up to 2 tons are subject to a 75 percent selective consumption tax, and those with a weight exceeding 2 tons are exempt. Pickup trucks with a standard weight of up to 1 ton are also subject to a selective consumption tax of 25 percent, and those with extra accessories are subject to a selective consumption tax of 40 percent.

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 ¢ 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 of the above payments, except for dependents of diplomatic parents, who pay only the ¢ 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 registered students, a maximum of US$500 a month for living expenses, in addition to tuition, textbooks, and insurance, upon presentation of documents. 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 15 or 20 percent for destinations outside Central America. In addition, exporters of nontraditional commodities eligible for CATs may also receive certificates for increases in exports (CIEXs) for 4–10 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 Institute); 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 semiperishable goods; and within 180 days of shipment for other industrial products, except for capital goods, which, by decision of the Central Bank of Costa Rica, may be granted periods of up to 360 days. There are no taxes on nontraditional exports to countries outside the Central American area and Panama; taxes are levied on traditional exports, 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 may be exchanged into colones only at 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 accordance with regulations established by its Board. Private physical and juridical persons may negotiate freely, at home or abroad, domestically produced gold (except national archaeological treasures, pursuant to Law No. 6703 of December 18, 1981), 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 may sell unrefined gold to artistic or professional users.

Changes During 1988

Imports and Import Payments

September 28. The maximum tariff rate was reduced to 80 percent, as part of a trade reform aimed at reducing the maximum tariff rate to 40 percent over three to five years.

Côte d’Ivoire

(Position on December 31, 1988)

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 (WAMU), and of 2.50 per mill on transfers to countries outside the WAMU.2 Banks and the postal system also levy a commission on transfers to all countries outside the WAMU, 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.

Spot foreign exchange cover is limited to imports effected by means of documentary credits; the transaction must be domiciled with an authorized intermediary, and goods must be shipped within eight days of the exchange operation. Forward exchange cover for eligible imports must not extend beyond one month for certain specified goods and three months for goods designated as essential commodities; no renewal of cover is possible. Forward cover against exchange rate risk is permitted, with prior authorization from the Directorate of External Finance and Credit, only in respect of payments for imports of goods and only for the currency stipulated in the commercial contract. There are no official schemes for currency swaps or guaranteed exchange rates for debt servicing.

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. Arrears are maintained with respect to external payments.

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. All imports are classified into four categories, as follows: (1) prohibited imports (e.g., wheat flour, and used garments); (2) import items (e.g., paints, matches, and detergents) for which import licenses are obligatory for each import transaction exceeding CFAF 25,000, f.o.b.; (3) import items requiring a declaration of intent to import; and (4) import items requiring both prior authorization and a declaration of intent to import; in the last two cases, (3) and (4), the requirements apply only to individual transactions exceeding CFAF 100,000, f.o.b.

As noted below, certain other import items are subject to annual volume or value quotas. Thus, 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, imports made freely, whose f.o.b. value is CFAF 100,000 or more, are subject to submission of an import declaration. When the f.o.b. value exceeds CFAF 1.5 million, they are subject to mandatory preshipment inspection by international agencies 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 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 foreign 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 down payment is made.

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 10 years). 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 WAMU, the amount taken out must be declared to 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 issuance of an export license by the Directorate of External Trade. An export premium is applied on the basis of the domestic value added in locally manufactured products and agricultural products, excluding coffee, cocoa, cotton, and pineapples. 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 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 Government of Côte d’Ivoire, 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 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. Imports of intermediate goods or raw materials for which no equivalents are produced locally are not exempt from import duties and taxes.

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 1988

No significant changes occurred in the exchange and trade system.

Cyprus

(Position on December 31, 1988)

Exchange Arrangement

The currency of Cyprus is the Cyprus Pound. The exchange rate of the Cyprus pound is adjusted daily, with the aim of maintaining its effective relationship with the currencies of its main trading partners. On December 31, 1988, the official buying and selling rates for the U.S. dollar, the intervention currency, were £C 0.4660 and £C 0.4666, 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 of U.S. dollars and pounds sterling for exports and tourism for periods of up to 12 months. Rates for longer periods up to 2 years for exports are also available on an ad hoc basis, when justified. Cover for imports is normally provided up to 6 months. When justified (e.g., payments for imports of raw materials for exports or capital goods), rates may be quoted up to 15 months on request. Forward contracts must be based on genuine commercial commitments.

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 dealers 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 (Cyprus pounds) in Cyprus. Companies registered or incorporated in Cyprus that are accorded nonresident status by the Central Bank as well as their nonresident employees 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 that may be released annually from blocked funds for transfer outside Cyprus is up to £C 5,000. Funds can also be released from Blocked Accounts to meet reasonable expenses in Cyprus of the account holder and his family, including educational expenses, donations to charitable institutions in Cyprus, payments for the acquisition of immovable property in Cyprus, and any other amounts authorized by the Central Bank.

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, and 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 dealers, 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 European Communities (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 authority for certain types of payments has been delegated to authorized dealers. 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 Council of Mutual Economic Assistance (CMEA) countries, the maximum yearly allowance for living expenses is £C 1,800; for Canada and the United States, £C 4,400; for Austria, the Benelux countries, France, the Federal Republic of Germany, Switzerland, and 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 trip. 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. Authorized dealers are empowered to provide up to £C 100 a day with a maximum of £C 1,000. They are further empowered to provide medical expense allowances up to £C 3,000.

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 up to US$1,000 need not be declared, except when they are to be deposited with an authorized dealer. In addition, authorized dealers may convert up to £C 100 into foreign currency for departing nonresidents. Furthermore, authorized dealers are permitted to issue to nonresidents as well as to resident employees of offshore companies 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 repatriation of the sales proceeds. Export proceeds must be surrendered without delay.

Proceeds from Invisibles

Receipts from invisibles must be sold to an authorized dealer. Persons entering Cyprus may bring in any amount in foreign currency notes and up to £C 50 in Cyprus currency notes.

Capital

Transfers abroad of a capital nature are not normally permitted. Applications for direct investment abroad by residents are approved only in cases where the proposed investments will promote exports of goods and services and provided the amount required is small.

Investments in Cyprus by nonresidents require prior approval of the Central Bank, which, in considering applications, gives due regard 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. Annual profits and proceeds from the liquidation of approved foreign investments, including capital gains, may be repatriated in full at any time, after payment of any 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 abroad 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, plus interest. The same treatment is accorded to nonresident Cypriots purchasing a holiday home in Cyprus.

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 a 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 a year. Interest earned on blocked accounts is freely transferable abroad.

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 1988

January 1. The second stage of the Association Agreement between Cyprus and the EEC entered into force. The Agreement envisages the phasing out of tariffs and other restrictions on trade between Cyprus and the EEC for a large number of agricultural products and for most industrial products. This trade liberalization will, in the main, be completed during the first phase of the second stage of the Customs Union, which will last ten years. The second phase will enter into force by a decision of the Association Council and will last five years (or four years by a decision of the Association Council). It will entail the phasing out of the remaining tariff and the adoption by Cyprus of a number of procedures and mechanisms so as to streamline them with those of the EEC.

Payments for Invisibles

January 2. Authorized dealers were empowered to provide medical expense allowances up to £C 3,000.

Denmark

(Position on December 31, 1988)

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 ECUs (European Currency Units).

The agreement implies that the Danmarks Nationalbank (the central bank) stands ready to buy or sell the currencies of the other countries participating in the EMS in unlimited amounts at specified intervention rates. On December 30, 1988, these rates were as follows:

Specified Intervention

Rates Per:
Danish Kroner
Upper limitLower limit
100 Belgian or Luxembourg francs18.914318.0831
100 deutsche mark390.16373.00
100 French francs116.32111.20
100 Netherlands guilders346.24331.02
100 Irish pounds1,045.11999.13
100 Italian lire0.56200.4985

The participants in the EMS do not maintain the exchange rates for other currencies within fixed limits. Danmarks Nationalbank, however, does intervene in other situations for the purpose of smoothing out fluctuations in exchange rates. This smoothing out takes place only with respect to movements of the EMS-currencies, i.e., predominantly the deutsche mark. Interventions may technically be executed in any currency included in the official fixing of exchange rates, and the U.S. dollar is often used as the intervention currency. Danmarks Nationalbank has an obligation to intervene on the Danish foreign exchange market only at the intervention rates agreed within the EMS. The middle rates (average of buying and selling rates) for 20 foreign currencies (including the ECU);1 are officially fixed daily and reflect the going rates at the time of the fixing. On December 30, 1988, the official rates for the deutsche mark and the U.S. dollar were DKr 386.38 and DKr 687.40, respectively, per 100 units.

All remaining foreign exchange regulations were lifted with effect from October 1, 1988. Residents may hold positions in foreign currencies without any limitations with respect to the amounts, currencies, or instruments involved. Foreign exchange dealers (banks) must, however, keep their net foreign exchange position (spot plus forward) against the Danish krone within a range equal to ± 10 percent of their capital.

There are no restrictions on foreign exchange dealing. The Executive Order on Foreign Exchange Regulations, issued by the Ministry of Industry with effect from October 1, 1988, contains rules concerning payments between residents and nonresidents, which—for statistical purposes—must be reported to Danmarks Nationalbank when payments exceed DKr 60,000.

Residents (with certain exceptions) must deposit foreign securities and Danish bonds issued abroad either with a Danish or a foreign bank or with the issuer. Residents who are holding accounts with foreign banking institutions, have deposited securities abroad, or have entered into contracts with foreign life insurance companies are required to provide the Danish tax authorities with relevant information concerning these transactions.

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. The Faeroe Islands are still subject to the regulations in force before October 1, 1988.

Administration of Control

No exchange control requirements are imposed on capital receipts or payments by residents or nonresidents. Exchange control rules on reporting requirements for statistical purposes, on depositing of foreign securities, and on holding of accounts abroad for tax purposes are administered by the Danmarks Nationalbank and foreign exchange dealers. Foreign exchange dealers are commercial banks, savings banks, and stockbrokerage companies or other financial institutes, as defined in the Executive Order, provided that they settle payments between residents and nonresidents on a commercial basis through accounts held in or on behalf of foreign banking institutions (correspondent banks). Danmarks Nationalbank has drawn up a list of foreign exchange dealers.

Licenses for imports and exports, where required, are issued by the Ministry of Industry, the Ministry of Agriculture, or the Ministry of Fisheries.

Prescription of Currency

There are no prescription of currency requirements.

Imports and Import Payments

Imports of most products, except for textiles, are free of licensing from all sources. For textiles, a common European Communities (EC) system of export-import licenses has now been established for almost all countries exporting low-priced textiles. A few items require a license when originating in Japan, the Republic of Korea, or any other nonstate-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., and Viet Nam.

No exchange control requirements are imposed on payments for imports.

Payments for and Proceeds from Invisibles

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

Exports and Export Proceeds

Except for certain items subject to strategic controls, licenses for exports are required only for waste and scrap of certain metals. Nearly all exports of goods and services to the Republic of South Africa and Namibia are prohibited.

No exchange control requirements are imposed on receipts from exports.

Capital

There are no restrictions on inward or outward capital transfers. The general rules on exchange control issued by the Ministry of Industry are based on EC directives on capital movements and the Organization for Economic Cooperation and Development (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.

No special permission is required for residents to make transfers abroad in connection with direct investments or with private acquisitions of real estate abroad. Private acquisition of real estate for noncommercial purposes and expenses related to building and construction work on such property can be made without limitations. 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.

Inward direct investment in the form of equity capital may be made without prior license.

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.

Residents may take up loans from nonresidents to finance imports of goods and services; they may also take up such loans to finance the granting of credits for exports of commodities and services. Business enterprises may borrow abroad without permission.

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 are permitted freely, irrespective of the manner in which 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 without restriction.

Inheritances and gifts to relatives may be transferred to any country without limitation. Gift remittances to other persons may also be made without limitation.

Imports and exports of securities are permitted. Danish securities held in Denmark and belonging to nonresidents may be sold freely to residents. Foreign securities held in Denmark may be negotiated freely between residents.

Foreign exchange dealers must maintain net positions in foreign currencies in a range equivalent to 10 percent of their equity capital.

Gold

Residents may freely buy, hold, and sell gold in bars or coin in Denmark; they may also import gold in bars or coin. Imports of gold in bars or coin, unless made by or on behalf of the monetary authorities, are subject to a value-added tax at the rate of 22 percent; domestic transactions in gold are also taxed at the rate of 22 percent. There is no customs duty on imports of gold in bars or coin.

Changes During 1988

Administration of Control

October 1. The regulations governing the activities of Danish foreign exchange dealers were changed. The use of the term “authorized” was discontinued, while the category of foreign exchange dealers remained essentially unchanged. They consist mainly of commercial banks, certain savings banks, and certain stockbrokerage companies. A list of foreign exchange dealers was drawn up by Danmarks Nationalbank. Although foreign exchange dealers remained free to conduct all transactions as before, they were subject to the regulation that they must maintain a net position in foreign currency in a range equivalent to ±10 percent of their equity capital.

Imports and Import Payments

(See Appendix for a summary of antidumping duties, countervailing charges, and import surveillance measures introduced or eliminated by the European Economic Community during 1988, page 561.)

Capital

October 1. A new Executive Order on Foreign Exchange Regulations was issued, eliminating all restrictions on inward and outward capital transfers. For statistical purposes, the reporting of transactions between residents and nonresidents to the Danmarks Nationalbank continued to be required. Residents were required to deposit foreign securities and Danish bonds issued abroad either with a Danish or a foreign bank or with the issuer. Residents who hold accounts with foreign banking institutions or have deposited securities abroad or have entered into contracts with foreign life insurance companies were required to provide relevant information concerning these transactions to the Danish tax authorities.

Gold

October 1. All restrictions on the importation and exportation of gold in any form were abolished.

Djibouti

(Position on December 31, 1988)

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. Buying and selling rates for other currencies 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 0.5–6.0 percent set by the commercial banks, depending on the currency concerned. There is a fixed commission of about DF 1,000 (or US$6.00) for transfers in foreign currencies. There are no taxes or subsidies on purchases or sales of foreign exchange. Commercial enterprises are free to negotiate forward exchange contracts in respect of commercial and financial transactions through local banks or banks abroad. All transactions are negotiated at free market rates. There are no official schemes for currency swaps or guaranteed exchange rates for external debt servicing.

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, customs duties are not 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 imports other than those covered by the customs tariffs. Certain commodities, including alcoholic beverages, noncarbonated mineral water, petroleum products, khat, and tobacco, are subject to a surtax at various rates. Additional taxes are levied on imported milk products and fruit juice.

Exports and Export Proceeds

Exports to Israel and South Africa are prohibited. Otherwise, there are virtually no restrictions. 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. A tax of 20 percent applies to fees and salaries paid to individuals and legal entities who are not permanent residents of Djibouti for professional purposes.

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 1988

No significant changes occurred in the exchange and trade system.

Dominica

(Position on December 31, 1988)

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, 1988, 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 are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

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 ECCB 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 ECCB 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 must be made in the foreign currency that is legal tender in the country where the settlement is being made.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 do not require approval.

Imports and Import Payments

All imports from South Africa are prohibited. Most other goods are imported under open general license, but individual licenses are required for manufactures or items that 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 authority to sell foreign currency to local residents, as specified below: (1) for incidentals, EC$100, subject to a limit of EC$500 a person a year; (2) for each trip outside the area served by ECCB, EC$3,000, subject to a maximum of two trips in any 12-month period and upon presentation of travel documents; (3) for bona fide business travelers, EC$1,000 for each day outside Dominica, provided the total does not exceed EC$30,000 in any 12-month period and upon presentation of travel documents; (4) for overseas travel for medical treatment, EC$1,000 a day up to a maximum of EC$30,000 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; (5) for educational expenses, including accommodation, up to EC$15,000 a student in each academic year; and (6) for dependents residing abroad, EC$2,400 in any 12-month period (EC$3,600 for minor or incapacitated dependents).

Amounts in excess of specified limits may be obtained with approval from the Ministry of Finance. Specific approval of the Ministry of Finance may also be obtained for outward remittances of cash gifts 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 ECCB currency account is mandatory, except when the exporter has a foreign currency account into which the proceeds may be paid. Exports of bananas are subject to a levy when the export price exceeds a minimum level.

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 foreign 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 ECCB area may transfer up to EC$30,000 per family from their assets, subject to income tax clearance.

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 1988

Imports and Import Payments

July 11. The customs service charge was reduced from 1.5 percent of the c.i.f. value of imports to 1 percent.

Payments for Invisibles

January 1. The withholding tax on profits, dividends, and other income accruing to nonresidents was made applicable only when these earnings are transferred abroad.

July 11. The 1.5 percent tax on sales of foreign exchange for invisible transactions was abolished.

Capital

January 1. An investment tax credit of 10 percent was introduced.

Dominican Republic

(Position on December 31, 1988)

Exchange Arrangement

The currency of the Dominican Republic is the Dominican Peso. A dual exchange rate system, consisting of an official exchange rate and a preferential exchange rate, is in operation. The Central Bank administers all foreign exchange transactions; all exchange receipts must be surrendered, and most payments require the prior approval of the Central Bank. Only foreign exchange purchases by private individuals for specified current invisibles up to US$5,000 for each transaction and up to a limit of US$10,000 a year do not require prior approval. On December 30, 1988, the buying and selling rates of the Central Bank in terms of the U.S. dollar were RD$6.33 and RD$6.35, respectively, per US$1. A preferential exchange rate of RD$5.15 per US$1 applies to certain import payments and debt-service payments.

A commission equivalent to 20 percent of the f.o.b. value of imports is collected by the Customs Office, and the proceeds are deposited in the Central Bank for the servicing of external debt.1 Proceeds from exports of sugar and mineral products are subject to a surcharge equivalent to the difference between the exchange rate of the day and the exchange rate of RD$4.00 per US$1. Other exchange transactions in U.S. dollars between the Central Bank and other banks carry a commission of 1/32 of 1 percent. Commercial banks charge their customers commissions of ¼ of 1 percent (buying) and ½ of 1 percent (selling); an additional commission of 1 percent is levied on payments by letter of credit.

There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

Administration of Control

Exchange control policy is determined by the Monetary Board and is administered by the Central Bank. A commission, composed of representatives of the Central Bank, the Ministry of Finance, and the Office of the President, determines priorities for the servicing of public sector external debt. Commercial banks transact in foreign exchange under central bank supervision and at exchange rates set by the Central Bank. Payments abroad are subject to documentation and limited to transactions via commercial banks. At the end of 1988, there were 22 commercial banks operating in the foreign exchange market in the Dominican Republic. Arrears are maintained with respect to external payments.

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.

Foreign Currency Accounts

Commercial banks may open time deposits (minimum balance of US$1,000) and savings deposits (minimum balance of US$100) denominated in U.S. dollars. Use of funds on these accounts is not restricted.

Imports and Import Payments

Most imports are effected at the official exchange rate determined by the Central Bank. Import settlements against collection or by draft must be denominated in U.S. dollars. Imported merchandise requires a Central Bank certification of the use of foreign currency for customs clearance. Most imports are subject to an exchange commission equivalent to 20 percent of the f.o.b. value. In principle, “nominal duty rates” range from a minimum of 40 percent to nearly 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. 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. In February 1988, the reference exchange rate used to evaluate imports for customs taxes was modified. Essential imports are evaluated on the basis of RD$3.36 per US$1, and nonessentials at RD$5 per US$1 (sliding up to RD$10 per US$1 for imported cars, depending on engine size).

Payments for Invisibles

All categories of invisible payments, with the exception of profit remittances and royalty payments, may be made freely through commercial banks, subject to documentation requirements. Annual profit remittances cannot exceed the equivalent of 25 percent of the net value of original and additional investment plus reinvestment minus repatriation, duly registered in the Foreign Department of the Central Bank.

Nonresident tourists who surrender foreign exchange to commercial banks upon arrival may reconvert up to 30 percent of the total amount surrendered (maximum of up to the equivalent of US$5,000) upon departure.

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 from being exported 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.

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 exporting ferronickel 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.2 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

Foreign exchange proceeds from all invisibles must be surrendered to the Central Bank through the commercial banks. Proceeds originating in transactions with foreigners using international credit cards are also subject to the same surrender requirements as those applicable to exports. 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. Outward remittances related to investments require the approval of 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.

Since January 23, 1985, the Central Bank has provided foreign exchange for the servicing of public external debt at the market rate; the servicing of private external debt is effected through 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 1988

Exchange Arrangement

February 11. The freely floating exchange rate system was abolished, and a temporary exchange arrangement (to be effective for 90 days) was introduced. The Central Bank would set the exchange rate for the peso and appreciate it on a weekly basis. The Central Bank’s buying and selling rates were initially set at RD$5.40 = US$1 and RD$5.45 = US$1, respectively.

June 6. All foreign exchange transactions were transferred to the unified exchange market (which was previously introduced on November 12, 1987), with the exception of payments for oil and other essential public sector imports and the servicing of foreign debt, to which a preferential exchange rate of RD$5.15 = US$1 would be applied.

June 23. The Central Bank suspended the operations of the exchange banks and set the buying and selling rates for all authorized foreign exchange transactions at RD$6.43 = US$1 and RD$6.47 = US$1, respectively. At the same time, the authorities created a Certificate of Monetary Correction (CCM) which would be used to cover essential imports. It would be denominated in U.S. dollars for a minimum of US$15,000 with terms of 60, 90, and 120 days. The total issue would be for US$100 million. These instruments would be sold through the commercial banks at an exchange rate between the rate on the day of sale and up to 15 cents below that rate, depending upon the term of the CCM. The interest and exchange rates that would apply to the CCM at the time of redemption were to be set later.

August 1. A new exchange system was established, under which the Central Bank would administer all foreign exchange transactions. All foreign exchange receipts were required to be surrendered, and most payments were subject to the prior approval of the Central Bank. Only foreign exchange purchases by private individuals for specified current invisibles up to US$5,000 for each transaction and US$10,000 a year would not require prior approval. The midpoint official exchange rate was set at RD$6.34 = US$1. A preferential exchange rate of RD$5.15 = US$1 would continue to apply to certain import payments and debt-service payments until December 31, 1988. After December 31, 1988, only payments for oil imports would be effected at the preferential exchange rate.

Foreign Currency Accounts

May 12. Commercial banks were permitted to offer time deposits (minimum balance of US$1,000) and savings deposits (minimum balance of US$100) denominated in U.S. dollars. Depositors may use them for any external payments, including futures contracts. The maximum allowable annual interest rates were 1 percent above the prevailing rate on U.S. savings accounts for savings deposits and 1 percent above the 90-day Eurodollar rate for time deposits. With the agreement of the depositor and the commercial bank, the funds could be placed into special accounts at the Central Bank and would earn an additional 1 percent a year.

May 13. The exchange deposit account established on November 12, 1987 was eliminated.

May 20. Dollar-denominated accounts were permitted in mortgage banks and savings and loan associations.

Administration of Control

January 14. It was announced that, effective March 14, 1988, only the Central Bank could operate foreign exchange offices at airports, ports, hotels, and other tourist establishments.

February 11. Exchange banks were required to sell their holdings of foreign exchange to commercial banks for delivery to the Central Bank. All excess dollar balances held by the exchange banks as of Friday noon of each week were to be sold to the commercial banks. Foreign exchange would be sold to importers through the commercial banks.

April 30. The responsibility to collect the 20 percent commission on sales of foreign exchange for imports was transferred from the Central Bank to the Customs Office.

May 13. Exchange banks were required to exchange a monthly quota of no less than US$25,000 in the Central Bank.

June 23. Exchange banks were closed indefinitely.

Imports and Import Payments

February 8. The reference exchange rate applied to the valuation of imports for customs taxes was modified, whereby the customs duties on essential imports were assessed on the basis of RD$3.36 = US$1, and nonessential imports, at RD$5 = US$1 (with a sliding scale of up to RD$10 for automobiles, depending upon engine size).

April 29. A one-year prohibition on the importation of large-size automobiles and luxury goods, including many household items, jewelry, transport vehicles with less than 16-person capacity, and pickup trucks, was imposed.

Payments for Invisibles

January 12. Tourist card prices were raised from RD$5 to RD$10.

Exports and Export Proceeds

January 26. The graduated tax on coffee exports was modified. Export proceeds in excess of those corresponding to a price of RD$2.5 a pound were taxed at 30 percent; export proceeds in excess of those corresponding to a price of RD$3 a pound were taxed at 40 percent.

Proceeds from Invisibles

January 14. Foreign exchange receipts of travel agencies and casinos became subject to the surrender requirement.

January 28. The Central Bank began to pay RD$0.03 above the official rate (in terms of the U.S. dollar) for private remittance inflows effected through the commercial banking system.

Ecuador

(Position on December 31, 1988)

Exchange Arrangement

The currency of Ecuador is the Ecuadoran Sucre. At present, there are three exchange rates: the official rate of S/. 390 per US$1, which is used for the accounting purposes of the Central Bank of Ecuador only; the intervention market rate of the Central Bank; and the free market rate. As of August 31, 1988, all foreign trade transactions of the private sector, as well as some other private sector foreign exchange transactions (mainly those of the national press and of eligible students abroad) take place on the intervention market of the Central Bank. This market has a single rate but operationally has two segments—one for the public sector (where all public sector transactions take place) and the other for the private sector (where a foreign exchange allocation system governs private sector transactions). Those private sector transactions that do not take place in the intervention market take place in the free market. The intervention rate of the Central Bank is adjusted weekly, on the basis of a preannounced peg rate (to date, a weekly depreciation of S/. 2.50 against the U.S. dollar); the buying and selling rates are set at 5 percent below and 5 percent above the published rate, respectively. On December 30, 1988, the exchange rate was equal to S/. 432.50 per US$1 in the intervention market of the Central Bank, and S/. 505.58 per US$1 in the free market (averages of buying and selling rates).

In the public sector segment of the intervention market, the Central Bank is authorized to purchase the foreign exchange proceeds relating to the following transactions: the f.o.b. value of exports of crude oil and petroleum products; interest earned on international reserves; all public sector income in foreign currency, including foreign loan disbursements; foreign exchange balances on public sector deposits in foreign currency at the Central Bank (when considered in excess of the normal requirements of each entity); and all other transactions of the Central Bank. The Central Bank is authorized to sell foreign exchange relating to payments of the following operations in the public sector segment of the intervention market: the c.i.f. value of public sector imports; purchases of services abroad by the public sector; interest payments and principal amortization in foreign currency of the public sector; transfer of surpluses of foreign oil companies operating in Ecuador; and all other transactions of the Central Bank.

In the intervention market for the private sector, the Central Bank is authorized to buy 100 percent of the f.o.b. value of all private sector export proceeds. Twice a week the Central Bank determines the maximum amount of foreign exchange available (set at 90 percent of the previous week’s purchases) and sells this amount for the payment of the c.i.f. value of private sector imports, and for the foreign exchange required by the national press and by students abroad who have obtained financing from the Ecuadoran Institute for Education Loans. Requests for foreign exchange have to be submitted to the Committee for Foreign Exchange Sales (Comité de Venta de Divisas) through authorized banks, financial companies, or professional organizations (Federaciones Nacionales de Cámaras), none of which can submit requests in excess of 20 percent of the total amount offered at each biweekly session. Requests for foreign exchange for import payments can be presented only on the basis of import permits granted at least 30 days before the session. Requests are satisfied according to the chronological order of the date of issuance of the import permits. The amount of foreign exchange received by each participating institution is determined on a pro rata basis, given by the ratio of the total amount offered to the total amount requested multiplied by the amount requested by the institution in question. The Central Bank is authorized to purchase foreign exchange in anticipation of future exports, within a maximum period of 90 days.

Under transitional arrangements, the Central Bank is obliged to provide foreign exchange at the intervention market rate for the following payments: imports for which permits were granted up to August 11, 1986; the redemption of foreign currency stabilization bonds; the servicing of the private sector external debt for which the foreign exchange was sold to the Central Bank up to August 11, 1986; profit remittances and capital repatriation generated by foreign investments for which the foreign currency was sold to the Central Bank up to August 11, 1986; and expenses incurred abroad by students and handicapped persons for which a contract was approved by the Central Bank up to August 11, 1986. To meet obligations arising from import permits granted up to August 11, 1986, the Central Bank is authorized to issue foreign currency stabilization bonds, provided the countervalue in sucres has been deposited with the Central Bank and all the requirements for payment abroad have been fulfilled. The maturity of the bonds runs from the date of fulfillment of such requirements, and is equal to 12 months for payments up to the equivalent of US$5,000; for payments above this figure, the Central Bank will issue four stabilization bonds, each amounting to 25 percent of its obligation, with maturities of 12, 16,20, and 24 months, respectively. In no case can the bonds be redeemed before 6 months after their date of issue. The bonds carry an interest rate equal to the 3-month LIBOR (or equivalent rate in non-U.S. dollar currencies), and interest is paid at the redemption date. The final deadline for submitting applications for foreign currency stabilization bonds was October 30, 1988.

Most borrowings abroad are subject to an exchange tax ranging from 0.5 percent to 2 percent.

There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

Ecuador formally accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Fund Agreement, with effect from August 31, 1970.

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 (“Special Group”), essential goods (Group A, consisting of capital goods, inputs for agriculture and industry, and consumer goods with no local substitutes), and semi-essential goods (Group B, consisting of products with some local equivalent, except luxury goods); and List II, consisting of 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. As of December 31, 1988, imports of motor vehicles have been prohibited, as have been imports of capital goods other than those financed by the proceeds of loans from international organizations and governments and their agencies.

A prior import deposit scheme introduced in October 1987 was modified in 1988. As of August 31, 1988, the scheme has required both private and public sector importers to lodge at the Central Bank a non-interest-bearing 120-day deposit in domestic currency. The rate of deposit for private sector imports is 60 percent of the c.i.f. value for goods on List I, Group A (essential goods); 100 percent for goods on List I, Group B (semi-essential goods); and 160 percent for goods on List II (luxury items). The rates for public sector imports are half of the above rates. Priority goods (List I, “Special Group”) are exempt from the deposit requirement. Nor does the requirement apply to nonreimbursable imports financed by loans from international organizations, certain donations, imports originating in or proceeding from Andean Group countries, and imports with payments deferred by 120 days or more from the date of shipment.

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. 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. With specified exceptions, requests for import licenses for goods included under List I, Special (priority goods) and for imports with deferred payments of 120 days or longer have to be accompanied by a foreign exchange guarantee from an authorized bank or financial company for the c.i.f. value of the imported goods. 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 goods, provided that the appropriate import taxes (including import surcharges) have been paid, prior ministerial authorization (where applicable) has been obtained, and a certificate has been submitted showing that insurance has been arranged in Ecuador. The inspection of merchandise imports by an international agency to ensure conformance with the import permit was terminated in January 1988. Upon arrival of the merchandise, the importer must settle up to 20 percent of total f.o.b. value in cash for imports for which the Central Bank has provided foreign currency.

All private sector imports are subject to a tax of 10 percent levied on commercial transactions. Furthermore, all public sector imports are subject to a service charge of 1 percent of the c.i.f. value. With certain exemptions, imports on List II are subject to an import surcharge of 30 percent ad valorem. There is a temporary duty-free importation scheme for inputs used in export production.

Payments for Invisibles

All public sector payments for invisibles, including interest on public debt, are transacted in the intervention market of the Central Bank. Other payments for current invisibles must be settled in the free market and are unrestricted. There are no limitations on the amounts of domestic and foreign bank notes that travelers may take out. 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 before 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 interest rates in 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 US$20 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; licenses are issued freely, subject to guarantee and may be provisional (with a validity of 30 days) or definitive (90 days). All export proceeds must be surrendered on the intervention market of the Central Bank not later than: (1) 15 days from the date of shipment for exports against cash payment, exports of bananas, coffee beans, cocoa beans, prawns in any marketable form, and other unprocessed seafood products; (2) 30 days from the date of each shipment for perishable products appearing on the lists issued by the Ministry of Industry, Commerce, Integration, and Fisheries, or the Ministry of Agriculture and Stockbreeding, provided it is shown that the sale was made on an installment basis or on consignment; (3) 30 days from the date of shipment for the remaining primary products, provided it is shown that the sale was made on an installment basis; and (4) 90 days from the date of shipment for products not mentioned above, provided it is shown that the sale was made on an installment basis. Nonobservance of the above surrender requirements is subject to penalty, and the Central Bank is authorized to carry out the inspections it considers necessary to verify the proper surrender of export proceeds. The surrender requirement does not apply to exports effected under authorized barter transactions; however, barter transactions require prior approval of the Ministry of Industry, Commerce, Integration, and Fisheries; they must be registered with the Central Bank and are subject to specific limitations. Minimum reference prices are established for exports of bananas, coffee, fish products, cocoa, and semifinished products of cocoa to help ensure that exchange proceeds are fully surrendered. Payment of foreign exchange for petroleum exports will be made on the basis of the sale prices stated in the sale contracts, and must be surrendered within 20 days of the date of shipment.

Proceeds from Invisibles

All receipts from invisibles must be sold in the free market, except for interest income on foreign reserves of the Central Bank and all invisible receipts of the public sector, which are transacted in the intervention market. Travelers may bring in any amount of foreign or domestic bank notes.

Capital

Capital may freely enter or leave the country through the free market. Most borrowings abroad are subject to an exchange tax ranging from 0.5 percent to 2 percent.

All foreign direct investment in Ecuador must be registered with the Central Bank. With specified exceptions, new investment requires the prior authorization of the Ministry of Industry, Commerce, Integration, and Fisheries. The Ministry does not authorize direct foreign investment for the purpose of establishing advertising firms, commercial broadcasting stations, television stations, newspapers, or magazines. The Department of Credit and Foreign Investment of the Central Bank of Ecuador must submit a recommendation to the general management of the Central Bank within 30 days of 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.

Repatriations of capital and remittances of profits on foreign investments are handled through the free exchange market in respect of those investments that have been effected through this market. There are no time limits on the remittance of profits. 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. There are no limits on repatriation of capital for the tourism sector and for enterprises that export more than 80 percent of their production.

All foreign loans granted to the Government or to official entities, or guaranteed by them, whether or not they involve the disbursement of foreign exchange, are subject to prior approval by the Monetary Board. Suppliers’ credits of up to one year’s maturity are exempt from this requirement. The request for such authorization must be accompanied by detailed information of the loan contract and of the investment projects it is intended to finance. In examining the request, the Monetary Board considers the effects that the loan and the related investment may have on the balance of payments in general, and on monetary policy in particular. For public sector entities, the projects to be financed must be included in the General Development Plan or receive a favorable opinion of the National Council for Development (Conade), and at least 20 percent of the total cost of the project must be covered by domestic funds. This requirement does not apply to loans granted by international organizations or national development agencies. New external credits with a maturity of over one year contracted by the private sector, either directly or through the domestic financial system, must be authorized and registered by the Central Bank of Ecuador.

Gold

Imports and exports of monetary gold are reserved for the Central Bank. The import duty on gold in bars is 10 percent of the c.i.f. value, while the duty on semi-worked gold is 40 percent ad valorem; semiworked gold is treated as a List II import.

Changes During 1988

Exchange Arrangement

March 3. A new foreign exchange market (the regulated market) was established for all foreign trade transactions of the private sector, for foreign private investment, and for the remittance of profits and repatriation of capital generated by such investment. All other private sector transactions were to continue to take place in the free exchange market, and all public sector transactions, in the intervention market of the Central Bank. The rate in the regulated market was not to be allowed to diverge by more than 10 percent from the Central Bank’s intervention rate (selling rate).

August 31. The regulated exchange rate market introduced in March was abolished, and most of the private sector transactions previously carried out in this market were transferred to the intervention market of the Central Bank. The intervention market rate was changed from S/. 250 per US$1 to S/. 390 per US$1, and it was announced that the intervention rate would be depreciated by S/. 2.50 a week against the U.S. dollar. A maximum spread of 10 percent was set between the buying and selling rates in the intervention market. The official rate, used only for the accounting purposes of the Central Bank of Ecuador, was changed from S/. 95 per US$1 to S/. 390 per US$1. A foreign exchange allocation system for private sector transactions on the intervention market was introduced, under which the private sector was to surrender 100 percent of the f.o.b. value of its merchandise exports, with the Central Bank selling back 90 percent of the proceeds for the payment of the c.i.f. value of private sector imports and some other transactions, in biweekly sessions with the authorized participation of commercial banks, financial companies, and professional organizations (Federaciones Nacionales de Cámaras).

September 19. Banks, financial companies, and professional organizations were prohibited from charging a commission on the purchase and sale of foreign exchange on the intervention market.

Imports and Import Payments

January 7. The inspection of merchandise imports by an international agency to ensure conformance with the import permit was no longer required.

February 23. Imports of automobiles were prohibited. New prior import deposit requirements were established, under which private sector importers were required to lodge a non-interest-bearing 120-day (previously 90-day) deposit in domestic currency at the Central Bank in an amount equivalent to 100 percent (previously 50 percent) of the c.i.f. value of imports included under List I, Group B (semi-essential goods), and to 160 percent (previously 80 percent) of the c.i.f. value of imports under List II (luxury items). The requirement of List I, Group A imports (essential goods) was left unchanged at 50 percent of the c.i.f. value, and essential imports of priority goods included under List I (“Special Group”) remained exempt from the deposit requirement.

March 24. The import deposit requirement on List I, Group A imports (essential goods) was to be phased out according to the following timetable: 40 percent as of April 1; 30 percent as of May 1; 20 percent as of June 1; 10 percent as of July 1; and abolished as of August 1.

June 21. The ban on automobile imports was lifted and replaced by specific import quotas.

July 1. The prior import deposit requirement for List I, Group A imports (essential goods) was raised from 20 percent to 60 percent of the c.i.f. value of imports, reversing the decision on its gradual phasing out adopted on March 24. The other import deposit requirements remained at 100 percent of the c.i.f. value for List I, Group B imports (semi-essential goods) and at 160 percent for List II imports (luxury items).

August 31. The prior import deposit scheme was extended to public sector imports, with a requirement to lodge a non-interest-bearing 120-day deposit in domestic currency at the Central Bank in an amount equivalent to 30 percent of the c.i.f. value of imports included under List I, Group A (essential goods), 50 percent of imports included under List I, Group B (semi-essential goods), and 80 percent of imports included under List II (luxury items). Neither private nor public sector import deposit requirements would apply to non-reimbursable imports financed with loans from international organizations, certain donations, imports originating or proceeding from Andean Group countries, and imports with payments deferred by 120 days or more from the date of shipment. Imports of automobiles were prohibited, as well as imports of capital goods other than those financed with the proceeds of loans from international organizations.

Exports and Export Proceeds

January 7. The inspection of merchandise exports by an international agency was no longer required. The Central Bank was authorized to carry out the inspections it considered necessary to verify the surrender of export proceeds.

August 31. The period for the surrender of export proceeds to the Central Bank was shortened, from a minimum of 15 days to a maximum of 90 days.

Capital

August 31. New regulations governing foreign direct investment and foreign loans were issued.

Egypt

(Position on December 31, 1988)

Exchange Arrangement

The currency of Egypt is the Egyptian Pound; the U.S. dollar is used as the intervention currency. The exchange rate system consists of two rates: the established central bank rate and the new bank market rate. The established buying and selling rates of the Central Bank of Egypt for the U.S. dollar on December 31, 1988 were LE 0.700 and LE 0.707, respectively, per US$1. Established rates for 16 other convertible currencies are based on cross rates for these currencies quoted in New York.1

The established central bank rate applies, on the receipts side, to proceeds from: (1) exports of petroleum, rice, and cotton; (2) Suez Canal dues; and (3) Sumed pipeline royalties. The established central bank rate applies, on the payments side, to: (1) settlements for imports of certain essential foodstuffs, insecticides, and fertilizers; and (2) specified public sector capital transactions. All external debt-service payments are effected at the established rate, with the exception of suppliers’ credits for imports of capital goods by the public sector, which are effected at the new bank market rate (see below).

Until March 19, 1988, the commercial bank pool rate applied to transactions taking place through the commercial bank pool. On May 11, 1987, about 40 percent of the transactions that were effected through this pool were transferred to the new bank market, and almost all the remaining transactions were transferred on November 18, 1987. After November 19, 1987, the commercial bank pool rate applied to a very limited number of transactions, while continuing to be used for customs valuation purposes. Beginning June 1, 1987, the commercial bank pool rate was changed on several occasions; on December 31, 1987, the buying and selling rates for the U.S. dollar stood at LE 1.87 and LE 1.88 per US$1, respectively. The commercial bank pool market was abolished on March 19, 1988.

A new exchange market (the new bank market) was introduced, starting May 11, 1987. All commercial banks authorized to carry business in both foreign and domestic currency (38 banks) and 2 travel agencies were permitted to operate in this market. The exchange rate in this market is set by a committee of eight members (four representatives of the public sector banks, two from the joint-venture banks, and two from the private sector banks). Two observers, one from the Central Bank of Egypt and one from the Ministry of Economy and Foreign Trade, attend the committee meetings. The committee meets at the end of each business day to fix the rate, which is binding for all transactions effected in the market the following business day. Cross rates are established on the basis of the London exchange market rates. In setting the rates, the committee uses four indicators (supply, demand, working balances of the banks, and assessment of general market trends). The rate, which was initially set at LE 2.165 = US$1 on May 11, 1987, moved to LE 2.190 = US$1 by December 31, 1987. During 1988, it fluctuated between LE 2.190 and LE 2.35 per US$1, and on December 31, 1988, it stood at LE 2.35 = US$1. The selling rate is set by the addition of ¼ of 1 percent to the buying rate set by the committee, with half of this difference (⅛ of 1 percent) accruing to an account of the Ministry of Finance with the Central Bank. The authorized banks may buy and sell foreign exchange among themselves at the exchange rate determined by the committee plus an additional 1/16 of 1 percent.

A number of special exchange rates are also in effect. At the end of December 1988, a rate of LE 0.70 = £ 1 applied to visible and invisible trade transactions within the framework of the bilateral payments agreement with the Democratic People’s Republic of Korea, and a rate of LE 2.0 = £ 1 applied to those visible trade transactions effected under the bilateral payments agreement with the U.S.S.R. A rate of LE 1.30 = US$1 applied to transactions effected under the bilateral payments agreement with Sudan. In addition, a rate of LE 0.3913 = US$1 is used for liquidation of accounts related to past bilateral payments agreements. The free bank market rate with a 12 percent discount applies to transfers by foreign aviation companies relating to operations transacted before March 15, 1988. Surpluses realized after that date are transferred at the free bank market rate.

The Central Bank has determined maximum operating balances in foreign exchange for each authorized bank in the new bank market. Any excess over this amount has to be sold twice a week to a special account in the name of the Central Bank at the rate set the day the operation takes place plus 1/16 of 1 percent. The Central Bank has also set a limit on banks’ negative operating balances on which it will cover any exchange loss resulting from a depreciation of the rate (the limit is set at 6 percent of each bank’s foreign currency deposits).

Each bank authorized to operate in the new market was required to swap a minimum of 3 percent of its foreign currency deposits outstanding as of December 31, 1986 with the Central Bank in return for Egyptian pounds for a renewable period of three months at the exchange rate prevailing in the new market. The Egyptian pound equivalent is re-evaluated at the time of settlement every three months, with the difference made up in Egyptian pounds according to the exchange rate of the day of settlement. Interest is not paid on the U.S. dollars or on the Egyptian pounds.

On May 11, 1987, the following transactions were authorized in the new bank market. On the receipts side: (1) workers’ remittances; (2) tourism receipts; (3) bank purchases from all types of foreign exchange accounts and foreign bank notes or other means of payment; (4) retained private sector export receipts; (5) surrendered private sector export receipts of live goats and sheep, molasses, and fish; and (6) specified public sector export receipts. On the payments side: (1) specified public sector visible and invisible payments within the limits established by the foreign exchange budget; (2) some private sector invisible payments (but excluding debt-service payments), according to current regulations;2 (3) private sector imports, including those of Law No. 43 companies; and (4) settlements of letters of credit opened by the private sector before May 11, 1987, provided that documents are negotiated after this date. Beginning June 1, 1987, foreign exchange grants from the U.S. aid program have been converted at the new bank market rate.

Beginning September 15, 1987, companies covered by Law No. 43 (joint ventures) have been permitted to remit profits abroad through the new bank market, provided they do not have “own exchange” in their capital and working accounts. Also, public and private sector payments (visible and invisible) authorized through the new bank market may not be effected through the market until the balance in the export retention accounts has been used up. On November 18, 1987, almost all transactions still effected through the commercial bank pool were transferred to the new bank market. These included, on the receipts side: (1) commissions and bank interest payments; (2) profits of Egyptian companies and banks; (3) proceeds surrendered to authorized banks by the private sector from exports of peanuts, fresh onions, fresh garlic, potatoes, and citrus fruits; (4) export proceeds of public sector companies in respect of flax, watermelon, fruits, and vegetables; (5) export proceeds of public sector companies in the chemical and food production sectors; and (6) export proceeds of public sector companies within the Ministry of Culture and the Ministry of Information, such as books, films, and television programs. On the payments side, additional import payments by the public sector were transferred to the new bank market, and they are effected at the new bank market rate.

Private sector payments not authorized through the new bank market may be effected through free accounts held with domestic banks (“own exchange”) at a rate agreed among the parties. These payments include some invisibles and servicing of foreign currency loans obtained through local banks.

Forward transactions are authorized for purchases and sales of foreign currencies through the central bank pool. Three percentage points are applied to the spot rates to determine the forward rates. Forward transactions, subject to the approval of the Central Bank, may be conducted with respect to merchandise export and import transactions.

Administration of Control

A foreign exchange budget for public sector exchange transactions is established annually. Banks are authorized to execute foreign exchange transactions through the new bank market, 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 by the public sector. Certain imports and exports are reserved for public sector entities. Port Said City is accorded the status of a free zone. Arrears are maintained with respect to external payments.

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. However, the proceeds from raw cotton exports to all countries during the September 1988–August 1989 season must be received in U.S. dollars, with the exception of the Federal Republic of Germany, Japan, and Switzerland, from which such proceeds must be received in their respective currencies or in U.S. dollars.

Settlements with countries with which Egypt has bilateral payments agreements are made according to the terms of these 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, or Free Accounts in Foreign Currency. Canal Dues Accounts must be opened in foreign currency, and balances are transferable 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 in foreign currency may be credited with transfers of convertible currencies from abroad, transfers from other similar accounts, foreign bank notes registered in a customs declaration form, and with the equivalent in foreign currencies from funds transferred from a free account in Egyptian pounds and interest earned on these accounts. These accounts may be debited for transfers abroad, transfers to other similar accounts, withdrawals in foreign bank notes to the owner or others, transfers to free accounts in Egyptian pounds, and for any payment in Egypt, including those for exports and for bank charges and commissions.

Free Accounts in Egyptian pounds may be credited with the equivalent in Egyptian pounds for transfers from abroad in convertible currencies or from a free account in foreign currency; with transfers from similar accounts; with proceeds of sales to an authorized bank of foreign currencies registered in a customs declaration form; and with proceeds of sales of bank instruments and interest on these accounts. These accounts may be debited for the equivalent in Egyptian pounds for transfers abroad in convertible currencies, transfers to other free accounts in foreign currency or transfers to similar accounts, funds withdrawn in foreign bank notes on behalf of the owner of the account or others, and funds used to meet local expenditures of the settlements of the value of export goods.

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 from 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 may be credited with any payment of a capital nature to a foreigner living outside 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 10,000 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; they may also be used for payments to residents for services rendered up to a limit of LE 20,000 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 Exchange Retention Accounts, Import Accounts in Foreign Exchange, and Capital and Working Accounts.

Foreign Exchange Retention Accounts may be opened in the name of authorized recipients and credited with the proceeds from certain exports of goods and invisible receipts. Public sector companies may use these funds for their purposes within the allocations of the foreign exchange budget, transfer them to other public sector companies within the same sector, or sell them to the authorized banks. Private sector exporters may debit these accounts for visible and invisible payments related to their economic activity or sell the exchange in the new bank market, but may not transfer these funds to free accounts. Holders of private sector export retention accounts are entitled—without the need to submit any documentation—to use up to 25 percent of the proceeds of their exports for the financing of travel expenses for the exporter or his employees, for other invisible payments related to the account holder’s activity, and for settling of repatriation requirements. Unused balances in retention accounts owned by the public sector, unless exempted, must be sold periodically to the banking system at the new bank market rate. If the balances in the retention accounts owned by the public sector entities originate from invisible proceeds, unutilized balances must be surrendered monthly. In addition, balances in these accounts must be fully utilized by the account holder before authorized transactions can be effected by the public or private sector through the new bank market.

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 convertible currencies, transfers from free accounts in foreign exchange or in Egyptian pounds, transfers from another import account in foreign exchange, the equivalent in free currency of any amount of foreign exchange deposited by clients (regardless of the means and the source), and with bank interest. They may be debited for the financing of imports of the private sector on behalf of the account holder or others, for transfers abroad to cover invisible transactions related to the activity of the account holder, for settlements of obligations related to import transactions effected on behalf of the private sector, and to cover in the form of foreign bank notes and other acceptable means of payment the expenditures of the account holder or others abroad within the limit of US$500 (or its equivalent) a calendar year, provided that the amount drawn is registered on the user’s passport and travel ticket. Withdrawal in cash by the account holder is permitted without any limit.

Capital and Working Accounts may be opened by companies covered by Law No. 43 (joint ventures). These accounts may be credited with transfers from abroad or transfers from other similar accounts, and may be debited with payments by the account holder (e.g., imports, profit remittances, interest payments, other invisible payments, and financing of local expenditures) or with transfers to other similar accounts. Holders of these accounts are not permitted to use the new bank market resources before their balances in these accounts are fully utilized.

Imports and Import Payments

All imports from South Africa are prohibited. A Supreme Council for the Planning of Foreign Trade is entrusted with formulation of a long-term policy for exports and imports, control of the annual export and import plan, and supervision of 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. Certain private trade with payments agreement countries is not restricted.

Imports by the Central Government, public authorities, and public sector companies are effected within the provisions of the foreign exchange budget through the central bank pool and the new bank market. Private sector imports are effected through the new bank market or from own resources. 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 on the goods to be imported and the entities that are to import them within that quota. All imports financed by the Central Bank are effected at the established rate, with the exception of capital goods imports under suppliers’ credits, which are effected at the new bank market rate, and imports under bilateral payments agreements, which are effected at a special, more appreciated rate (except for imports from the U.S.S.R. (see section on Exchange Arrangement, above)).

Beginning May 11, 1987, imports by the private sector have taken place through the new bank market or through the own-exchange system. There is a prohibited list containing 210 items, with all commodities not included on the prohibited list being freely imported. Certain goods (e.g., imports financed with bilateral and multilateral assistance, components imported by licensed local manufacturers and assembly units, and free zone imports) are exempted from the negative list, and the items on the negative list may be imported with the approval of the Ministry of Economy. On application to open a letter of credit, private sector importers (including companies covered by Law No. 43) must lodge with an authorized bank a 35 percent prior import deposit in domestic or foreign currency. These deposits have to be financed from the importers’ own resources. Importers are required to cover 100 percent of a letter of credit when it is opened. Banks are allowed to finance all or part of the remaining 65 percent. When suppliers’ credit facilities are available, the importer may not be required to cover the remaining 65 percent of the letter of credit, depending on the conditions of the suppliers’ credit agreement. Goods may not be shipped before a letter of credit is opened, except for imports of spare parts needed for machinery and equipment for production activities financed through the use of balances in export retention accounts, provided that the importer pledges to present certification that, within two months, the parts were used or installed in accordance with the relevant regulations.

Payments for Invisibles

Banks are authorized to provide foreign exchange through the new bank market for all invisible payments by the public sector, within the framework of the foreign exchange budget and in accordance with current rules and regulations, provided that the public sector entities concerned have used up the balances of their retention accounts. Invisible payments by the private sector are financed through the new bank market (e.g., authorized pilgrimage and medical treatment abroad, specified payments for emigrants, etc.). Egyptian nationals are entitled to retain their earnings in foreign exchange 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). Profit remittances by companies covered by Law No. 43 are authorized through the new bank market, provided funds in capital and working accounts are used up first.

Only Egyptian nationals and foreigners who have lived in the country for a continuous period of five years and foreigners permitted to reside in Egypt for a period of ten years can purchase airline tickets under certain conditions (one-way or round-trip originating in Egypt) in Egyptian pounds. With this exception, all others must purchase tickets with convertible currencies or with Egyptian pounds converted at the new bank market exchange rate.

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 deducting US$30 for each night spent in Egypt, provided that evidence is produced that Egyptian pounds were obtained at the new bank market exchange rate.

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 without 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 books, newspapers, and other publications must be repatriated as soon as they are received and in any case within a period not exceeding five years from the date of shipment. Proceeds from all other exports must be repatriated within one year from the date of shipment. Proceeds from exports of petroleum, cotton, and rice have to be sold to the Central Bank. Proceeds from exports of other products may be fully retained in foreign exchange retention accounts with the exception that only 50 percent of the proceeds from exports of peanuts, onions, garlic, potatoes, citrus, live goats and sheep, fish, and molasses may be retained. Proceeds from exports by both private and public sectors to bilateral payments agreement countries are obtained in Egyptian pounds, in accordance with the provisions of the relevant agreement.

All departing foreigners who are carrying on their person gifts valued at more than LE 250 are required to show evidence that foreign exchange equivalent to the excess value has been exchanged at an authorized bank at the new bank market exchange rate. The corresponding limit on excess value applied to Egyptian nationals is LE 100, and that for purchases left behind with Khan El Khalil merchants is LE 500 (provided that they are exported within three months from the date of the traveler’s departure and that proof is provided that he visited Egypt).

Proceeds from Invisibles

Earnings abroad by persons and juridical entities other than the Egyptian Government, public authorities, and public sector entities may be held abroad or retained indefinitely in Free Accounts.

Receipts from tourism must be surrendered to the banking system at the new bank rate. However, privately owned hotels are allowed to retain 25 percent of their foreign exchange earnings in their retention accounts. Hotels operating under Law No. 43 are allowed to retain all of their foreign exchange earnings in their retention accounts. Travel agencies belonging to the private sector are allowed to retain 10 percent of their foreign exchange earnings, and 100 percent if they operate under Law No. 43. Public sector hotels are allowed to retain only 10 percent of their foreign exchange proceeds, and Misr Travel (a public sector agency) is allowed to retain 25 percent.

Other invisible earnings by public sector entities may be retained to the extent of 10 percent of the total; authorization to retain more or exemption from periodic surrender requirements must be approved by the Ministry of Economy and Foreign Trade. 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.

Capital

There are no restrictions on the use or transfer of balances on free accounts maintained in banks operating in Egypt. 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.

Transactions in Egyptian and foreign securities abroad relating to the purchase and sale of these securities must be carried out through authorized banks, provided that the funds used for this purpose represent free foreign exchange. 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, joint-venture, and private sector banks are required to deposit 15 percent of their foreign currency deposits with the Central Bank.

Transfers of accrued alimony are permitted in accordance with court orders. Foreigners leaving Egypt permanently after a period of residence of at least five years are permitted to transfer abroad the equivalent of LE 5,000 in foreign currencies through authorized banks, irrespective of whether this sum represents capital assets owned by or income accrued to the foreign national. Amounts exceeding this sum are deposited in 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

Banks are not authorized to deal or speculate (for their own or their customers’ account) in precious metals. The import of precious metals and stones for industrial and local market requirements is subject to regulations. The export of gold and silver fabrics may be permitted, provided that the sales proceeds are repatriated in convertible currencies. Travelers are permitted to take out and bring in their gold jewelry within specified limits.

Changes During 1988

Exchange Arrangement

March 20. Following the transfers of most of the transactions from the commercial bank pool to the new bank market on May 11, 1987 and November 18, 1987, all of the remaining transactions were transferred to the new bank market. These transactions included those by the spinning, weaving, textile, and mining industries in the public sector as well as by foreign and domestic airline and shipping companies.

March 21. The new bank rate with a 12 percent discount would apply to transfers by foreign aviation companies of surpluses realized before March 15, 1988; airline surpluses realized after that date would be transferred at the new bank rate.

March 21. The exchange rate for customs valuation purposes was no longer established each month on the basis of the average commercial bank pool rate of the preceding month. Following the abolition of the commercial bank pool on March 20, 1988, the rate would be set at the discretion of the Minister of Economy; the rate was initially set at LE 1.89 = US$1.

May 5. The rates of LE 1.300 = US$1 (buying) and LE 1.303 = US$1 (selling) were established for transactions with Sudan under the bilateral payments agreement.

Payments for Invisibles

February 11. The commercial banks were authorized to use a portion of their available foreign exchange receipts each month to settle debt-servicing obligations falling due after this date on private sector debt denominated in foreign currencies owed to banks operating in Egypt, including branches of foreign banks, provided that debtors’ own foreign exchange accounts had been drawn down. This drawdown requirement would not apply to free accounts. Priority would be given to settlements of private debt obligations related to imports, and the Central Bank would determine the maximum foreign exchange allocation for each commercial bank for this purpose. Debts secured by deposits in foreign exchange or similar guarantees were excluded, and no other transactions were permitted under this arrangement.

September 28. Foreigners licensed to reside in Egypt for a period of ten years were allowed to purchase airline tickets in Egyptian pounds (one-way or round-trip originating in Egypt).

Capital

February 11. (See changes under Payments for Invisibles on servicing of private sector debt.)

El Salvador

(Position on December 31, 1988)

Exchange Arrangement

The currency of El Salvador is the Salvadoran Colón. The Salvadoran colón is pegged to the U.S. dollar, the intervention currency, at Ȼ5.00 = US$1. The rates of the Central Reserve Bank for transactions with the public are Ȼ5.000 buying and Ȼ5.075 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. Foreign exchange held in approved foreign currency deposit accounts may also be sold to specified registered manufacturers/importers by specified exporters directly at a rate which may deviate from the official exchange rate. A stamp tax of 0.1 percent is applicable to all sales of exchange; on amounts below Ȼ100,000 the tax is levied at fixed amounts that may slightly exceed 0.1 percent. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

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 imports in excess of US$300 and for many invisible payments and capital transactions.

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 National Sugar Institute (Inazucar), and those of coffee are governed by the National Coffee Institute (Incafe).

Most of the exchange proceeds from all exports have been centralized at the Central Reserve Bank. The Central Reserve Bank allocates foreign exchange to the commercial banks through the Fondo Operativo, under which each commercial bank is assigned a maximum foreign exchange operating balance. Commercial banks are required to report daily to the Central Reserve Bank all credits and debits to the Fondo, and each week foreign exchange holdings in excess of the assigned limit are transferred to the Central Reserve Bank, while deficiencies may be covered by the Central Reserve Bank. In turn, the commercial banks are required to provide foreign exchange to the private sector in accordance with the following list of priorities: (1) basic foods, medicines, raw materials and other intermediate goods needed for production, machinery, equipment, spare parts, and external debt-service payments; (2) expenses abroad relating to medical treatment, study and travel, and pension transfers; and (3) all other goods, services, transfers, and movements of capital.

Prescription of Currency

On August 20, 1986, a new payments mechanism called the Derecho de Importación Centroamericana (DICA) was approved in principle to settle trade transactions with other countries of Central America.1 The DICAs are U.S. dollar-denominated, non-interest-bearing, negotiable, transferable obligations of the central bank of an importing country, payable in its local currency within a period of 18 months. The issue of DICAs of an importer by the central bank is subject to the acceptance of the exporter. Prior to maturity, DICAs can be freely negotiated between exporters and importers in the region at mutually agreed prices, which can differ from the original nominal value of the DICA; at maturity, the DICAs have to be liquidated at the official exchange rate (or average of official exchange rates in case of multiple exchange rates) by the issuing central bank, which will bear the exchange risk arising from any difference between the date of issue and date of liquidation. Certain DICAs can be liquidated prior to maturity; this occurs when a DICA issued by the central bank of a given country and already used for payment of imports from another country is presented for liquidation by an exporter of the same country that originally issued the DICA. Payments to Mexico are 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 and nonresidents 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 of such accounts.

Foreign Currency Deposit Accounts

Banks may open foreign currency deposit accounts in the name of the enterprises exporting nontraditional goods and services or requiring imported inputs and services for production. 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 provided 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 deposit at rates of up to 2 percent below LIBOR. Transfers of funds between individual holders of foreign currency deposit accounts are prohibited.

Imports and Import Payments

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. Permits for private sector imports that exceed the equivalent of US$300 need to be authorized by the Exchange Control Department of the Central Reserve Bank.

The allocation of foreign exchange for import payments is made according to a set of priority lists. Top priority is assigned to imports of basic foods, medicines, raw materials and other intermediate goods needed for production, machinery, equipment, spare parts, and external debt-service payments.

Imports from the rest of Central America can be financed by sight drafts, letters of credit, direct payments, or the regional clearing arrangement. Imports from outside Central America that can be financed through sight drafts (cobranzas) are limited to US$10,000. Imports from outside Central America in excess of US$10,000 can only be made by means of 90-day letters of credit.2 However, in practice, the Central Reserve Bank also sets limits on the total value of letters of credit each bank can open.

Public sector import payments are made by the External Department of the Central Reserve Bank. The External Department handles all official bilateral lines of credit, and lines of credit for Industrial Reactivation funded by the Inter-American Development Bank.

Imports from countries outside the Central American Common Market (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. Also, 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.

Imports of many nonessential goods are subject to a selective consumption tax at rates ranging between 10 percent and 125 percent.3 Most goods of Central American origin are exempt.

Payments for Invisibles

Payments for invisibles of a personal nature (i.e., medical treatment, study abroad, and foreign travel) are subject to the following limits: (1) up to US$5,000 a year to meet expenses for medical treatment (additional amounts can be authorized in exceptional cases subject to verification) and a guarantee deposit equivalent to 50 percent of the foreign exchange to be placed with the Central Reserve Bank; (2) up to US$8,000 a year for educational expenses, plus US$400 a month for living expenses; and (3) up to US$1,500 a year (or US$75 a day for a maximum of 20 days) for nonbusiness trips to countries in Central America (US$700 a year a child under 16 years), up to US$1,875 a year (or US$125 a day for a maximum of 15 days) for nonbusiness trips to countries outside Central America (US$900 a year a child under 16 years), and up to a maximum of US$150 a day for business trips, subject to the approval of the Central Reserve Bank. A guarantee deposit of 20 percent of the foreign exchange request in excess of US$400 is required by the commercial banks for travel outside of Central America. For residents traveling outside of Central America, the branch of Banco Hipotecario (a mortgage bank) at the international airport is authorized to sell foreign exchange up to US$800 (on the basis of US$125 a day), without a guarantee deposit, if a traveler can verify that he is still within the applicable annual limits for travel. The authority to grant foreign exchange for expenses relating to foreign travel and study abroad is delegated to the commercial banks. In the case of private remittances, the Central Reserve Bank can authorize pension payments to retired Salvadoran diplomats living abroad with more than ten years of government service.

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.

Export proceeds from coffee, sugar, and cotton must be surrendered directly to the Central Reserve Bank. In addition, all other export proceeds in excess of US$10,000 received through the commercial banks must be surrendered to the Central Reserve Bank within one working day.

The collection term for export payments normally must not exceed 90 days, but longer credit terms may be authorized by the Exchange Control Department. The Central Reserve Bank gives “prompt proceeds surrender bonds” to exporters of nontraditional goods and services who sell their proceeds within 180 days of receipt. The face value of these bonds, which is equivalent to net of financial charges which the Central Reserve Bank pays on short-term loans, may be freely negotiated and can be used as a warranty for banking credits to cover advanced deposits for imports or to make settlements on credits contracted with Central Reserve Bank resources.

Exporters of nontraditional products receive a “certificate for discounting taxes” up to the equivalent of 20 percent of the value added of export products. These certificates may be used for payment of direct and indirect taxes.

Exports of coffee, sugar, and shrimp 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. Embassies, consulates, and offices of international organizations in El Salvador and their employees are allowed to deposit their exchange receipts in the special foreign currency accounts in their names for purposes of meeting their foreign exchange requirements. Travelers may bring in Ȼ200 in domestic notes and coins; this limit is, however, subject to modification to facilitate border trade with other Central American countries.

Capital

All exchange receipts resulting from capital transactions must be surrendered to the monetary authorities, including direct and indirect foreign investment. 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) 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 enterprises (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.

Payments abroad representing capital transfers 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 external loans. 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. The Central Reserve Bank is authorized to set ceilings on the utilization of foreign credit by the commercial banks and the mortgage bank.

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 Ȼ25, Ȼ50, Ȼ100, and Ȼ200 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 for dental purposes.

Changes During 1988

Imports and Import Payments

January 1. The number of prohibited import items was reduced from 170 to 106 items.

February 1. The rate of advance import deposit requirement for letters of credit was lowered from 100 percent to 75 percent.

February 1. The 20 percent guarantee deposit requirement was abolished.

June 1. The number of prohibited import items was reduced from 106 to 28 items.

June 1. The rate of advance import deposit requirement for letters of credit was lowered from 75 percent to 50 percent.

September 1. The rate of advance import deposit requirement for letters of credit was reduced from 50 percent to 25 percent.

December 31. The advance import deposit requirement for letters of credit was abolished.

Equatorial Guinea

(Position on December 31, 1988)

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. There are no arrangements for forward cover against exchange risk operating in the official or the commercial banking sector.

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 Francs.

Imports and Import Payments

Imports from South Africa are prohibited. All other imports in excess of CFAF 50,000 in value are subject to license, 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 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. Of that amount, CFAF 150,000 may be bills. Travelers must present certificates of their activity and permission from their 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 bank notes.

Nonresident travelers may take out 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 30 days of the payment date stipulated in the sales contract. Payments for exports must be made within 30 days of 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. The approval of the Directorate of Mines is required to hold gold in any other form. Such approval is not normally given, as there are no industrial users in Equatorial Guinea. 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 allowed 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 1988

No significant changes occurred in the exchange and trade system.

Ethiopia

(Position on December 31, 1988)

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. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

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 department 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. Arrears are maintained with respect to external payments.

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 be made only 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 to purchase 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 be replenished only 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, and all imports from other sources require a license. 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 group 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.

Certain imports (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’ credits requires prior approval of the terms and conditions of the credit, and such imports are limited to raw and intermediate materials, pharmaceuticals, and machinery and transport equipment.

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 of 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 20 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 at 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 allocation for medical treatment and travel abroad of up to Br 10,000. 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 are also prohibited. 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). Exports of hides and skins are regulated and are prohibited until the needs of local factories have been met.

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 prevent 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 non-registered 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 1988

No significant changes occurred in the exchange and trade system.

Fiji

(Position on December 31, 1988)

Exchange Arrangement

The currency of Fiji is the Fiji Dollar, the external 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 weighting formula is normally reviewed every three years; the most recent revision was made in 1986. 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 30, 1988, the midpoint exchange rate for the Fiji dollar in terms of the U.S. dollar was F$1.4049 per 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.

Fiji formally accepted the obligations of Article VIII, Sections 2, 3, and 4 of the Fund Agreement, as from August 4, 1972.

Administration of Control

Exchange control is administered by the Reserve Bank of Fiji, acting as agent of the Government; the Reserve 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 Trade and Commerce 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.

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, steel bars, steel shelving and racking, tubes and pipes of iron or steel, cement, certain foodstuffs, alcoholic beverages, kerosene stoves, safety matches, seed potatoes, polyvinyl chloride (PVC) pipes, PVC-insulated electric wires and wiring pin clips, polypropylene bags and ropes, clinker, polypropylene fabrics, knitted fabrics, 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. A wide range of consumer goods is 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 that have been imported under either a specific import license or an open general license. Authorized banks may allow advance payments of up to F$2,000 for all imports, provided the goods are imported into Fiji within 90 days of the date the advance payment is made. Approval of the Reserve Bank of Fiji is required in cases where amounts exceed F$2,000.

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. Approval of the Reserve Bank of Fiji, however, is required in cases where amounts exceed the established limits. Residents of Fiji traveling to other countries may obtain from a bank, without reference to the Reserve Bank, a foreign currency travel allowance for a private or business visit up to the equivalent of F$2,000 a person a journey; amounts in excess of this limit are approved by the Reserve Bank of Fiji in case of genuine need supported by documentary proof. 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. Residents of Fiji are allowed to make cash gifts to nonresidents equivalent to F$200 a donor a year; additional funds are permitted in compassionate cases.

Foreign-owned companies must apply to the Reserve Bank for permission to transfer dividends abroad. The policy of the Reserve Bank is to allow the remittance of the current year’s profits and one year’s retained earnings. The transfer abroad of rent to nonresidents is subject to approval by the Reserve Bank.

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.

Receipts of interest, dividends, and amortization are required to be surrendered on a half-yearly basis unless approval for reinvestment abroad was given by the Reserve Bank.

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. Overseas investments and other forms of capital transfers abroad have been temporarily suspended. The purchase of personal real property abroad is not permitted.

Foreign-owned companies are permitted to repatriate proceeds from the sale of assets up to the limit of F$1 million a company a year.

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. The transfer of funds by emigrants on departure is limited to F$20,000 for married and F$13,000 for single applicants. Thereafter, the emigrant is allowed an automatic transfer of F$3,000 a month commencing three months after emigration until the amount cleared by the Inland Revenue Department has been fully transferred.

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) that 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 in Fiji or abroad.

The facility for residents to purchase foreign currency up to a maximum of F$5,000 a family a year to acquire foreign currency securities has been suspended. The purchase of personal real property outside Fiji is not permitted. Special tax incentives are granted for investments in the tourism 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. Prepayment of external borrowing is prohibited and all repayments must be in conformity with the schedule in the loan contract.

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 but is subject to a fiscal tax of 10 percent; 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 25 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 are free of export duty but they require licenses if their value exceeds F$1,000. Exports of gold bullion are subject to an export duty of 2 percent. 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 1988

Imports and Import Payments

April 1. Authorized banks were permitted to approve advance import payments of up to F$2,000, provided that the goods are imported into Fiji within 90 days of the date of advance payments. Advance import payments exceeding F$2,000 continue to require Reserve Bank approval.

Payments for Invisibles

July 8. The transfer abroad of rent to nonresidents was made subject to approval by the Reserve Bank.

December 13. Authorized banks were permitted to approve travel allowances up to F$2,000 a person a journey and gift remittances of F$200 a person a year.

December 13. One year’s retained earnings were permitted to be remitted abroad.

Capital

September 1. The control on transfers of emigrant funds was liberalized as follows: (1) the initial emigration allowance was increased to F$20,000 for married and to F$13,000 for single applicants; (2) thereafter, the emigrant is allowed to transfer F$3,000 a month commencing three months after emigration until the amount cleared by the Inland Revenue Department has been fully transferred.

December 13. Foreign-owned companies were allowed to repatriate proceeds from the sale of assets up to the limit of F$1 million a company a year.

Finland

(Position on December 31, 1988)

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 (Bank of Finland) within a margin established by the Council of State; during January 1984–November 1988, the range was 101.3–106.0, and since December 1988 the range has been 100.5–106.8 (1982 = 100). 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 30, 1988, the rates were Fmk 4.161 and Fmk 4.177 per US$1, respectively. 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 taxes or subsidies on purchases or sales of foreign exchange.

Authorized banks may deal among themselves, with residents, and with nonresident banks in U.S. dollars and other convertible currencies. Nonbanks may obtain forward cover for authorized transactions only. Forward premiums and discounts quoted by authorized banks reflect interest rate differentials in the countries of various currencies. The Suomen Pankki does not provide forward cover for commercial banks. It also does not quote forward ruble rates.

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 in practice 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 convertible currency countries and the bilateral countries.1 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 Finnish markka for Bulgaria and 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 two categories of nonresident accounts: Convertible Accounts and Nonresident Markka Accounts.2

Convertible Accounts are held by nonresidents in any convertible currency, including Finnish markkaa. 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.

Nonresident Markka Accounts comprise all other nonresident accounts. They are held in markkaa and are intended primarily for payments of a capital nature. The transfer abroad of funds in a Nonresident Markka Account requires the special permission of the Suomen Pankki in most cases. A monetary institution may credit a Nonresident Markka 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 or on the authorized banks’ OTC markets. 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 received from a resident in a permissible manner, and with interest accrued on funds held in the account.

Nonresident Markka Accounts may be debited freely for noncommercial current expenses in Finland of and for the account of the holder, and funds in these accounts may be used for capital payments when the transaction does not require authorization or is authorized for transferable funds.

Imports and Import Payments

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 goods3 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 classified4 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.

Foreign exchange is granted freely by authorized banks for all imports for which licenses are granted, 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 six months after the date of customs clearance of the goods; if the import payment is made to the seller through foreign financing credits arranged by an authorized Finnish bank, the credit period may not exceed six months without a special permit.

Payments for Invisibles

Payments in respect of invisible transactions are not restricted. The authorized banks have general permission to effect payments for most invisibles.

A Finnish resident traveling abroad may purchase from commercial banks foreign exchange without a limit on the basis of a breakdown of costs drawn up by the purchaser; the maximum limit is Fmk 10,000 a trip if a cost breakdown is not provided. Nonresident travelers may take out of the country Fmk 10,000 a trip in Finnish or foreign bank notes and coin and any amount in Finnish or foreign bank notes and coin declared upon entry; resident travelers may take out of the country foreign or domestic currency, or any combination of these, up to Fmk 10,000, without the export certificate for means of payment.

Exports and Export Proceeds

Exporters are required to repatriate foreign exchange proceeds within eight days of collection, which may then be held in a domestic 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.

Sales of arms are strictly controlled. Exports to the U.S.S.R., which is outside the scope of agreements on the reciprocal removal of obstacles to trade, are allocated by means of bilateral trade arrangements.

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 unused 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.

Capital

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 inflows. The Suomen Pankki has exempted from regulation foreign credits with at least a five-year maturity that have been raised by companies. The authorized banks and certain other financial institutions are entitled to act as intermediaries between such credits and their corporate customers. Early repayments require the permission of the Suomen Pankki. Lending to nonresidents by nonbanks is generally restricted to export credits. Permission is not required for customary export credits up to six months; suppliers’ credits over three months to residents of Bulgaria, the German Democratic Republic, and the U.S.S.R. are, however, subject to special permit by the Suomen Pankki. International banking activities of Finnish authorized banks are free of regulations, but are subject to certain supervisory reporting requirements.

Most outward transfers of nonresident capital are subject to approval by the Suomen Pankki. Authorization is granted for residents of Finland to invest in foreign listed securities, to place funds in accounts with foreign monetary institutions, or to leave foreign claims unrepatriated up to a cumulative total of the equivalent of Fmk 300,000 a person. Outward direct investments are freely permitted for nonfinancial companies without applying to the Suomen Pankki. Inheritances are transferred to the beneficiaries after verification. Persons who have resided outside Finland during the previous calendar year and continue to do so are allowed to transfer abroad their net assets in Finland in one lump sum, subject to the prior approval of the Suomen Pankki.

Nonresidents may purchase Finnish securities only if they are “free shares” or related options quoted on the Helsinki Stock Exchange or on the authorized banks’ OTC market in Finland through an authorized bank or a securities agent against convertible currencies, or by debiting a Convertible Account. A nonresident purchaser of Finnish shares is permitted to sell them through an authorized bank or a securities agent and to transfer abroad the net proceeds of the sale in a convertible currency. The acquisition of shares quoted on the Helsinki Stock Exchange or on the authorized banks’ OTC markets in Finland with funds from Nonresident Markka Accounts is also permitted automatically if they are acquired by an authorized bank or a securities agent. Other transactions in securities require approval in most cases.

Inward direct investments require the approval of the Council of State if they involve purchases of property and real estate; other inward direct investments are approved by the Ministry of Trade and Industry, and 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 granted if the underlying investment has been approved by the Ministry of Trade and Industry. Repatriation of direct investment is subject to the verification of the Suomen Pankki. Outward transfers of capital 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, securities agents, and insurance and other companies have permission to purchase foreign and Finnish securities issued abroad. Purchases of real estate abroad are authorized up to a limit of Fmk 1 million a person without the special permit of the Suomen Pankki. The upper limit on shares entitling part-time use of real estate abroad is Fmk 1 million. The Suomen Pankki may grant permission for acquisition of a dwelling at a price exceeding Fmk 1 million.

Finnish emigrants are permitted to transfer abroad assets owned prior to their departure.

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 granted liberally.

Changes During 1988

Exchange Arrangement

November 30. The fluctuation range of the currency index was widened to 100.5–106.8 (1982 = 100).

Capital

August 1. The Suomen Pankki relaxed restrictions on direct investment, on purchases of foreign securities, and on the acquisition of real property and dwellings, by raising the ceiling to Fmk 0.3 million. The Suomen Pankki also announced that it would consider applications for exceptions applicable to the ceilings for enterprises, based on their size or their foreign business. In addition, direct foreign investment by nonfinancial enterprises will no longer require special permission from the Suomen Pankki.

France

(Position on December 31, 1988)

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 plus 2.2753 percent or minus 2.2247 percent (in the case of the Italian lira, 6 percent) against 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, 1988, these rates were as follows:

Specified Intervention

Rates Per:
Francs
Upper limitLower limit
100 Belgian or Luxembourg francs16.63115.899
100 Danish kroner89.92585.970
100 deutsche mark343.05327.92
100 Netherlands guilders304.44291.04
100 Irish pounds918.90878.50
100 Italian lire0.49410.4383

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. Buying and selling rates for 20 currencies are quoted daily on the basis of market rates.1 On December 29, 1988, the buying and selling rates for the U.S. dollar were F 6.0875 and F 6.0995, 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 CFPF1 = 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.

Registered 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. Registered 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. Firms engaged in international trade may purchase foreign exchange forward without restriction. Forward cover in foreign currency, including the ECU, for import payments is free. Forward cover may be obtained freely for future outlays for direct investment and debt-service obligations, and there is no limit on the maturity of contract. Forward sales of foreign currency are not restricted.

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 apply in all territories of the French Republic, that is, in continental France, Corsica, the Overseas Departments (Guadeloupe, Martinique, French Guiana, and Réunion), Mayotte, St. Pierre and Miquelon, 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); all 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; payments between France and foreign countries may be subject to exchange regulations.

The exchange control regulations include controls over inward direct investment 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). The majority of exchange operations are free from any prior authorization; these include direct investments abroad (except in South Africa) and direct investment from the European Communities (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 and 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 registered 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 a registered bank for nonresidents, including French nationals (other than officials) who are residing abroad. All overdrafts and advances on non-resident-held franc accounts are subject to general or specific permission. Nonresident accounts may be operated freely.

If francs accruing to a nonresident are not transferable, or are not immediately transferable, they may be credited to a Suspense Account in Francs in the name of the beneficiary. Emigrants of foreign or French nationality may take out all of their assets upon departure. In addition, nonresidents may hold foreign currency accounts with French and foreign-owned banks.

Imports and Import Payments

Goods originating in and shipped from other countries that are accorded privileged treatment in respect of trade transactions (see section on Exchange Control Territory, above) are generally admitted free of quantitative restrictions and individual licenses. Imports of goods that originate in other countries and are not covered by French import liberalization require individual licenses. Some imports from non-EC countries are subject to minimum prices; these require an administrative visa and sometimes, exceptionally, an import license. Certain imports require certificates of origin.

For import control purposes, countries other than those that are accorded privileged treatment are divided into four groups according to the extent of import liberalization: (1) the former Organization for European Economic Cooperation (OEEC) countries, their dependent territories and certain former dependent territories, Andorra, Canada, Egypt, Ethiopia, Fiji, Finland, Israel, Jordan, Lebanon, Liberia, Sudan, Syrian Arab Republic, United States, Western Samoa, and Yugoslavia; (2) some specified countries;4 (3) the Eastern European countries (Albania, Bulgaria, Czechoslovakia, Hungary, Poland, Romania, and U.S.S.R.), People’s Republic of China, Democratic People’s Republic of Korea, and Mongolia; and (4) German Democratic Republic. Goods covered by the import liberalization arrangements applicable to one country may be imported freely from another country, provided that the country of origin and the country of shipment both benefit from the same degree of liberalization.

Imports of practically all industrial products from countries in group (1) are free of quantitative restrictions, but restrictions are applied to a number of agricultural and electronic products; there is relatively little difference between the lists of goods that may be imported freely from different countries in this group. Imports of certain industrial products from countries in group (2) are restricted, and restrictions are applied to these and to certain additional industrial products from group (3) countries. For some commodities, global quotas are allocated annually (petroleum and petroleum products) or semiannually and apply to all countries (other than those that have bilaterally negotiated quotas or receive privileged treatment). Imports from all countries of certain agricultural items and certain raw materials are free of quantitative restrictions.

Imports from non-EC countries of most products covered by the Common Agricultural Policy (CAP) of the EC are subject to variable import levies that 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.

Liberalized imports are not subject to trade controls, but do require a customs document that constitutes the customs declaration. For some liberalized imports, an administrative visa issued by the Central Customs Administration or by the appropriate ministry is required on an import declaration. Imports of the products of the European Coal and Steel Community (ECSC) require such administrative visas when originating in non-ECSC countries.

Other imports generally require individual import licenses. These are granted up to quotas determined on an individual commodity basis or for a group of commodities and are applicable to specified countries or areas in accordance with trade agreements or an import plan drawn up for a definite period. Imports of some products must pass through designated customs offices. Documents accompanying goods passing through customs must be written in or translated into French.

Quantitative import restrictions consist of EC-wide restrictions and national restrictions. The former include bilaterally agreed restrictions on textile imports under the Multifiber Arrangement (MFA) and voluntary export restraints on a number of agricultural and industrial products negotiated at the EC level. EC-wide restrictions are enforced through import licensing subject to prior authorization. National restrictions on imports from third countries that are in free circulation within the EC are enforced through temporary import restrictions authorized by the EC Commission under Article 115 of the EEC Treaty. In cases where the restrictions are not officially recognized by the EC (e.g., industry-to-industry understandings that do not directly involve member governments), import restrictions are enforced through national import licensing or standards and certification procedures. Automatic licensing is granted for imports that are under surveillance at either the EC or national level.

Payments for imports from foreign countries must be made by credit to a Foreign Account in Francs or with foreign currency purchased in the French exchange market. Payments may be made by transfer through a registered bank, by credit card, by check, or by bank notes. The amounts that may be transferred through postal channels are not subject to limitation, but, in practice, the Postal Administration does not make import payments valued at over F 250,000.

Registered banks may without special authorization permit advance payments to be made that are provided for in the commercial contract. There is no restriction on the use of suppliers’ credits. Importers, exporters, and international trading houses may freely open accounts in foreign currencies in France with registered banks or abroad without limit on the credit balance.

Payments for Invisibles

Payments for current invisibles to foreign countries are controlled but are not restricted as to amount. If justifying documents are presented and certain exchange control requirements are met, registered banks are permitted to approve applications for payments for all categories of current invisibles without any limitation. Any resident may make remittances abroad up to the equivalent of F 50,000 a transaction, provided that the transfers do not serve as a means of accumulating funds abroad. Outward remittances for family support abroad and transfers of donations to nonresidents are freely permitted.

Irrespective of the exchange control regulations, certain transactions between persons or firms in France and abroad are subject to restriction; these include certain transactions relating to insurance, reinsurance, and road and river transport.

There are no limits on expenditures for travel abroad. There is no restriction on the amount of foreign or domestic bank notes resident and nonresident travelers may take out, but amounts exceeding F 50,000 and its equivalent must be declared to customs upon departure.

Exports and Export Proceeds

Certain goods on a prohibited export list may be exported only under a special license. Some other exports also require individual licenses, but if the total value does not exceed F 1,000 (F 5,000 for art objects or collectors’ items), these exports may be permitted without any formality, subject to certain exceptions.

Exports to foreign countries are not subject to any exchange control, except when they are made by an occasional exporter, in which case payment must be received through the exchange market. The repatriation of export proceeds5 and, where appropriate, the surrender by sale in the exchange market of proceeds from exports to foreign countries are required not later than three months from the date of receipt. Exporters are allowed forward coverage of an unlimited period, and may hold foreign currency accounts at home and abroad without limit on the credit balance. Registered banks may freely extend foreign currency advances to exporters; such advances and their repayment may be settled by the receipts of the corresponding exports.

Certain goods purchased in France by persons not normally residing in France are considered as exports, even when paid for in francs, and are exempt from taxes.

Proceeds from Invisibles

Proceeds from transactions in invisibles with Monaco and the Operations Account countries may be retained. As in the case of proceeds of occasional exporters, all amounts due from residents of other countries in respect of services and all income earned in those countries from foreign assets (with the exception of income from work in border areas) must be repatriated by occasional exporters of services and, where appropriate, surrendered within three months from the due date. With minor exceptions for certain types of transactions, services performed for nonresidents do not require licenses.

Resident and nonresident travelers may bring in any amount of bank notes and coin (except gold coin) in francs, CFA francs, CFP francs, or any foreign currency; amounts exceeding F 50,000, however, must be declared to customs upon arrival. The exchange of bank notes issued by Algeria, Morocco, and Tunisia is prohibited at the request of those countries. Resident travelers must sell in the exchange market any foreign bank notes or traveler’s checks in excess of F 50,000 within three months of entry.

Capital

Capital movements between France and Monaco and the Operations Account countries are free of exchange control; purchases of French and foreign securities abroad and the corresponding outward transfers of resident-owned capital are free; capital receipts from foreign countries are permitted freely, provided that the foreign exchange proceeds are surrendered by sale in the exchange market by residents who do not have a professional activity in exporting, importing, or international trading (but see below for special controls over borrowing abroad and over inward direct investment). Capital assets abroad of residents are not subject to repatriation. The transfer abroad of non-resident-owned funds, including the sales proceeds of capital assets, is not restricted.

French and foreign securities held in France by nonresidents may be exported, provided that they have been deposited with a registered bank in a foreign dossier (dossier étranger de valeurs mobilières); French securities held under a foreign dossier can also be sold in France, and the sales proceeds can be transferred abroad. Foreign securities held in France by a nonresident must be deposited with a registered bank; French securities held in France by nonresidents need not be deposited but cannot be dealt with or exported unless they have been deposited. Foreign securities held in France by residents must be deposited with a qualified bank or broker. Residents may hold French and foreign securities abroad under the control of a French registered bank or broker. The export for the account of residents of French securities held in France is prohibited, except when they are to be sold abroad.

Subject to compliance with the special regulations concerning inward and outward direct investment, residents may purchase abroad French and foreign securities on stock exchanges and securities that are not quoted on a recognized stock exchange through registered banks. French and foreign securities may be held or sold abroad, but they may also be imported and then either held or sold on a French stock exchange. Correspondingly, nonresidents holding French or foreign securities abroad (whether acquired before November 24, 1968 or later) may import them into France through a registered bank and hold them in a foreign dossier or sell them on a French stock exchange.

The exchange control regulations include controls over inward direct investment on the basis of Decree No. 68-1021 of November 24, 1968. This decree applies to financial relations with all countries except those belonging to the French Franc Zone (i.e., Operation Account countries). As of June 1, 1988, residents may freely contract foreign loans in foreign currencies and in French francs; such borrowings in French francs exceeding F 50 million an operation were previously subject to prior authorization. Certain exchange operations are free from any prior authorization; these include direct investments coming from EC countries, which are only subject to prior notification. As of September 24, 1988, prior declaration and authorization are no longer required for direct investments by residents of EC and non-EC countries, except in cases where acquisition of existing French firms is involved.

Foreign direct investments in France require prior declaration to the Ministry of Economy, Finance, and the Budget. Direct investments are defined as investments leading to control of a company or enterprise. Any participation exceeding 20 percent of the capital is considered as direct investment. In the case of firms whose shares are quoted on the stock exchange, this 20 percent threshhold applies only to each individual participation and not to the total of foreign participations. To determine whether a company is foreign controlled, the Treasury may also take into account any special relationships resulting from such factors as stock options, loans, patents and licenses, and commercial contracts. Foreign companies controlled by EC residents are free to establish a subsidiary and to take over any participation in the equity capital of a French company, within one month following the declaration in the case of investments not exceeding F 10 million and within two months of declaration in the case of investments exceeding F 10 million. Foreign companies controlled by other nonresidents may take over any participation under F10 million in a French company within one month following the declaration, unless the Ministry of Economy, Finance, and the Budget formally notifies the companies of its decision to postpone the operation; such a decision is highly exceptional. Whatever the nationality of a nonresident investor, the Treasury is, however, entitled to issue a finding within one month to forbid such an establishment or participation, should it be deemed to jeopardize public health, order, security, or defense. Takeovers of French companies by non-EC residents amounting to more than F 10 million, as well as changes in a shareholder’s ownership percentage of any foreign-controlled corporation, require an authorization. Exemptions from declaration or approval requirements are granted for increases of equity capital of a subsidiary.

The liquidation proceeds of foreign direct investment in France may be freely transferred abroad; the liquidation itself must be reported to the Ministry within 20 days of its occurrence. Direct foreign investments by residents are not restricted, except those located in South Africa, but must be reported to the Ministry of Economy within 20 days if they exceed F 5 million. The liquidation of direct investments abroad is free from any prior application, provided that the corresponding funds are reported to the Ministry of Economy if they exceed F 5 million.

Foreign issues on the French capital market, except issues originating from EC countries, are subject to prior authorization by the Ministry of Economy, Finance, and the Budget. The requirement is applicable also to the Operations Account countries. Exempt from authorization, however, are operations in connection with (1) loans backed by a guarantee from the French Government, and (2) shares similar to securities that are already officially quoted on a stock exchange in France.

Borrowing abroad by physical or juridical persons, whether public or private persons, whose normal residence or registered office is in France, or by branches or subsidiaries in France of juridical persons whose registered office is abroad, is unrestricted. Residents who do not have a professional activity in exporting, importing, or international trading are required to expatriate and surrender such loans. Borrowing abroad in French francs must be repatriated. The application of the controls over direct investment and borrowing is delegated to the Bank of France insofar as they relate to French firms that are mainly engaged in real estate business.

Lending abroad is subject only to exchange control authorization by the Bank of France within the framework of directives issued by the Treasury. Since the imposition of exchange control in 1968, registered banks have been virtually free to lend foreign currency to nonresidents, subject to certain reservations in respect of the granting of guarantees and varying limitations on their external position, and to residents. Lending to nonresidents in francs is free if financed by funds deposited by nonresidents.6 Registered banks’ foreign currency assets and their overall liabilities in francs and foreign currency to nonresidents are free from limitation. Nonresidents may freely purchase French short-term securities, including treasury bills, bons de caisse, and private drafts.

Gold

Residents are free to hold, acquire regularly, and dispose of gold in any form in France. They may continue to hold abroad any gold they held there prior to November 25, 1968. There is a free gold market for bars and coin in Paris, to which residents and nonresidents have free access and in which normally no official intervention takes place.

Imports and exports of “monetary” gold (defined as gold having a fineness or a weight that is recognized in the gold market) into or from the territory of continental France are now governed by the regulations applying to ordinary goods. Movements of industrial gold are subject to a simple declaration, as are imports and exports of manufactured articles containing a minor quantity of gold, such as gold-filled and gold-plated articles. Collectors’ items of gold and gold antiques are subject to specific regulations.

Most gold coins are traded on the Paris stock exchange. In domestic trading, purchases of bars and coin are not subject to value-added tax. Imports of monetary gold, except gold imported by the Bank of France, are subject to customs duty and value-added tax. Domestic transactions in gold and gold coin are subject to capital gains tax.

Changes During 1988

Imports and Import Payments

(See Appendix for a summary of antidumping duties, countervailing charges, and import surveillance measures introduced or eliminated by the European Economic Community during 1988, page 561.)

Capital

June 1. Domestic enterprises were permitted to operate foreign currency accounts in France or abroad in foreign exchange or French francs without any restriction; the restriction on borrowing abroad in excess of F 50 million was abolished.

September 24. Prior authorization was no longer required for direct investments by residents of non-EC countries, except in cases where acquisition of existing French firms is involved.

Gabon

(Position on December 31, 1988)

Exchange Arrangement

The currency of Gabon 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 at present take place at the rate of CFAF 50 = F 1. Buying and selling rates for certain 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, and include a commission. Commissions are charged at the rate of 0.25 per mill on transfers made by the banks for their own accounts, and 0.225 per mill on all private capital transfers to countries that are not members of the BEAC, except those made for the account of the Treasury, national accounting offices, national and international public agencies, and private entities granted exemption by the Ministry of Finance, Budget, and Participations because of the nature of their activities. There are no taxes or subsidies on purchases or sales of foreign exchange. There are no arrangements for forward cover against exchange rate risk operating in the official or the commercial banking sector.

With the exception of those relating to gold, Gabon’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, Chad, the Comoros, the Congo, Côte d’Ivoire, Equatorial Guinea, 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 Directorate of Financial Institutions in the Ministry of Finance, Budget, and Participations supervises borrowing and lending abroad. Exchange control is administered by the Minister of Finance, Budget, and Participations, who has partly delegated his approval authority for current payments to the authorized banks and that with respect to the external position of the banks to the BEAC. All exchange transactions relating to foreign countries must be effected through authorized intermediaries—that is, the Postal Administration and authorized banks. Import and export authorizations, where necessary, are issued by the Directorate of External Trade of the Ministry of Commerce and Industry.

Prescription of Currency

Since Gabon 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 to Foreign Accounts in Francs when they have been mailed to the BEAC agency in Libreville by an authorized bank’s foreign correspondent. Otherwise, the crediting to nonresident accounts of BEAC 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.

Imports and Import Payments

In general, imports from member countries of the Central African Customs and Economic Union (UDEAC) are free of formalities; imports of refined vegetable oil from these countries require prior approval. All imports from countries outside the UDEAC are subject to an authorization to import (when the value is more than CFAF 500,000). All imports, of any origin, are subject to authorization. For perishables and spare parts, an anticipatory authorization is given to simplify administrative procedures. Imports from countries outside the UDEAC that are similar to, and compete with, domestic products are subject to licensing, but, with a few exceptions2 established by Ministerial Order, import authorizations are granted liberally in practice. Some imports are prohibited for security and health reasons. Imports of refined vegetable oil are suspended except when they originate from member countries of the UDEAC. All imports of commercial goods must be insured through authorized insurance companies in Gabon.

All import transactions relating to foreign countries must be domiciled with an authorized bank. Authorizations duly endorsed by the Ministry of Foreign Trade and the Ministry of Finance, Budget, and Participations (Directorate of Financial Institutions) entitle importers to purchase the necessary foreign exchange, provided that the shipping documents are submitted to the authorized bank.

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, which is granted when the appropriate documents are submitted. 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.

For tourist travel, residents traveling to countries other than France (as defined above), Monaco, and the Operations Account countries may obtain an exchange allocation equivalent to CFAF 200,000 a person a trip (CFAF 100,000 for children under 10 years) for any number of trips a year; any foreign exchange remaining after return to Gabon must be surrendered. For business travel to foreign countries, there is a special allocation equivalent to CFAF 25,000 a day, subject to a maximum of CFAF 500,000 a trip. Tourist and business travel allocations may not be combined. Travelers to foreign countries may take out up to a maximum of CFAF 25,000 in BEAC bank notes; the amount taken out is not deducted from the travel allocation. Travelers to France, Monaco, and the other Operations Account countries may not export CFA or French bank notes in excess of an amount equivalent to CFAF 200,000 (CFAF 100,000 for children under 10 years) for tourist travel; for business travel the amount of such bank notes that may be carried out is the equivalent of CFAF 25,000 a day and CFAF 500,000 a trip. Transfers may be effected without limit through the banking or postal systems.

Exports and Export Proceeds

Exports require authorization, irrespective of destination. Export transactions relating to foreign countries must be domiciled with an authorized bank. Export proceeds received in currencies other than those of France or an Operations Account country must be surrendered. Export proceeds normally must be received within 150 days after the arrival of the commodities at their destination. The proceeds must be collected and, if received in a foreign currency, surrendered within one month of the due date.

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 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) of countries outside the French Franc Area.

Capital

Capital movements between Gabon and France (as defined above), Monaco, and the Operations Account countries are free of exchange control; capital transfers to all other countries require the approval of the Directorate of Financial Institutions 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 Gabon by residents or nonresidents must be deposited with authorized banks in Gabon.

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 Gabon; these controls relate to the transactions themselves, not to payments or receipts. With the exception of controls over the sale or introduction of foreign securities in Gabon, the control measures do not apply to France (as defined above), Monaco, and the Operations Account countries.

Direct investments abroad3 must be declared to the Ministry of Finance, Budget, and Participations unless they take the form of a capital increase resulting from reinvestment of undistributed profits; the full or partial liquidation of such investments also must be declared to the Ministry unless the operation involves the relinquishing of a participation that had previously been approved as constituting a direct investment abroad. Foreign direct investments in Gabon4 must be declared to the Ministry unless they take the form of a capital increase resulting from reinvestment of undistributed profits; within two months from receipt of the declaration, the Ministry may request the postponement of the project. The full or partial liquidation of direct investments in Gabon must also be declared to the Ministry unless the operation involves the relinquishing of a participation that had previously been approved as constituting a direct investment in Gabon. Both the making and the liquidation of direct investments, whether these are Gabonese investments abroad or foreign investments in Gabon, must be reported to the Ministry within 20 days following 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 Gabon requires prior authorization by the Ministry of Economy and Finance. Exempt from authorization, however, are operations in connection with (1) loans backed by a guarantee from the Gabonese Government, and (2) shares similar to securities whose issue, advertising, or offering for sale in Gabon has previously been authorized.

Borrowing abroad by physical or juridical persons, whether public or private, whose normal residence or registered office is in Gabon, or by branches or subsidiaries in Gabon of juridical persons whose registered office is abroad, requires prior authorization by the Ministry of Finance, Budget, and Participations. 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 Gabon and countries abroad or between foreign countries in which these persons or firms take part; (3) loans contracted by registered banks; and (4) loans other than those mentioned above, when the total amount outstanding 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 declared to the Directorate of Financial Institutions within 20 days of the operation, unless the total outstanding amount of all loans contracted abroad by the borrower is CFAF 5 million or less.

Lending abroad by physical or juridical persons, whether public or private, whose normal residence or registered office is in Gabon, or by branches or subsidiaries in Gabon of juridical persons whose registered office is abroad, requires prior authorization by the Ministry of Finance, Budget, and Participations. The following are, however, exempt from this authorization: (1) loans granted by registered banks; and (2) other loans, when the total amount outstanding 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 declared to the Directorate of Financial Institutions within 20 days of the operation, except when the total outstanding amount of all loans granted abroad by the lender does not exceed CFAF 5 million.

Under the Investment Code of December 4, 1961, as amended on March 23, 1967 and July 9, 1971, any enterprise to be established in Gabon, 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. A minimum of 10 percent state participation is required for any enterprise located in Gabon. The Code provides for four categories of preferential treatment. In addition to fiscal privileges, eligible companies may receive protection against foreign competition and may be given priority in the allocation of imports, public credit, and government contracts. A Presidential Decree of April 11, 1975 provides that foreign companies investing in Gabon must offer shares for purchase by Gabonese nationals. Non-Gabonese firms or individuals are not permitted to own land in Gabon.

Gold

Residents are free to hold, acquire, and dispose of gold in any form in Gabon. Imports and exports of gold require the authorization of the Ministry of Finance, Budget, and Participations. 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). The export of gold is the monopoly of the Société Gabonaise de Recherches et d’Exploitation Minières (Sogarem). Imports of gold exempted from licensing and authorization requirements are subject to customs declaration.

Changes During 1988

No significant changes occurred in the exchange and trade system.

The Gambia

(Position on December 31, 1988)

Exchange Arrangement

The currency of The Gambia is the Gambian Dalasi. On January 20, 1986, the previous system of a fixed peg to the pound sterling was abolished, and a floating exchange rate system was introduced. Commercial banks are free to transact either among themselves or with customers at exchange rates agreed on by the parties to these transactions. The Central Bank of The Gambia (CBG) conducts a fixing session with the participation of the commercial banks to set the exchange rate to value official foreign exchange transactions during the following week. There are no taxes or subsidies on purchases or sales of foreign exchange. On December 31, 1988, the midpoint exchange rate of the dalasi in the interbank market was D 6.90 per US$1.

Administration of Control

Exchange control policy is determined by the Ministry of Finance and Trade. The day-to-day administration of exchange control is carried out by the CBG. The commercial banks, which have been appointed as authorized dealers, may authorize sales of foreign currencies for all current transactions. The Ministry of Finance and Trade is responsible for the issue of import and export licenses.

Arrears are maintained with respect to external payments incurred before the introduction of the floating exchange system.

Prescription of Currency

Settlements with other countries may be made and received in dalasis or pounds sterling or in any other convertible currency from nonresident sources. Settlements with the Central Bank of West African States (BCEAO) (Benin, Burkina Faso, Côte d’Ivoire, Niger, Senegal, and Togo), and Ghana, Guinea, Guinea-Bissau, Liberia, Mali, Mauritania, Nigeria, and Sierra Leone are normally made through the West African Clearing House.

External Accounts

Accounts denominated in dalasis held by residents of other countries are designated external accounts. Such accounts may be opened without reference to the CBG when commercial banks are satisfied that the account holders’ source of funds is from abroad in convertible foreign currency. Designated external accounts may be credited with payments from residents of other countries, with transfers from other external accounts, and with the proceeds of sales through the banking system of other convertible currencies. They may be debited for any payment to residents of other countries, for transfers to other external accounts, and for the purchase of other convertible currencies.

Imports and Import Payments

Importation of certain specified goods is prohibited from all sources for social, health, or security reasons. All other imports are freely permitted under open general licenses.

Commercial banks are free to make payments for all imports, subject to evidence of shipment. Advance payments in respect of imports may be made freely, provided that commercial banks are satisfied with the bona fide nature of such transactions. Payments for imports may be made in dalasis or pounds sterling to an External Account or in any convertible currency.

Effective July 1, 1988, all merchandise imports are subject to a national sales tax of 10 percent (which replaced the previous import tax of 6 percent) of the c.i.f. value; imports by the Government, diplomatic missions, and charitable organizations are exempted from this tax.

Payments for Invisibles

Payments to nonresidents for current transactions are not restricted, provided that commercial banks are satisfied with documentary evidence that the payment is due. Commercial banks may sell foreign exchange for travel purposes and for making interest and profit remittances without prior approval. A traveler leaving The Gambia may take out D 75 in Gambian currency notes. Visitors to The Gambia do not have to declare their foreign currency.

Exports and Export Proceeds

The export of forestry products is subject to prior authorization by the Forestry Department. The export of all other goods can generally be made without individual licenses, if settlement is made in accordance with procedures laid down by the CBG. Export proceeds must be received through a commercial bank within six months from the date of exportation in a convertible foreign currency or through transfers from a designated external account. The Gambia Produce Marketing Board (GPMB) is the authorized exporter of groundnut products, oil, palm kernels, cotton, and all derivatives of cotton.

Proceeds from Invisibles

Receipts from invisibles in foreign currencies must be offered for sale to commercial banks. There is no restriction on the import of foreign currency notes, but the importation of Gambian currency notes is prohibited.

Capital

Inward transfers of capital for the purpose of direct equity investment are not restricted, but must be reported to the CBG. Prior approval of the CBG is required in order for residents to accept loans in foreign currency from any source.

Overdraft facilities may be provided by the banks to members of diplomatic and international missions in The Gambia up to reasonable amounts. Loans and advances by commercial banks to nonresident companies are subject to the authorization of the CBG. Foreign exchange working balances held by the commercial banks are subject to limits set by the CBG; amounts held in excess of these limits must be sold in the interbank market or offered to the CBG. These limits must be observed on a daily basis, and the amount held must be reported monthly to the CBG. In addition, two parastatals (the GPMB and The Gambia Telecommunication Company) are permitted temporarily to maintain limited working balances in foreign exchange. The limits must be observed on a weekly basis, and the amounts held must be reported monthly to the CBG. Any amount in excess of the limit must be surrendered to a commercial bank in The Gambia.

Gold

The import of gold coin and bullion requires the approval of the CBG.

Changes During 1988

Imports and Import Payments

July 1. All merchandise imports became subject to a national sales tax of 10 percent (which replaced the previous import tax of 6 percent) of the c.i.f. value; imports by the Government, diplomatic missions, and charitable organizations were exempted from this tax.

Federal Republic of Germany

(Position on December 31, 1988)

Exchange Arrangement

The currency of the Federal Republic of Germany is the Deutsche Mark. Germany1 participates with Belgium, Denmark, France, Ireland, Italy, Luxembourg, and the Netherlands in the exchange rate mechanism of the European Monetary System (EMS), whereby each country maintains the value of its currency in relation to the currencies of the other participating countries. Under this agreement, spot exchange rates between the deutsche mark and the currencies of the other participants are maintained within margins of 2.25 percent above or below the cross rates derived from the central rates expressed in European Currency Units (ECUs), except for the Italian lira, for which the temporary intervention limit is plus or minus 6 percent.

The agreement implies that the Deutsche Bundesbank (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 30, 1988, these rates were as follows:

Specified Intervention

Rates Per:
Deutsche Mark
Upper limit2Lower limit2
100Belgian or Luxembourg francs4.7404.959
100Danish kroner25.63026.810
100French francs29.15030.495
1Irish pound2.6192.740
1,000Italian lire1.30651.4735
100Netherlands guilders86.78090.770

In principle, interventions within the EMS are made in participating currencies, but they may also take place in third currencies such as the U.S. dollar. The participants in the EMS do not maintain the exchange rates for other currencies within fixed limits, but they intervene periodically with a view to smoothing out erratic fluctuations in exchange rates.

Official middle, buying, and selling rates are quoted for 17 foreign currencies on the foreign exchange market of Frankfurt am Main.3 On December 30, 1988, the official middle rate for the U.S. dollar was DM 1.7803 per US$1. There are no taxes or subsidies on purchases or sales of foreign exchange. Forward exchange contracts involving both commercial and financial transactions may be negotiated freely by residents and nonresidents in all leading convertible currencies in the domestic foreign exchange market and at major international foreign exchange markets. There are no officially fixed rates in the forward exchange market, and all transactions are negotiated at free market rates.

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

Administration of Control

The administration of control in respect of imports and exports of goods and services is operated by the Federal Ministry of Economics, the Federal Ministry of Finance, the Federal Ministry of Transportation, the Federal Office for Economics, the Federal Ministry for Food, Agriculture, and Forestry, the Federal Office for Food and Forestry, the Federal Office for Agricultural Marketing Organization, and the Ministries of Economics of the Laender. All banks in Germany are permitted to carry out foreign exchange transactions.

Imports and Import Payments

The Import List comprises a total of 10,370 statistical positions. Their treatment is as follows: Commodities corresponding to 115 positions are subject to import licensing when being imported from countries in Country List C.4 The import of some 1,363 textile items (under the arrangements regarding international trade in textiles) and of certain steel items is governed by bilateral agreements of the European Economic Community (EEC) with various supplier countries. Imports of coal from countries that are not members of the European Coal and Steel Community (ECSC) and from Austria, Finland, Iceland, Norway, Sweden, and Switzerland are permitted within the framework of an annual global quota. The Common Agricultural Policy (CAP) of the European Communities (EC) covers about 2,054 statistical items; most of these are subject to variable import levies, which in most cases have replaced previous barriers to imports.

Payments for imports are unrestricted. Commodity futures may be dealt in freely. Most transit trade transactions may also be carried out freely.

Payments for Invisibles

All payments for invisibles may be made freely without individual license. German and foreign notes and coin and other means of payment may be exported freely.

The following transactions—but not the related payments—between residents and nonresidents are subject to restriction: the chartering of foreign ships from residents of specified countries and the conclusion of related sea freight contracts; the use of foreign boats in certain inland waterway traffic; and transactions with specified countries (which do not grant reciprocal treatment) for hull and marine liability insurance and aviation insurance, except passenger accident insurance.

Exports and Export Proceeds

With few exceptions, export transactions may be carried out freely. For statistical purposes, an export notification is required for all goods. Certain exports (mostly strategic goods) are subject to individual licensing. The customs authorities exercise control over export declarations. Foreign exchange proceeds from exports do not have to be declared or surrendered, and they may be used for all payments.

Proceeds from Invisibles

With few exceptions, services performed for nonresidents do not require licenses. However, licenses are required for transactions related to specific sea services and for technical assistance through the delivery of constructional drawings, materials, and instructions for manufacture to residents of List C countries (see footnote 4), if such assistance is for the production of goods whose export requires a license.

There are no restrictions on the receipt of payments for services rendered to nonresidents; however, receipts exceeding DM 2,000 on account of services have to be reported for statistical purposes. German and foreign notes and coin and other means of payment may be imported freely.

Capital

Residents and nonresidents may export capital freely without a license. Foreign and international bond issues on the German capital market do not require official approval. All resident banks, including legally independent foreign-owned banks, may lead-manage issues of foreign bonds denominated in deutsche mark; the right of foreign-owned banks to lead-manage foreign deutsche mark bond issues is contingent, however, on reciprocal lead-management rights of German-owned banks in the home countries of the foreign-owned banks operating in Germany. Domestic and foreign securities of all types may be imported or exported freely.

Following the changes in regulations beginning March 12, 1981, no restrictions are applied on the sale of German money market papers and fixed interest securities by residents to nonresidents. Nonresidents’ direct investments in Germany, purchases of real estate in Germany for investment or personal use, and purchases of German or foreign equities do not require approval. There are no limitations on the disposal of legacies located in Germany and inherited by nonresidents or on legacies located abroad and inherited by residents. Residents are not required to repatriate or surrender their foreign exchange earnings or holdings.

Banks are subject to minimum reserve requirements on the level of their foreign liabilities with maturities of less than four years; the minimum reserve ratios at the end of 1988 were, in principle, the same as those applicable to domestic liabilities, that is, 12.1 percent, 4.95 percent, and 4.15 percent on demand, time, and savings deposits, respectively. The principal exemption is for banks’ foreign currency borrowings that are reinvested abroad. Banks are free to pay interest on domestic or foreign currency balance